HR 4770 IH

To amend title XVIII of the Social Security Act to provide a prescription medicine benefit under the Medicare Program, to enhance the preventive benefits covered under such program, and for other purposes.

June 27, 2000

Mr. GEPHARDT (for himself, Mr. HOEFFEL, Mr. BONIOR, Mr. RANGEL, Mr. DINGELL, Mr. STARK, Mr. BROWN of Ohio, Mr. MATSUI, Mr. COYNE, Mr. LEVIN, Mr. CARDIN, Mr. MCDERMOTT, Mr. KLECZKA, Mr. LEWIS of Georgia, Mr. NEAL of Massachusetts, Mr. MCNULTY, Mr. JEFFERSON, Mr. TANNER, Mr. BECERRA, Mrs. THURMAN, Mr. DOGGETT, Mr. WAXMAN, Mr. MARKEY, Mr. BOUCHER, Mr. PALLONE, Mr. STUPAK, Mr. ENGEL, Mr. GREEN of Texas, Mr. ALLEN, Mr. BACA, Mr. BENTSEN, Ms. BERKLEY, Mr. BISHOP, Mrs. CAPPS, Mr. BLAGOJEVICH, Mr. BLUMENAUER, Mr. BRADY of Pennsylvania, Ms. BROWN of Florida, Mr. CAPUANO, Mr. CLAY, Mrs. CLAYTON, Mr. CLEMENT, Mr. CONYERS, Mr. COSTELLO, Mr. CUMMINGS, Ms. DANNER, Mr. DAVIS of Illinois, Ms. DEGETTE, Mr. DELAHUNT, Ms. DELAURO, Mr. DIXON, Mr. DOYLE, Mr. EDWARDS, Mr. EVANS, Mr. FARR of California, Mr. FORBES, Mr. FRANK of Massachusetts, Mr. FROST, Mr. GONZALEZ, Mr. GUTIERREZ, Mr. HILLIARD, Ms. NORTON, Mr. HOYER, Mr. INSLEE, Mr. JACKSON of Illinois, Ms. JACKSON-LEE of Texas, Ms. EDDIE BERNICE JOHNSON of Texas, Mr. KENNEDY of Rhode Island, Mr. KILDEE, Ms. KILPATRICK, Mr. KUCINICH, Mr. LAMPSON, Mr. LANTOS, Ms. LEE, Mrs. LOWEY, Mr. MCGOVERN, Mrs. MALONEY of New York, Mr. MEEHAN, Mr. MENENDEZ, Ms. MILLENDER-MCDONALD, Mr. MOAKLEY, Mrs. NAPOLITANO, Mr. OBERSTAR, Mr. OLVER, Mr. ORTIZ, Mr. PASCRELL, Mr. PASTOR, Ms. PELOSI, Mr. PHELPS, Mr. POMEROY, Mr. REYES, Mr. RODRIGUEZ, Ms. ROYBAL-ALLARD, Ms. SANCHEZ, Mr. SANDLIN, Mr. SKELTON, Ms. SLAUGHTER, Mr. SNYDER, Mr. SPRATT, Ms. STABENOW, Mrs. JONES of Ohio, Mr. TURNER, Mr. UDALL of New Mexico, Mr. UNDERWOOD, Mr. WEYGAND, Mr. WEXLER, and Ms. WOOLSEY) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To amend title XVIII of the Social Security Act to provide a prescription medicine benefit under the Medicare Program, to enhance the preventive benefits covered under such program, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Medicare Guaranteed and Defined Rx Benefit and Health Provider Relief Act of 2000'.

(b) TABLE OF CONTENTS- The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings.

TITLE I--MEDICARE PRESCRIPTION MEDICINE BENEFIT PROGRAM

Sec. 101. Prescription medicine benefit program.

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

Sec. 102. Medicaid buy-in of medicare prescription drug coverage for certain low-income individuals.

Sec. 103. Offset for catastrophic prescription medicine benefit.

Sec. 104. GAO ongoing studies and reports on program; miscellaneous studies and reports.

TITLE II--IMPROVEMENT IN BENEFICIARY SERVICES

Subtitle A--Improvement of Medicare Coverage and Appeals Process

Sec. 201. Revisions to medicare appeals process.

Sec. 202. Provisions with respect to limitations on liability of beneficiaries.

Sec. 203. Waivers of liability for cost sharing amounts.

Subtitle B--Establishment of Medicare Ombudsman

Sec. 211. Establishment of Medicare Ombudsman for Beneficiary Assistance and Advocacy.

TITLE III--MEDICARE+CHOICE REFORMS; PRESERVATION OF MEDICARE PART B DRUG BENEFIT

Subtitle A--Medicare+Choice Reforms

Sec. 301. Increase in national per capita Medicare+Choice growth percentage in 2001 and 2002.

Sec. 302. Permanently removing application of budget neutrality beginning in 2002.

Sec. 303. Increasing minimum payment amount.

Sec. 304. Allowing movement to 50:50 percent blend in 2002.

Sec. 305. Increased update for payment areas with only one or no Medicare+Choice contracts.

Sec. 306. Permitting higher negotiated rates in certain Medicare+Choice payment areas below national average.

Sec. 307. 10-year phase in of risk adjustment based on data from all settings.

Subtitle B--Preservation of Medicare Coverage of Drugs and Biologicals

Sec. 311. Preservation of coverage of drugs and biologicals under part B of the medicare program.

Sec. 312. Comprehensive immunosuppressive medicine coverage for transplant patients.

Subtitle C--Improvement of Certain Preventive Benefits

Sec. 321. Coverage of annual screening pap smear and pelvic exams.

TITLE IV--ADJUSTMENTS TO PAYMENT PROVISIONS OF THE BALANCED BUDGET ACT

Subtitle A--Payments for Inpatient Hospital Services

Sec. 401. Eliminating reduction in hospital market basket update for fiscal year 2001.

Sec. 402. Eliminating further reductions in indirect medical education (IME) for fiscal year 2001.

Sec. 403. Eliminating further reductions in disproportionate share hospital (DSH) payments.

Sec. 404. Increase base payment to Puerto Rico hospitals.

Subtitle B--Payments for Skilled Nursing Services

Sec. 411. Eliminating reduction in SNF market basket update for fiscal year 2001.

Sec. 412. Extension of moratorium on therapy caps.

Subtitle C--Payments for Home Health Services

Sec. 421. 1-year additional delay in application of 15 percent reduction on payment limits for home health services.

Sec. 422. Provision of full market basket update for home health services for fiscal year 2001.

Subtitle D--Rural Provider Provisions

Sec. 431. Elimination of reduction in hospital outpatient market basket increase.

Subtitle E--Other Providers

Sec. 441. Update in renal dialysis composite rate.

Subtitle F--Provision for Additional Adjustments

Sec. 451. Guarantee of additional adjustments to payments for providers from budget surplus.

SEC. 2. FINDINGS.

Congress makes the following findings:

(1) Prescription medicine coverage was not a standard part of health insurance when the medicare program under title XVIII of the Social Security Act was enacted in 1965. Since 1965, however, medicine coverage has become a key component of most private and public health insurance coverage, except for the medicare program.

(2) At least 2/3 of medicare beneficiaries have unreliable, inadequate, or no medicine coverage at all.

(3) Seniors who do not have medicine coverage typically pay, at a minimum, 15 percent more than people with coverage.

(4) Medicare beneficiaries at all income levels lack prescription medicine coverage, with more than 1/2 of such beneficiaries having incomes greater than 150 percent of the poverty line.

(5) The number of private firms offering retiree health coverage is declining.

(6) Medigap premiums for medicines are too expensive for most beneficiaries and are highest for older senior citizens, who need prescription medicine coverage the most and typically have the lowest incomes.

(7) While the management of a medicare prescription medicine benefit program should mirror the practices employed by benefit administrators in delivering prescription medicines, the Secretary of Health and Human Services should oversee that program to assure that a guaranteed and defined prescription drug benefit is provided to all medicare beneficiaries.

(8) All medicare beneficiaries should have access to a voluntary, reliable, affordable, dependable, and defined outpatient medicine benefit as part of the medicare program that assists with the high cost of prescription medicines and protects them against excessive out-of-pocket costs.

TITLE I--MEDICARE PRESCRIPTION MEDICINE BENEFIT PROGRAM

SEC. 101. ESTABLISHMENT OF THE MEDICARE PRESCRIPTION MEDICINE BENEFIT PROGRAM.

(a) IN GENERAL- Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is amended--

(1) by redesignating part D as part E; and

(2) by inserting after part C the following new part:

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

`ESTABLISHMENT OF DEFINED PRESCRIPTION MEDICINE BENEFIT PROGRAM FOR THE AGED AND DISABLED UNDER THE MEDICARE PROGRAM

`SEC. 1860. (a) IN GENERAL- There is established as a part of the medicare program under this title a voluntary insurance program to provide defined prescription medicine benefits, including pharmacy services, in accordance with the provisions of this part for individuals who are aged or disabled or have end-stage renal disease and who voluntarily elect to enroll under such program, to be financed from premium payments by enrollees together with contributions from funds appropriated by the Federal Government.

`(b) NONINTERFERENCE BY THE SECRETARY- In administering the prescription medicine benefit program established under this part, the Secretary may not--

`(1) require a particular formulary, institute a price structure for benefits, or in any way ration benefits;

`(2) interfere in any way with negotiations between benefit administrators and medicine manufacturers, or wholesalers; or

`(3) otherwise interfere with the competitive nature of providing a prescription medicine benefit using private benefit administrators, except as is required to guarantee coverage of the defined benefit.

`SCOPE OF DEFINED BENEFITS; COVERAGE OF ALL MEDICALLY NECESSARY PRESCRIPTION MEDICINES

`SEC. 1860A. (a) IN GENERAL- The benefits provided to an individual enrolled in the insurance program under this part shall consist of--

`(1) payments made, in accordance with the provisions of this part, for covered prescription medicines (as specified in subsection (b)) dispensed by any pharmacy participating in the program under this part (and, in circumstances designated by the benefit administrator, by a nonparticipating pharmacy), including any specifically named medicine prescribed for the individual by a qualified health care professional regardless of whether the medicine is included in a formulary established by the benefit administrator if such medicine is certified as medically necessary by such health care professional (except that to the maximum extent possible the substitution and use of lower-cost generics shall be encouraged); and

`(2) charging by pharmacies of the negotiated discount price--

`(A) for all covered prescription medicines, without regard to such basic benefit limitation; and

`(B) established with respect to any drugs or classes of drugs described in subparagraphs (A), (B), (D), (E), or (F) of section 1927(d)(2) that are available to individuals receiving benefits under this title.

`(b) COVERED PRESCRIPTION MEDICINES-

`(1) IN GENERAL- Covered prescription medicines, for purposes of this part, include all prescription medicines (as defined in section 1860J(1)), including smoking cessation agents, except as otherwise provided in this subsection.

`(2) EXCLUSIONS FROM COVERAGE- Covered prescription medicines shall not include drugs or classes of drugs described in subparagraphs (A) through (D) and (F) through (H) of section 1927(d)(2) unless--

`(A) specifically provided otherwise by the Secretary with respect to a drug in any of such classes; or

`(B) a drug in any of such classes is certified to be medically necessary by a health care professional.

`(3) NONDUPLICATION OF PRESCRIPTION MEDICINES COVERED UNDER PART A OR B- A medicine prescribed for an individual that would otherwise be a covered prescription medicine under this part shall not be so considered to the extent that payment for such medicine is available under part A or B (including all injectable drugs and biologicals for which payment was made or should have been made by a carrier under section 1861(s)(2) (A) or (B) as of the date of enactment of the Medicare Guaranteed and Defined Rx Benefit and Health Provider Relief Act of 2000). Medicines otherwise covered under part A or B shall be covered under this part to the extent that benefits under part A or B are exhausted.

`(4) STUDY ON INCLUSION OF HOME INFUSION THERAPY SERVICES- Not later than one year after the date of the enactment of the Medicare Guaranteed and Defined Rx Benefit and Health Provider Relief Act of 2000, the Secretary shall submit to Congress a legislative proposal for the delivery of home infusion therapy services under this title and for a system of payment for such a benefit that coordinates items and services furnished under part B and under this part.

`PAYMENT OF DEFINED BASIC AND CATASTROPHIC BENEFITS

`SEC. 1860B. (a) PAYMENT OF BENEFITS- There shall be paid from the Prescription Medicine Insurance Account within the Supplementary Medical Insurance Trust Fund, in the case of each individual who is enrolled in the insurance program under this part and who purchases covered prescription medicines in a calendar year, the sum of the benefit amounts under subsections (b) and (c).

`(b) BASIC BENEFIT-

`(1) IN GENERAL- An amount (not exceeding 50 percent of the annual limitation under paragraph (3)) equal to the applicable government percentage (specified in paragraph (2)) of the negotiated price for each such covered prescription medicine or such higher percentage as is proposed under section 1860G(d)(9).

`(2) APPLICABLE GOVERNMENT PERCENTAGE- The applicable government percentage specified in this paragraph is 50 percent or such higher percentage as may be proposed under section 1860G(d)(9), if the Secretary finds that such higher percentage will not increase aggregate costs to the Prescription Medicine Insurance Account.

`(3) ANNUAL LIMITATION IN BASIC BENEFIT-

`(A) FOR 2003 THROUGH 2009- For purposes of the basic benefit described in paragraph (1), the annual limitation under this paragraph is--

`(i) $2,000 for each of 2003 and 2004;

`(ii) $3,000 for each of 2005 and 2006;

`(iii) $4,000 for each of 2007 and 2008; and

`(iv) $5,000 for 2009.

`(B) FOR 2010 AND SUBSEQUENT YEARS- For purposes of paragraph (1), the annual limitation under this paragraph for 2010 and each subsequent year is equal to the limitation for the preceding year adjusted by the annual percentage increase in average per capita aggregate expenditures for covered outpatient medicines in the United States for medicare beneficiaries, as estimated by the Secretary. Any amount determined under this subparagraph that is not a multiple of $10 shall be rounded to the nearest multiple of $10.

`(c) CATASTROPHIC BENEFIT-

`(1) FOR 2003- In the case of and with respect to out-of-pocket expenditures, the amount of such expenditures that exceeds the catastrophic benefit level established by the Secretary under paragraph (2) and increased in subsequent years by the annual percentage increase under paragraph (3).

`(2) ESTABLISHMENT OF CATASTROPHIC BENEFIT LEVEL- The Chief Actuary shall estimate, over each five-year period, beginning with 2003, the amount of savings to the program under this title attributable to the operation of section 103 of the Medicare Guaranteed and Defined Rx Benefit and Health Provider Relief Act of 2000. Based on such estimates, the Secretary shall establish the catastrophic benefit level in a manner so that the aggregate amount of expenditures under this paragraph does not exceed the aggregate amount of such savings, except that in 2003 and each year thereafter, the catastrophic benefit level may not be greater than $4,000, as adjusted under paragraph (3).

`(3) INDEXING FOR OUTYEARS- For a year beginning after 2003, the catastrophic benefit level shall be increased by annual percentage increase determined for the year involved under subsection (b)(3)(B).

`ELIGIBILITY AND ENROLLMENT

`SEC. 1860C. (a) ELIGIBILITY- Every individual who, in or after 2003, is entitled to hospital insurance benefits under part A or enrolled in the medical insurance program under part B is eligible to enroll in the insurance program under this part, during an enrollment period prescribed in or under this section, in such manner and form as may be prescribed by regulations.

`(b) ENROLLMENT-

`(1) IN GENERAL- Each individual who satisfies subsection (a) shall be enrolled (or eligible to enroll) in the program under this part in accordance with the provisions of section 1837, as if that section applied to this part, except as otherwise explicitly provided in this part.

`(2) SINGLE ENROLLMENT PERIOD- Except as provided in section 1837(i) (as such section applies to this part), 1860E (relating to loss of coverage under the medicaid program), or 1860H(e) (relating to loss of employer or union coverage), or as otherwise explicitly provided, no individual shall be entitled to enroll in the program under this part at any time after the initial enrollment period without penalty, and in the case of all other late enrollments, the Secretary shall develop a late enrollment penalty for the individual that fully recovers the additional actuarial risk involved in providing coverage for the individual.

`(3) SPECIAL ENROLLMENT PERIOD IN 2003-

`(A) IN GENERAL- An individual who first satisfies subsection (a) in 2003 may, at any time on or before December 31, 2003--

`(i) enroll in the program under this part; and

`(ii) enroll or reenroll in such program after having previously declined or terminated enrollment in such program.

`(B) EFFECTIVE DATE OF COVERAGE- An individual who enrolls under the program under this part pursuant to subparagraph (A) shall be entitled to benefits under this part beginning on the first day of the month following the month in which such enrollment occurs.

`(c) PERIOD OF COVERAGE-

`(1) IN GENERAL- Except as otherwise provided in this part, an individual's coverage under the program under this part shall be effective for the period provided in section 1838, as if that section applied to the program under this part.

`(2) PART D COVERAGE TERMINATED BY TERMINATION OF COVERAGE UNDER PARTS A AND B- In addition to the causes of termination specified in section 1838, an individual's coverage under this part shall be terminated when the individual retains coverage under neither the program under part A nor the program under part B, effective on the effective date of termination of coverage under part A or (if later) under part B.

`MONTHLY PREMIUM; INITIAL $25 PREMIUM

`SEC. 1860D. (a) ANNUAL ESTABLISHMENT OF GUARANTEED SINGLE RATE FOR ALL PARTICIPATING BENEFICIARIES-

`(1) $25 monthly premium rate in 2003- The monthly premium rate in 2003 for prescription medicine benefits under this part is $25.

`(2) PREMIUM RATES IN SUBSEQUENT YEARS-

`(A) IN GENERAL- The Secretary shall, during September of 2003 and of each succeeding year, determine and promulgate a monthly premium rate for the succeeding year in accordance with the provisions of this paragraph.

`(B) DETERMINATION OF ANNUAL BENEFIT COSTS- The Secretary shall estimate annually for the succeeding year the amount equal to the total of the benefits (but not including catastrophic benefits under section 1860B(c)) that will be payable from the Prescription Medicine Insurance Account for prescription medicines dispensed in such calendar year with respect to enrollees in the program under this part. In calculating such amount, the Secretary shall include an appropriate amount for a contingency margin.

`(C) DETERMINATION OF MONTHLY PREMIUM RATES-

`(i) IN GENERAL- The Secretary shall determine the monthly premium rate with respect to such enrollees for such succeeding year, which shall be 1/12 of the share specified in clause (ii) of the amount determined under subparagraph (B), divided by the total number of such enrollees, and rounded (if such rate is not a multiple of 10 cents) to the nearest multiple of 10 cents.

`(ii) ENROLLEE AND EMPLOYER PERCENTAGE SHARES- The share specified in this clause, for purposes of clause (i), shall be--

`(I) one-half, in the case of premiums paid by an individual enrolled in the program under this part; and

`(II) two-thirds, in the case of premiums paid for such an individual by a former employer (as defined in section 1860H(f)(2)).

`(D) PUBLICATION OF ASSUMPTIONS- The Secretary shall publish, together with the promulgation of the monthly premium rates for the succeeding year, a statement setting forth the actuarial assumptions and bases employed in arriving at the amounts and rates determined under this paragraph.

`(b) PAYMENT OF PREMIUMS-

`(1) GENERALLY THROUGH DEDUCTION FROM SOCIAL SECURITY, RAILROAD RETIREMENT BENEFITS, OR BENEFITS ADMINISTERED BY OPM-

`(A) IN GENERAL- In the case of an individual who is entitled to or receiving benefits as described in

subsection (a), (b), or (d) of section 1840, premiums payable under this part shall be collected by deduction from such benefits at the same time and in the same manner as premiums payable under part B are collected pursuant to section 1840.

`(B) TRANSFERS OF DEDUCTION TO ACCOUNT- The Secretary of the Treasury shall, from time to time, but not less often than quarterly, transfer premiums collected pursuant to subparagraph (A) to the Prescription Medicine Insurance Account from the appropriate funds and accounts described in subsections (a)(2), (b)(2), and (d)(2) of section 1840, on the basis of the certifications described in such subsections. The amounts of such transfers shall be appropriately adjusted to the extent that prior transfers were too great or too small.

`(2) OTHERWISE THROUGH DIRECT PAYMENTS BY ENROLLEE TO SECRETARY-

`(A) IN THE CASE OF INADEQUATE DEDUCTION- An individual to whom paragraph (1) applies (other than an individual receiving benefits as described in section 1840(d)) and who estimates that the amount that will be available for deduction under such paragraph for any premium payment period will be less than the amount of the monthly premiums for such period may (under regulations) pay to the Secretary the estimated balance, or such greater portion of the monthly premium as the individual chooses.

`(B) OTHER CASES- An individual enrolled in the insurance program under this part with respect to whom none of the preceding provisions of this subsection applies (or to whom section 1840(c) applies) shall pay premiums to the Secretary at such times and in such manner as the Secretary shall by regulations prescribe.

`(C) DEPOSIT OF PREMIUMS IN ACCOUNT- Amounts paid to the Secretary under this paragraph shall be deposited in the Treasury to the credit of the Prescription Medicine Insurance Account in the Supplementary Medical Insurance Trust Fund.

`(c) CERTAIN LOW-INCOME INDIVIDUALS- For rules concerning premiums for certain low-income individuals, see section 1860E.

`PRESCRIPTION MEDICINE INSURANCE ACCOUNT

`SEC. 1860F. (a) ESTABLISHMENT- There is created within the Federal Supplemental Medical Insurance Trust Fund established by section 1841 an account to be known as the `Prescription Medicine Insurance Account' (in this section referred to as the `Account').

`(b) AMOUNTS IN ACCOUNT-

`(1) IN GENERAL- The Account shall consist of--

`(A) such amounts as may be deposited in, or appropriated to, such fund as provided in this part; and

`(B) such gifts and bequests as may be made as provided in section 201(i)(1).

`(2) SEPARATION OF FUNDS- Funds provided under this part to the Account shall be kept separate from all other funds within the Federal Supplemental Medical Insurance Trust Fund.

`(c) PAYMENTS FROM ACCOUNT-

`(1) IN GENERAL- The Managing Trustee shall pay from time to time from the Account such amounts as the Secretary certifies are necessary to make the payments provided for by this part, and the payments with respect to administrative expenses in accordance with section 201(g).

`(2) TREATMENT IN RELATION TO PART B PREMIUM- Amounts payable from the Account shall not be taken into account in computing actuarial rates or premium amounts under section 1839.

`ADMINISTRATION OF BENEFITS

`SEC. 1860G. (a) ADMINISTRATION-

`(1) USE OF PRIVATE BENEFIT ADMINISTRATORS AS PROVIDED FOR UNDER PARTS A AND B- The Secretary shall provide for administration of the benefits under this part through a contract with a private benefit administrator designated in accordance with subsection (c), for enrolled individuals residing in each service area designated pursuant to subsection (b) (other than such individuals enrolled in a Medicare+Choice program under part C), in accordance with the provisions of this section.

`(2) GUARANTEE OF PROGRAM ADMINISTRATION- In the case of a service area in which no private benefit administrator has entered into a contract with the Secretary under paragraph (1) for the administration of this part, the Secretary shall seek to enter into a contract with a fiscal intermediary under part A (with a contract under section 1816) or a carrier under part B (with a contract under section 1842) to administer this part in that service area in accordance with the provisions of subsection (d). If the Secretary is unable to enter into such a contract for that service area, the Secretary shall provide for the administration of this part in that service area in accordance with the provisions of subsection (d) through another benefit administrator.

`(b) DESIGNATION OF GEOGRAPHIC SERVICE AREAS-

`(1) IN GENERAL- The Secretary shall divide the total geographic area served by the programs under this title into an appropriate number of service areas for purposes of administration of benefits under this part.

`(2) CONSIDERATIONS IN DETERMINING SERVICE AREAS- In determining or adjusting the number and boundaries of service areas under this subsection, the Secretary shall seek to ensure that--

`(A) there is a reasonable level of competition among entities eligible to contract to administer the benefit program under this section for each area; and

`(B) the designation of areas is consistent with the goal of securing contracts under this section that use the volume purchasing power of enrollees to obtain the same or similar type of prescription medicine discounts as are afforded favored, large purchasers.

`(c) DESIGNATION OF BENEFIT ADMINISTRATOR-

`(1) AWARD AND DURATION OF CONTRACT-

`(A) COMPETITIVE AWARD- Each contract for a service area shall be awarded competitively in accordance with section 5 of title 41, United States Code, for a period (subject to subparagraph (B)) of not less than 2 nor more than 5 years.

`(B) REVIEW- A contract for a service area shall be subject to an evaluation after a year and termination for cause.

`(2) ELIGIBLE BENEFIT ADMINISTRATORS- An entity shall not be eligible for consideration as a benefit administrator responsible for administering the prescription medicine benefit program under this part in a service area unless it meets at least the following criteria:

`(A) TYPE OF ENTITY- The entity shall be capable of administering a prescription medicine benefit program, and may be a prescription medicine vendor, wholesale and retail pharmacy delivery system, health care provider or insurer, any other type of entity as the Secretary may specify, or a consortium of such entities.

`(B) PERFORMANCE CAPABILITY- The entity shall have sufficient expertise, personnel, and resources to perform effectively the benefit administration functions for such area.

`(C) FINANCIAL INTEGRITY- The entity and its officers, directors, agents, and managing employees shall have a satisfactory record of professional competence and professional and financial integrity, and the entity shall have adequate financial resources to perform services under the contract without risk of insolvency.

`(3) PROPOSAL REQUIREMENTS-

`(A) IN GENERAL- An entity's proposal for award or renewal of a contract under this section shall include such material and information as the Secretary may require.

`(B) SPECIFIC INFORMATION- A proposal described in subparagraph (A) shall--

`(i) include a detailed description of--

`(I) the schedule of negotiated prices that will be charged to enrollees;

`(II) how the entity will deter medical errors that are related to prescription medicines; and

`(III) proposed contracts with local pharmacy providers designed to ensure access, including compensation for local pharmacists' services;

`(ii) be accompanied by such information as the Secretary may require on the entity's past performance; and

`(iii) disclose ownership and shared financial interests with other entities involved in the delivery of the benefit as proposed.

`(4) CRITERIA FOR COMPETITIVE SELECTION- In awarding a contract competitively, the Secretary shall consider the comparative merits of each of the applications by eligible entities, as determined on the basis of the entities' past performance and other relevant factors, with respect to the following:

`(A) the estimated total cost of the contract, taking into consideration the entity's proposed fees and price and cost estimates, as evaluated and adjusted by the Secretary in accordance with the provisions of the Federal Acquisition Regulation concerning contracting by negotiation;

`(B) prior experience in administering a type of health insurance program;

`(C) effectiveness in containing costs through obtaining discounts from manufacturers, pricing incentives, utilization management, and drug utilization review;

`(D) the quality and efficiency of benefit management services with respect to such matters as claims processing and benefits coordination; record-keeping and reporting; maintenance of medical records confidentiality; and drug utilization review, patient information, customer satisfaction, and other activities supporting quality of care; and

`(E) such other factors as the Secretary deems necessary to evaluate the merits of each application.

`(5) FLEXIBILITY IN SECURING BEST BENEFIT ADMINISTRATOR- In awarding contracts under this subsection, the Secretary may waive conflict of interest rules generally applicable to Federal acquisitions (subject to such safeguards as the Secretary may find necessary to impose) in circumstances where the Secretary finds that such waiver--

`(A) is not inconsistent with the purposes of the programs under this title and the best interests of enrolled individuals; and

`(B) will permit a sufficient level of competition for such contracts, promote efficiency of benefits administration, or otherwise serve the objectives of the program under this part.

If the Secretary waives such rules, the Secretary shall establish a special monitoring program to ensure that beneficiaries served by the benefit administrator have access to all necessary pharmaceuticals as prescribed.

`(6) MAXIMIZING COMPETITION AND SAVINGS- In awarding contracts under this section, the Secretary shall give consideration to the need to maintain sufficient numbers of entities eligible and willing to administer benefits under this part to ensure vigorous competition for such contracts, while also giving consideration to the need for a benefit administrator to have sufficient purchasing power to obtain appropriate cost savings.

`(d) FUNCTIONS OF BENEFIT ADMINISTRATOR- A benefit administrator for a service area shall (or in the case of the function described in paragraph (9), may) perform the following functions:

`(1) PARTICIPATION AGREEMENTS, PRICES, AND FEES-

`(A) PRIVATELY NEGOTIATED PRICES- Each benefit administrator shall establish, through negotiations with medicine manufacturers and wholesalers and pharmacies, a schedule of prices for covered prescription medicines.

`(B) AGREEMENTS WITH ANY WILLING PHARMACY- Each benefit administrator shall enter into participation agreements under subsection (e) with any willing pharmacy, that include terms that--

`(i) secure the participation of sufficient numbers of pharmacies to ensure convenient access (including adequate emergency access);

`(ii) permit the participation of any willing pharmacy in the service area that meets the participation requirements described in subsection (e); and

`(iii) allow for reasonable dispensing and consultation fees for pharmacies.

`(C) LISTS OF PRICES AND PARTICIPATING PHARMACIES- Each benefit administrator shall ensure that the negotiated prices established under subparagraph (A) and the list of pharmacies with agreements under subsection (e) are regularly updated and readily available in the service area to health care professionals authorized to prescribe medicines, participating pharmacies, and enrolled individuals.

`(2) TRACKING OF COVERED ENROLLED INDIVIDUALS- In coordination with the Secretary, each benefit administrator shall maintain accurate, updated records of all enrolled individuals residing in the service area (other than individuals enrolled in a plan under part C).

`(3) PAYMENT AND COORDINATION OF BENEFITS-

`(A) PAYMENT- Each benefit administrator shall--

`(i) administer claims for payment of benefits under this part and encourage, to the maximum extent possible, use of electronic means for the submissions of claims;

`(ii) determine amounts of benefit payments to be made; and

`(iii) receive, disburse, and account for funds used in making such payments, including through the activities specified in the provisions of this paragraph.

`(B) COORDINATION- Each benefit administrator shall coordinate with the Secretary, other benefit administrators, pharmacies, and other relevant entities as necessary to ensure appropriate coordination of benefits with respect to enrolled individuals, including coordination of access to and payment for covered prescription medicines according to an individual's in-service area plan provisions, when such individual is traveling outside the home service area, and under such other circumstances as the Secretary may specify.

`(C) EXPLANATION OF BENEFITS- Each benefit administrator shall furnish to enrolled individuals an explanation of benefits in accordance with section 1806(a), and a notice of the balance of benefits remaining for the current year, whenever prescription medicine benefits are provided under this part (except that such notice need not be provided more often than monthly).

`(4) REQUIREMENTS WITH RESPECT TO FORMULARIES- If a benefit administrator uses a formulary to contain costs under this part, the benefit administrator shall--

`(A) use a pharmacy and therapeutics committee comprised of licensed practicing physicians, pharmacists, and other health care practitioners to develop and manage the formulary;

`(B) include in the formulary at least 1 medicine from each therapeutic class and, if available, a generic equivalent thereof; and

`(C) disclose to current and prospective enrollees and to participating providers and pharmacies in the service area, the nature of the formulary restrictions, including information regarding the medicines included in the formulary and any difference in cost-sharing amounts.

`(5) COST AND UTILIZATION MANAGEMENT; QUALITY ASSURANCE- Each benefit administrator shall have in place effective cost and utilization management, drug utilization review, quality assurance measures, and systems to reduce medical errors, including at least the following, together with such additional measures as the Secretary may specify:

`(A) DRUG UTILIZATION REVIEW- A drug utilization review program conforming to the standards provided in section 1927(g)(2) (with such modifications as the Secretary finds appropriate).

`(B) FRAUD AND ABUSE CONTROL- Activities to control fraud, abuse, and waste, including prevention of diversion of pharmaceuticals to the illegal market.

`(C) MEDICATION THERAPY MANAGEMENT-

`(i) IN GENERAL- A program of medicine therapy management and medication administration that is designed to assure that covered outpatient medicines are appropriately used to achieve therapeutic goals and reduce the risk of adverse events, including adverse drug interactions.

`(ii) ELEMENTS OF MEDICATION THERAPY MANAGEMENT- Such program may include--

`(I) enhanced beneficiary understanding of such appropriate use through beneficiary education, counseling, and other appropriate means; and

`(II) increased beneficiary adherence with prescription medication regimens through medication refill reminders, special packaging, and other appropriate means.

`(iii) DEVELOPMENT OF PROGRAM IN COOPERATION WITH LICENSED PHARMACISTS- The program shall be developed in cooperation with licensed pharmacists and physicians.

`(iv) CONSIDERATIONS IN PHARMACY FEES- The benefit administrators 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.

`(6) EDUCATION AND INFORMATION ACTIVITIES- Each benefit administrator shall have in place mechanisms for disseminating educational and informational materials to enrolled individuals and health care providers designed to encourage effective and cost-effective use of prescription medicine benefits and to ensure that enrolled individuals understand their rights and obligations under the program.

`(7) BENEFICIARY PROTECTIONS-

`(A) CONFIDENTIALITY OF HEALTH INFORMATION- Each benefit administrator shall have in effect systems to safeguard the confidentiality of health care information on enrolled individuals, which comply with section 1106 and with section 552a of title 5, United States Code, and meet such additional standards as the Secretary may prescribe.

`(B) GRIEVANCE AND APPEAL PROCEDURES- Each benefit administrator shall have in place such procedures as the Secretary may specify for hearing and resolving grievances and appeals, including expedited appeals, brought by enrolled individuals against the benefit administrator or a pharmacy concerning benefits under this part, which shall include procedures equivalent to those specified in subsections (f) and (g) of section 1852.

`(8) RECORDS, REPORTS, AND AUDITS OF BENEFIT ADMINISTRATORS-

`(A) RECORDS AND AUDITS- Each benefit administrator shall maintain adequate records, and afford the Secretary access to such records (including for audit purposes).

`(B) REPORTS- Each benefit administrator shall make such reports and submissions of financial and utilization data as the Secretary may require taking into account standard commercial practices.

`(9) PROPOSAL FOR ALTERNATIVE COINSURANCE AMOUNT-

`(A) SUBMISSION- Each benefit administrator may submit a proposal for decreased beneficiary cost-sharing for generic prescription medicines, prescription medicines on the benefit administrator's formulary, or prescription medicines obtained through mail order pharmacies.

`(B) CONTENTS- The proposal submitted under subparagraph (A) shall contain evidence that such decreased cost-sharing would not result in an increase in aggregate costs to the Account, including an analysis of differences in projected drug utilization patterns by beneficiaries whose cost-sharing would be reduced under the proposal and those making the cost-sharing payments that would otherwise apply.

`(10) OTHER REQUIREMENTS- Each benefit administrator shall meet such other requirements as the Secretary may specify.

`(e) PHARMACY PARTICIPATION AGREEMENTS-

`(1) IN GENERAL- A pharmacy that meets the requirements of this subsection shall be eligible to enter an agreement with a benefit administrator to furnish covered

prescription medicines and pharmacists' services to enrolled individuals residing in the service area.

`(2) TERMS OF AGREEMENT- An agreement under this subsection shall include the following terms and requirements:

`(A) LICENSING- The pharmacy and pharmacists shall meet (and throughout the contract period will continue to meet) all applicable State and local licensing requirements.

`(B) LIMITATION ON CHARGES- Pharmacies participating under this part shall not charge an enrolled individual more than the negotiated price for an individual medicine as established under subsection (d)(1), regardless of whether such individual has attained the basic benefit limitation under section 1860B(b)(3), and shall not charge an enrolled individual more than the individual's share of the negotiated price as determined under the provisions of this part.

`(C) PERFORMANCE STANDARDS- The pharmacy and the pharmacist shall comply with performance standards relating to--

`(i) measures for quality assurance, reduction of medical errors, and participation in the drug utilization review program described in subsection (d)(3)(A);

`(ii) systems to ensure compliance with the confidentiality standards applicable under subsection (d)(5)(A); and

`(iii) other requirements as the Secretary may impose to ensure integrity, efficiency, and the quality of the program.

`(D) DISCLOSURE OF PRICE OF GENERIC MEDICINE- A pharmacy participating under this part that dispenses a prescription medicine to a medicare beneficiary enrolled under this part 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 that is therapeutically and pharmaceutically equivalent and bioequivalent.

`(f) FLEXIBILITY IN ASSIGNING WORKLOAD AMONG BENEFIT ADMINISTRATORS- During the period after the Secretary has given notice of intent to terminate a contract with a benefit administrator, the Secretary may transfer responsibilities of the benefit administrator under such contract to another benefit administrator.

`(g) GUARANTEED ACCESS TO MEDICINES IN RURAL AND HARD-TO-SERVE AREAS-

`(1) IN GENERAL- The Secretary shall ensure that all beneficiaries have guaranteed access to the full range of pharmaceuticals under this part, and shall give special attention to access, pharmacist counseling, and delivery in rural and hard-to-serve areas, including through the use of incentives such as bonus payments to retail pharmacists in rural areas and extra payments to the benefit administrator for the cost of rapid delivery of pharmaceuticals, and any other actions necessary.

`(2) GAO REPORT- Not later than 2 years after the implementation of this part the Comptroller General of the United States shall submit to Congress a report on the access of medicare beneficiaries to pharmaceuticals and pharmacists' services in rural and hard-to-serve areas under this part together with any recommendations of the Comptroller General regarding any additional steps the Secretary may need to take to ensure the access of medicare beneficiaries to pharmaceuticals and pharmacists' services in such areas under this part.

`(h) INCENTIVES FOR COST AND UTILIZATION MANAGEMENT AND QUALITY IMPROVEMENT- The Secretary is authorized to include in a contract awarded under subsection (c) such incentives for cost and utilization management and quality improvement as the Secretary may deem appropriate, including--

`(1) bonus and penalty incentives to encourage administrative efficiency;

`(2) incentives under which benefit administrators share in any benefit savings achieved;

`(3) financial incentives under which savings derived from the substitution of generic medicines in lieu of non-generic medicines are made available to beneficiaries enrolled under this part, benefit administrators, pharmacies, and the Prescription Medicine Insurance Account; and

`(4) any other incentive that the Secretary deems appropriate and likely to be effective in managing costs or utilization.

`INCENTIVE PROGRAM TO ENCOURAGE EMPLOYERS TO CONTINUE COVERAGE

`SEC. 1860H. (a) PROGRAM AUTHORITY- The Secretary shall develop and implement a program under this section called the `Employer Incentive Program' that encourages employers and other sponsors of employment-based health care coverage to provide adequate prescription medicine benefits to retired individuals and to maintain such existing benefit programs, by subsidizing, in part, the cost of providing coverage under qualifying plans.

`(b) SPONSOR REQUIREMENTS- In order to be eligible to receive an incentive payment under this section with respect to coverage of an individual under a qualified retiree prescription medicine plan (as defined in subsection (f)(3)), a sponsor shall meet the following requirements:

`(1) ASSURANCES- The sponsor shall--

`(A) annually attest, and provide such assurances as the Secretary may require, that the coverage offered by the sponsor is a qualified retiree prescription medicine plan, and will remain such a plan for the duration of the sponsor's participation in the program under this section; and

`(B) guarantee that it will give notice to the Secretary and covered retirees--

`(i) at least 120 days before terminating its plan; and

`(ii) immediately upon determining that the actuarial value of the prescription medicine benefit under the plan falls below the actuarial value of the insurance benefit under this part.

`(2) OTHER REQUIREMENTS- The sponsor shall provide such information, and comply with such requirements, including information requirements to ensure the integrity of the program, as the Secretary may find necessary to administer the program under this section.

`(c) INCENTIVE PAYMENT-

`(1) IN GENERAL- A sponsor that meets the requirements of subsection (b) with respect to a quarter in a calendar year shall have payment made by the Secretary on a quarterly basis to the appropriate employment-based health plan of an incentive payment, in the amount determined as described in paragraph (2), for each retired individual (or spouse) who--

`(A) was covered under the sponsor's qualified retiree prescription medicine plan during such quarter; and

`(B) was eligible for but was not enrolled in the insurance program under this part.

`(2) AMOUNT OF INCENTIVE- The payment under this section with respect to each individual described in paragraph (1) for a month shall be equal to 2/3 of the monthly premium amount payable from the Prescription Medicine Insurance Account for an enrolled individual, as set for the calendar year pursuant to section 1860D(a)(2).

`(3) PAYMENT DATE- The incentive under this section with respect to a calendar quarter shall be payable as of the end of the next succeeding calendar quarter.

`(d) CIVIL MONEY PENALTIES- A sponsor, health plan, or other entity that the Secretary determines has, directly or through its agent, provided information in connection with a request for an incentive payment under this section that the entity knew or should have known to be false shall be subject to a civil monetary penalty in an amount up to 3 times the total

incentive amounts under subsection (c) that were paid (or would have been payable) on the basis of such information.

`(e) PART D ENROLLMENT FOR INDIVIDUALS WHOSE EMPLOYMENT-BASED RETIREE HEALTH COVERAGE ENDS-

`(1) ELIGIBLE INDIVIDUALS- An individual shall be given the opportunity to enroll in the program under this part during the period specified in paragraph (2) if--

`(A) the individual declined enrollment in the program under this part at the time the individual first satisfied section 1860C(a);

`(B) at that time, the individual was covered under a qualified retiree prescription medicine plan for which an incentive payment was paid under this section; and

`(C)(i) the sponsor subsequently ceased to offer such plan; or

`(ii) the value of prescription medicine coverage under such plan became less than the value of the coverage under the program under this part.

`(2) SPECIAL ENROLLMENT PERIOD- An individual described in paragraph (1) shall be eligible to enroll in the program under this part during the 6-month period beginning on the first day of the month in which--

`(A) the individual receives a notice that coverage under such plan has terminated (in the circumstance described in paragraph (1)(C)(i)) or notice that a claim has been denied because of such a termination; or

`(B) the individual received notice of the change in benefits (in the circumstance described in paragraph (1)(C)(ii)).

`(f) DEFINITIONS- In this section:

`(1) EMPLOYMENT-BASED RETIREE HEALTH COVERAGE- The term `employment-based retiree health coverage' means health insurance or other coverage of health care costs for retired individuals (or for such individuals and their spouses and dependents) based on their status as former employees or labor union members.

`(2) EMPLOYER- The term `employer' has the meaning given to such term by section 3(5) of the Employee Retirement Income Security Act of 1974 (except that such term shall include only employers of 2 or more employees).

`(3) QUALIFIED RETIREE PRESCRIPTION MEDICINE PLAN- The term `qualified retiree prescription medicine plan' means health insurance coverage included in employment-based retiree health coverage that--

`(A) provides coverage of the cost of prescription medicines whose actuarial value to each retired beneficiary equals or exceeds the actuarial value of the benefits provided to an individual enrolled in the program under this part; and

`(B) does not deny, limit, or condition the coverage or provision of prescription medicine benefits for retired individuals based on age or any health status-related factor described in section 2702(a)(1) of the Public Health Service Act.

`(4) SPONSOR- The term `sponsor' has the meaning given the term `plan sponsor' by section 3(16)(B) of the Employee Retirement Income Security Act of 1974.

`APPROPRIATIONS TO COVER GOVERNMENT CONTRIBUTIONS

`SEC. 1860I. (a) IN GENERAL- There are authorized to be appropriated from time to time, out of any moneys in the Treasury not otherwise appropriated, to the Prescription Medicine Insurance Account, a Government contribution equal to--

`(1) the aggregate premiums payable for a month pursuant to section 1860D(a)(2) by individuals enrolled in the program under this part; plus

`(2) one-half the aggregate premiums payable for a month pursuant to such section for such individuals by former employers; plus

`(3) the benefits payable by reason of the application of section 1860B(c) (relating to catastrophic benefits).

`(b) APPROPRIATIONS TO COVER INCENTIVES FOR EMPLOYMENT-BASED RETIREE MEDICINE COVERAGE- There are authorized to be appropriated to the Prescription Medicine Insurance Account from time to time, out of any moneys in the Treasury not otherwise appropriated such sums as may be necessary for payment of incentive payments under section 1860H(c).

`DEFINITIONS

`SEC. 1860J. As used in this part--

`(1) the term `prescription medicine' means--

`(A) a drug that may be dispensed only upon a prescription, and that is described in subparagraph (A)(i), (A)(ii), or (B) of section 1927(k)(2); and

`(B) insulin certified under section 506 of the Federal Food, Drug, and Cosmetic Act, and needles, syringes, and disposable pumps for the administration of such insulin; and

`(2) the term `benefit administrator' means an entity which is providing for the administration of benefits under this part pursuant to 1860G.'.

(b) CONFORMING AMENDMENTS-

(1) AMENDMENTS TO FEDERAL SUPPLEMENTARY HEALTH INSURANCE TRUST FUND- Section 1841 of the Social Security Act (42 U.S.C. 1395t) is amended--

(A) in the last sentence of subsection (a)--

(i) by striking `and' after `section 201(i)(1)'; and

(ii) by inserting before the period the following: `, and such amounts as may be deposited in, or appropriated to, the Prescription Medicine Insurance Account established by section 1860F';

(B) in subsection (g), by inserting after `by this part,' the following: `the payments provided for under part D (in which case the payments shall come from the Prescription Medicine Insurance Account in the Supplementary Medical Insurance Trust Fund),';

(C) in the first sentence of subsection (h), by inserting before the period the following: `and section 1860D(b)(4) (in which case the payments shall come from the Prescription Medicine Insurance Account in the Supplementary Medical Insurance Trust Fund)'; and

(D) in the first sentence of subsection (i)--

(i) by striking `and' after `section 1840(b)(1)'; and

(ii) by inserting before the period the following: `, section 1860D(b)(2) (in which case the payments shall come from the Prescription Medicine Insurance Account in the Supplementary Medical Insurance Trust Fund)'.

(2) PRESCRIPTION MEDICINE OPTION UNDER MEDICARE+CHOICE PLANS-

(A) ELIGIBILITY, ELECTION, AND ENROLLMENT- Section 1851 of the Social Security Act (42 U.S.C. 1395w-21) is amended--

(i) in subsection (a)(1)(A), by striking `parts A and B' inserting `parts A, B, and D'; and

(ii) in subsection (i)(1), by striking `parts A and B' and inserting `parts A, B, and D'.

(B) VOLUNTARY BENEFICIARY ENROLLMENT FOR MEDICINE COVERAGE- Section 1852(a)(1)(A) of such Act (42 U.S.C. 1395w-22(a)(1)(A)) is amended by inserting `(and under part D to individuals also enrolled under that part)' after `parts A and B'.

(C) ACCESS TO SERVICES- Section 1852(d)(1) of such Act (42 U.S.C. 1395w-22(d)(1)) is amended--

(i) in subparagraph (D), by striking `and' at the end;

(ii) in subparagraph (E), by striking the period at the end and inserting `; and'; and

(iii) by adding at the end the following new subparagraph:

`(F) the plan for prescription medicine benefits under part D guarantees coverage of any specifically named covered prescription medicine for an enrollee, when prescribed by a physician in accordance with the provisions of such part, regardless of whether such medicine would otherwise be covered under an applicable formulary or discount arrangement.'.

(D) PAYMENTS TO ORGANIZATIONS- Section 1853(a)(1)(A) of such Act (42 U.S.C. 1395w-23(a)(1)(A)) is amended--

(i) by inserting `determined separately for benefits under parts A and B and under part D (for individuals enrolled under that part)' after `as calculated under subsection (c)';

(ii) by striking `that area, adjusted for such risk factors' and inserting `that area. In the case of payment for benefits under parts A and B, such payment shall be adjusted for such risk factors as'; and

(iii) by inserting before the last sentence the following: `In the case of the payments for benefits under part D, such payment shall initially be adjusted for the risk factors of each enrollee as the Secretary determines to be feasible and appropriate. By 2006, the adjustments would be for the same risk factors applicable for benefits under parts A and B.'.

(E) CALCULATION OF ANNUAL MEDICARE +CHOICE CAPITATION RATES- Section 1853(c) of such Act (42 U.S.C. 1395w-23(c)) is amended--

(i) in paragraph (1), in the matter preceding subparagraph (A), by inserting `for benefits under parts A and B' after `capitation rate';

(ii) in paragraph (6)(A), by striking `rate of growth in expenditures under this title' and inserting `rate of growth in expenditures for benefits available under parts A and B'; and

(iii) by adding at the end the following new paragraph:

`(8) PAYMENT FOR PRESCRIPTION MEDICINES- The Secretary shall determine a capitation rate for prescription medicines--

`(A) dispensed in 2003, which is based on the projected national per capita costs for prescription medicine benefits under part D and associated claims processing costs for beneficiaries under the original medicare fee-for-service program; and

`(B) dispensed in each subsequent year, which shall be equal to the rate for the previous year updated by the Secretary's estimate of the projected per capita rate of growth in expenditures under this title for prescription medicines for an individual enrolled under part D.'.

(F) LIMITATION ON ENROLLEE LIABILITY- Section 1854(e) of such Act (42 U.S.C. 1395w-24(e)) is amended by adding at the end the following new paragraph:

`(5) SPECIAL RULE FOR PROVISION OF PART D BENEFITS- In no event may a Medicare+Choice organization include as part of a plan for prescription medicine benefits under part D the following requirements:

`(A) NO DEDUCTIBLE; NO COINSURANCE GREATER THAN 50 PERCENT- A requirement that an enrollee pay a deductible, or a coinsurance percentage that exceeds 50 percent.

`(B) MANDATORY INCLUSION OF CATASTROPHIC BENEFIT- A requirement that the catastrophic benefit level under the plan be greater than such level established under section 1860B(c).'.

(G) REQUIREMENT FOR ADDITIONAL BENEFITS- Section 1854(f)(1) of such Act (42 U.S.C. 1395w-24(f)(1)) is amended by adding at the end the following new sentence: `Such determination shall be made separately for benefits under parts A and B and for prescription medicine benefits under part D.'.

(H) PROTECTIONS AGAINST FRAUD AND BENEFICIARY PROTECTIONS- Section 1857(d) of such Act (42 U.S.C. 1395w-27(d)) is amended by adding at the end the following new paragraph:

`(6) AVAILABILITY OF NEGOTIATED PRICES- Each contract under this section shall provide that enrollees who exhaust prescription medicine benefits under the plan will continue to have access to prescription medicines at negotiated prices equivalent to the total combined cost of such medicines to the plan and the enrollee prior to such exhaustion of benefits.'.

(3) EXCLUSIONS FROM COVERAGE-

(A) APPLICATION TO PART D- Section 1862(a) of the Social Security Act (42 U.S.C. 1395y(a)) is amended in the matter preceding paragraph (1) by striking `part A or part B' and inserting `part A, B, or D'.

(B) PRESCRIPTION MEDICINES NOT EXCLUDED FROM COVERAGE IF APPROPRIATELY PRESCRIBED- Section 1862(a)(1) of such Act (42 U.S.C. 1395y(a)(1)) is amended--

(i) in subparagraph (H), by striking `and' at the end;

(ii) in subparagraph (I), by striking the semicolon at the end and inserting `, and'; and

(iii) by adding at the end the following new subparagraph:

`(J) in the case of prescription medicines covered under part D, which are not prescribed in accordance with such part;'.

SEC. 102. MEDICAID BUY-IN OF MEDICARE PRESCRIPTION MEDICINE COVERAGE FOR CERTAIN LOW-INCOME INDIVIDUALS.

(a) STATE OPTION TO BUY-IN DUALLY ELIGIBLE INDIVIDUALS-

(1) COVERAGE OF PREMIUMS AS MEDICAL ASSISTANCE- Section 1905(a) of the Social Security Act (42 U.S.C. 1396d) is amended in the second sentence of the flush matter at the end by striking `premiums under part B' the first place it appears and inserting `premiums under parts B and D'.

(2) STATE COMMITMENT TO CONTINUE PARTICIPATION IN PART D AFTER BENEFIT LIMIT EXCEEDED- Section 1902(a) of such Act (42 U.S.C. 1396a) is amended--

(A) by striking `and' at the end of paragraph (64);

(B) by striking the period at the end of paragraph (65)(B) and inserting `; and'; and

(C) by adding at the end the following new paragraph:

`(66) provide that in the case of any individual whose eligibility for medical assistance is not limited to medicare or medicare medicine cost-sharing and for whom the State elects to pay premiums under part D of title XVIII pursuant to section 1860E, the State will purchase all prescription medicines for such individual in accordance with the provisions of such part D, without regard to whether the basic benefit limitation for such individual under section 1860B(b)(3) has been reached.'.

(b) GOVERNMENT PAYMENT OF MEDICARE MEDICINE COST-SHARING REQUIRED FOR QUALIFIED MEDICARE BENEFICIARIES- Section 1905(p)(3) of the Social Security Act (42 U.S.C. 1396d(p)(3)) is amended--

(1) in subparagraph (A)--

(A) in clause (i), by striking `and' at the end;

(B) in clause (ii), by inserting `and' at the end; and

(C) by adding at the end the following new clause:

`(iii) premiums under section 1860D.'; and

(2) in subparagraph (D)--

(A) by inserting `(i)' after `(D)'; and

(B) by adding at the end the following:

`(ii) PART D COST-SHARING- The difference between the amount that is paid under section 1860B and the amount that would be paid under such section if any reference to `50 percent' therein were deemed a reference to `100 percent' (or, if the Secretary approves a higher percentage under such section, if such percentage were deemed to be 100 percent).'.

(c) GOVERNMENT PAYMENT OF MEDICARE MEDICINE COST-SHARING REQUIRED FOR MEDICARE BENEFICIARIES WITH INCOMES BETWEEN 100 AND 150 PERCENT OF POVERTY LINE-

(1) STATE PLAN REQUIREMENT- Section 1902(a)(10)(E) of the Social Security Act (42 U.S.C. 1396a(a)(10)(E)) is amended--

(A) in clause (iii), by striking `and' at the end; and

(B) by adding at the end the following new clause:

`(v) for making medical assistance available for medicare medicine cost-sharing (as defined in section 1905(x)(2)) for qualified medicare medicine beneficiaries described in section 1905(x)(1); and'.

(2) 100 PERCENT FEDERAL MATCHING OF STATE MEDICAL ASSISTANCE COSTS FOR MEDICARE MEDICINE COST-SHARING- Section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) is amended--

(A) by redesignating paragraph (7) as paragraph (8); and

(B) by inserting after paragraph (6) the following new paragraph:

`(7) except in the case of amounts expended for an individual whose eligibility for medical assistance is not limited to medicare or medicare medicine cost-sharing, an amount equal to 100 percent of amounts as expended as medicare medicine cost-sharing for qualified medicare medicine beneficiaries (as defined in section 1905(x)); plus'.

(3) ADDITIONAL FUNDS FOR MEDICARE MEDICINE COST-SHARING IN TERRITORIES- Section 1108 of the Social Security Act (42 U.S.C. 1308) is amended--

(A) in subsection (f), by striking `subsection (g),' and inserting `subsections (g) and (h)'; and

(B) by adding at the end the following new subsection:

`(h) ADDITIONAL MEDICAID PAYMENTS TO TERRITORIES FOR MEDICARE MEDICINE COST-SHARING-

`(1) IN GENERAL- In the case of a territory that develops and implements 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 subsection (f) (as increased under subsection (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 some or all medicare medicine cost sharing (as defined in section 1905(x)(2)) 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 subsection (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) 2003, is equal to $25,000,000; or

`(ii) a subsequent year, is equal to the aggregate amount specified in this subparagraph for the previous year increased by annual percentage increase specified in section 1860B(b)(3)(B) for the year involved.'.

(4) DEFINITIONS OF ELIGIBLE BENEFICIARIES AND COVERAGE- Section 1905 of the Social Security Act (42

U.S.C. 1396d) is amended by adding at the end the following new subsection:

`(x)(1) The term `qualified medicare medicine beneficiary' means an individual--

`(A) who is enrolled or enrolling under part D of title XVIII;

`(B) whose income (as determined under section 1612 for purposes of the supplemental security income program, except as provided in subsection (p)(2)(D)) is above 100 percent but below 150 percent of the official poverty line (as referred to in subsection (p)(2)) applicable to a family of the size involved; and

`(C) whose resources (as determined under section 1613 for purposes of the supplemental security income program) do not exceed twice the maximum amount of resources that an individual may have and obtain benefits under that program.

`(2) The term `medicare medicine cost-sharing' means the following costs incurred with respect to a qualified medicare medicine beneficiary, without regard to whether the costs incurred were for items and services for which medical assistance is otherwise available under the plan:

`(A) In the case of a qualified medicare medicine beneficiary whose income (as determined under paragraph (1)) is less than 135 percent of the official poverty line--

`(i) premiums under section 1860D; and

`(ii) the difference between the amount that is paid under section 1860B and the amount that would be paid under such section if any reference to `50 percent' therein were deemed a reference to `100 percent' (or, if the Secretary approves a higher percentage under such section, if such percentage were deemed to be 100 percent).

`(B) In the case of a qualified medicare medicine beneficiary whose income (as determined under paragraph (1)) is at least 135 percent but less than 150 percent of the official poverty line, a percentage of premiums under section 1860D, determined on a linear sliding scale ranging from 100 percent for individuals with incomes at 135 percent of such line to 0 percent for individuals with incomes at 150 percent of such line.

`(3) In the case of any State which is providing medical assistance to its residents under a waiver granted under section 1115, the Secretary shall require the State to meet the requirement of section 1902(a)(10)(E) in the same manner as the State would be required to meet such requirement if the State had in effect a plan approved under this title.'.

(d) MEDICAID MEDICINE PRICE REBATES UNAVAILABLE WITH RESPECT TO MEDICINES PURCHASED THROUGH MEDICARE BUY-IN- Section 1927 of the Social Security Act (42 U.S.C. 1396r-8) is amended by adding at the end the following new subsection:

`(l) MEDICINES PURCHASED THROUGH MEDICARE BUY-IN- The provisions of this section shall not apply to prescription medicines purchased under part D of title XVIII pursuant to an agreement with the Secretary under section 1860E (including any medicines so purchased after the limit under section 1860B(b)(3) has been exceeded).'.

(e) AMENDMENTS TO MEDICARE PART D- Part D of title XVIII of the Social Security Act (as added by section 2) is amended by inserting after section 1860D the following new section:

`SPECIAL ELIGIBILITY, ENROLLMENT, AND COPAYMENT RULES FOR LOW-INCOME INDIVIDUALS

`SEC. 1860E. (a) STATE OPTIONS FOR COVERAGE: CONTINUATION OF MEDICAID COVERAGE OR ENROLLMENT UNDER THIS PART-

`(1) IN GENERAL- The Secretary shall, at the request of a State, enter into an agreement with the State under which all individuals described in paragraph (2) are enrolled in the program under this part, without regard to whether any such individual has previously declined the opportunity to enroll in such program.

`(2) ELIGIBILITY GROUPS- The individuals described in this paragraph, for purposes of paragraph (1), are individuals who satisfy section 1860C(a) and who are--

`(A) in a coverage group or groups permitted under section 1843 (as selected by the State and specified in the agreement); or

`(B) qualified medicare medicine beneficiaries (as defined in section 1905(x)(1)).

`(3) COVERAGE PERIOD- The period of coverage under this part of an individual enrolled under an agreement under this subsection shall be as follows:

`(A) INDIVIDUALS ELIGIBLE (AT STATE OPTION) FOR PART B BUY-IN- In the case of an individual described in subsection (a)(2)(A), the coverage period shall be the same period that applies (or would apply) pursuant to section 1843(d).

`(B) QUALIFIED MEDICARE MEDICINE BENEFICIARIES- In the case of an individual described in subsection (a)(2)(B)--

`(i) the coverage period shall begin on the latest of--

`(I) January 1, 2003;

`(II) the first day of the third month following the month in which the State agreement is entered into; or

`(III) the first day of the first month following the month in which the individual satisfies section 1860C(a); and

`(ii) the coverage period shall end on the last day of the month in which the individual is determined by the State to have become ineligible for medicare medicine cost-sharing.

`(4) ENROLLMENT FOR LOW-INCOME SUBSIDY THROUGH OTHER MEANS-

`(A) FLEXIBILITY IN ENROLLMENT PROCESS- With respect to low-income individuals residing in a State enrolling under this part on or after January 1,

2003, the Secretary shall provide for determinations of whether the individual is eligible for a subsidy and the amount of such individual's income to be made under arrangements with appropriate entities other than State medicaid agencies.

`(B) USE OF CERTAIN INFORMATION- Arrangements with entities under subparagraph (A) shall provide for --

`(i) the use of existing Federal government databases to identify eligibility; and

`(ii) the use of information obtained under section 154 of the Social Security Act Amendments of 1994 for newly eligible medicare beneficiaries, and the application of such information with respect to other medicare beneficiaries.

`(b) SPECIAL PART D ENROLLMENT OPPORTUNITY FOR INDIVIDUALS LOSING MEDICAID ELIGIBILITY- In the case of an individual who--

`(1) satisfies section 1860C(a); and

`(2) loses eligibility for benefits under the State plan under title XIX after having been enrolled under such plan or having been determined eligible for such benefits;

the Secretary shall provide an opportunity for enrollment under the program under this part during the period that begins on the date that such individual loses such eligibility and ends on the date specified by the Secretary.

`(c) DEFINITION- For purposes of this section, the term `State' has the meaning given such term under section 1101(a) for purposes of title XIX.'.

(f) REMOVAL OF SUNSET DATE FOR COST-SHARING IN MEDICARE PART B PREMIUMS FOR CERTAIN QUALIFYING INDIVIDUALS-

(1) IN GENERAL- Section 1902(a)(10)(E)(iv) of the Social Security Act (42 U.S.C. 1396a(a)(10)(E)(iv)) is amended to read as follows--

`(iv) subject to section 1905(p)(4), for making medical assistance available for medicare cost-sharing described in section 1905(p)(3)(A)(ii) for individuals who would be qualified medicare beneficiaries described in section 1905(p)(1) but for the fact that their income exceeds the income level established by the State under section 1905(p)(2) and is at least 120 percent, but less than 135 percent, of the official poverty line (referred to in such section) for a family of the size involved and who are not otherwise eligible for medical assistance under the State plan;'.

(2) RELOCATION OF PROVISION REQUIRING 100 PERCENT FEDERAL MATCHING OF STATE MEDICAL ASSISTANCE COSTS FOR CERTAIN QUALIFYING INDIVIDUALS- Section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)), as amended by subsection (c)(3), is amended--

(A) by redesignating paragraph (8) as paragraph (9); and

(B) by inserting after paragraph (7) the following new paragraph:

`(8) an amount equal to 100 percent of amounts expended as medicare cost-sharing described in section 1903(a)(10)(E)(iv) for individuals described in such section; plus'.

(3) REPEAL OF SECTION 1933- Section 1933 is repealed.

(4) EFFECTIVE DATE- The amendments made by this subsection shall take effect on January 1, 2003.

SEC. 103. OFFSET FOR CATASTROPHIC PRESCRIPTION MEDICINE BENEFIT.

If the mid-summer 2000 budget estimate prepared by the Director of the Congressional Budget Office results in a higher level of projected on-budget surplus over the ten fiscal year period beginning with fiscal year 2001 than the projected on-budget surplus in the estimate prepared by the Director in March, 2000, there shall be transferred out of any moneys in the Treasury not otherwise appropriated in a fiscal year (beginning with fiscal year 2003) to the Prescription Medicine Insurance Account (created in the Federal Supplemental Medical Insurance Trust Fund established by section 1841 of the Social Security Act (42 U.S.C. 1395t)) such sums as are necessary to offset the costs attributable to the operation of section 1860B(a)(2) of the Social Security Act (as added by section 3) (relating to catastrophic benefit payment amounts) in that fiscal year.

SEC. 104. GAO ONGOING STUDIES AND REPORTS ON PROGRAM; MISCELLANEOUS REPORTS.

(a) ONGOING STUDY- The Comptroller General of the United States shall conduct an ongoing study and analysis of the prescription medicine benefit program under part D of the Medicare program under title XVIII of the Social Security Act (as added by section 3 of this Act), including an analysis of each of the following:

(1) The extent to which the administering entities have -achieved volume-based discounts similar to the favored -price paid by other large purchasers.

(2) Whether access to the benefits under such program are in fact available to all beneficiaries, with special attention given to access for beneficiaries living in rural and hard-to-serve areas.

(3) The success of such program in reducing medication error and adverse medicine reactions and improving quality of care, and whether it is probable that the program has resulted in savings through reduced hospitalizations and morbidity due to medication errors and adverse medicine reactions.

(4) Whether patient medical record confidentiality is being maintained and safe-guarded.

(5) Such other issues as the Comptroller General may consider.

(b) REPORTS- The Comptroller General shall issue such reports on the results of the ongoing study described in (a) as the Comptroller General shall deem appropriate and shall notify Congress on a timely basis of significant problems in the operation of the part D prescription medicine program and the need for legislative adjustments and improvements.

(c) MISCELLANEOUS STUDIES AND REPORTS-

(1) STUDY ON METHODS TO ENCOURAGE ADDITIONAL RESEARCH ON BREAKTHROUGH PHARMACEUTICALS-

(A) IN GENERAL- The Secretary of Health and Human Services shall seek the advice of the Secretary of the Treasury on possible tax and trade law changes to encourage increased original research on new pharmaceutical breakthrough products designed to address disease and illness.

(B) REPORT- Not later than January 1, 2003, the Secretary shall submit to Congress a report on such study. The report shall include recommended methods to encourage the pharmaceutical industry to devote more resources to research and development of new covered products than it devotes to overhead expenses.

(2) STUDY ON PHARMACEUTICAL SALES PRACTICES AND IMPACT ON COSTS AND QUALITY OF CARE-

(A) IN GENERAL- The Secretary of Health and Human Services shall conduct a study on the methods used by the pharmaceutical industry to advertise and sell to consumers and educate and sell to providers.

(B) REPORT- Not later than January 1, 2003, the Secretary shall submit to Congress a report on such study. The report shall include the estimated direct and indirect costs of the sales methods used, the quality of the information conveyed, and whether such sales efforts leads (or could lead) to inappropriate prescribing. Such report may include legislative and regulatory recommendations to encourage more appropriate education and prescribing practices.

(3) STUDY ON COST OF PHARMACEUTICAL RESEARCH-

(A) IN GENERAL- The Secretary of Health and Human Services shall conduct a study on the costs of, and needs for, the pharmaceutical research and the role

that the taxpayer provides in encouraging such research.

(B) REPORT- Not later than January 1, 2003, the Secretary shall submit to Congress a report on such study. The report shall include a description of the full-range of taxpayer-assisted programs impacting pharmaceutical research, including tax, trade, government research, and regulatory assistance. The report may also include legislative and regulatory recommendations that are designed to ensure that the taxpayer's investment in pharmaceutical research results in the availability of pharmaceuticals at reasonable prices.

(4) REPORT ON PHARMACEUTICAL PRICES IN MAJOR FOREIGN NATIONS- Not later than January 1, 2003, the Secretary of Health and Human Services shall submit to Congress a report on the retail price of major pharmaceutical products in various developed nations, compared to prices for the same or similar products in the United States. The report shall include a description of the principal reasons for any price differences that may exist.

TITLE II--IMPROVEMENT IN BENEFICIARY SERVICES

Subtitle A--Improvement of Medicare Coverage and Appeals Process

SEC. 201. REVISIONS TO MEDICARE APPEALS PROCESS.

(a) CONDUCT OF RECONSIDERATIONS OF DETERMINATIONS BY INDEPENDENT CONTRACTORS- Section 1869 of the Social Security Act (42 U.S.C. 1395ff) is amended to read as follows:

`DETERMINATIONS; APPEALS

`SEC. 1869. (a) INITIAL DETERMINATIONS- The Secretary shall promulgate regulations and make initial determinations with respect to benefits under part A or part B in accordance with those regulations for the following:

`(1) The initial determination of whether an individual is entitled to benefits under such parts.

`(2) The initial determination of the amount of benefits available to the individual under such parts.

`(3) Any other initial determination with respect to a claim for benefits under such parts, including an initial determination by the Secretary that payment may not be made, or may no longer be made, for an item or service under such parts, an initial determination made by a utilization and quality control peer review organization under section 1154(a)(2), and an initial determination made by an entity pursuant to a contract with the Secretary to administer provisions of this title or title XI.

`(b) APPEAL RIGHTS-

`(1) IN GENERAL-

`(A) RECONSIDERATION OF INITIAL DETERMINATION- Subject to subparagraph (D), any individual dissatisfied with any initial determination under subsection (a) shall be entitled to reconsideration of the determination, and, subject to subparagraphs (D) and (E), a hearing thereon by the Secretary to the same extent as is provided in section 205(b) and to judicial review of the Secretary's final decision after such hearing as is provided in section 205(g).

`(B) REPRESENTATION BY PROVIDER OR SUPPLIER-

`(i) IN GENERAL- Sections 206(a), 1102, and 1871 shall not be construed as authorizing the Secretary to prohibit an individual from being represented under this section by a person that furnishes or supplies the individual, directly or indirectly, with services or items, solely on the basis that the person furnishes or supplies the individual with such a service or item.

`(ii) MANDATORY WAIVER OF RIGHT TO PAYMENT FROM BENEFICIARY- Any person that furnishes services or items to an individual may not represent an individual under this section with respect to the issue described in section 1879(a)(2) unless the person has waived any rights for payment from the beneficiary with respect to the services or items involved in the appeal.

`(iii) PROHIBITION ON PAYMENT FOR REPRESENTATION- If a person furnishes services or items to an individual and represents the individual under this section, the person may not impose any financial liability on such individual in connection with such representation.

`(iv) REQUIREMENTS FOR REPRESENTATIVES OF A BENEFICIARY- The provisions of section 205(j) and section 206 (regarding representation of claimants) shall apply to representation of an individual with respect to appeals under this section in the same manner as they apply to representation of an individual under those sections.

`(C) SUCCESSION OF RIGHTS IN CASES OF ASSIGNMENT- The right of an individual to an appeal under this section with respect to an item or service may be assigned to the provider of services or supplier of the item or service upon the written consent of such individual using a standard form established by the Secretary for such an assignment.

`(D) TIME LIMITS FOR APPEALS-

`(i) RECONSIDERATIONS- Reconsideration under subparagraph (A) shall be available only if the individual described in subparagraph (A) files notice with the Secretary to request reconsideration by not later than 180 days after the individual receives notice of the initial determination under subsection (a) or within such additional time as the Secretary may allow.

`(ii) HEARINGS CONDUCTED BY THE SECRETARY- The Secretary shall establish in regulations time limits for the filing of a request for a hearing by the Secretary in accordance with provisions in sections 205 and 206.

`(E) AMOUNTS IN CONTROVERSY-

`(i) IN GENERAL- A hearing (by the Secretary) shall not be available to an individual under this section if the amount in controversy is less than $100, and judicial review shall not be available to the individual if the amount in controversy is less than $1,000.

`(ii) AGGREGATION OF CLAIMS- In determining the amount in controversy, the Secretary, under regulations, shall allow 2 or more appeals to be aggregated if the appeals involve--

`(I) the delivery of similar or related services to the same individual by one or more providers of services or suppliers, or

`(II) common issues of law and fact arising from services furnished to 2 or more individuals by one or more providers of services or suppliers.

`(F) EXPEDITED PROCEEDINGS-

`(i) EXPEDITED DETERMINATION- In the case of an individual who--

`(I) has received notice by a provider of services that the provider of services plans to terminate services provided to an individual and a physician certifies that failure to continue the provision of such services is likely to place the individual's health at significant risk, or

`(II) has received notice by a provider of services that the provider of services plans to discharge the individual from the provider of services,

the individual may request, in writing or orally, an expedited determination or an expedited reconsideration of an initial determination made under subsection (a), as the case may be, and the Secretary

shall provide such expedited determination or expedited reconsideration.

`(ii) EXPEDITED HEARING- In a hearing by the Secretary under this section, in which the moving party alleges that no material issues of fact are in dispute, the Secretary shall make an expedited determination as to whether any such facts are in dispute and, if not, shall render a decision expeditiously.

`(G) REOPENING AND REVISION OF DETERMINATIONS- The Secretary may reopen or revise any initial determination or reconsidered determination described in this subsection under guidelines established by the Secretary in regulations.

`(2) REVIEW OF COVERAGE DETERMINATIONS-

`(A) NATIONAL COVERAGE DETERMINATIONS-

`(i) IN GENERAL- Review of any national coverage determination shall be subject to the following limitations:

`(I) Such a determination shall not be reviewed by any administrative law judge.

`(II) Such a determination shall not be held unlawful or set aside on the ground that a requirement of section 553 of title 5, United States Code, or section 1871(b) of this title, relating to publication in the Federal Register or opportunity for public comment, was not satisfied.

`(III) Upon the filing of a complaint by an aggrieved party, such a determination shall be reviewed by the Departmental Appeals Board of the Department of Health and Human Services. In conducting such a review, the Departmental Appeals Board shall review the record and shall permit discovery and the taking of evidence to evaluate the reasonableness of the determination. In reviewing such a determination, the Departmental Appeals Board shall defer only to the reasonable findings of fact, reasonable interpretations of law, and reasonable applications of fact to law by the Secretary.

`(IV) A decision of the Departmental Appeals Board constitutes a final agency action and is subject to judicial review.

`(ii) DEFINITION OF NATIONAL COVERAGE DETERMINATION- For purposes of this section, the term `national coverage determination' means a determination by the Secretary respecting whether or not a particular item or service is covered nationally under this title, including such a determination under 1862(a)(1).

`(B) LOCAL COVERAGE DETERMINATION- In the case of a local coverage determination made by a fiscal intermediary or a carrier under part A or part B respecting whether a particular type or class of items or services is covered under such parts, the following limitations apply:

`(i) Upon the filing of a complaint by an aggrieved party, such a determination shall be reviewed by an administrative law judge of the Social Security Administration. The administrative law judge shall review the record and shall permit discovery and the taking of evidence to evaluate the reasonableness of the determination. In reviewing such a determination, the administrative law judge shall defer only to the reasonable findings of fact, reasonable interpretations of law, and reasonable applications of fact to law by the Secretary.

`(ii) Such a determination may be reviewed by the Departmental Appeals Board of the Department of Health and Human Services.

`(iii) A decision of the Departmental Appeals Board constitutes a final agency action and is subject to judicial review.

`(C) NO MATERIAL ISSUES OF FACT IN DISPUTE- In the case of review of a determination under subparagraph (A)(i)(III) or (B)(i) where the moving party alleges that there are no material issues of fact in dispute, and alleges that the only issue is the constitutionality of a provision of this title, or that a regulation, determination, or ruling by the Secretary is invalid, the moving party may seek review by a court of competent jurisdiction.

`(D) PENDING NATIONAL COVERAGE DETERMINATIONS-

`(i) IN GENERAL- In the event the Secretary has not issued a national coverage or noncoverage determination with respect to a particular type or class of items or services, an affected party may submit to the Secretary a request to make such a determination with respect to such items or services. By not later than the end of the 90-day period beginning on the date the Secretary receives such a request, the Secretary shall take one of the following actions:

`(I) Issue a national coverage determination, with or without limitations.

`(II) Issue a national noncoverage determination.

`(III) Issue a determination that no national coverage or noncoverage determination is appropriate as of the end of such 90-day period with respect to national coverage of such items or services.

`(IV) Issue a notice that states that the Secretary has not completed a review of the request for a national coverage determination and that includes an identification of the remaining steps in the Secretary's review process and a deadline by which the Secretary will complete the review and take an action described in subclause (I), (II), or (III).

`(ii) In the case of an action described in clause (i)(IV), if the Secretary fails to take an action referred to in such clause by the deadline specified by the Secretary under such clause, then the Secretary is deemed to have taken an action described in clause (i)(III) as of the deadline.

`(iii) When issuing a determination under clause (i), the Secretary shall include an explanation of the basis for the determination. An action taken under clause (i) (other than subclause (IV)) is deemed to be a national coverage determination for purposes of review under subparagraph (A).

`(E) ANNUAL REPORT ON NATIONAL COVERAGE DETERMINATIONS-

`(i) IN GENERAL- Not later than December 1 of each year, beginning in 2001, the Secretary shall submit to Congress a report that sets forth a detailed compilation of the actual time periods that were necessary to complete and fully implement national coverage determinations that were made in the previous fiscal year for items, services, or medical devices not previously covered as a benefit under this title, including, with respect to each new item, service, or medical device, a statement of the time taken by the Secretary to make the necessary coverage, coding, and payment determinations, including the time taken to complete each significant step in the process of making such determinations.

`(ii) PUBLICATION OF REPORTS ON THE INTERNET- The Secretary shall publish each report submitted under clause (i) on the medicare Internet site of the Department of Health and Human Services.

`(3) PUBLICATION ON THE INTERNET OF DECISIONS OF HEARINGS OF THE SECRETARY- Each decision of a hearing by the Secretary shall be made public, and the Secretary shall publish each decision on the Medicare Internet site of the Department of Health and Human Services. The Secretary shall remove from such decision any information

that would identify any individual, provider of services, or supplier.

`(4) LIMITATION ON REVIEW OF CERTAIN REGULATIONS- A regulation or instruction which relates to a method for determining the amount of payment under part B and which was initially issued before January 1, 1981, shall not be subject to judicial review.

`(5) STANDING- An action under this section seeking review of a coverage determination (with respect to items and services under this title) may be initiated only by one (or more) of the following aggrieved persons, or classes of persons:

`(A) Individuals entitled to benefits under part A, or enrolled under part B, or both, who are in need of the items or services that are the subject of the coverage determination.

`(B) Persons, or classes of persons, who make, manufacture, offer, supply, make available, or provide such items and services.

`(c) CONDUCT OF RECONSIDERATIONS BY INDEPENDENT CONTRACTORS-

`(1) IN GENERAL- The Secretary shall enter into contracts with qualified independent contractors to conduct reconsiderations of initial determinations made under paragraphs (2) and (3) of subsection (a). Contracts shall be for an initial term of three years and shall be renewable on a triennial basis thereafter.

`(2) QUALIFIED INDEPENDENT CONTRACTOR- For purposes of this subsection, the term `qualified independent contractor' means an entity or organization that is independent of any organization under contract with the Secretary that makes initial determinations under subsection (a), and that meets the requirements established by the Secretary consistent with paragraph (3).

`(3) REQUIREMENTS- Any qualified independent contractor entering into a contract with the Secretary under this subsection shall meet the following requirements:

`(A) IN GENERAL- The qualified independent contractor shall perform such duties and functions and assume such responsibilities as may be required under regulations of the Secretary promulgated to carry out the provisions of this subsection, and such additional duties, functions, and responsibilities as provided under the contract.

`(B) DETERMINATIONS- The qualified independent contractor shall determine, on the basis of such criteria, guidelines, and policies established by the Secretary and published under subsection (d)(2)(D), whether payment shall be made for items or services under part A or part B and the amount of such payment. Such determination shall constitute the conclusive determination on those issues for purposes of payment under such parts for fiscal intermediaries, carriers, and other entities whose determinations are subject to review by the contractor; except that payment may be made if--

`(i) such payment is allowed by reason of section 1879;

`(ii) in the case of inpatient hospital services or extended care services, the qualified independent contractor determines that additional time is required in order to arrange for postdischarge care, but payment may be continued under this clause for not more than 2 days, and only in the case in which the provider of such services did not know and could not reasonably have been expected to know (as determined under section 1879) that payment would not otherwise be made for such services under part A or part B prior to notification by the qualified independent contractor under this subsection;

`(iii) such determination is changed as the result of any hearing by the Secretary or judicial review of the decision under this section; or

`(iv) such payment is authorized under section 1861(v)(1)(G).

`(C) DEADLINES FOR DECISIONS-

`(i) DETERMINATIONS- The qualified independent contractor shall conduct and conclude a determination under subparagraph (B) or an appeal of an initial determination, and mail the notice of the decision by not later than the end of the 45-day period beginning on the date a request for reconsideration has been timely filed.

`(ii) CONSEQUENCES OF FAILURE TO MEET DEADLINE- In the case of a failure by the qualified independent contractor to mail the notice of the decision by the end of the period described in clause (i), the party requesting the reconsideration or appeal may request a hearing before an administrative law judge, notwithstanding any requirements for a reconsidered determination for purposes of the party's right to such hearing.

`(iii) EXPEDITED RECONSIDERATIONS- The qualified independent contractor shall perform an expedited reconsideration under subsection (b)(1)(F) of a notice from a provider of services or supplier that payment may not be made for an item or service furnished by the provider of services or supplier, of a decision by a provider of services to terminate services furnished to an individual, or in accordance with the following:

`(I) DEADLINE FOR DECISION- Notwithstanding section 216(j), not later than 1 day after the date the qualified independent contractor has received a request for such reconsideration and has received such medical or other records needed for such reconsideration, the qualified independent contractor shall provide notice (by telephone and in writing) to the individual and the provider of services and attending physician of the individual of the results of the reconsideration. Such reconsideration shall be conducted regardless of whether the provider of services or supplier will charge the individual for continued services or whether the individual will be liable for payment for such continued services.

`(II) CONSULTATION WITH BENEFICIARY- In such reconsideration, the qualified independent contractor shall solicit the views of the individual involved.

`(D) LIMITATION ON INDIVIDUAL REVIEWING DETERMINATIONS-

`(i) PHYSICIANS- No physician under the employ of a qualified independent contractor may review--

`(I) determinations regarding health care services furnished to a patient if the physician was directly responsible for furnishing such services; or

`(II) determinations regarding health care services provided in or by an institution, organization, or agency, if the physician or any member of the physician's family has, directly or indirectly, a significant financial interest in such institution, organization, or agency.

`(ii) PHYSICIAN'S FAMILY DESCRIBED- For purposes of this paragraph, a physician's family includes the physician's spouse (other than a spouse who is legally separated from the physician under a decree of divorce or separate maintenance), children (including stepchildren and legally adopted children), grandchildren, parents, and grandparents.

`(E) EXPLANATION OF DETERMINATIONS- Any determination of a qualified independent contractor shall be in writing, and shall include a detailed explanation of the determination as well as a discussion of the pertinent facts and applicable regulations applied in making such determination.

`(F) NOTICE REQUIREMENTS- Whenever a qualified independent contractor makes a determination under this subsection, the qualified independent contractor shall promptly notify such individual and the entity responsible for the payment of claims under part A or part B of such determination.

`(G) DISSEMINATION OF INFORMATION- Each qualified independent contractor shall, using the methodology established by the Secretary under subsection (d)(4), make available all determinations of such qualified independent contractors to fiscal intermediaries (under section 1816), carriers (under section 1842), peer review organizations (under part B of title XI), Medicare+Choice organizations offering Medicare+Choice plans under part C, and other entities under contract with the Secretary to make initial determinations under part A or part B or title XI.

`(H) ENSURING CONSISTENCY IN DETERMINATIONS- Each qualified independent contractor shall monitor its determinations to ensure the consistency of its determinations with respect to requests for reconsideration of similar or related matters.

`(I) DATA COLLECTION-

`(i) IN GENERAL- Consistent with the requirements of clause (ii), a qualified independent contractor shall collect such information relevant to its functions, and keep and maintain such records in such form and manner as the Secretary may require to carry out the purposes of this section and shall permit access to and use of any such information and records as the Secretary may require for such purposes.

`(ii) TYPE OF DATA COLLECTED- Each qualified independent contractor shall keep accurate

records of each decision made, consistent with standards established by the Secretary for such purpose. Such records shall be maintained in an electronic database in a manner that provides for identification of the following:

`(I) Specific claims that give rise to appeals.

`(II) Situations suggesting the need for increased education for providers of services, physicians, or suppliers.

`(III) Situations suggesting the need for changes in national or local coverage policy.

`(IV) Situations suggesting the need for changes in local medical review policies.

`(iii) ANNUAL REPORTING- Each qualified independent contractor shall submit annually to the Secretary (or otherwise as the Secretary may request) records maintained under this paragraph for the previous year.

`(J) HEARINGS BY THE SECRETARY- The qualified independent contractor shall (i) prepare such information as is required for an appeal of its reconsidered determination to the Secretary for a hearing, including as necessary, explanations of issues involved in the determination and relevant policies, and (ii) participate in such hearings as required by the Secretary.

`(4) NUMBER OF QUALIFIED INDEPENDENT CONTRACTORS- The Secretary shall enter into contracts with not fewer than 12 qualified independent contractors under this subsection.

`(5) LIMITATION ON QUALIFIED INDEPENDENT CONTRACTOR LIABILITY- No qualified independent contractor having a contract with the Secretary under this subsection and no person who is employed by, or who has a fiduciary relationship with, any such qualified independent contractor or who furnishes professional services to such qualified independent contractor, shall be held by reason of the performance of any duty, function, or activity required or authorized pursuant to this subsection or to a valid contract entered into under this subsection, to have violated any criminal law, or to be civilly liable under any law of the United States or of any State (or political subdivision thereof) provided due care was exercised in the performance of such duty, function, or activity.

`(d) ADMINISTRATIVE PROVISIONS-

`(1) OUTREACH- The Secretary shall perform such outreach activities as are necessary to inform individuals entitled to benefits under this title and providers of services and suppliers with respect to their rights of, and the process for, appeals made under this section. The Secretary shall use the toll-free telephone number maintained by the Secretary (1-800-MEDICAR(E)) (1-800-633-4227) to provide information regarding appeal rights and respond to inquiries regarding the status of appeals.

`(2) GUIDANCE FOR RECONSIDERATIONS AND HEARINGS-

`(A) REGULATIONS- Not later than 1 year after the date of the enactment of this section, the Secretary shall promulgate regulations governing the processes of reconsiderations of determinations by the Secretary and qualified independent contractors and of hearings by the Secretary. Such regulations shall include such specific criteria and provide such guidance as required to ensure the adequate functioning of the reconsiderations and hearings processes and to ensure consistency in such processes.

`(B) DEADLINES FOR ADMINISTRATIVE ACTION-

`(i) HEARING BY ADMINISTRATIVE LAW JUDGE-

`(I) IN GENERAL- Except as provided in subclause (II), an administrative law judge shall conduct and conclude a hearing on a decision of a qualified independent contractor under subsection (c) and render a decision on such hearing by not later than the end of the 90-day period beginning on the date a request for hearing has been timely filed.

`(II) WAIVER OF DEADLINE BY PARTY SEEKING HEARING- The 90-day period under subclause (i) shall not apply in the case of a motion or stipulation by the party requesting the hearing to waive such period.

`(ii) DEPARTMENTAL APPEALS BOARD REVIEW- The Departmental Appeals Board of the Department of Health and Human Services shall conduct and conclude a review of the decision on a hearing described in subparagraph (B) and make a decision or remand the case to the administrative law judge for reconsideration by not later than the end of the 90-day period beginning on the date a request for review has been timely filed.

`(iii) CONSEQUENCES OF FAILURE TO MEET DEADLINES- In the case of a failure by an administrative law judge to render a decision by the end of the period described in clause (ii), the party requesting the hearing may request a review by the Departmental Appeals Board of the Department of Health and Human Services, notwithstanding any requirements for a hearing for purposes of the party's right to such a review.

`(iv) DAB HEARING PROCEDURE- In the case of a request described in clause (iii), the Departmental Appeals Board shall review the case de novo.

`(C) POLICIES- The Secretary shall provide such specific criteria and guidance, including all applicable national and local coverage policies and rationale for such policies, as is necessary to assist the qualified independent contractors to make informed decisions in considering appeals under this section. The Secretary shall furnish to the qualified independent contractors the criteria and guidance described in this paragraph in a published format, which may be an electronic format.

`(D) PUBLICATION OF MEDICARE COVERAGE POLICIES ON THE INTERNET- The Secretary shall publish national and local coverage policies under this title on an Internet site maintained by the Secretary.

`(E) EFFECT OF FAILURE TO PUBLISH POLICIES-

`(i) NATIONAL AND LOCAL COVERAGE POLICIES- Qualified independent contractors shall not be bound by any national or local medicare coverage policy established by the Secretary that is not published on the Internet site under subparagraph (D).

`(ii) OTHER POLICIES- With respect to policies established by the Secretary other than the policies described in clause (i), qualified independent contractors shall not be bound by such policies if the Secretary does not furnish to the qualified independent contractor the policies in a published format consistent with subparagraph (C).

`(3) CONTINUING EDUCATION REQUIREMENT FOR QUALIFIED INDEPENDENT CONTRACTORS AND ADMINISTRATIVE LAW JUDGES-

`(A) IN GENERAL- The Secretary shall provide to each qualified independent contractor, and, in consultation with the Commissioner of Social Security, to administrative law judges that decide appeals of reconsiderations of initial determinations or other decisions or determinations under this section, such continuing education with respect to policies of the Secretary under this title or part B of title XI as is necessary for such qualified independent contractors and administrative law judges to make informed decisions with respect to appeals.

`(B) MONITORING OF DECISIONS BY QUALIFIED INDEPENDENT CONTRACTORS AND ADMINISTRATIVE LAW JUDGES- The Secretary shall monitor determinations made by all qualified independent contractors and administrative law judges under this section and shall provide continuing education and training to such qualified independent contractors and administrative law judges to ensure consistency of determinations with respect to appeals on similar or related matters. To ensure such consistency, the Secretary shall provide for administration and oversight of qualified independent contractors and, in consultation with the Commissioner of Social Security, administrative law judges through a central office of the Department of Health and Human Services. Such administration and oversight may not be delegated to regional offices of the Department.

`(4) DISSEMINATION OF DETERMINATIONS- The Secretary shall establish a methodology under which qualified independent contractors shall carry out subsection (c)(3)(G).

`(5) SURVEY- Not less frequently than every 5 years, the Secretary shall conduct a survey of a valid sample of individuals entitled to benefits under this title, providers of services, and suppliers to determine the satisfaction of such individuals or entities with the process for appeals of determinations provided for under this section and education and training provided by the Secretary with respect to that process. The Secretary shall submit to Congress a report describing the results of the survey, and shall include any recommendations for administrative or legislative actions that the Secretary determines appropriate.

`(6) REPORT TO CONGRESS- The Secretary shall submit to Congress an annual report describing the number of appeals for the previous year, identifying issues that require administrative or legislative actions, and including any recommendations of the Secretary with respect to such actions. The Secretary shall include in such report an analysis of determinations by qualified independent contractors with respect to inconsistent decisions and an analysis of the causes of any such inconsistencies.'.

(b) APPLICABILITY OF REQUIREMENTS AND LIMITATIONS ON LIABILITY OF QUALIFIED INDEPENDENT CONTRACTORS TO MEDICARE+CHOICE INDEPENDENT APPEALS CONTRACTORS- Section 1852(g)(4) of the Social Security Act (42 U.S.C. 1395w-22(e)(3)) is amended by adding at the end the following: `The provisions of section 1869(c)(5) shall apply to independent outside entities under contract with the Secretary under this paragraph.'.

(c) CONFORMING AMENDMENT TO REVIEW BY THE PROVIDER REIMBURSEMENT REVIEW BOARD- Section 1878(g) of the Social Security Act (42 U.S.C. 1395oo(g)) is amended by adding at the end the following new paragraph:

`(3) Findings described in paragraph (1) and determinations and other decisions described in paragraph (2) may be reviewed or appealed under section 1869.'.

SEC. 202. PROVISIONS WITH RESPECT TO LIMITATIONS ON LIABILITY OF BENEFICIARIES.

(a) EXPANSION OF LIMITATION OF LIABILITY PROTECTION FOR BENEFICIARIES WITH RESPECT TO MEDICARE CLAIMS NOT PAID OR PAID INCORRECTLY-

(1) IN GENERAL- Section 1879 of the Social Security Act (42 U.S.C. 1395pp) is amended by adding at the end the following new subsections:

`(i) Notwithstanding any other provision of this Act, an individual who is entitled to benefits under this title and is furnished a service or item is not liable for repayment to the Secretary of amounts with respect to such benefits--

`(1) subject to paragraph (2), in the case of a claim for such item or service that is incorrectly paid by the Secretary; and

`(2) in the case of payments made to the individual by the Secretary with respect to any claim under paragraph (1), the individual shall be liable for repayment of such amount only up to the amount of payment received by the individual from the Secretary.

`(j)(1) An individual who is entitled to benefits under this title and is furnished a service or item is not liable for payment of amounts with respect to such benefits in the following cases:

`(A) In the case of a benefit for which an initial determination has not been made by the Secretary under subsection (a) whether payment may be made under this title for such benefit.

`(B) In the case of a claim for such item or service that is--

`(i) improperly submitted by the provider of services or supplier; or

`(ii) rejected by an entity under contract with the Secretary to review or pay claims for services and items furnished under this title, including an entity under contract with the Secretary under section 1857.

`(2) The limitation on liability under paragraph (1) shall not apply if the individual signs a waiver provided by the Secretary under subsection (l) of protections under this paragraph, except that any such waiver shall not apply in the case of a denial of a claim for noncompliance with applicable regulations or procedures under this title or title XI.

`(k) An individual who is entitled to benefits under this title and is furnished services by a provider of services is not liable for payment of amounts with respect to such services prior to noon of the first working day after the date the individual receives the notice of determination to discharge and notice of appeal rights under paragraph (1), unless the following conditions are met:

`(1) The provider of services shall furnish a notice of discharge and appeal rights established by the Secretary under subsection (l) to each individual entitled to benefits under this title to whom such provider of services furnishes services, upon admission of the individual to the provider of services and upon notice of determination to discharge the individual from the provider of services, of the individual's limitations of liability under this section and rights of appeal under section 1869.

`(2) If the individual, prior to discharge from the provider of services, appeals the determination to discharge under section 1869 not later than noon of the first working day after the date the individual receives the notice of determination to discharge and notice of appeal rights under paragraph (1), the provider of services shall, by the close of business of such first working day, provide to the Secretary (or qualified independent contractor under section 1869, as determined by the Secretary) the records required to review the determination.

`(l) The Secretary shall develop appropriate standard forms for individuals entitled to benefits under this title to waive limitation of liability protections under subsection (j) and to receive notice of discharge and appeal rights under subsection (k). The forms developed by the Secretary under this subsection shall clearly and in plain language inform such individuals of their limitations on liability, their rights under section 1869(a) to obtain an initial determination by the Secretary of whether payment may be made under part A or part B for such benefit, and their rights of appeal under section 1869(b), and shall inform such individuals that they may obtain further information or file an appeal of the determination by use of the toll-free telephone number (1-800-MEDICAR(E)) (1-800-633-4227) maintained by the Secretary. The forms developed by the Secretary under this subsection shall be the only manner in which such individuals may waive such protections under this title or title XI.

`(m) An individual who is entitled to benefits under this title and is furnished an item or service is not liable for payment of cost sharing amounts of more than $50 with respect to such benefits unless the individual has been informed in advance of being furnished the item or service of the estimated amount of the cost sharing for the item or service using a standard form established by the Secretary.'.

(2) CONFORMING AMENDMENT- Section 1870(a) of the Social Security Act (42 U.S.C. 1395gg(a)) is amended by striking `Any payment under this title' and inserting `Except as provided in section 1879(i), any payment under this title'.

(b) INCLUSION OF BENEFICIARY LIABILITY INFORMATION IN EXPLANATION OF MEDICARE BENEFITS- Section 1806(a) of the Social Security Act (42 U.S.C. 1395b-7(a)) is amended--

(1) in paragraph (1), by striking `and' at the end;

(2) by redesignating paragraph (2) as paragraph (3); and

(3) by inserting after paragraph (1) the following new paragraph:

`(2) lists with respect to each item or service furnished the amount of the individual's liability for payment;';

(4) in paragraph (3), as so redesignated, by striking the period at the end and inserting `; and'; and

(5) by adding at the end the following new paragraph:

`(4) includes the toll-free telephone number (1-800-MEDICAR(E)) (1-800-633-4227) for information and questions concerning the statement, liability of the individual for payment, and appeal rights.'.

SEC. 203. WAIVERS OF LIABILITY FOR COST SHARING AMOUNTS.

(a) IN GENERAL- Section 1128A(i)(6)(A) of the Social Security Act (42 U.S.C. 1320a-7a(i)(6)(A)) is amended by striking clauses (i) through (iii) and inserting the following:

`(i) the waiver is offered as a part of a supplemental insurance policy or retiree health plan;

`(ii) the waiver is not offered as part of any advertisement or solicitation, other than in conjunction with a policy or plan described in clause (i);

`(iii) the person waives the coinsurance and deductible amount after the beneficiary informs the person that payment of the coinsurance or deductible amount would pose a financial hardship for the individual; or

`(iv) the person determines that the coinsurance and deductible amount would not justify the costs of collection.'.

(b) CONFORMING AMENDMENT- Section 1128B(b) of the Social Security Act (42 U.S.C. 1320a-7b(b)) is amended by adding at the end the following new paragraph:

`(4) In this section, the term `remuneration' includes the meaning given such term in section 1128A(i)(6).'.

Subtitle B--Establishment of Medicare Ombudsman

SEC. 211. ESTABLISHMENT OF MEDICARE OMBUDSMAN FOR BENEFICIARY ASSISTANCE AND ADVOCACY.

(a) IN GENERAL- Within the Health Care Financing Administration of the Department of Health and Human Services, there shall be a Medicare Ombudsman, appointed by the Secretary of Health and Human Services from among individuals with expertise and experience in the fields of health care and advocacy, to carry out the duties described in subsection (b).

(b) DUTIES- The Medicare Ombudsman shall--

(1) receive complaints, grievances, and requests for information submitted by a medicare beneficiary, with respect to any aspect of the medicare program;

(2) provide assistance with respect to complaints, grievances, and requests referred to in clause (i), including--

(A) assistance in collecting relevant information for such beneficiaries, to seek an appeal of a decision or determination made by a fiscal intermediary, carrier, Medicare+Choice organization, a benefit administrator responsible for administering the prescription medicine benefit program under part D of title XVIII of the Social Security Act, or the Secretary;

(B) assistance to such beneficiaries with any problems arising from disenrollment from a Medicare+Choice plan under part C of title XVIII of such Act or a benefit administrator responsible for administering such prescription medicine benefit program; and

(C) submit annual reports to Congress and the Secretary, and include in such reports recommendations for improvement in the administration of this title as the Medicare Ombudsman determines appropriate.

(c) COORDINATION WITH STATE OMBUDSMAN PROGRAMS AND CONSUMER ORGANIZATIONS- The Medicare Ombudsman shall, to the extent appropriate, coordinate with State medical Ombudsman programs, and with State- and community-based consumer organizations, to--

(1) provide information about the medicare program; and

(2) conduct outreach to educate medicare beneficiaries with respect to manners in which problems under the medicare program may be resolved or avoided.

(d) DEFINITIONS- In this section:

(1) The term `medicare beneficiary' means an individual entitled to benefits under part A of title XVIII of the Social Security Act, or enrolled under part B of such title, or both.

(2) The term `medicare program' means the insurance program established under title XVIII of the Social Security Act.

(3) The term `fiscal intermediary' has the meaning given such term under section 1816(a) of the Social Security Act (42 U.S.C. 1395h(a)).

(4) The term `carrier' has the meaning given such term under section 1842(f) of the Social Security Act (42 U.S.C. 1395u(f)).

(5) The term `Medicare+Choice organization' has the meaning given such term under section 1859(a)(1) of the Social Security Act (42 U.S.C. 1395w-29(a)(1)).

(6) The term `Secretary' means the Secretary of Health and Human Services.

TITLE III--MEDICARE+CHOICE REFORMS; PRESERVATION OF MEDICARE PART B DRUG BENEFIT

Subtitle A--Medicare+Choice Reforms

SEC. 301. INCREASE IN NATIONAL PER CAPITA MEDICARE+CHOICE GROWTH PERCENTAGE IN 2001 AND 2002.

Section 1853(c)(6)(B) of the Social Security Act (42 U.S.C. 1395w-23(c)(6)(B)) is amended--

(1) in clause (iv), by striking `for 2001, 0.5 percentage points' and inserting `for 2001, 0 percentage points'; and

(2) in clause (v), by striking `for 2002, 0.3 percentage points' and inserting `for 2002, 0 percentage points'.

SEC. 302. PERMANENTLY REMOVING APPLICATION OF BUDGET NEUTRALITY BEGINNING IN 2002.

Section 1853(c) of the Social Security Act (42 U.S.C. 1395w-23(c)) is amended--

(1) in paragraph (1)(A), in the matter following clause (ii), by inserting `(for years before 2002)' after `multiplied'; and

(2) in paragraph (5), by inserting `(before 2002)' after `for each year'.

SEC. 303. INCREASING MINIMUM PAYMENT AMOUNT.

(a) IN GENERAL- Section 1853(c)(1)(B)(ii) of the Social Security Act (42 U.S.C. 1395w-23(c)(1)(B)(ii)) is amended--

(1) by striking `(ii) For a succeeding year' and inserting `(ii)(I) Subject to subclause (II), for a succeeding year'; and

(2) by adding at the end the following new subclause:

`(II) For 2002 for any of the 50 States and the District of Columbia, $450.'.

(b) EFFECTIVE DATE- The amendments made by subsection (a) apply to years beginning with 2002.

SEC. 304. ALLOWING MOVEMENT TO 50:50 PERCENT BLEND IN 2002.

Section 1853(c)(2) of the Social Security Act (42 U.S.C. 1395w-23(c)(2)) is amended--

(1) by striking the period at the end of subparagraph (F) and inserting a semicolon; and

(2) by adding after and below subparagraph (F) the following:

`except that a Medicare+Choice organization may elect to apply subparagraph (F) (rather than subparagraph (E)) for 2002.'.

SEC. 305. INCREASED UPDATE FOR PAYMENT AREAS WITH ONLY ONE OR NO MEDICARE+CHOICE CONTRACTS.

(a) IN GENERAL- Section 1853(c)(1)(C)(ii) of the Social Security Act (42 U.S.C. 1395w-23(c)(1)(C)(ii)) is amended--

(1) by striking `(ii) For a subsequent year' and inserting `(ii)(I) Subject to subclause (II), for a subsequent year'; and

(2) by adding at the end the following new subclause:

`(II) During 2002, 2003, 2004, and 2005, in the case of a Medicare+Choice payment area in which there is no more than 1 contract entered into under this part as of July 1 before the beginning of the year, 102.5 percent of the annual Medicare+Choice capitation rate under this paragraph for the area for the previous year.'.

(b) CONSTRUCTION- The amendments made by subsection (a) do not affect the payment of a first time bonus under section 1853(i) of the Social Security Act (42 U.S.C. 1395w-23(i)).

SEC. 306. PERMITTING HIGHER NEGOTIATED RATES IN CERTAIN MEDICARE+CHOICE PAYMENT AREAS BELOW NATIONAL AVERAGE.

Section 1853(c)(1) of the Social Security Act (42 U.S.C. 1395w-23(c)(1)) is amended--

(1) in the matter before subparagraph (A), by striking `or (C)' and inserting `(C), or (D)'; and

(2) by adding at the end the following new subparagraph:

`(D) PERMITTING HIGHER RATES THROUGH NEGOTIATION-

`(i) IN GENERAL- For each year beginning with 2004, in the case of a Medicare+Choice payment area for which the Medicare+Choice capitation rate under this paragraph would otherwise be less than the United States per capita cost (USPCC), as calculated by the Secretary, a Medicare+Choice organization may negotiate with the Medicare Benefits Administrator an annual per capita rate that--

`(I) reflects an annual rate of increase up to the rate of increase specified in clause (ii);

`(II) takes into account audited current data supplied by the organization on its adjusted community rate (as defined in section 1854(f)(3)); and

`(III) does not exceed the United States per capita cost, as projected by the Secretary for the year involved.

`(ii) MAXIMUM RATE DESCRIBED- The rate of increase specified in this clause for a year is the rate of inflation in private health insurance for the year involved, as projected by the Medicare Benefits Administrator, and includes such adjustments as may be necessary--

`(I) to reflect the demographic characteristics in the population under this title; and

`(II) to eliminate the costs of prescription drugs.

`(iii) ADJUSTMENTS FOR OVER OR UNDER PROJECTIONS- If subparagraph is applied to an organization and payment area for a year, in applying this subparagraph for a subsequent year the provisions of paragraph (6)(C) shall apply in the same manner as such provisions apply under this paragraph.'.

SEC. 307. 10-YEAR PHASE IN OF RISK ADJUSTMENT BASED ON DATA FROM ALL SETTINGS.

Section 1853(a)(3)(C)(ii) of the Social Security Act (42 U.S.C. 1395w-23(c)(1)(C)(ii)) is amended--

(1) by striking the period at the end of subclause (II) and inserting a semicolon; and

(2) by adding after and below subclause (II) the following:

`and, beginning in 2004, insofar as such risk adjustment is based on data from all settings, the methodology shall be phased in equal increments over a 10 year period, beginning with 2004 or (if later) the first year in which such data is used.'.

Subtitle B--Preservation of Medicare Coverage of Drugs and Biologicals

SEC. 311. PRESERVATION OF COVERAGE OF DRUGS AND BIOLOGICALS UNDER PART B OF THE MEDICARE PROGRAM.

(a) IN GENERAL- Section 1861(s)(2) of the Social Security Act (42 U.S.C. 1395x(s)(2)) is amended, in each of subparagraphs (A) and (B), by striking `(including drugs and biologicals which cannot, as determined in accordance with regulations, be self-administered)' and inserting `(including injectable and infusable drugs and biologicals which are not usually self-administered by the patient)'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) applies to drugs and biologicals administered on or after October 1, 2000.

SEC. 312. COMPREHENSIVE IMMUNOSUPPRESSIVE DRUG COVERAGE FOR TRANSPLANT PATIENTS.

(a) REVISION OF MEDICARE COVERAGE FOR IMMUNOSUPPRESSIVE DRUGS-

(1) IN GENERAL- Section 1861(s)(2)(J) of the Social Security Act (42 U.S.C. 1395x(s)(2)(J)) (as amended by section 227(a) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-354), as enacted into law by section 1000(a)(6) of Public Law 106-113) is amended by striking `, to an individual who receives' and all that follows before the semicolon at the end and inserting `to an individual who has received an organ transplant'.

(2) CONFORMING AMENDMENTS-

(A) Section 1832 of the Social Security Act (42 U.S.C. 1395k) (as amended by section 227(b) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-354), as enacted into law by section 1000(a)(6) of Public Law 106-113) is amended--

(i) by striking subsection (b); and

(ii) by redesignating subsection (c) as subsection (b).

(B) Subsections (c) and (d) of section 227 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-355), as enacted into law by section 1000(a)(6) of Public Law 106-113, are repealed.

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to drugs furnished on or after the date of enactment of this Act.

(b) EXTENSION OF CERTAIN SECONDARY PAYER REQUIREMENTS- Section 1862(b)(1)(C) of the Social Security Act (42 U.S.C. 1395y(b)(1)(C)) is amended by adding at the end the following: `With regard to immunosuppressive drugs furnished on or after the date of enactment of the Medicare Guaranteed and Defined Rx Benefit and Health Provider Relief Act of 2000, this subparagraph shall be applied without regard to any time limitation.'.

(c) ESTABLISHMENT OF PART D CATASTROPHIC LIMIT ON PART B COPAYMENTS FOR IMMUNOSUPPRESSIVE DRUGS- Section 1833 of the Social Security Act (42 U.S.C. 1395l) is

amended by inserting after subsection (o) the following new subsection:

`(p) LIMITATION ON AMOUNT OF DEDUCTIBLES AND COINSURANCE FOR IMMUNOSUPPRESSIVE DRUGS FOR CERTAIN BENEFICIARIES- With respect to 2003 and each subsequent year, no deductibles and coinsurance applicable to immunosuppresive drugs (as described in section 1861(s)(2)(J)) in a year under this part shall be imposed to the extent that the individual has incurred expenditures in that year for out-of-pocket expenditures for immunosuppressive drugs in excess of the catastrophic benefit level provided for under section 1860B(c).'.

Subtitle C--Improvement of Certain Preventive Benefits

SEC. 321. COVERAGE OF ANNUAL SCREENING PAP SMEAR AND PELVIC EXAMS.

(a) IN GENERAL-

(1) ANNUAL SCREENING PAP SMEAR- Section 1861(nn)(1) of the Social Security Act (42 U.S.C. 1395x(nn)(1)) is amended by striking `if the individual involved has not had such a test during the preceding 3 years, or during the preceding year in the case of a woman described in paragraph (3).' and inserting `if the woman involved has not had such a test during the preceding year.'.

(2) ANNUAL SCREENING PELVIC EXAM- Section 1861(nn)(2) of such Act (42 U.S.C. 1395x(nn)(2)) is amended by striking `during the preceding 3 years, or during the preceding year in the case of a woman described in paragraph (3),' and inserting `during the preceding year,'.

(3) CONFORMING AMENDMENT- Section 1861(nn) of such Act (42 U.S.C. 1395x(nn)) is amended by striking paragraph (3).

(b) EFFECTIVE DATE- The amendments made by subsection (a) apply to items and services furnished on or after January 1, 2001.

TITLE IV--ADJUSTMENTS TO PAYMENT PROVISIONS OF THE BALANCED BUDGET ACT

Subtitle A--Payments for Inpatient Hospital Services

SEC. 401. ELIMINATING REDUCTION IN HOSPITAL MARKET BASKET UPDATE FOR FISCAL YEAR 2001.

Section 1886(b)(3)(B)(i)(XVI) of the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)(XVI)) is amended by striking `minus 1.1 percentage points for hospitals (other than sole community hospitals) in all areas, and the market basket percentage increase for sole community hospitals,' and inserting `for hospitals in all areas,'.

SEC. 402. ELIMINATING FURTHER REDUCTIONS IN INDIRECT MEDICAL EDUCATION (IME) FOR FISCAL YEAR 2001.

Section 1886(d)(5)(B)(ii) of the Social Security Act (42 U.S.C. 1395ww(d)(5)(B)(ii)(V)) is amended--

(1) in subclause (IV)--

(A) by striking `fiscal year 2000' and inserting `each of fiscal years 2000 and 2001'; and

(B) by adding `and' at the end;

(2) by striking subclause (V); and

(3) by redesignating subclause (VI) as subclause (V).

SEC. 403. ELIMINATING FURTHER REDUCTIONS IN DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS.

(a) MEDICARE PAYMENTS- Section 1886(d)(5)(F)(ix) of the Social Security Act (42 U.S.C. 1395ww(d)(5)(F)(ix)) is amended--

(1) in subclause (III), by striking `and 2001';

(2) by redesignating subclauses (IV) and (V) as subclauses (V) and (VI), respectively; and

(3) by inserting after subclause (III) the following new subclause:

`(IV) during fiscal year 2001, such additional payment amount shall be reduced by 0 percent;'.

(b) FREEZE IN MEDICAID DSH ALLOTMENTS FOR FISCAL YEAR 2001- Notwithstanding section 1923(f)(2) of the Social Security Act (42 U.S.C. 1396r-4(f)(2)), the DSH allotment under such section for a State for fiscal year 2001 shall be the same as the DSH allotment under such section for fiscal year 2000.

SEC. 404. INCREASE BASE PAYMENT TO PUERTO RICO HOSPITALS.

Section 1886(d)(9)(A) of the Social Security Act (42 U.S.C. 1395ww(d)(9)(A)) is amended--

(1) in clause (i), by striking `October 1, 1997, 50 percent (' and inserting `October 1, 2000, 25 percent (for discharges between October 1, 1997 and September 30, 2000, 50 percent,'; and

(2) in clause (ii), in the matter preceding subclause (I), by striking `after October 1, 1997, 50 percent (' and inserting `after October 1, 2000, 75 percent (for discharges between October 1, 1997, and September 30, 2000, 50 percent,'.

Subtitle B--Payments for Skilled Nursing Services

SEC. 411. ELIMINATING REDUCTION IN SNF MARKET BASKET UPDATE FOR FISCAL YEAR 2001.

Section 1888(e)(4)(E) of the Social Security Act (42 U.S.C. 1395yy(e)(4)(E)) is amended--

(1) by redesignating subclauses (II) and (III) as subclauses (III) and (IV) respectively;

(2) in subclause (III) as redesignated, by striking `for each of fiscal years 2001 and 2002,' and inserting `for fiscal year 2002,'; and

(3) by inserting after subclause (I) the following new subclause:

`(II) for fiscal year 2001, the rate computed for fiscal year 2000 increased by the skilled nursing facility market basket percentage increase for fiscal year 2000.'.

SEC. 412. EXTENSION OF MORATORIUM ON THERAPY CAPS.

Section 1833(g) of the Social Security Act (42 U.S.C. 1395l(g)) is amended in paragraph (4) by striking `2000 and 2001.' and inserting `2000 through 2002.'.

Subtitle C--Payments for Home Health Services

SEC. 421. 1-YEAR ADDITIONAL DELAY IN APPLICATION OF 15 PERCENT REDUCTION ON PAYMENT LIMITS FOR HOME HEALTH SERVICES.

Section 1895(b)(3)(A)(i) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(A)(i)) is amended--

(1) by redesignating subparagraph (II) as subparagraph (III);

(2) by inserting in subparagraph (III), as redesignated, `24 months' following `periods beginning'; and

(3) by inserting after subclause (I) the following new subclause:

`(II) For the 12-month period beginning after the period described in subclause (I), such amount (or amounts) shall be equal to the amount (or amounts) determined under subclause (I), updated under subparagraph (B).'.

SEC. 422. PROVISION OF FULL MARKET BASKET UPDATE FOR HOME HEALTH SERVICES FOR FISCAL YEAR 2001.

Section 1861(v)(1)(L)(x) of the Social Security Act (42 U.S.C. 1395x(v)(1)(L)(x)) is amended--

(1) by striking `2001,'; and

(2) by adding at the end the following: `With respect to cost reporting periods beginning during fiscal year 2001, the update to any limit under this subparagraph shall be the home health market basket.'.

Subtitle D--Rural Provider Provisions

SEC. 431. ELIMINATION OF REDUCTION IN HOSPITAL OUTPATIENT MARKET BASKET INCREASE.

Section 1833(t)(3)(C)(iii) of the Social Security Act (42 U.S.C. 1395l(t)(3)(C)(iii)) is amended by striking `reduced by 1 percentage point for such factor for services furnished in each of 2000, 2001, and 2002' and inserting `reduced by 1 percentage point for such factor for services furnished in 2000 and reduced (except in the case of hospitals located in a rural area, as defined for purposes of section 1886(d)) by 1 percentage point for such factor for services furnished in each of 2001 and 2002.'

Subtitle E--Other Providers

SEC. 441. UPDATE IN RENAL DIALYSIS COMPOSITE RATE.

The last sentence of section 1881(b)(7) of the Social Security Act (42 U.S.C. 1395rr(b)(7)) is amended by striking `for such services furnished on or after January 1, 2001, by 1.2 percent' and inserting `for such services furnished on or after January 1, 2001, by 2.4 percent'.

Subtitle F--Provision for Additional Adjustments

SEC. 451. GUARANTEE OF ADDITIONAL ADJUSTMENTS TO PAYMENTS FOR PROVIDERS FROM BUDGET SURPLUS.

Notwithstanding any other provision of law, from amounts estimated to be in excess social security surpluses estimated under the Balanced Budget and Emergency Deficit Control Act of 1985 for the 5 fiscal year and 10 fiscal year periods beginning in fiscal year 2001, there shall be made available for further adjustments to payment policies established by the Balanced Budget Act of 1997, amounts that would provide for additional improvements to the medicare and medicaid programs carried out under titles XVIII and XIX of the Social Security Act and payments to providers of services and suppliers furnishing items and services for which payments is made under those programs in the aggregate amounts over such 5 fiscal year and 10 fiscal year periods of $11,000,000, and $21,000,000, respectively.

END