S 1480 IS

To amend title XVIII of the Social Security Act to assure access of medicare beneficiaries to prescription drug coverage through the SPICE drug benefit program.

August 4, 1999

Ms. SNOWE (for herself and Mr. WYDEN) introduced the following bill; which was read twice and referred to the Committee on Finance

To amend title XVIII of the Social Security Act to assure access of medicare beneficiaries to prescription drug coverage through the SPICE drug benefit program.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Seniors Prescription Insurance Coverage Equity (SPICE) Act of 1999'.

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

Sec. 1. Short title; table of contents.

Sec. 2. SPICE drug benefit program.

`Part D--SPICE Drug Benefit Program

Sec. 3. Conforming changes to medigap.

Sec. 4. Provision of information on SPICE drug benefit program under health insurance information, counseling, and assistance grants.

Sec. 5. Funding through taxes on tobacco products.

SEC. 2. SPICE DRUG BENEFIT PROGRAM.

Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is amended by redesignating part D as part E and by inserting after part C the following new part:

`Part D--SPICE Drug Benefit Program

`ESTABLISHMENT OF SPICE DRUG BENEFIT PROGRAM

`SEC. 1860A. (a) IN GENERAL- Under this part, the SPICE Board (established under section 1860E) shall provide for a SPICE drug benefit program under which--

`(1) all eligible medicare beneficiaries shall be provided access to SPICE prescription drug coverage (meeting the conditions of section 1860B) through either enrollment in a Medicare+Choice plan, enrollment in a SPICE medicare supplemental policy, or coverage under a group health plan; and

`(2) there is financial assistance provided under section 1860D for beneficiaries who voluntarily obtain such coverage, with such assistance varying depending upon the income of such beneficiaries.

`(b) VOLUNTARY NATURE OF PROGRAM FOR ENTITIES AND BENEFICIARIES- Nothing in this part shall be construed as requiring--

`(1) an eligible medicare beneficiary to obtain coverage under a plan or policy that provides SPICE prescription drug coverage;

`(2) a Medicare+Choice organization to offer a Medicare+Choice plan that provides SPICE prescription drug coverage; or

`(3) an issuer of a medicare supplemental policy to issue a SPICE medicare supplemental policy.

`(c) PROVIDING INFORMATION TO BENEFICIARIES-

`(1) IN GENERAL- The SPICE Board shall broadly disseminate information to eligible medicare beneficiaries on the SPICE drug benefit program under this part, including information on the sanctions for delayed enrollment under section 1860D(e).

`(2) SIMILAR TO MEDICARE+CHOICE ACTIVITIES- Such activities shall be similar to the activities performed under section 1851(d) (including the approval of policy marketing materials).

`(3) ARRANGEMENTS- The SPICE Board shall, in cooperation with the Secretary, enter into such arrangements as may be appropriate to disseminate widely to eligible medicare beneficiaries information about the SPICE drug benefit program in connection with materials distributed by the Secretary to medicare beneficiaries, including in the medicare handbook under section 1804 and in materials distributed under section 1851(d).

`(d) ELIGIBLE MEDICARE BENEFICIARY DEFINED- For purposes of this part, the term `eligible medicare beneficiary' means an individual who is entitled to benefits under part A and enrolled under part B.

`REQUIREMENTS FOR OFFERING SPICE DRUG BENEFIT COVERAGE

`SEC. 1860B. (a) REQUIREMENT FOR APPROVAL OF NAIC MODEL REVISIONS-

`(1) IN GENERAL-

`(A) CONDITION FOR OFFERING SPICE MEDICARE SUPPLEMENTAL POLICY- On or after the effective date of this provision, it is unlawful to issue or sell a medicare supplemental policy (as defined in section 1882(g)) that provides coverage of outpatient prescription drugs in a State unless--

`(i) the State has adopted the National Association of Insurance Commissioners revisions under section 1882(v)(1)(A) that have been approved by the SPICE Board under this section; and

`(ii) the coverage is offered consistent with section 1860C.

The penalties described in clause (ii) of section 1882(d)(3)(A) shall apply to whoever violates this subparagraph in the same manner as they apply to whoever violates such section.

`(B) CONDITION FOR RECEIPT OF SPICE FINANCIAL ASSISTANCE- No payment of financial assistance with respect to coverage of an eligible medicare beneficiary under SPICE prescription drug coverage which is offered either as a SPICE medicare supplemental policy, as part of the benefits under a Medicare+Choice plan, or as part of the benefits under a group health plan, shall be made unless--

`(i) an application with respect to such coverage has been approved by the SPICE Board under this section; and

`(ii) in the case of a SPICE medicare supplemental policy or a Medicare+Choice plan, the coverage is offered consistent with section 1860C.

`(2) ESTABLISHMENT OF APPLICATION PROCESS-

`(A) IN GENERAL- The SPICE Board shall establish--

`(i) procedures regarding the information to be included in applications under this section and for the time and manner in which such applications should be submitted;

`(ii) conditions (consistent with this part) for the approval of such applications; and

`(iii) the period (in no case less than 1 year) for which approval of such an application is valid.

`(B) DISAPPROVAL- The SPICE Board may disapprove (or revoke the approval) of such an application if the Board finds that, in the case of a SPICE medicare supplemental policy or Medicare+Choice plan, that the entity offering the SPICE prescription drug coverage is purposefully engaged in activities intended to result in favorable selection of those eligible medicare beneficiaries obtaining coverage through the policy or plan.

`(b) SPICE PRESCRIPTION DRUG COVERAGE DEFINED- For purposes of this title, the term `SPICE prescription drug coverage' means coverage of outpatient prescription drugs that the SPICE Board determines meets the following requirements:

`(1) BENEFIT LEVEL- The benefits provided--

`(A) are limited to outpatient prescription drugs;

`(B) include at least the threshold benefits specified under subsection (c); and

`(C) do not include benefits for prescription drugs for which benefits are otherwise available (directly or when furnished as part of, or as an incident to, another item or service) under part A or B.

`(2) ACCESSIBILITY- The benefits are accessible and convenient to all eligible medicare beneficiaries who have such coverage and provide for access on a timely basis to new outpatient prescription drugs and they become available.

`(3) NO PRE-EXISTING CONDITION EXCLUSIONS- There are no pre-existing condition exclusions or similar exclusions applied with respect to the coverage.

`(4) LIMITS ON FORMULARIES- If the coverage uses a formulary, the formulary meets the requirements of subsection (d).

`(c) THRESHOLD BENEFIT LEVEL-

`(1) IN GENERAL- The SPICE Board shall request the National Association of Insurance Commissioners to revise the model standards for medicare supplemental policies pursuant to section 1882(v) for the purpose of--

`(A) defining the term `outpatient prescription drugs'; and

`(B) specifying a threshold level of benefits for SPICE prescription drug coverage.

`(2) CONSIDERATIONS-

`(A) DEFINITION- In establishing a definition under paragraph (1)(A), the Board shall request that the National Association of Insurance Commissioners take into account the definition of covered outpatient drugs under section 1927(k)(2) (which includes biological products and insulin).

`(B) THRESHOLD- In specifying the threshold level under paragraph (1)(B), the Board shall request that the National Association of Insurance Commissioners--

`(i) take into account the level of such coverage (including deductibles and other cost-sharing) applied under health plans offered under the Federal Employees Health Benefits Program (under chapter 89 of title 5, United States Code) and under other large group health plans; and

`(ii) permit (if determined appropriate) optional coverage of drugs (except for agents used to promote smoking cessation) for which coverage may be excluded or restricted under section 1927(d)(2).

`(3) CONSTRUCTION- Nothing in this part shall be construed as preventing SPICE prescription drug coverage from providing benefits for outpatient prescription drugs in excess of the threshold specified under this subsection.

`(d) FORMULARY REQUIREMENTS-

`(1) IN GENERAL- A formulary meets the requirements of this subsection only if--

`(A) such formulary is based on the medical needs of eligible medicare beneficiaries;

`(B) the entity offering the coverage has in place an appeals process for any eligible medicare beneficiary to receive any medically necessary outpatient prescription drug that is not on the formulary;

`(C) such procedures do not impose a significant financial burden on an eligible medicare beneficiary or delay the provision of medically necessary outpatient prescription drugs to such a beneficiary; and

`(D) the entity offering the coverage provides notification to enrollees of any change in the formulary and such notification is provided at least 60 days prior to such change.

`(2) APPEAL PROCESS- The appeals process established under paragraph (1)(B) shall provide for at least a level of protection that is similar to or better than the level of protection provided with respect to benefits under Medicare+Choice plans under part C.

`(e) USE OF COST CONTAINMENT MECHANISMS- Nothing in this part shall be construed as preventing an entity offering SPICE prescription drug coverage from using reasonable cost containment methods, such as formularies, mail order services, and generic drug substitution, consistent with the specific requirements of this part and applicable law.

`ENROLLMENT PROCESS FOR SPICE DRUG BENEFIT COVERAGE

`SEC. 1860C. (a) ENROLLMENT PROCESS- The SPICE Board shall establish procedures, consistent with this section, through which an eligible medicare beneficiary may voluntarily elect whether or not to enroll, disenroll, and change enrollment in a SPICE medicare supplemental policy or in a Medicare+Choice plan that includes SPICE prescription drug coverage.

`(b) CONSIDERATIONS- In establishing such procedures, the SPICE Board shall--

`(1) use rules similar to the rules for enrollment, disenrollment, and changes in enrollment in a Medicare+Choice plan under section 1851 (including annual open enrollment periods and guaranteed issue during any enrollment period);

`(2) permit special enrollment periods in cases in which an eligible medicare beneficiary, who is enrolled under a Medicare+Choice plan or group health plan that provides SPICE prescription drug coverage--

`(A) loses such coverage under such a plan; or

`(B) experiences a significant adverse income level change (as defined by the SPICE Board) which changes the level of financial assistance available under section 1860D; and

`(3) provide for coordination with the Secretary with respect to such enrollment, disenrollment, and changes in enrollment under par C.

`FINANCIAL ASSISTANCE TO OBTAIN SPICE PRESCRIPTION DRUG COVERAGE

`SEC. 1860D. (a) IN GENERAL- The SPICE Board shall provide financial assistance, in accordance with this section, with respect to eligible medicare beneficiaries who have SPICE prescription drug coverage through enrollment in a SPICE medicare supplemental policy, in a Medicare+Choice plan that includes such coverage, or in a group health plan that includes such coverage.

`(b) AMOUNT OF ASSISTANCE-

`(1) IN GENERAL- Subject to subsections (e) and (f) and paragraph (2), the amount of financial assistance with respect to an eligible medicare beneficiary is equal to the following percentage of the applicable cost (as defined in subsection (g)(1)) of the SPICE prescription drug coverage:

`(A) 100 PERCENT IF INCOME BELOW 150 PERCENT OF POVERTY- In the case of an eligible medicare beneficiary who applies for enhanced financial assistance under subsection (c) and whose income (as verified under such subsection) does not exceed 150 percent of the poverty line, the percentage is 100 percent.

`(B) OTHER PERCENT IF INCOME BETWEEN 150 AND 175 PERCENT OF POVERTY- In the case of an eligible medicare beneficiary who applies for enhanced financial assistance under subsection (c) and whose income (as verified under such subsection) is greater than 150 percent, but does not exceed 175 percent, of the poverty line, the SPICE Board shall specify the percentage consistent with the following rules:

`(i) RANGE- The percentage may not exceed 100 percent nor be less than the percentage specified under subparagraph (C).

`(ii) SLIDING SCALE- The percentage may not be higher for eligible medicare beneficiaries whose income is higher.

`(iii) WITHIN AVAILABLE FUNDS- The percentage is established in a manner that is consistent with the amount of funds available for financial assistance under this section.

`(C) 25 PERCENT FOR OTHER BENEFICIARIES- In the case of any other eligible medicare beneficiary, the percentage is 25 percent.

`(2) LIMITATION IN CASE OF COVERAGE PROVIDED THROUGH A MEDICARE+CHOICE PLAN- In the case of financial assistance provided under this section with respect to SPICE prescription drug coverage provided through a Medicare+Choice plan, the amount of the financial assistance may not exceed the amount of the portion of the premium charged for enrollment in the plan that is related to outpatient prescription drugs.

`(c) APPLICATION FOR ENHANCED FINANCIAL ASSISTANCE-

`(1) IN GENERAL- The SPICE Board shall establish procedures under which an individual who desires enhanced financial assistance under this section may voluntarily apply for an income determination.

`(2) INCOME VERIFICATION-

`(A) IN GENERAL- Under the procedures established under paragraph (1), if an individual voluntarily applies for an income determination under this subsection, the individual is deemed to have consented to the SPICE Board seeking and using income-related information from other Government agencies in order to verify the individual's income.

`(B) RESTRICTION ON USE OF INFORMATION- Information obtained under subparagraph (A) may be used by officers and employees of the SPICE Board only for the purposes of, and to the extent necessary in, carrying out their responsibilities under this part.

`(3) PERIODIC REDETERMINATIONS- Such income determinations shall be valid for a period (of not less than 1 year) specified by the SPICE Board.

`(d) FORM OF ASSISTANCE-

`(1) IN GENERAL- Financial assistance under this section shall be provided in the form of a payment to the issuer of the SPICE medicare supplemental policy involved, the Medicare+Choice organization offering the Medicare+Choice plan involved, or the sponsor of the group health plan involved, of the amount of the subsidy. Such payment shall be in a manner and time provided for by the SPICE Board.

`(2) ADDITIONAL REQUIREMENT- No financial assistance shall be made available with respect to SPICE prescription drug coverage provided by an entity to an eligible medicare beneficiary unless the

entity provides assurances satisfactory to the SPICE Board that the entity shall reduce the amount otherwise charged the beneficiary for such coverage by an amount equal to the amount of such assistance.

`(3) SPECIAL RULE WHERE NO OR LOW PREMIUM CHARGED- The SPICE Board shall establish appropriate procedures to assure that eligible medicare beneficiaries who obtain SPICE prescription drug coverage through enrollment in a group health plan which does not impose a premium or imposes a premium that is less than the amount of the financial assistance otherwise provided, are provided the benefit of some of such financial assistance.

`(e) LATE ENROLLMENT PENALTY-

`(1) IN GENERAL- Subject to paragraph (2), the SPICE Board shall establish procedures for reducing the amount of financial assistance provided under this section on behalf of an eligible medicare beneficiary if the beneficiary fails to obtain and maintain SPICE prescription drug coverage during periods in which the beneficiary is eligible to obtain such coverage. Such procedures may be similar to the part B late enrollment penalty provisions under section 1839(b) and shall not take into account periods before the first period in which financial assistance is made available under this section.

`(2) EXCEPTION- The late enrollment procedures established pursuant to paragraph (1) shall not apply to an eligible medicare beneficiary who is enrolled under Medicare+Choice plan or a group health plan that provides outpatient prescription drug coverage and the plan terminates or ceases to provide such coverage to the beneficiary, but only if--

`(A) the beneficiary seeks to enroll under a plan or policy that offers SPICE prescription drug coverage at the next opportunity that is available to the beneficiary after the effective date of the termination of such coverage; and

`(B) submits evidence of the effective date of the termination of such coverage.

`(f) ADJUSTMENT OF FINANCIAL ASSISTANCE IF INSUFFICIENT FUNDING-

`(1) LIMITATION OF ASSISTANCE TO FUNDS AVAILABLE- In no case shall the amount of financial assistance provided under this section exceed the amount of funds available for such assistance under the SPICE Trust Fund.

`(2) REQUIRED ADJUSTMENT- If the SPICE Board determines under section 1860E(b)(3)(C) that the amount in the SPICE Trust Fund in the next year will be insufficient to cover the costs of providing financial assistance under this section in such year--

`(A) the SPICE Board shall first reduce the percentage specified in subsection (b)(3) to such lower percentage (but not below 10 percent) as may be required, and to adjust the percentage specified under subsection (b)(2) to reflect such reduction;

`(B) if such percentage reductions are not sufficient to reduce the costs to comply with paragraph (1), the SPICE Board shall next reduce the income thresholds (as a percentage of the poverty line) under subsection (b) as may be further required; and

`(C) if such previous reductions are still not sufficient to reduce the costs to comply with paragraph (1), the SPICE Board shall immediately report to Congress and suspend the provision of financial assistance under this section during such year.

`(g) DEFINITIONS- For purposes of this section:

`(1) APPLICABLE COST- The term `applicable cost' means, with respect to SPICE prescription drug coverage provided under--

`(A) a SPICE medicare supplemental policy, is the premium charged for the policy;

`(B) a Medicare+Choice plan, is the actuarial value of the portion of the adjusted community rate for the plan that is related to providing such coverage, as determined by the SPICE Board in consultation with the Secretary; or

`(C) a group health plan, is the actuarial value of the portion of the applicable premium for the plan that is related to providing such coverage, as determined by the SPICE Board taking into account the applicable premium for such plan (as defined in section 604(1) of the Employee Retirement Income Security Act of 1974).

`(2) POVERTY LINE- The term `poverty line' means the income official poverty line (as defined by the Office of Management and Budget, and revised annually in accordance with section 673(2) of the Omnibus Budget Reconciliation Act of 1981) applicable to a family of the size involved.

`SPICE BOARD

`SEC. 1860E. (a) ESTABLISHMENT- There is established within the Department of Health and Human Services a Seniors Prescription Insurance Coverage Equity Office, which shall be--

`(1) outside of the Health Care Financing Administration; and

`(2) run by a board to be known as the SPICE Board.

`(b) DUTIES-

`(1) IN GENERAL- The SPICE Board shall administer the SPICE drug benefit program under this part.

`(2) ONGOING STUDIES- The SPICE Board shall conduct ongoing studies of the following issues:

`(A) The administration of this part.

`(B) The provision of information about the program under the health insurance information, counseling, and assistance grants under section 4360 of the Omnibus Budget Reconciliation Act of 1990.

`(C) Ways in which drug utilization can be used to provide better overall care for eligible medicare beneficiaries.

`(D) Savings and potential savings in Federal health care programs which may occur, or can be attributed to, eligible medicare beneficiary access to, and utilization of, outpatient prescription drugs.

`(E) Trends in premium increases and factors that contribute to changes in premiums.

`(F) Integration of the SPICE drug benefit program into a reformed medicare program.

`(G) The ability of eligible medicare beneficiaries to afford SPICE prescription drug coverage.

`(H) The impact of the program on the prescription drug benefits offered under Medicare+Choice plans and group health plans.

`(I) The appropriateness of the levels of financial assistance provided in the case of eligible medicare beneficiaries who obtain assistance through SPICE prescription drug coverage provided under Medicare+Choice plans or group health plans.

`(3) ANNUAL REPORT-

`(A) IN GENERAL- Not later than June 1 of each year (beginning with 2001), the SPICE Board shall submit an annual report to Congress on the program under this part.

`(B) INFORMATION ON STUDIES- Such report shall include a detailed statement on the issues studied under paragraph (2).

`(C) DETAILED FINANCIAL PROJECTIONS AND REQUIRED ADJUSTMENTS IN FINANCIAL ASSISTANCE- Such report shall include--

`(i) the report on the financial status of the SPICE Trust Fund under section 1860F; and

`(ii) a statement if, based on such status, a reduction in financial assistance for the subsequent year is required under section 1860D(f) and, if so, the manner in which such reductions will be made.

Such report may include recommendations regarding increases in financial assistance that should be made in a subsequent year, to the extent they may be made consistent with section 1860D(f)(1).

`(D) RECOMMENDATIONS- Such report shall include such other recommendations for legislation and administrative actions as the SPICE Board considers appropriate.

`(4) STUDY AND REPORT REGARDING EXPANSION-

`(A) STUDY- The SPICE Board, in consultation with the National Association of Insurance Commissioners, shall conduct a study on--

`(i) permitting a benefit package under section 1882 of the Social Security Act (other than the outpatient prescription drug only package established under subsection (v)(1)(A) of such section) to offer outpatient prescription drugs; and

`(ii) providing financial assistance under this part on behalf of eligible medicare beneficiaries receiving coverage under such a benefit package.

`(B) REPORT- Not later than 1 year after all of the members of the SPICE Board are appointed under subsection (c), the SPICE Board shall submit a detailed report to Congress on the study conducted pursuant to subparagraph (A), together with any recommendations as determined appropriate by the SPICE Board.

`(5) RECOMMENDATIONS REGARDING GRANT PROGRAM- The SPICE Board shall provide recommendations and necessary information regarding the SPICE drug benefit program to the Secretary in order for the Secretary to provide health insurance information, counseling, and assistance grants under section 4360 of the Omnibus Budget Reconciliation Act of 1990.

`(c) MEMBERSHIP OF SPICE BOARD-

`(1) NUMBER AND APPOINTMENT-

`(A) IN GENERAL- The SPICE Board shall be composed of 7 members appointed by the President, by and with the advice and consent of the Senate.

`(B) SPECIFIC REPRESENTATIVES- In making appointments under subparagraph (A), the President shall ensure that the following groups are represented on the SPICE Board:

`(i) Consumers.

`(ii) Private health plan insurers (including insurers that offer fee-for-service and managed care plans) with expertise in the quality, scope, and marketing of health care services.

`(iii) The Health Care Financing Administration.

`(iv) State insurance commissioners.

`(C) SECRETARY OF HHS- The Secretary shall be a nonvoting, ex officio member of the SPICE Board.

`(2) DEADLINE FOR INITIAL APPOINTMENT- The initial members of the SPICE Board shall be appointed by not later than 6 months after the date of enactment of this section.

`(3) TERMS-

`(A) IN GENERAL- The terms of the members of the SPICE Board shall be for 6 years, except that of the members first appointed--

`(i) three shall be appointed for terms of 6 years;

`(ii) two shall be appointed for terms of 4 years; and

`(iii) two shall be appointed for terms of 2 years.

`(B) VACANCIES- Any member appointed to fill a vacancy occurring before the expiration of the term for which the member's predecessor was appointed shall be appointed only for the

remainder of that term. A member may serve after the expiration of that member's term until a successor has taken office.

`(4) CHAIRPERSON- The President shall designate the chairperson of the SPICE Board, except that the representative from the Health Care Financing Administration may not be designated as chairperson.

`(d) OPERATION OF THE BOARD-

`(1) MEETINGS- The SPICE Board shall meet at the call of the chairperson or upon written request of a majority of its members.

`(2) QUORUM- A majority of the members of the SPICE Board shall constitute a quorum, but a lesser number of members may hold hearings.

`(e) POWERS OF THE SPICE BOARD-

`(1) HEARINGS- The SPICE Board may hold such hearings, sit and act at such times and places, take such testimony, and receive such evidence as the SPICE Board considers advisable to carry out the purposes of this part.

`(2) INFORMATION FROM FEDERAL AGENCIES- Upon request of the chairperson of the SPICE Board, the head of any Federal department or agency shall furnish such information to the SPICE Board as is necessary to carry out the functions of the SPICE Board under this part.

`(3) POSTAL SERVICES- The SPICE Board may use the United States mails in the same manner and under the same conditions as other departments and agencies of the Federal Government.

`(4) GIFTS- The SPICE Board may accept, use, and dispose of gifts or donations of services or property.

`(f) BOARD PERSONNEL MATTERS-

`(1) MEMBERS-

`(A) COMPENSATION- Each member of the SPICE Board who is not an officer or employee of the Federal Government shall be compensated at a rate equal to the daily equivalent of the annual rate of basic pay prescribed for level IV of the Executive Schedule under section 5315 of title 5, United States Code, for each day (including travel time) during which such member is engaged in the performance of the duties of the SPICE Board. All members of the SPICE Board who are officers or employees of the United States shall serve without compensation in addition to that received for their services as officers or employees of the United States.

`(B) TRAVEL EXPENSES- The members of the SPICE Board shall be allowed travel expenses, including per diem in lieu of subsistence, at rates authorized for employees of agencies under subchapter I of chapter 57 of title 5, United States Code, while away from their homes or regular places of business in the performance of services for the SPICE Board.

`(C) REMOVAL- The President may remove a member of the SPICE Board only for neglect of duty or malfeasance in office.

`(2) STAFF-

`(A) IN GENERAL- The chairperson of the SPICE Board may, without regard to the civil service laws and regulations, appoint and terminate an executive director and such other additional personnel as may be necessary to enable the SPICE Board to perform its duties. The employment of an executive director shall be subject to confirmation by the SPICE Board.

`(B) COMPENSATION- The chairperson of the SPICE Board may fix the compensation of the executive director and other personnel without regard to the provisions of chapter 51 and subchapter III of chapter 53 of title 5, United States Code, relating to classification of positions and General Schedule pay rates, except that the rate of pay for the executive director and other personnel may not exceed the rate payable for level V of the Executive Schedule under section 5316 of such title.

`(C) DETAIL OF GOVERNMENT EMPLOYEES- Any Federal Government employee may be detailed to the SPICE Board without further reimbursement, and such detail shall be without interruption or loss of civil service status or privilege.

`(D) PROCUREMENT OF TEMPORARY AND INTERMITTENT SERVICES- The chairperson of the SPICE Board may procure temporary and intermittent services under section 3109(b) of title 5, United States Code, at rates for individuals which do not exceed the daily equivalent of the annual rate of basic pay prescribed for level V of the Executive Schedule under section 5316 of such title.

`SPICE TRUST FUND

`SEC. 1860F. (a) CREATION OF TRUST FUND- There is established in the Treasury of the United States a trust fund to be known as the `SPICE Trust Fund', consisting of such amounts as may be appropriated or credited to the SPICE Trust Fund as provided in this section.

`(b) AMOUNTS IN SPICE TRUST FUND-

`(1) IN GENERAL- The SPICE Trust Fund shall consist of the following amounts:

`(A) Amounts deposited in, or appropriated to, the SPICE Trust Fund as provided in this section.

`(B) Any gifts and bequests made to such Trust Fund.

`(2) APPROPRIATION-

`(A) AMOUNTS FROM TOBACCO TAX- There are appropriated to the SPICE Trust Fund amounts equivalent to the net revenues received in the Treasury after December 31, 1999, from the taxes imposed by section 5701 of the Internal Revenue Code of 1986 to the extent attributable to increases in the rates of tax imposed by such section over the rates which would have been imposed if the Seniors Prescription Insurance Coverage Equity (SPICE) Act of 1999 had not been enacted.

`(B) OTHER AMOUNTS- There are hereby authorized to be appropriated to the SPICE Trust Fund amounts from the on-budget surplus.

`(3) NET REVENUES- For purposes of this subsection, the term `net revenues' means the amount estimated by the Secretary of the Treasury based on the excess of--

`(A) the taxes received in the Treasury as described in paragraph (1), over

`(B) the sum of the decrease in the tax imposed by chapter 1 of the Internal Revenue Code of 1986 resulting from the imposition of the taxes described in paragraph (2) and the amount of refunds provided under subchapter A of chapter 52 of such Code to the extent such refunds are attributable to the revenues transferred to such Trust Fund under this section.

`(4) TRANSFER- The amounts appropriated pursuant to paragraph (2) shall be transferred by the Secretary of the Treasury from time to time from the general fund in the Treasury to the SPICE Trust Fund. The amount to be transferred under this paragraph shall be determined on the basis of estimates by the Secretary of the Treasury of the taxes, described in such paragraph, paid to or deposited into the Treasury. The Secretary of the Treasury shall make adjustments in amounts subsequently transferred to the extent that prior estimates were in excess of, or were less than, such taxes.

`(c) EXPENDITURES FROM TRUST FUND- Amounts in the SPICE Trust Fund shall only be available for making expenditures to carry out this part, including administrative expenses of the SPICE Board.

`(d) APPLICATION OF HI TRUST FUND PROVISIONS- The provisions of subsections (b) through (e) of section 1817 shall apply to the SPICE Board, this part, and the SPICE Trust Fund in the same manner as they apply to the Board of Trustees (and the Secretary and the Health Care Financing Administration), part A, and the Federal Hospital Insurance Trust Fund, respectively, except that--

`(1) the Board of Trustees shall be composed of the SPICE Board and the Secretary of the Treasury; and

`(2) the annual report shall be submitted as part of the annual report provided under section 1860E(b)(3).'.

SEC. 3. CONFORMING CHANGES TO MEDIGAP.

Section 1882 of the Social Security Act (42 U.S.C. 1395ss) is amended by adding at the end the following:

`(v)(1) Notwithstanding subsection (p), the benefit packages established under such subsection shall be revised (in the manner described in subsection (p)(1)(E)) so that--

`(A) there is established a benefit package consisting of only outpatient prescription drug benefits that are consistent with SPICE prescription drug coverage (as defined in section 1860B(b)) and that are offered only through the SPICE Board and in accordance with part D;

`(B) such package shall permit coverage of outpatient prescription drugs that exceeds the thresholds established under such section;

`(C) no package (except the package established under subparagraph (A)) includes coverage of outpatient prescription drugs provided under part D; and

`(D) other benefit packages that do not include prescription drug coverage may be substituted for the packages eliminated under subparagraph (C).

In this title, a medicare supplemental policy which has the benefit package described in subparagraph (A) is referred to as a `SPICE medicare supplemental policy'. The revisions of benefit packages under this paragraph shall not effect the renewal of medicare supplemental policies under this section that are in existence on the effective date of such revisions, and shall be designed to avoid adverse selection and to be affordable.

`(2) Notwithstanding subsection (d), nothing in this section shall be construed as prohibiting or making unlawful--

`(A) the sale or issuance of a SPICE medicare supplemental policy to an individual who has a medicare supplemental policy that does not provide coverage of outpatient prescription drugs;

`(B) the sale or issuance of a medicare supplemental policy that does not provide coverage of outpatient prescription drugs to an individual who has a SPICE medicare supplemental policy; or

`(C) the sale or issuance of such a SPICE medicare supplemental policy to an individual who is enrolled in a Medicare+Choice plan that does not provide coverage of outpatient prescription drugs (not including coverage required to be provided under part A or B).

The sale or issuance of policies under the circumstances described in this paragraph shall be treated as not `duplicative' under this section.

`(3)(A) No medicare supplemental policy of the insurer that is in effect on the effective date of the revision under paragraph (1) and that has a benefit package classified as `H', `I', or `J' under the standards established by subsection (p)(2) shall be deemed to meet the standards in subsection (c) unless the insurer--

`(i) provides written notice, within a 60-day period specified by the revisions, to the policyholder or certificate holder (at the most recent available address) of the offer described in clause (ii) and of the fact that, so long as they retain coverage under such policy, they are unable to purchase a SPICE medicare supplemental policy; and

`(ii) offers the individual under the terms described in subparagraph (B), during a period of at least 180 days beginning on the date specified in subparagraph (C), institution of coverage effective as of a date specified by the revisions, a non-SPICE medicare supplemental policy that the Secretary determines is most comparable to the policy in which the individual is enrolled (but for coverage of prescription drugs).

`(B) The terms described under this subparagraph are terms which do not--

`(i) deny or condition the issuance or effectiveness of a medicare supplemental policy described in subparagraph (A)(ii) that is offered and is available for issuance to new enrollees by such issuer;

`(ii) discriminate in the pricing of such policy because of health status, claims experience, receipt of health care, or medical condition; or

`(iii) impose an exclusion of benefits based on a pre-existing condition under such policy.

`(C) The date specified in this subparagraph for a policy issued in a State is such date as specified by the revisions (taking into account the method used under subsection (n)(4) for establishing a date under that subsection).

`(4) In applying this section with respect to SPICE medicare supplemental policies, any reference to the `Secretary' is deemed a reference to the SPICE Board.'.

SEC. 4. PROVISION OF INFORMATION ON SPICE DRUG BENEFIT PROGRAM UNDER HEALTH INSURANCE INFORMATION, COUNSELING, AND ASSISTANCE GRANTS.

Section 4360(b)(2)(A)(ii) of the Omnibus Budget Reconciliation Act of 1990 (42 U.S.C. 1395b-4(b)(2)(A)(ii)) is amended by striking `and information' and inserting `, information regarding the SPICE drug benefit program under part D of title XVIII of the Social Security Act, and information'.

SEC. 5. FUNDING THROUGH TAXES ON TOBACCO PRODUCTS.

(a) CIGARETTES- Subsection (b) of section 5701 of the Internal Revenue Code of 1986 is amended--

(1) by striking `$12 per thousand ($10 per thousand on cigarettes removed during 1991 or 1992);' in paragraph (1) and inserting `the applicable rate per thousand determined in accordance with the following table:

$44.50

$47.00.';

and

(2) by striking paragraph (2) and inserting the following:

`(2) LARGE CIGARETTES-

`(A) IN GENERAL- Except as provided in subparagraph (B), on cigarettes, weighing more than 3 pounds per thousand, the applicable rate per thousand determined in accordance with the following table:

$93.45

$98.70.

`(B) EXCEPTION- On cigarettes more than 6 1/2 inches in length, at the rate prescribed for cigarettes weighing not more than 3 pounds per thousand, counting each 2 3/4 inches, or fraction thereof, of the length of each as one cigarette.'

(b) CIGARS- Subsection (a) of section 5701 of such Code is amended--

(1) by striking `$1.125 cents per thousand (93.75 cents per thousand on cigars removed during 1991 or 1992),' in paragraph (1) and inserting `the applicable rate per thousand determined in accordance with the following table:

2000 and 2001

--$4.173 cents

2002 and thereafter

--$4.406 cents.';

and

(2) by striking paragraph (2) and inserting the following:

`(2) LARGE CIGARS- On cigars, weighing more than 3 pounds per thousand, the applicable percentage of the price for which sold but not more that the applicable rate per thousand determined in accordance with the following table:

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`In the case of cigars removed during: The applicable percentage is: The applicable rate is: 

   2000 and 2001                                  59.458%                                                 $139.90 

   2002 and thereafter                           68.201%                                                $160.47.' 

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(c) CIGARETTE PAPERS- Subsection (c) of section 5701 of such Code is amended to read as follows:

`(c) CIGARETTE PAPERS-

`(1) IN GENERAL- Except as provided in paragraph (2), on each book or set of cigarette papers containing more than 25 papers, manufactured in or imported into the United States, there shall be imposed a tax of the applicable rate for each 50 papers or fractional part thereof as determined in accordance with the following table:

2.80 cents

2.90 cents.

`(2) EXCEPTION- If cigarette papers measure more than 6 1/2 inches in length, such cigarette papers shall be taxable at the rate prescribed, counting each 2 3/4 inches, or fraction thereof, of the length of each as one cigarette paper.'

(d) CIGARETTE TUBES- Subsection (d) of section 5701 of such Code is amended to read as follows:

`(d) CIGARETTE TUBES-

`(1) IN GENERAL- Except as provided in paragraph (2), on cigarette tubes, manufactured in or imported into the United States, there shall be imposed a tax of the applicable rate for each 50 tubes or fractional part thereof as determined in accordance with the following table:

5.60 cents

5.90 cents.

`(2) EXCEPTION- If cigarette tubes measure more than 6 1/2 inches in length, such cigarette tubes shall be taxable at the rate prescribed, counting each 2 3/4 inches, or fraction thereof, of the length of each as one cigarette tube.'

(e) SMOKELESS TOBACCO- Paragraphs (1) and (2) of subsection (e) of section 5701 are amended to read as follows:

`(1) SNUFF- On snuff, the applicable rate per pound determined in accordance with the following table (and a proportionate tax at the like rate on all fractional parts of a pound):

$1.335 cents

$1.410 cents.

`(2) CHEWING TOBACCO- On chewing tobacco, the applicable rate per pound determined in accordance with the following table (and a proportionate tax at the like rate on all fractional parts of a pound):

44.5 cents

47.0 cents.'

(f) PIPE TOBACCO- Subsection (f) of section 5701 of such Code is amended to read as follows:

`(f) PIPE TOBACCO- On pipe tobacco, manufactured in or imported into the United States, there shall be imposed a tax of the applicable rate per pound determined in accordance with the following table (and a proportionate tax at the like rate on all fractional parts of a pound):

$2.504 cents

$2.644 cents.'

(g) IMPOSITION OF EXCISE TAX ON MANUFACTURE OR IMPORTATION OF ROLL-YOUR-OWN TOBACCO-

(1) IN GENERAL- Section 5701 of such Code (relating to rate of tax) is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following:

`(g) ROLL-YOUR-OWN TOBACCO- On roll-your-own tobacco, manufactured in or imported into the United States, there shall be imposed a tax of the applicable rate per pound determined in accordance with the following table (and a proportionate tax at the like rate on all fractional parts of a pound):

$2.504 cents

$2.644 cents.'

(2) ROLL-YOUR-OWN TOBACCO- Section 5702 of such Code (relating to definitions) is amended by adding at the end the following:

`(p) ROLL-YOUR-OWN TOBACCO- The term `roll-your-own tobacco' means any tobacco which, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes.'

(3) TECHNICAL AMENDMENTS-

(A) Subsection (c) of section 5702 of such Code is amended by striking `and pipe tobacco' and inserting `pipe tobacco, and roll-your-own tobacco'.

(B) Subsection (d) of section 5702 of such Code is amended--

(i) in the material preceding paragraph (1), by striking `or pipe tobacco' and inserting `pipe tobacco, or roll-your-own tobacco', and

(ii) by striking paragraph (1) and inserting the following:

`(1) a person who produces cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own tobacco solely for the person's own personal consumption or use, and'.

(C) The chapter heading for chapter 52 of such Code is amended to read as follows:

`CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES'.

(D) The table of chapters for subtitle E of such Code is amended by striking the item relating to chapter 52 and inserting the following:

`CHAPTER 52. Tobacco products and cigarette papers and tubes.'

(h) FLOOR STOCKS TAXES AND APPLICATION OF TAXES TO POSSESSIONS- Section 5701 of such Code, as amended by subsection (g), is amended by redesignating subsection (h) as subsection (j) and by inserting after subsection (g) the following:

`(h) FLOOR STOCKS TAXES-

`(1) IMPOSITION OF TAX- On tobacco products manufactured in or imported into the United States or any possession of the United States which are removed before any tax increase date, and held on such date for sale by any person, there is hereby imposed a tax in an amount equal to the excess of--

`(A) the tax which would be imposed under any preceding subsection of this section on the article if the article had been removed on such date, over

`(B) the prior tax (if any) imposed under such subsection on such article.

`(2) CREDIT AGAINST TAX- Each person shall be allowed as a credit against the taxes imposed by paragraph (1) an amount equal to $500. Such credit shall not exceed the amount of taxes imposed by paragraph (1) on any tax increase date, for which such person is liable.

`(3) LIABILITY FOR TAX AND METHOD OF PAYMENT-

`(A) LIABILITY FOR TAX- A person holding cigarettes on any tax increase date, to which any tax imposed by paragraph (1) applies shall be liable for such tax.

`(B) METHOD OF PAYMENT- The tax imposed by paragraph (1) shall be paid in such manner as the Secretary shall prescribe by regulations.

`(C) TIME FOR PAYMENT- The tax imposed by paragraph (1) shall be paid on or before the date which is 180 days after any tax increase date.

`(4) ARTICLES IN FOREIGN TRADE ZONES- Notwithstanding the Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any other provision of law, any article which is located in a foreign trade zone on any tax increase date, shall be subject to the tax imposed by paragraph (1) if--

`(A) internal revenue taxes have been determined, or customs duties liquidated, with respect to such article before such date pursuant to a request made under the 1st proviso of section 3(a) of such Act, or

`(B) such article is held on such date under the supervision of a customs officer pursuant to the 2d proviso of such section 3(a).

`(5) TAX INCREASE DATE- The term `tax increase date' means January 1, 2000, and January 1, 2002.

`(6) CONTROLLED GROUPS- Rules similar to the rules of section 5061(e)(3) shall apply for purposes of this subsection.

`(7) OTHER LAWS APPLICABLE- All provisions of law, including penalties, applicable with respect to the taxes imposed by the preceding subsections of this section shall, insofar as applicable and not inconsistent with the provisions of this subsection, apply to the floor stocks taxes imposed by paragraph (1), to the same extent as if such taxes were imposed by such subsections. The Secretary may treat any person who bore the ultimate burden of the tax imposed by paragraph (1) as the person to whom a credit or refund under such provisions may be allowed or made.

`(i) APPLICATION OF TAXES TO U.S. POSSESSIONS- Notwithstanding subsections (b) and (c) of section 7653 and any other provision of law--

`(1) IN GENERAL- On tobacco products manufactured in or imported into any possession of the United States, there is hereby imposed a tax at the rate equal to the excess of--

`(A) the rate of tax applicable under this section to like articles manufactured in the United States, over

`(B) the rate referred to in subparagraph (A) which would have been in effect if the amendments made by the Seniors Prescription Insurance Coverage Equity (SPICE) Act of 1999 had not been enacted.

`(2) SHIPMENTS TO U.S. POSSESSIONS FROM THE UNITED STATES- Only the rates of tax which would have been in effect if the amendments made by the Seniors Prescription Insurance Coverage Equity (SPICE) Act of 1999 had not been enacted shall be taken into account in determining the amount of any exemption from, or credit or drawback of, any tax imposed by this section on any article shipped to any possession of the United States from the United States.

`(3) SHIPMENTS FROM U.S. POSSESSIONS TO THE UNITED STATES- The rates of tax taken into account under section 7652(a) with respect to tobacco products coming into the United States from any possession of the United States shall be the rates of tax which would have been in effect if the amendments made by the Seniors Prescription Insurance Coverage Equity (SPICE) Act of 1999 had not been enacted.

`(4) DISPOSITION OF REVENUES- The provisions of section 7652(a)(3) shall not apply to any tax imposed by reason of this subsection.'

(i) MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS-

(1) EXEMPTION FOR EXPORTED TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES TO APPLY ONLY TO ARTICLES MARKED FOR EXPORT-

(A) Subsection (b) of section 5704 of such Code is amended by adding at the end the following: `Tobacco products and cigarette papers and tubes may not be transferred or removed under this subsection unless such products or papers and tubes bear such marks, labels, or notices as the Secretary shall by regulations prescribe.'

(B) Section 5761 of such Code is amended by redesignating subsections (c) and (d) as subsections (d) and (e), respectively, and by inserting after subsection (b) the following:

`(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES FOR EXPORT- Except as provided in subsections (b) and (d) of section 5704--

`(1) every person who sells, relands, or receives within the jurisdiction of the United States any tobacco products or cigarette papers or tubes which have been labeled or shipped for exportation under this chapter,

`(2) every person who sells or receives such relanded tobacco products or cigarette papers or tubes, and

`(3) every person who aids or abets in such selling, relanding, or receiving,

shall, in addition to the tax and any other penalty provided in this title, be liable for a penalty equal to the greater of $1,000 or 5 times the amount of the tax imposed by this chapter. All tobacco products and cigarette papers and tubes relanded within the jurisdiction of the United States, and all vessels, vehicles, and aircraft used in such relanding or in removing such products, papers, and tubes from the place where relanded, shall be forfeited to the United States.'

(C) Subsection (a) of section 5761 of such Code is amended by striking `subsection (b)' and inserting `subsection (b) or (c)'.

(D) Subsection (d) of section 5761 of such Code, as redesignated by subparagraph (B), is amended by striking `The penalty imposed by subsection (b)' and inserting `The penalties imposed by subsections (b) and (c)'.

(E)(i) Subpart F of chapter 52 of such Code is amended by adding at the end the following:

`SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY EXPORTED TOBACCO PRODUCTS.

`(a) IN GENERAL- Tobacco products and cigarette papers and tubes previously exported from the United States may be imported or brought into the United States only as provided in section 5704(d). For purposes of this section, section 5704(d), section 5761, and such other provisions as the Secretary may specify by regulations, references to exportation shall be treated as including a reference to shipment to the Commonwealth of Puerto Rico.

`(b) CROSS REFERENCE-

(ii) The table of sections for subpart F of chapter 52 of such Code is amended by adding at the end the following:

`Sec. 5754. Restriction on importation of previously exported tobacco products.'

(2) IMPORTERS REQUIRED TO BE QUALIFIED-

(A) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and 5763 (b) and (c) of such Code are each amended by inserting `or importer' after `manufacturer'.

(B) The heading of subsection (b) of section 5763 of such Code is amended by inserting `QUALIFIED IMPORTERS,' after `MANUFACTURERS,'.

(C) The heading for subchapter B of chapter 52 of such Code is amended by inserting `and Importers' after `Manufacturers'.

(D) The item relating to subchapter B in the table of subchapters for chapter 52 of such Code is amended by inserting `and importers' after `manufacturers'.

(3) BOOKS OF 25 OR FEWER CIGARETTE PAPERS SUBJECT TO TAX- Subsection (c) of section 5701 of such Code is amended by striking `On each book or set of cigarette papers containing more than 25 papers,' and inserting `On cigarette papers,'.

(4) STORAGE OF TOBACCO PRODUCTS- Subsection (k) of section 5702 of such Code is amended by inserting `under section 5704' after `internal revenue bond'.

(5) AUTHORITY TO PRESCRIBE MINIMUM MANUFACTURING ACTIVITY REQUIREMENTS- Section 5712 of such Code is amended by striking `or' at the end of paragraph (1), by redesignating paragraph (2) as paragraph (3), and by inserting after paragraph (1) the following:

`(2) the activity proposed to be carried out at such premises does not meet such minimum capacity or activity requirements as the Secretary may prescribe, or'.

(j) REPEAL OF DUPLICATIVE PROVISIONS- Section 9302 of the Balanced Budget Act of 1997 (other than subsection (i)(2)) and the amendments made by such section are repealed, and the Internal Revenue Code of 1986 shall be administered as if such section and such amendments had not been enacted.

(k) EFFECTIVE DATE- The amendments and repeal made by this section shall apply to articles removed (as defined in section 5702(k) of the Internal Revenue Code of 1986, as amended by this section) after December 31, 1999.

END