HR 4751 IH

To amend title XVIII of the Social Security Act to provide for a voluntary outpatient prescription drug benefit program.

MAY 16, 2002

Mrs. CAPITO introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, 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 for a voluntary outpatient prescription 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 `More Savings, More Choice Prescription Drug Act of 2002'.

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

Sec. 1. Short title; table of contents.

Sec. 2. Establishment of a medicare prescription drug benefit.

`Part D--Voluntary Prescription Drug Benefit Program

Sec. 3. Offering of qualified prescription drug coverage under the Medicare+Choice program.

Sec. 4. Medicaid amendments.

Sec. 5. Medigap transition provisions.

SEC. 2. ESTABLISHMENT OF A MEDICARE PRESCRIPTION DRUG BENEFIT.

(a) IN GENERAL- Title XVIII of the Social Security Act is amended--

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

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

`Part D--Voluntary Prescription Drug Benefit Program

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

`(a) PROVISION OF QUALIFIED PRESCRIPTION DRUG COVERAGE THROUGH ENROLLMENT IN PLANS- Subject to the succeeding provisions of this part, each individual who is entitled to benefits under part A or is enrolled under part B is entitled to obtain qualified prescription drug coverage (described in section 1860B(a)) as follows:

`(1) MEDICARE+CHOICE PLAN- If the individual is eligible to enroll in a Medicare+Choice plan that provides qualified prescription drug coverage under section 1851(j), the individual may enroll in the plan and obtain coverage through such plan.

`(2) PRESCRIPTION DRUG PLAN- If the individual is not enrolled in a Medicare+Choice plan that provides qualified prescription drug coverage, the individual may enroll under this part in a prescription drug plan (as defined in section 1860C(a)).

Such individuals shall have a choice of such plans under section 1860E(d).

`(b) GENERAL ELECTION PROCEDURES-

`(1) IN GENERAL- An individual may elect to enroll in a prescription drug plan under this part, or elect the option of qualified prescription drug coverage under a Medicare+Choice plan under part C, and change such election only in such manner and form as may be prescribed by regulations of the Secretary and only during an election period prescribed in or under this subsection.

`(2) ELECTION PERIODS-

`(A) IN GENERAL- Except as provided in this paragraph, the election periods under this subsection shall be the same as the coverage election periods under the Medicare+Choice program under section 1851(e), including--

`(i) annual coordinated election periods; and

`(ii) special election periods.

In applying the last sentence of section 1851(e)(4) (relating to discontinuance of a Medicare+Choice election during the first year of eligibility) under this subparagraph, in the case of an election described in such section in which the individual had elected or is provided qualified prescription drug coverage at the time of such first enrollment, the individual shall be permitted to enroll in a prescription drug plan under this part at the time of the election of coverage under the original fee-for-service plan.

`(B) INITIAL ELECTION PERIODS-

`(i) INDIVIDUALS CURRENTLY COVERED- In the case of an individual who is entitled to benefits under part A or enrolled under part B as of November 1, 2004, there shall be an initial election period of 6 months beginning on that date.

`(ii) INDIVIDUAL COVERED IN FUTURE- In the case of an individual who is first entitled to benefits under part A or enrolled under part B after November 1, 2004, there shall be an initial election period which is the same as the initial enrollment period under section 1837(d).

`(C) ADDITIONAL SPECIAL ELECTION PERIODS- The Secretary shall establish special election periods--

`(i) in cases of individuals who have and involuntarily lose prescription drug coverage described in subsection (c)(2)(C);

`(ii) in cases described in section 1837(h) (relating to errors in enrollment), in the same manner as such section applies to part B; and

`(iii) in the case of an individual who meets such exceptional conditions (including conditions recognized under section 1851(d)(4)(D)) as the Secretary may provide.

`(c) GUARANTEED ISSUE; COMMUNITY RATING; AND NONDISCRIMINATION-

`(1) GUARANTEED ISSUE-

`(A) IN GENERAL- An eligible individual who is eligible to elect qualified prescription drug coverage under a prescription drug plan or Medicare+Choice plan at a time during which elections are accepted under this part with respect to the plan shall not be denied enrollment based on any health status-related factor (described in section 2702(a)(1) of the Public Health Service Act) or any other factor.

`(B) MEDICARE+CHOICE LIMITATIONS PERMITTED- The provisions of paragraphs (2) and (3) (other than subparagraph (C)(i), relating to default enrollment) of section 1851(g) (relating to priority and limitation on termination of election) shall apply to PDP sponsors under this subsection.

`(2) COMMUNITY-RATED PREMIUM-

`(A) IN GENERAL- In the case of an individual who maintains (as determined under subparagraph (C)) continuous prescription drug coverage since first qualifying to elect prescription drug coverage under this part, a PDP sponsor or Medicare+Choice organization offering a prescription drug plan or Medicare+Choice plan that provides qualified prescription drug coverage and in which the individual is enrolled may not deny, limit, or condition the coverage or provision of covered prescription drug benefits or increase the premium under the plan based on any health status-related factor described in section 2702(a)(1) of the Public Health Service Act or any other factor.

`(B) LATE ENROLLMENT PENALTY- In the case of an individual who does not maintain such continuous prescription drug coverage, a PDP sponsor or Medicare+Choice organization may (notwithstanding any provision in this title) increase the premium otherwise applicable or impose a pre-existing condition exclusion with respect to qualified prescription drug coverage in a manner that reflects additional actuarial risk involved. Such a risk shall be established through an appropriate actuarial opinion of the type described in subparagraphs (A) through (C) of section 2103(c)(4).

`(C) CONTINUOUS PRESCRIPTION DRUG COVERAGE- An individual is considered for purposes of this part to be maintaining continuous prescription drug coverage on and after a date if the individual establishes that there is no period of 63 days or longer on and after such date (beginning not earlier than January 1, 2005) during all of which the individual did not have any of the following prescription drug coverage:

`(i) COVERAGE UNDER PRESCRIPTION DRUG PLAN OR MEDICARE+CHOICE PLAN- Qualified prescription drug coverage under a prescription drug plan or under a Medicare+Choice plan.

`(ii) MEDICAID PRESCRIPTION DRUG COVERAGE- Prescription drug coverage under a medicaid plan under title XIX, including through the Program of All-inclusive Care for the Elderly (PACE) under section 1934, through a social health maintenance organization (referred to in section 4104(c) of the Balanced Budget Act of 1997), or through a Medicare+Choice project that demonstrates the application of capitation payment rates for frail elderly medicare beneficiaries through the use of a interdisciplinary team and through the provision of primary care services to such beneficiaries by means of such a team at the nursing facility involved.

`(iii) PRESCRIPTION DRUG COVERAGE UNDER GROUP HEALTH PLAN- Any outpatient prescription drug coverage under a group health plan, including a health benefits plan under the Federal Employees Health Benefit Plan under chapter 89 of title 5, United States Code, and a qualified retiree prescription drug plan as defined in section 1860H(e)(1).

`(iv) PRESCRIPTION DRUG COVERAGE UNDER CERTAIN MEDIGAP POLICIES- Coverage under a medicare supplemental policy under section 1882 that provides benefits for prescription drugs (whether or not such coverage conforms to the standards for packages of benefits under section 1882(p)(1)), but only if the policy was in effect on January 1, 2005, and only until the date such coverage is terminated.

`(v) STATE PHARMACEUTICAL ASSISTANCE PROGRAM- Coverage of prescription drugs under a State pharmaceutical assistance program.

`(vi) VETERANS' COVERAGE OF PRESCRIPTION DRUGS- Coverage of prescription drugs for veterans under chapter 17 of title 38, United States Code.

`(D) CERTIFICATION- For purposes of carrying out this paragraph, the certifications of the type described in sections 2701(e) of the Public Health Service Act and in section 9801(e) of the Internal Revenue Code shall also include a statement for the period of coverage of whether the individual involved had prescription drug coverage described in subparagraph (C).

`(E) CONSTRUCTION- Nothing in this section shall be construed as preventing the disenrollment of an individual from a prescription drug plan or a Medicare+Choice plan based on the termination of an election described in section 1851(g)(3), including for non-payment of premiums or for other reasons specified in subsection (d)(3), which takes into account a grace period described in section 1851(g)(3)(B)(i).

`(3) NONDISCRIMINATION- A PDP sponsor offering a prescription drug plan shall not establish a service area in a manner that would discriminate based on health or economic status of potential enrollees.

`(d) EFFECTIVE DATE OF ELECTIONS-

`(1) IN GENERAL- Except as provided in this section, the Secretary shall provide that elections under subsection (b) take effect at the same time as the Secretary provides that similar elections under section 1851(e) take effect under section 1851(f).

`(2) NO ELECTION EFFECTIVE BEFORE 2005- In no case shall any election take effect before January 1, 2005.

`(3) TERMINATION- The Secretary shall provide for the termination of an election in the case of--

`(A) termination of coverage under part B (in the case of an individual not entitled to benefits under part A); and

`(B) termination of elections described in section 1851(g)(3) (including failure to pay required premiums).

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

`(a) REQUIREMENTS-

`(1) IN GENERAL- For purposes of this part and part C, the term `qualified prescription drug coverage' means either of the following:

`(A) STANDARD COVERAGE WITH ACCESS TO NEGOTIATED PRICES- Standard coverage (as defined in subsection (b)) and access to negotiated prices under subsection (d).

`(B) ACTUARIALLY EQUIVALENT COVERAGE WITH ACCESS TO NEGOTIATED PRICES- Coverage of covered outpatient drugs which meets the alternative coverage requirements of subsection (c) and access to negotiated prices under subsection (d).

`(2) PERMITTING ADDITIONAL OUTPATIENT PRESCRIPTION DRUG COVERAGE-

`(A) IN GENERAL- Subject to subparagraph (B), nothing in this part shall be construed as preventing qualified prescription drug coverage from including coverage of covered outpatient drugs that exceeds the coverage required under paragraph (1), but any such additional coverage shall be limited to coverage of covered outpatient drugs.

`(B) DISAPPROVAL AUTHORITY- The Secretary shall review the offering of qualified prescription drug coverage under this part or part C. If the Secretary finds that, in the case of a qualified prescription drug coverage under a prescription drug plan or a Medicare+Choice plan, that the organization or sponsor offering the coverage is purposefully engaged in activities intended to result in favorable selection of those eligible medicare beneficiaries obtaining coverage through the plan, the Secretary may terminate the contract with the sponsor or organization under this part or part C.

`(3) APPLICATION OF SECONDARY PAYOR PROVISIONS- The provisions of section 1852(a)(4) shall apply under this part in the same manner as they apply under part C.

`(b) STANDARD COVERAGE- For purposes of this part, the `standard coverage' is coverage of covered outpatient drugs (as defined in subsection (f)) that meets the following requirements:

`(1) DEDUCTIBLE- The coverage has an annual deductible that is equal to $100.

`(2) LIMITS ON COST-SHARING- The coverage has cost-sharing (for incurred costs above the annual deductible specified in paragraph (1))--

`(A) of 25 percent to the extent that the incurred expenses (including incurred out-of-pocket expenses) for covered outpatient drugs under this part in the year do not exceed $2,000;

`(B) of 50 percent to the extent such incurred expenses exceed $2,000 but the true out-of-pocket expenses do not exceed $5,000; and

`(C) of 0 percent to the extent such true out-of-pocket expenses exceed $5,000.

`(3) OUT-OF-POCKET EXPENSES DEFINED- For purposes of paragraph (2), the term `out-of-pocket expenses' means expenses incurred as a result of the application of the deductible under paragraph (1) and the coinsurance required under this subsection.

`(4) TRUE OUT-OF-POCKET EXPENSES DEFINED- For purposes of paragraph (2), the term `true out-of-pocket expenses' means out-of-pocket expenses insofar as there is no third party reimbursement made.

`(5) INFLATION ADJUSTMENT-

`(A) IN GENERAL- In the case of any calendar year beginning after 2005, each of the dollar amounts in paragraphs (1) and (2) shall be increased by an amount equal to--

`(i) such dollar amount, multiplied by

`(ii) the percentage (if any) by which the amount of average per capita expenditures under this part in the preceding calendar year exceeds the amount of such expenditures in 2005.

`(B) ROUNDING- Any amount determined under paragraph (1) or (2) that is not a multiple of $5 or $25, respectively, shall be rounded to the nearest multiple of $5 or $25, respectively.

`(c) ALTERNATIVE COVERAGE REQUIREMENTS- A prescription drug plan or Medicare+Choice plan may provide a different prescription drug benefit design from the standard coverage described in subsection (b) so long as the following requirements are met:

`(1) ASSURING AT LEAST ACTUARIALLY EQUIVALENT COVERAGE-

`(A) ASSURING EQUIVALENT VALUE OF TOTAL COVERAGE- The actuarial value of the total coverage (as determined under subsection (e)) is at least equal to the actuarial value (as so determined) of standard coverage.

`(B) ASSURING EQUIVALENT UNSUBSIDIZED VALUE OF COVERAGE- The unsubsidized value of the coverage is at least equal to the unsubsidized value of standard coverage. For purposes of this subparagraph, the unsubsidized value of coverage is the amount by which the actuarial value of the coverage (as determined under subsection (e)) exceeds the actuarial value of the reinsurance subsidy payments under section 1860H with respect to such coverage.

`(C) ASSURING STANDARD PAYMENT FOR COSTS IN INITIAL BENEFIT RANGE- The coverage is designed, based upon an actuarially representative

pattern of utilization (as determined under subsection (e)), to provide for the payment, with respect to costs incurred in the range described in subsection (b)(2)(A), of an amount equal to at least 75 percent of the applicable dollar amount under such subsection (as adjusted under subsection (b)(5)).

`(2) LIMITATION ON TRUE OUT-OF-POCKET EXPENDITURES BY BENEFICIARIES- The coverage provides the limitation on true out-of-pocket expenditures by beneficiaries described in subsection (b)(2)(C).

`(d) ACCESS TO NEGOTIATED PRICES- Under qualified prescription drug coverage offered by a PDP sponsor or a Medicare+Choice organization, the sponsor or organization shall provide beneficiaries with access to negotiated prices (including applicable discounts) used for payment for covered outpatient drugs, regardless of the fact that no benefits may be payable under the coverage with respect to such drugs because of the application of cost-sharing or an initial coverage limit (described in subsection (b)(3)). Insofar as a State elects to provide medical assistance under title XIX for a drug based on the prices negotiated by a prescription drug plan under this part, the requirements of section 1927 shall not apply to such drugs.

`(e) ACTUARIAL VALUATION; DETERMINATION OF ANNUAL PERCENTAGE INCREASES-

`(1) PROCESSES- For purposes of this section, the Secretary shall establish processes and methods--

`(A) for determining the actuarial valuation of prescription drug coverage, including--

`(i) an actuarial valuation of standard coverage and of the reinsurance subsidy payments under section 1860H;

`(ii) the use of generally accepted actuarial principles and methodologies; and

`(iii) applying the same methodology for determinations of alternative coverage under subsection (c) as is used with respect to determinations of standard coverage under subsection (b); and

`(B) for determining annual percentage increases described in subsection (b)(5).

`(2) USE OF OUTSIDE ACTUARIES- Under the processes under paragraph (1)(A), PDP sponsors and Medicare+Choice organizations may use actuarial opinions certified by independent, qualified actuaries to establish actuarial values.

`(f) COVERED OUTPATIENT DRUGS DEFINED-

`(1) IN GENERAL- Except as provided in this subsection, for purposes of this part, the term `covered outpatient drug' means--

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

`(B) a biological product described in clauses (i) through (iii) of subparagraph (B) of such section or insulin described in subparagraph (C) of such section,

and such term includes any use of a covered outpatient drug for a medically accepted indication (as defined in section 1927(k)(6)).

`(2) EXCLUSIONS-

`(A) IN GENERAL- Such term does not include drugs or classes of drugs, or their medical uses, which may be excluded from coverage or otherwise restricted under section 1927(d)(2), other than subparagraph (E) thereof (relating to smoking cessation agents) and except to the extent otherwise specifically provided by the Secretary with respect to a drug in any of such classes.

`(B) AVOIDANCE OF DUPLICATE COVERAGE- A drug prescribed for an individual that would otherwise be a covered outpatient drug under this part shall not be so considered if payment for such drug is available under part A or B (but shall be so considered if such payment is not available because benefits under part A or B have been exhausted), without regard to whether the individual is entitled to benefits under part A or enrolled under part B.

`(3) APPLICATION OF FORMULARY RESTRICTIONS- A drug prescribed for an individual that would otherwise be a covered outpatient drug under this part shall not be so considered under a plan if the plan excludes the drug under a formulary that meets the requirements of section 1860C(f)(2) (including providing an appeal process).

`(4) APPLICATION OF GENERAL EXCLUSION PROVISIONS- A prescription drug plan or Medicare+Choice plan may exclude from qualified prescription drug coverage any covered outpatient drug--

`(A) for which payment would not be made if section 1862(a) applied to part D; or

`(B) which are not prescribed in accordance with the plan or this part.

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

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

`(a) GUARANTEED ISSUE COMMUNITY-RELATED PREMIUMS AND NONDISCRIMINATION- For provisions requiring guaranteed issue, community-rated premiums, and nondiscrimination, see sections 1860A(c)(1), 1860A(c)(2), and 1860F(b).

`(b) DISSEMINATION OF INFORMATION-

`(1) GENERAL INFORMATION- A PDP sponsor shall disclose, in a clear, accurate, and standardized form to each enrollee with a prescription drug plan offered by the sponsor under this part at the time of enrollment and at least annually thereafter, the information described in section 1852(c)(1) relating to such plan. Such information includes the following:

`(A) Access to covered outpatient drugs, including access through pharmacy networks.

`(B) How any formulary used by the sponsor functions.

`(C) Co-payments and deductible requirements.

`(D) Grievance and appeals procedures.

`(2) DISCLOSURE UPON REQUEST OF GENERAL COVERAGE, UTILIZATION, AND GRIEVANCE INFORMATION- Upon request of an individual eligible to enroll under a prescription drug plan, the PDP sponsor shall provide the information described in section 1852(c)(2) (other than subparagraph (D)) to such individual.

`(3) RESPONSE TO BENEFICIARY QUESTIONS- Each PDP sponsor offering a prescription drug plan shall have a mechanism for providing specific information to enrollees upon request. The sponsor shall make available, through an Internet website and in writing upon request, information on specific changes in its formulary.

`(4) CLAIMS INFORMATION- Each PDP sponsor offering a prescription drug plan must furnish to enrolled individuals in a form easily understandable to such individuals an explanation of benefits (in accordance with section 1806(a) or in a comparable manner) and a notice of the benefits in relation to initial coverage limit and annual out-of-pocket limit for the current year, whenever prescription drug benefits are provided under this part (except that such notice need not be provided more often than monthly).

`(c) ACCESS TO COVERED BENEFITS-

`(1) ASSURING PHARMACY ACCESS- The PDP sponsor of the prescription drug plan shall secure the participation of sufficient numbers of pharmacies (which may include mail order pharmacies) to ensure convenient access (including adequate emergency access) for enrolled beneficiaries, in accordance with standards established under section 1860D(e) that ensure such convenient access. Nothing in this paragraph shall be construed as requiring the participation of (or permitting the exclusion of) all pharmacies in any area under a plan.

`(2) PREFERRED PHARMACY NETWORKS-

`(A) IN GENERAL- If a PDP sponsor uses a preferred pharmacy network to deliver benefits under this

part, such network shall meet minimum access standards established by the Secretary.

`(B) STANDARDS- In establishing standards under subparagraph (A), the Secretary shall take into account reasonable distances to pharmacy services in both urban and rural areas.

`(C) ASSURING PHARMACY ACCESS- Such standards shall require that each PDP sponsor include in any preferred pharmacy network any pharmacy that agrees to the terms and conditions established by the sponsor for such participation in such network.

`(3) ACCESS TO NEGOTIATED PRICES FOR PRESCRIPTION DRUGS- The PDP sponsor of a prescription drug plan shall issue such a card that may be used by an enrolled beneficiary to assure access to negotiated prices under section 1860B(d) for the purchase of prescription drugs for which coverage is not otherwise provided under the prescription drug plan.

`(4) REQUIREMENTS ON DEVELOPMENT AND APPLICATION OF FORMULARIES- Insofar as a PDP sponsor of a prescription drug plan uses a formulary, the following requirements must be met:

`(A) FORMULARY COMMITTEE- The sponsor must establish a pharmaceutical and therapeutic committee that develops the formulary. Such committee shall include at least one physician and at least one pharmacist.

`(B) INCLUSION OF DRUGS IN ALL THERAPEUTIC CATEGORIES- The formulary must include drugs within all therapeutic categories and classes of covered outpatient drugs (although not necessarily for all drugs within such categories and classes).

`(C) APPEALS AND EXCEPTIONS TO APPLICATION- The PDP sponsor must have, as part of the appeals process under subsection (f)(2), a process for appeals for denials of coverage based on such application of the formulary.

`(d) COST AND UTILIZATION MANAGEMENT; QUALITY ASSURANCE; MEDICATION THERAPY MANAGEMENT PROGRAM-

`(1) IN GENERAL- The PDP sponsor shall have in place--

`(A) an effective cost and drug utilization management program, including appropriate incentives to use generic drugs, when appropriate;

`(B) quality assurance measures and systems to reduce medical errors and adverse drug interactions, including a medication therapy management program described in paragraph (2); and

`(C) a program to control fraud, abuse, and waste.

`(2) MEDICATION THERAPY MANAGEMENT PROGRAM-

`(A) IN GENERAL- A medication therapy management program described in this paragraph is a program of drug therapy management and medication administration that is designed to assure that covered outpatient drugs under the prescription drug plan are appropriately used to achieve therapeutic goals and reduce the risk of adverse events, including adverse drug interactions.

`(B) ELEMENTS- Such program may include--

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

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

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

`(D) CONSIDERATIONS IN PHARMACY FEES- The PDP sponsor of a prescription drug program shall take into account, in establishing fees for pharmacists and others providing services under the medication therapy management program, the resources and time used in implementing the program.

`(3) TREATMENT OF ACCREDITATION- Section 1852(e)(4) (relating to treatment of accreditation) shall apply to prescription drug plans under this part with respect to the following requirements, in the same manner as they apply to Medicare+Choice plans under part C with respect to the requirements described in a clause of section 1852(e)(4)(B):

`(A) Paragraph (1) (including quality assurance), including medication therapy management program under paragraph (2).

`(B) Subsection (c)(1) (relating to access to covered benefits).

`(C) Subsection (g) (relating to confidentiality and accuracy of enrollee records).

`(4) PUBLIC DISCLOSURE OF PHARMACEUTICAL PRICES FOR GENERIC EQUIVALENT DRUGS- Each PDP sponsor shall provide that each pharmacy or other dispenser that arranges for the dispensing of a covered outpatient drug shall inform the beneficiary at the time of purchase of the drug of any differential between the price of the prescribed drug to the enrollee and the price of the lowest cost generic drug that is therapeutically and pharmaceutically equivalent and bioequivalent.

`(e) GRIEVANCE MECHANISM- Each PDP sponsor shall provide meaningful procedures for hearing and resolving grievances between the organization (including any entity or individual through which the sponsor provides covered benefits) and enrollees with prescription drug plans of the sponsor under this part in accordance with section 1852(f).

`(f) COVERAGE DETERMINATIONS, RECONSIDERATIONS, AND APPEALS-

`(1) IN GENERAL- A PDP sponsor shall meet the requirements of section 1852(g) with respect to covered benefits under the prescription drug plan it offers under this part in the same manner as such requirements apply to a Medicare+Choice organization with respect to benefits it offers under a Medicare+Choice plan under part C.

`(2) APPEALS OF FORMULARY DETERMINATIONS- Under the appeals process under paragraph (1) an individual who is enrolled in a prescription drug plan offered by a PDP sponsor may appeal to obtain coverage for a covered outpatient drug that is not on the formulary of the sponsor (established under subsection (c)) if the prescribing physician determines that the therapeutically similar drug that is on the formulary is not as effective for the enrollee or has significant adverse effects for the enrollee.

`(g) CONFIDENTIALITY AND ACCURACY OF ENROLLEE RECORDS- A PDP sponsor shall meet the requirements of section 1852(h) with respect to enrollees under this part in the same manner as such requirements apply to a Medicare+Choice organization with respect to enrollees under part C.

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

`(a) GENERAL REQUIREMENTS- Each PDP sponsor of a prescription drug plan shall meet the following requirements:

`(1) LICENSURE- Subject to subsection (c), the sponsor is organized and licensed under State law as a risk-bearing entity eligible to offer health insurance or health benefits coverage in each State in which it offers a prescription drug plan.

`(2) ASSUMPTION OF FULL FINANCIAL RISK-

`(A) IN GENERAL- Subject to subparagraph (B) and section 1860E(d)(2), the entity assumes full financial risk on a prospective basis for qualified prescription drug coverage that it offers under a prescription drug plan and that is not covered under reinsurance under section 1860H.

`(B) REINSURANCE PERMITTED- The entity may obtain insurance or make other arrangements for the cost of coverage provided to any enrolled member under this part.

`(3) SOLVENCY FOR UNLICENSED SPONSORS- In the case of a sponsor that is not described in paragraph (1), the sponsor shall meet solvency standards established by the Secretary under subsection (d).

`(b) CONTRACT REQUIREMENTS-

`(1) IN GENERAL- The Secretary shall not permit the election under section 1860A of a prescription drug plan offered by a PDP sponsor under this part, and the sponsor shall not be eligible for payments under section 1860G or 1860H, unless the Secretary has entered into a contract under this subsection with the sponsor with respect to the offering of such plan. Such a contract with a sponsor may cover more than one prescription drug plan. Such contract shall provide that the sponsor agrees to comply with the applicable requirements and standards of this part and the terms and conditions of payment as provided for in this part.

`(2) NEGOTIATION REGARDING TERMS AND CONDITIONS- The Secretary shall have the same authority to negotiate the terms and conditions of prescription drug plans under this part as the Director of the Office of Personnel Management has with respect to health benefits plans under chapter 89 of title 5, United States Code. In negotiating the terms and conditions regarding premiums for which information is submitted under section 1860F(a)(2), the Secretary shall take into account the reinsurance subsidy payments under section 1860H and the adjusted community rate (as defined in section 1854(f)(3)) for the benefits covered.

`(3) INCORPORATION OF CERTAIN MEDICARE+CHOICE CONTRACT REQUIREMENTS- The following provisions of section 1857 shall apply, subject to subsection (c)(5), to contracts under this section in the same manner as they apply to contracts under section 1857(a):

`(A) MINIMUM ENROLLMENT- Paragraphs (1) and (3) of section 1857(b).

`(B) CONTRACT PERIOD AND EFFECTIVENESS- Paragraphs (1) through (3) and (5) of section 1857(c).

`(C) PROTECTIONS AGAINST FRAUD AND BENEFICIARY PROTECTIONS- Section 1857(d).

`(D) ADDITIONAL CONTRACT TERMS- Section 1857(e); except that in applying section 1857(e)(2) under this part--

`(i) such section shall be applied separately to costs relating to this part (from costs under part C);

`(ii) in no case shall the amount of the fee established under this subparagraph for a plan exceed 20 percent of the maximum amount of the fee that may be established under subparagraph (B) of such section; and

`(iii) no fees shall be applied under this subparagraph with respect to Medicare+Choice plans.

`(E) INTERMEDIATE SANCTIONS- Section 1857(g).

`(F) PROCEDURES FOR TERMINATION- Section 1857(h).

`(4) RULES OF APPLICATION FOR INTERMEDIATE SANCTIONS- In applying paragraph (3)(E)--

`(A) the reference in section 1857(g)(1)(B) to section 1854 is deemed a reference to this part; and

`(B) the reference in section 1857(g)(1)(F) to section 1852(k)(2)(A)(ii) shall not be applied.

`(c) WAIVER OF CERTAIN REQUIREMENTS TO EXPAND CHOICE-

`(1) IN GENERAL- In the case of an entity that seeks to offer a prescription drug plan in a State, the Secretary shall waive the requirement of subsection (a)(1) that the entity be licensed in that State if the Secretary determines, based on the application and other evidence presented to the Secretary, that any of the grounds for approval of the application described in paragraph (2) has been met.

`(2) GROUNDS FOR APPROVAL- The grounds for approval under this paragraph are the grounds for approval described in subparagraph (B), (C), and (D) of section 1855(a)(2), and also include the application by a State of any grounds other than those required under Federal law.

`(3) APPLICATION OF WAIVER PROCEDURES- With respect to an application for a waiver (or a waiver granted) under this subsection, the provisions of subparagraphs (E), (F), and (G) of section 1855(a)(2) shall apply.

`(4) LICENSURE DOES NOT SUBSTITUTE FOR OR CONSTITUTE CERTIFICATION- The fact that an entity is licensed in accordance with subsection (a)(1) does not deem the entity to meet other requirements imposed under this part for a PDP sponsor.

`(5) REFERENCES TO CERTAIN PROVISIONS- For purposes of this subsection, in applying provisions of section 1855(a)(2) under this subsection to prescription drug plans and PDP sponsors--

`(A) any reference to a waiver application under section 1855 shall be treated as a reference to a waiver application under paragraph (1); and

`(B) any reference to solvency standards shall be treated as a reference to solvency standards established under subsection (d).

`(d) SOLVENCY STANDARDS FOR NON-LICENSED SPONSORS-

`(1) ESTABLISHMENT- The Secretary shall establish, by not later than October 1, 2003, financial solvency and capital adequacy standards that an entity that does not meet the requirements of subsection (a)(1) must meet to qualify as a PDP sponsor under this part.

`(2) COMPLIANCE WITH STANDARDS- Each PDP sponsor that is not licensed by a State under subsection (a)(1) and for which a waiver application has been approved under subsection (c) shall meet solvency and capital adequacy standards established under paragraph (1). The Secretary shall establish certification procedures for such PDP sponsors with respect to such solvency standards in the manner described in section 1855(c)(2).

`(e) OTHER STANDARDS- The Secretary shall establish by regulation other standards (not described in subsection (d)) for PDP sponsors and plans consistent with, and to carry out, this part. The Secretary shall publish such regulations by October 1, 2003. In order to carry out this requirement in a timely manner, the Secretary may promulgate regulations that take effect on an interim basis, after notice and pending opportunity for public comment.

`(f) RELATION TO STATE LAWS-

`(1) IN GENERAL- The standards established under this section shall supersede any State law or regulation (including standards described in paragraph (2)) with respect to prescription drug plans which are offered by PDP sponsors under this part to the extent such law or regulation is inconsistent with such standards.

`(2) STANDARDS SPECIFICALLY SUPERSEDED- State standards relating to the following are superseded under this subsection:

`(A) Benefit requirements.

`(B) Requirements relating to inclusion or treatment of providers.

`(C) Coverage determinations (including related appeals and grievance processes).

`(D) Establishment and regulation of premiums.

`(3) PROHIBITION OF STATE IMPOSITION OF PREMIUM TAXES- No State may impose a premium tax or similar tax with respect to premiums paid to PDP sponsors for prescription drug plans under this part, or with respect to any payments made to such a sponsor by the Secretary under this part.

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

`(a) IN GENERAL- The Secretary shall establish, based upon and consistent with the procedures used under part C (including section 1851), a process for the selection of the prescription drug plan or Medicare+Choice plan which offer qualified prescription drug coverage through which eligible individuals elect qualified prescription drug coverage under this part.

`(b) ELEMENTS- Such process shall include the following:

`(1) Annual, coordinated election periods, in which such individuals can change the qualifying plans through which they obtain coverage, in accordance with section 1860A(b)(2).

`(2) Active dissemination of information to promote an informed selection among qualifying plans based upon price, quality, and other features, in the manner described in (and in coordination with) section 1851(d), including the provision of annual comparative information, maintenance of a toll-free hotline, and the use of non-Federal entities.

`(3) Coordination of elections through filing with a Medicare+Choice organization or a PDP sponsor, in the manner described in (and in coordination with) section 1851(c)(2).

`(c) MEDICARE+CHOICE ENROLLEE IN PLAN OFFERING PRESCRIPTION DRUG COVERAGE MAY ONLY OBTAIN BENEFITS THROUGH THE PLAN- An individual who is enrolled under a Medicare+Choice plan that offers qualified prescription drug coverage may only elect to receive qualified prescription drug coverage under this part through such plan.

`(d) ASSURING ACCESS TO A CHOICE OF QUALIFIED PRESCRIPTION DRUG COVERAGE-

`(1) CHOICE OF AT LEAST TWO PLANS IN EACH AREA-

`(A) IN GENERAL- The Secretary shall assure that each individual who is entitled to benefits under part A or is enrolled under part B and who is residing in an area has available, consistent with subparagraph (B), a choice of enrollment in at least two qualifying plans (as defined in paragraph (5)) in the area in which the individual resides, at least one of which is a prescription drug plan.

`(B) REQUIREMENT FOR DIFFERENT PLAN SPONSORS- The requirement in subparagraph (A) is not satisfied with respect to an area if only one PDP sponsor or Medicare+Choice organization offers all the qualifying plans in the area.

`(2) GUARANTEEING ACCESS TO COVERAGE- In order to assure access under paragraph (1) and consistent with paragraph (3), the Secretary may provide financial incentives (including partial underwriting of risk) for a PDP sponsor to expand the service area under an existing prescription drug plan to adjoining or additional areas or to establish such a plan (including offering such a plan on a regional or nationwide basis), but only so long as (and to the extent) necessary to assure the access guaranteed under paragraph (1).

`(3) LIMITATION ON AUTHORITY- In exercising authority under this subsection, the Secretary--

`(A) shall not provide for the full underwriting of financial risk for any PDP sponsor;

`(B) shall not provide for any underwriting of financial risk for a public PDP sponsor with respect to the offering of a nationwide prescription drug plan; and

`(C) shall seek to maximize the assumption of financial risk by PDP sponsors or Medicare+Choice organizations.

`(4) REPORTS- The Secretary shall, in each annual report to Congress under section 1807(f), include information on the exercise of authority under this subsection. The Secretary also shall include such recommendations as may be appropriate to minimize the exercise of such authority, including minimizing the assumption of financial risk.

`(5) QUALIFYING PLAN DEFINED- For purposes of this subsection, the term `qualifying plan' means a prescription drug plan or a Medicare+Choice plan that includes qualified prescription drug coverage.

`SEC. 1860F. PREMIUMS.

`(a) SUBMISSION OF PREMIUMS AND RELATED INFORMATION-

`(1) IN GENERAL- Each PDP sponsor shall submit to the Secretary information of the type described in paragraph (2) in the same manner as information is submitted by a Medicare+Choice organization under section 1854(a)(1).

`(2) TYPE OF INFORMATION- The information described in this paragraph is the following:

`(A) Information on the qualified prescription drug coverage to be provided.

`(B) Information on the actuarial value of the coverage.

`(C) Information on the monthly premium to be charged for the coverage, including an actuarial certification of--

`(i) the actuarial basis for such premium;

`(ii) the portion of such premium attributable to benefits in excess of standard coverage; and

`(iii) the reduction in such premium resulting from the reinsurance subsidy payments provided under section 1860H.

`(D) Such other information as the Secretary may require to carry out this part.

`(3) REVIEW- The Secretary shall review the information filed under paragraph (2) for the purpose of conducting negotiations under section 1860D(b)(2).

`(4) LIMITATIONS ON PREMIUMS-

`(A) $35 MONTHLY PREMIUM FOR 2005- In no case may the monthly premium of a PDP plan for months in 2005 exceed $35.

`(B) MONTHLY PREMIUM LIMITATION FOR SUBSEQUENT YEARS- In no case may the monthly premium of a PDP plan for months in a year after 2005 exceed the dollar limitation specified in this paragraph for the preceding year adjusted by the annual percentage change in the increase in the consumer price index for all urban consumers (U.S. city average) as estimated by the Secretary for the 12-month period ending with the midpoint of previous year. If any dollar amount after being adjusted under this subparagraph is not a multiple of $1, such dollar amount shall be rounded to the nearest multiple of $1.

`(b) UNIFORM PREMIUM- The premium for a prescription drug plan charged under this section may not vary among individuals enrolled in the plan in the same service area, except as is permitted under section 1860A(c)(2)(B) (relating to late enrollment penalties).

`(c) TERMS AND CONDITIONS FOR IMPOSING PREMIUMS- The provisions of section 1854(d) shall apply under this part in the same manner as they apply under part C, and, for this purpose, the reference in such section to section 1851(g)(3)(B)(i) is deemed a reference to section 1860A(d)(3)(B) (relating to failure to pay premiums required under this part).

`(d) Acceptance of Reference Premium as Full Premium if No Standard (or Equivalent) Coverage in an Area-

`(1) IN GENERAL- If there is no standard prescription drug coverage (as defined in paragraph (2)) offered in an area, in the case of an individual who is eligible for a premium subsidy under section 1860G and resides in the area, the PDP sponsor of any prescription drug plan offered in the area (and any Medicare+Choice organization that offers qualified prescription drug coverage in the area) shall accept the reference premium under section 1860G(b)(2) as payment in full for the premium charge for qualified prescription drug coverage.

`(2) STANDARD PRESCRIPTION DRUG COVERAGE DEFINED- For purposes of this subsection, the term `standard prescription drug coverage' means qualified prescription drug coverage that is standard coverage or that has an actuarial value equivalent to the actuarial value for standard coverage.

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

`(a) IN GENERAL-

`(1) FULL PREMIUM SUBSIDY AND REDUCTION OF COST-SHARING FOR INDIVIDUALS WITH INCOME BELOW 135 PERCENT OF FEDERAL POVERTY LEVEL- In the case of a subsidy eligible individual (as defined in paragraph (4)) who is determined to have income that does not exceed 150 percent of the Federal poverty level, the individual is entitled under this section--

`(A) to a premium subsidy equal to 100 percent of the amount described in subsection (b)(1); and

`(B) subject to subsection (c), to the substitution for the beneficiary cost-sharing described in section 1860B(b)(2)) of amounts that are nominal.

`(2) PREMIUM SUBSIDY ONLY FOR INDIVIDUALS WITH INCOME ABOVE 150, BUT BELOW 175 PERCENT, OF FEDERAL POVERTY LEVEL- In the case of a subsidy eligible individual who is determined to have income that exceeds 150 percent, but does not exceed 175 percent, of the Federal poverty level, the individual is entitled under this section to a premium subsidy equal to 100 percent of the amount described in subsection (b)(1).

`(3) SLIDING SCALE PREMIUM SUBSIDY FOR INDIVIDUALS WITH INCOME ABOVE 175, BUT BELOW 200 PERCENT, OF FEDERAL POVERTY LEVEL- In the case of a subsidy eligible individual who is determined to have income that exceeds 175 percent, but does not exceed 200 percent, of the Federal poverty level, the individual is entitled under this section to a premium subsidy determined on a linear sliding scale ranging from 100 percent of the amount described in subsection (b)(1) for individuals with incomes at 175 percent of such level to 0 percent of such amount for individuals with incomes at 200 percent of such level.

`(4) DETERMINATION OF ELIGIBILITY-

`(A) SUBSIDY ELIGIBLE INDIVIDUAL DEFINED- For purposes of this section, subject to subparagraph (D), the term `subsidy eligible individual' means an individual who--

`(i) is eligible to elect, and has elected, to obtain qualified prescription drug coverage under this part; and

`(ii) has income below 200 percent of the Federal poverty line.

`(B) DETERMINATIONS- The determination of whether an individual residing in a State is a subsidy eligible individual and the amount of such individual's income shall be determined under the State medicaid plan for the State under section 1935(a). In the case of a State that does not operate such a medicaid plan (either under title XIX or under a statewide waiver granted under section 1115), such determination shall be made under arrangements made by the Secretary.

`(C) INCOME DETERMINATIONS- For purposes of applying this section--

`(i) income shall be determined in the manner described in section 1905(p)(1)(B); and

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

`(D) TREATMENT OF TERRITORIAL RESIDENTS- In the case of an individual who is not a resident of the 50 States or the District of Columbia, the individual is not eligible to be a subsidy eligible individual but may be eligible for financial assistance with prescription drug expenses under section 1935(e).

`(b) PREMIUM SUBSIDY AMOUNT-

`(1) IN GENERAL- The premium subsidy amount described in this subsection for an individual residing in an area is the reference premium (as defined in paragraph (2)) for qualified prescription drug coverage offered by the prescription drug plan or the Medicare+Choice plan in which the individual is enrolled.

`(2) REFERENCE PREMIUM DEFINED- For purposes of this subsection, the term `reference premium' means, with respect to qualified prescription drug coverage offered under--

`(A) a prescription drug plan that--

`(i) provides standard coverage (or alternative prescription drug coverage the actuarial value is equivalent to that of standard coverage), the premium imposed for enrollment under the plan under this part (determined without regard to any subsidy under this section or any late enrollment penalty under section 1860A(c)(2)(B)); or

`(ii) provides alternative prescription drug coverage the actuarial value of which is greater than that of standard coverage, the premium described in clause (i) multiplied by the ratio of (I) the actuarial value of standard coverage, to (II) the actuarial value of the alternative coverage; or

`(B) a Medicare+Choice plan, the standard premium computed under section 1851(j)(5)(A)(iii), determined without regard to any reduction effected under section 1851(j)(5)(B).

`(c) RULES IN APPLYING COST-SHARING SUBSIDIES-

`(1) IN GENERAL- In applying subsection (a)(1)(B)--

`(A) the maximum amount of subsidy that may be provided with respect to an enrollee for a year may not exceed 95 percent of the maximum cost-sharing described in such subsection that may be incurred for standard coverage;

`(B) the Secretary shall determine what is `nominal' taking into account the rules applied under section 1916(a)(3); and

`(C) nothing in this part shall be construed as preventing a plan or provider from waiving or reducing the amount of cost-sharing otherwise applicable.

`(2) LIMITATION ON CHARGES- In the case of an individual receiving cost-sharing subsidies under subsection (a)(1)(B), the PDP sponsor may not charge more than a nominal amount in cases in which the cost-sharing subsidy is provided under such subsection.

`(d) ADMINISTRATION OF SUBSIDY PROGRAM- The Secretary shall provide a process whereby, in the case of an individual who is determined to be a subsidy eligible individual and who is enrolled in prescription drug plan or is enrolled in a Medicare+Choice plan under which qualified prescription drug coverage is provided--

`(1) the Secretary provides for a notification of the PDP sponsor or Medicare+Choice organization involved that the individual is eligible for a subsidy and the amount of the subsidy under subsection (a);

`(2) the sponsor or organization involved reduces the premiums or cost-sharing otherwise imposed by the amount of the applicable subsidy and submits to the Secretary information on the amount of such reduction; and

`(3) the Secretary periodically and on a timely basis reimburses the sponsor or organization for the amount of such reductions.

The reimbursement under paragraph (3) with respect to cost-sharing subsidies may be computed on a capitated basis, taking into account the actuarial value of the subsidies and with appropriate adjustments to reflect differences in the risks actually involved.

`(e) RELATION TO MEDICAID PROGRAM-

`(1) IN GENERAL- For provisions providing for eligibility determinations, and additional financing, under the medicaid program, see section 1935.

`(2) MEDICAID PROVIDING WRAP AROUND BENEFITS- The coverage provided under this part is primary payor to benefits for prescribed drugs provided under the medicaid program under title XIX.

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

`(a) REINSURANCE SUBSIDY PAYMENT- In order to reduce premium levels applicable to qualified prescription drug coverage for all medicare beneficiaries, to reduce adverse selection among prescription drug plans and Medicare+Choice plans that provide qualified prescription drug coverage, and to promote the participation of PDP sponsors under this part, the Secretary shall provide in accordance with this section for payment to a qualifying entity (as defined in subsection (b)) of the reinsurance payment amount (as defined in subsection (c)) for excess costs incurred in providing qualified prescription drug coverage--

`(1) for individuals enrolled with a prescription drug plan under this part;

`(2) for individuals enrolled with a Medicare+Choice plan that provides qualified prescription drug coverage under part C; and

`(3) for medicare primary individuals (described in subsection (e)(3)(D)) who are enrolled in a qualified retiree prescription drug plan.

This section constitutes budget authority in advance of appropriations Acts and represents the obligation of the Secretary to provide for the payment of amounts provided under this section.

`(b) QUALIFYING ENTITY DEFINED- For purposes of this section, the term `qualifying entity' means any of the following that has entered into an agreement with the Secretary to provide the Secretary with such information as may be required to carry out this section:

`(1) A PDP sponsor offering a prescription drug plan under this part.

`(2) A Medicare+Choice organization that provides qualified prescription drug coverage under a Medicare+Choice plan under part C.

`(3) The sponsor of a qualified retiree prescription drug plan (as defined in subsection (e)).

`(c) REINSURANCE PAYMENT AMOUNT-

`(1) IN GENERAL- Subject to paragraph (3), the reinsurance payment amount under this subsection for a qualifying covered individual (as defined in subsection (f)(1)) for a coverage year (as defined in subsection (f)(2)) is equal to such percentages, at such attachment points, as the Secretary may specify in order to provide that the total of the payments made for the year under this section is equal to 65 percent of the total payments described in paragraph (2)(B) during the year. The Secretary shall adjust such percentages and attachment points each year.

`(2) PAYMENT COMPUTATIONS- The Secretary shall estimate--

`(A) the total payments to be made (without regard to this subsection) during a year under this section; and

`(B) the total payments to be made by qualifying entities for standard coverage under plans described in subsection (b) during the year.

`(3) ADJUSTMENT OF PAYMENTS- In lieu of, or in addition to, the adjustment made under paragraph (1), the Secretary may provide for such payment adjustments (or direct subsidy payments) to PDP sponsors as the Secretary may specify in order to assure participation of PDP sponsors under this part consistent with the limitations on premiums under section 1860F(a)(4).

`(d) PAYMENT METHODS-

`(1) IN GENERAL- Payments under this section shall be based on such a method as the Secretary determines. The Secretary may establish a payment method by which interim payments of amounts under this section are made during a year based on the Secretary's best estimate of amounts that will be payable after obtaining all of the information.

`(2) SOURCE OF PAYMENTS- Payments under this section shall be made from the Medicare Prescription Drug Account.

`(e) QUALIFIED RETIREE PRESCRIPTION DRUG PLAN DEFINED-

`(1) IN GENERAL- For purposes of this section, the term `qualified retiree prescription drug plan' means employment-based retiree health coverage (as defined in paragraph (3)(A)) if, with respect to an individual enrolled (or eligible to be enrolled) under this part who is covered under the plan, the following requirements are met:

`(A) ASSURANCE- The sponsor of the plan shall annually attest, and provide such assurances as the Secretary may require, that the coverage meets the requirements for qualified prescription drug coverage.

`(B) AUDITS- The sponsor (and the plan) shall maintain, and afford the Secretary access to, such records as the Secretary may require for purposes of audits and other oversight activities necessary to ensure the adequacy of prescription drug coverage, the accuracy of payments made, and such other matters as may be appropriate.

`(C) PROVISION OF CERTIFICATION OF PRESCRIPTION DRUG COVERAGE- The sponsor of the plan shall provide for issuance of certifications of the type described in section 1860A(c)(2)(D).

`(D) OTHER REQUIREMENTS- The sponsor of the plan shall comply with such other requirements as the Secretary finds necessary to administer the program under this section.

`(2) LIMITATION ON BENEFIT ELIGIBILITY- No payment shall be provided under this section with respect to an individual who is enrolled under a qualified retiree prescription drug plan unless the individual is a medicare primary individual who--

`(A) is covered under the plan; and

`(B) is eligible to obtain qualified prescription drug coverage under section 1860A but did not elect such coverage under this part (either through a prescription drug plan or through a Medicare+Choice plan).

`(3) DEFINITIONS- As used in this section:

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

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

`(C) SPONSOR- The term `sponsor' means a plan sponsor, as defined in section 3(16)(B) of the Employee Retirement Income Security Act of 1974.

`(D) MEDICARE PRIMARY INDIVIDUAL- The term `medicare primary individual' means, with respect to a plan, an individual who is covered under the plan and with respect to whom the plan is not a primary plan (as defined in section 1862(b)(2)(A)).

`(f) GENERAL DEFINITIONS- For purposes of this section:

`(1) QUALIFYING COVERED INDIVIDUAL- The term `qualifying covered individual' means an individual who--

`(A) is enrolled with a prescription drug plan under this part;

`(B) is enrolled with a Medicare+Choice plan that provides qualified prescription drug coverage under part C; or

`(C) is covered as a medicare primary individual under a qualified retiree prescription drug plan.

`(2) COVERAGE YEAR- The term `coverage year' means a calendar year in which covered outpatient drugs are dispensed if a claim for payment is made under the plan for such drugs, regardless of when the claim is paid.

`SEC. 1860I. MEDICARE PRESCRIPTION DRUG ACCOUNT IN FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND.

`(a) IN GENERAL- There is created within the Federal Supplementary Medical Insurance Trust Fund established by section 1841 an account to be known as the `Medicare Prescription Drug Account' (in this section referred to as the `Account'). The Account shall consist of such gifts and bequests as may be made as provided in section 201(i)(1), and such amounts as may be deposited in, or appropriated to, such fund as provided in this part. Funds provided under this part to the Account shall be kept separate from all other funds within the Federal Supplementary Medical Insurance Trust Fund.

`(b) PAYMENTS FROM ACCOUNT-

`(1) IN GENERAL- The Managing Trustee shall pay from time to time from the Account such amounts as the Secretary certifies are necessary to make--

`(A) payments under section 1860G (relating to low-income subsidy payments);

`(B) payments under section 1860H (relating to reinsurance subsidy payments); and

`(C) payments with respect to administrative expenses under this part in accordance with section 201(g).

`(2) TRANSFERS TO MEDICAID ACCOUNT FOR INCREASED ADMINISTRATIVE COSTS- The Managing Trustee shall transfer from time to time from the Account to the Grants to States for Medicaid account amounts the Secretary certifies are attributable to increases in payment resulting from the application of a higher Federal matching percentage under section 1935(b).

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

`(c) DEPOSITS INTO ACCOUNT-

`(1) MEDICAID TRANSFER- There is hereby transferred to the Account, from amounts appropriated for Grants to States for Medicaid, amounts equivalent to the aggregate amount of the reductions in payments under section 1903(a)(1) attributable to the application of section 1935(c).

`(2) APPROPRIATIONS TO COVER GOVERNMENT CONTRIBUTIONS- There are authorized to be appropriated from time to time, out of any moneys in the Treasury not otherwise appropriated, to the Account, an amount equivalent to the amount of payments made from the Account under subsection (b), reduced by the amount transferred to the Account under paragraph (1).

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

`(a) DEFINITIONS- For purposes of this part:

`(1) COVERED OUTPATIENT DRUGS- The term `covered outpatient drugs' is defined in section 1860B(f).

`(2) INITIAL COVERAGE LIMIT- The term `initial coverage limit' means the such limit as established under section 1860B(b)(3), or, in the case of coverage that is not standard coverage, the comparable limit (if any) established under the coverage.

`(3) MEDICARE PRESCRIPTION DRUG ACCOUNT- The term `Medicare Prescription Drug Account' means the Account in the Federal Supplementary Medical Insurance Trust Fund created under section 1860I(a).

`(4) PDP SPONSOR- The term `PDP sponsor' means an entity that is certified under this part as meeting the requirements and standards of this part for such a sponsor.

`(5) PRESCRIPTION DRUG PLAN- The term `prescription drug plan' means health benefits coverage that--

`(A) is offered under a policy, contract, or plan by a PDP sponsor pursuant to, and in accordance with, a contract between the Secretary and the sponsor under section 1860D(b);

`(B) provides qualified prescription drug coverage; and

`(C) meets the applicable requirements of the section 1860C for a prescription drug plan.

`(6) QUALIFIED PRESCRIPTION DRUG COVERAGE- The term `qualified prescription drug coverage' is defined in section 1860B(a).

`(7) STANDARD COVERAGE- The term `standard coverage' is defined in section 1860B(b).

`(b) APPLICATION OF MEDICARE+CHOICE PROVISIONS UNDER THIS PART- For purposes of applying provisions of part C under this part with respect to a prescription drug plan and a PDP sponsor, unless otherwise provided in this part such provisions shall be applied as if--

`(1) any reference to a Medicare+Choice plan included a reference to a prescription drug plan;

`(2) any reference to a provider-sponsored organization included a reference to a PDP sponsor;

`(3) any reference to a contract under section 1857 included a reference to a contract under section 1860D(b); and

`(4) any reference to part C included a reference to this part.

`MEDICARE PRESCRIPTION DRUG ADVISORY COMMITTEE

`SEC. 1860K. (a) ESTABLISHMENT OF COMMITTEE- There is established a Medicare Prescription Drug Advisory Committee (in this section referred to as the `Committee').

`(b) FUNCTIONS OF COMMITTEE- The Committee shall advise the Secretary on policies related to the development of standards and guidelines for the implementation and administration of the outpatient prescription drug benefit program under this part.

`(c) STRUCTURE AND MEMBERSHIP OF THE COMMITTEE-

`(1) STRUCTURE- The Committee shall be composed of 19 members, of whom--

`(A) 12 shall be appointed by the Secretary;

`(B) 3 shall be appointed by the President;

`(C) 2 shall be appointed by the Speaker of the House of Representatives; and

`(D) 2 shall be appointed by the Majority Leader of the Senate.

`(2) MEMBERSHIP-

`(A) IN GENERAL- The members of the Committee shall be chosen on the basis of their integrity, impartiality, and good judgment, and shall be individuals who are, by reason of their education, experience, and attainments, exceptionally qualified to perform the duties of members of the Committee.

`(B) SPECIFIC MEMBERS- Of the members appointed under paragraph (1)(A)--

`(i) 4 shall be chosen to represent physicians;

`(ii) 3 shall be chosen to represent pharmacists;

`(iii) 1 shall be chosen to represent the Centers for Medicare & Medicaid Services;

`(iv) 3 shall be chosen to represent actuaries, pharmacoeconomists, researchers, and other appropriate experts; and

`(v) 1 shall be chosen to represent emerging drug technologies.

`(d) TERMS OF APPOINTMENT- Each member of the Committee shall serve for a term determined appropriate by the

Secretary. The terms of service of the members initially appointed shall begin on January 1, 2003.

`(e) CHAIRPERSON- The Secretary shall designate a member of the Committee as Chairperson. The term as Chairperson shall be for a 1-year period.

`(f) COMMITTEE PERSONNEL MATTERS-

`(1) MEMBERS-

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

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

`(2) STAFF- The Committee may appoint such personnel as the Committee considers appropriate.

`(g) OPERATION OF THE COMMITTEE-

`(1) MEETINGS- The Committee shall meet at the call of the Chairperson (after consultation with the other members of the Committee) not less often than quarterly to consider a specific agenda of issues, as determined by the Chairperson after such consultation.

`(2) QUORUM- Ten members of the Committee shall constitute a quorum for purposes of conducting business.

`(h) FEDERAL ADVISORY COMMITTEE ACT- Section 14 of the Federal Advisory Committee Act (5 U.S.C. App.) shall not apply to the Committee.

`(i) TRANSFER OF PERSONNEL, RESOURCES, AND ASSETS- For purposes of carrying out its duties, the Secretary and the Committee may provide for the transfer to the Committee of such civil service personnel in the employ of the Department of Health and Human Services (including the Centers for Medicare & Medicaid Services), and such resources and assets of the Department used in carrying out this title, as the Committee requires.

`(j) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated such sums as may be necessary to carry out the purposes of this section.'.

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

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

(A) by striking `and' before `such amounts'; and

(B) by inserting before the period the following: `and such amounts as may be deposited in, or appropriated to, the Medicare Prescription Drug Account established by section 1860I'; and

(2) in subsection (g), by inserting after `by this part,' the following: `the payments provided for under part D (in which case the payments shall come from the Medicare Prescription Drug Account in the Trust Fund),'.

(c) ADDITIONAL CONFORMING CHANGES-

(1) CONFORMING REFERENCES TO PREVIOUS PART D- Any reference in law (in effect before the date of the enactment of this Act) to part D of title XVIII of the Social Security Act is deemed a reference to part E of such title (as in effect after such date).

(2) SECRETARIAL SUBMISSION OF LEGISLATIVE PROPOSAL- Not later than 6 months after the date of the enactment of this Act, the Secretary of Health and Human Services shall submit to the appropriate committees of Congress a legislative proposal providing for such technical and conforming amendments in the law as are required by the provisions of this subtitle.

SEC. 3. OFFERING OF QUALIFIED PRESCRIPTION DRUG COVERAGE UNDER THE MEDICARE+CHOICE PROGRAM.

(a) IN GENERAL- Section 1851 of the Social Security Act (42 U.S.C. 1395w-21) is amended by adding at the end the following new subsection:

`(j) AVAILABILITY OF PRESCRIPTION DRUG BENEFITS-

`(1) IN GENERAL- A Medicare+Choice organization may not offer prescription drug coverage (other than that required under parts A and B) to an enrollee under a Medicare+Choice plan unless such drug coverage is at least qualified prescription drug coverage and unless the requirements of this subsection with respect to such coverage are met.

`(2) COMPLIANCE WITH ADDITIONAL BENEFICIARY PROTECTIONS- With respect to the offering of qualified prescription drug coverage by a Medicare+Choice organization under a Medicare+Choice plan, the organization and plan shall meet the requirements of section 1860C, including requirements relating to information dissemination and grievance and appeals, in the same manner as they apply to a PDP sponsor and a prescription drug plan under part D. The Secretary shall waive such requirements to the extent the Secretary determines that such requirements duplicate requirements otherwise applicable to the organization or plan under this part.

`(3) TREATMENT OF COVERAGE- Except as provided in this subsection, qualified prescription drug coverage offered under this subsection shall be treated under this part in the same manner as supplemental health care benefits described in section 1852(a)(3)(A).

`(4) AVAILABILITY OF PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME ENROLLEES AND REINSURANCE SUBSIDY PAYMENTS FOR ORGANIZATIONS- For provisions--

`(A) providing premium and cost-sharing subsidies to low-income individuals receiving qualified prescription drug coverage through a Medicare+Choice plan, see section 1860G; and

`(B) providing a Medicare+Choice organization with reinsurance subsidy payments for providing qualified prescription drug coverage under this part, see section 1860H.

`(5) SPECIFICATION OF SEPARATE AND STANDARD PREMIUM-

`(A) IN GENERAL- For purposes of applying section 1854 and section 1860G(b)(2)(B) with respect to qualified prescription drug coverage offered under this subsection under a plan, the Medicare+Choice organization shall compute and publish the following:

`(i) SEPARATE PRESCRIPTION DRUG PREMIUM- A premium for prescription drug benefits that constitute qualified prescription drug coverage that is separate from other coverage under the plan. Such premium shall be established consistent with the limitations described in section 1860F(a)(4).

`(ii) PORTION OF COVERAGE ATTRIBUTABLE TO STANDARD BENEFITS- The ratio of the actuarial value of standard coverage to the actuarial value of the qualified prescription drug coverage offered under the plan.

`(iii) PORTION OF PREMIUM ATTRIBUTABLE TO STANDARD BENEFITS- A standard premium equal to the product of the premium described in clause (i) and the ratio under clause (ii).

The premium under clause (i) shall be compute without regard to any reduction in the premium permitted under subparagraph (B).

`(B) REDUCTION OF PREMIUMS ALLOWED- Nothing in this subsection shall be construed as preventing a Medicare+Choice organization from reducing the amount of a premium charged for prescription drug coverage because of the application of section 1854(f)(1)(A) to other coverage.

`(C) ACCEPTANCE OF REFERENCE PREMIUM AS FULL PREMIUM IF NO STANDARD (OR EQUIVALENT) COVERAGE IN AN AREA- For requirement to accept reference premium as full premium if there is no standard (or equivalent) coverage in the area of a Medicare+Choice plan, see section 1860F(d).

`(6) TRANSITION IN INITIAL ENROLLMENT PERIOD- Notwithstanding any other provision of this part, the annual, coordinated election period under subsection (e)(3)(B) for 2005 shall be the 6-month period beginning with November 2004.

`(7) QUALIFIED PRESCRIPTION DRUG COVERAGE; STANDARD COVERAGE- For purposes of this part, the terms `qualified prescription drug coverage' and `standard coverage' have the meanings given such terms in section 1860B.'.

(b) CONFORMING AMENDMENTS- Section 1851 of such Act (42 U.S.C. 1395w-21) is amended--

(1) in subsection (a)(1)--

(A) by inserting `(other than qualified prescription drug benefits)' after `benefits';

(B) by striking the period at the end of subparagraph (B) and inserting a comma; and

(C) by adding after and below subparagraph (B) the following:

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

(2) in subsection (g)(1), by inserting `and section 1860A(c)(2)(B)' after `in this subsection'.

(c) EFFECTIVE DATE- The amendments made by this section apply to coverage provided on or after January 1, 2005.

SEC. 4. MEDICAID AMENDMENTS.

(a) DETERMINATIONS OF ELIGIBILITY FOR LOW-INCOME SUBSIDIES-

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

(A) in subsection (a)--

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

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

(iii) by inserting after paragraph (65) the following new paragraph:

`(66) provide for making eligibility determinations under section 1935(a).'.

(2) NEW SECTION- Title XIX of such Act is further amended--

(A) by redesignating section 1935 as section 1936; and

(B) by inserting after section 1934 the following new section:

`SPECIAL PROVISIONS RELATING TO MEDICARE PRESCRIPTION DRUG BENEFIT

`SEC. 1935. (a) REQUIREMENT FOR MAKING ELIGIBILITY DETERMINATIONS FOR LOW-INCOME SUBSIDIES- As a condition of its State plan under this title under section 1902(a)(66) and receipt of any Federal financial assistance under section 1903(a), a State shall--

`(1) make determinations of eligibility for premium and cost-sharing subsidies under (and in accordance with) section 1860G;

`(2) inform the Secretary of such determinations in cases in which such eligibility is established; and

`(3) otherwise provide such Secretary with such information as may be required to carry out part D of title XVIII (including section 1860G).

`(b) PAYMENTS FOR ADDITIONAL ADMINISTRATIVE COSTS-

`(1) IN GENERAL- The amounts expended by a State in carrying out subsection (a) are, subject to paragraph (2), expenditures reimbursable under the appropriate paragraph of section 1903(a); except that, notwithstanding any other provision of such section, the applicable Federal matching rates with respect to such expenditures under such section shall be increased as follows:

`(A) For expenditures attributable to costs incurred during 2005, the otherwise applicable Federal matching rate shall be increased by 20 percent of the percentage otherwise payable (but for this subsection) by the State.

`(B) For expenditures attributable to costs incurred during 2006, the otherwise applicable Federal matching rate shall be increased by 40 percent of the percentage otherwise payable (but for this subsection) by the State.

`(C) For expenditures attributable to costs incurred during 2007, the otherwise applicable Federal matching rate shall be increased by 60 percent of the percentage otherwise payable (but for this subsection) by the State.

`(D) For expenditures attributable to costs incurred during 2008, the otherwise applicable Federal matching rate shall be increased by 80 percent of the percentage otherwise payable (but for this subsection) by the State.

`(E) For expenditures attributable to costs incurred after 2009, the otherwise applicable Federal matching rate shall be increased to 100 percent.

`(2) COORDINATION- The State shall provide the Secretary with such information as may be necessary to properly allocate administrative expenditures described in paragraph (1) that may otherwise be made for similar eligibility determinations.'.

(b) PHASED-IN FEDERAL ASSUMPTION OF MEDICAID RESPONSIBILITY FOR PREMIUM AND COST-SHARING SUBSIDIES FOR DUALLY ELIGIBLE INDIVIDUALS-

(1) IN GENERAL- Section 1903(a)(1) of the Social Security Act (42 U.S.C. 1396b(a)(1)) is amended by inserting before the semicolon the following: `, reduced by the amount computed under section 1935(c)(1) for the State and the quarter'.

(2) AMOUNT DESCRIBED- Section 1935 of such Act, as inserted by subsection (a)(2), is amended by adding at the end the following new subsection:

`(c) FEDERAL ASSUMPTION OF MEDICAID PRESCRIPTION DRUG COSTS FOR DUALLY-ELIGIBLE BENEFICIARIES-

`(1) IN GENERAL- For purposes of section 1903(a)(1), for a State that is one of the 50 States or the District of Columbia for a calendar quarter in a year (beginning with 2005) the amount computed under this subsection is equal to the product of the following:

`(A) MEDICARE SUBSIDIES- The total amount of payments made in the quarter under section 1860G (relating to premium and cost-sharing prescription drug subsidies for low-income medicare beneficiaries) that are attributable to individuals who are residents of the State and are entitled to benefits with respect to prescribed drugs under the State plan under this title (including such a plan operating under a waiver under section 1115).

`(B) STATE MATCHING RATE- A proportion computed by subtracting from 100 percent the Federal medical assistance percentage (as defined in section 1905(b)) applicable to the State and the quarter.

`(C) PHASE-OUT PROPORTION- The phase-out proportion (as defined in paragraph (2)) for the quarter.

`(2) PHASE-OUT PROPORTION- For purposes of paragraph (1)(C), the `phase-out proportion' for a calendar quarter in--

`(A) 2005 is 80 percent;

`(B) 2006 is 60 percent;

`(C) 2007 is 40 percent;

`(D) 2008 is 20 percent; or

`(E) a year after 2008 is 0 percent.'.

(c) MEDICAID PROVIDING WRAP-AROUND BENEFITS- Section 1935 of such Act, as so inserted and amended, is further amended by adding at the end the following new subsection:

`(d) ADDITIONAL PROVISIONS-

`(1) MEDICAID AS SECONDARY PAYOR- In the case of an individual dually entitled to qualified prescription drug coverage under a prescription drug plan under part D of title XVIII (or under a Medicare+Choice plan under part C of such title) and medical assistance for prescribed drugs under this title, medical assistance shall continue to be provided under this title for prescribed drugs to the extent payment is not made under the prescription drug plan or the Medicare+Choice plan selected by the individual.

`(2) CONDITION- A State may require, as a condition for the receipt of medical assistance under this title with respect to prescription drug benefits for an individual eligible to obtain qualified prescription drug coverage described in paragraph (1), that the individual elect qualified prescription drug coverage under section 1860A.'.

(d) TREATMENT OF TERRITORIES-

(1) IN GENERAL- Section 1935 of such Act, as so inserted and amended, is further amended--

(A) in subsection (a) in the matter preceding paragraph (1), by inserting `subject to subsection (e)' after `section 1903(a)';

(B) in subsection (c)(1), by inserting `subject to subsection (e)' after `1903(a)(1)'; and

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

`(e) TREATMENT OF TERRITORIES-

`(1) IN GENERAL- In the case of a State, other than the 50 States and the District of Columbia--

`(A) the previous provisions of this section shall not apply to residents of such State; and

`(B) if the State establishes a plan described in paragraph (2) (for providing medical assistance with respect to the provision of prescription drugs to medicare beneficiaries), the amount otherwise determined under section 1108(f) (as increased under section 1108(g)) for the State shall be increased by the amount specified in paragraph (3).

`(2) PLAN- The plan described in this paragraph is a plan that--

`(A) provides medical assistance with respect to the provision of covered outpatient drugs (as defined in section 1860B(f)) to low-income medicare beneficiaries; and

`(B) assures that additional amounts received by the State that are attributable to the operation of this subsection are used only for such assistance.

`(3) INCREASED AMOUNT-

`(A) IN GENERAL- The amount specified in this paragraph for a State for a year is equal to the product of--

`(i) the aggregate amount specified in subparagraph (B); and

`(ii) the amount specified in section 1108(g)(1) for that State, divided by the sum of the amounts specified in such section for all such States.

`(B) AGGREGATE AMOUNT- The aggregate amount specified in this subparagraph for--

`(i) 2005, is equal to $20,000,000; or

`(ii) a subsequent year, is equal to the aggregate amount specified in this subparagraph for the previous year increased by annual percentage increase specified in section 1860B(b)(5) for the year involved.

`(4) REPORT- The Secretary shall submit to Congress a report on the application of this subsection and may include in the report such recommendations as the Secretary deems appropriate.'.

(2) CONFORMING AMENDMENT- Section 1108(f) of such Act is amended by inserting `and section 1935(e)(1)(B)' after `Subject to subsection (g)'.

SEC. 5. MEDIGAP TRANSITION PROVISIONS.

(a) IN GENERAL- Notwithstanding any other provision of law, no new medicare supplemental policy that provides coverage of expenses for prescription drugs may be issued under section 1882 of the Social Security Act on or after January 1, 2005, to an individual unless it replaces a medicare supplemental policy that was issued to that individual and that provided some coverage of expenses for prescription drugs.

(b) ISSUANCE OF SUBSTITUTE POLICIES IF OBTAIN PRESCRIPTION DRUG COVERAGE THROUGH MEDICARE-

(1) IN GENERAL- The issuer of a medicare supplemental policy--

(A) may not deny or condition the issuance or effectiveness of a medicare supplemental policy that has a benefit package classified as `A', `B', `C', `D', `E', `F', or `G' (under the standards established under subsection (p)(2) of section 1882 of the Social Security Act, 42 U.S.C. 1395ss) and that is offered and is available for issuance to new enrollees by such issuer;

(B) may not discriminate in the pricing of such policy, because of health status, claims experience, receipt of health care, or medical condition; and

(C) may not impose an exclusion of benefits based on a pre-existing condition under such policy,

in the case of an individual described in paragraph (2) who seeks to enroll under the policy not later than 63 days after the date of the termination of enrollment described in such paragraph and who submits evidence of the date of termination or disenrollment along with the application for such medicare supplemental policy.

(2) INDIVIDUAL COVERED- An individual described in this paragraph is an individual who--

(A) enrolls in a prescription drug plan under part D of title XVIII of the Social Security Act; and

(B) at the time of such enrollment was enrolled and terminates enrollment in a medicare supplemental policy which has a benefit package classified as `H', `I', or `J' under the standards referred to in paragraph (1)(A) or terminates enrollment in a policy to which such standards do not apply but which provides benefits for prescription drugs.

(3) ENFORCEMENT- The provisions of paragraph (1) shall be enforced as though they were included in section 1882(s) of the Social Security Act (42 U.S.C. 1395ss(s)).

(4) DEFINITIONS- For purposes of this subsection, the term `medicare supplemental policy' has the meaning given such term in section 1882(g) of the Social Security Act (42 U.S.C. 1395ss(g)).

END