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                  In the Senate of the United States,

                                                          July 7, 2003.
    Resolved, That the bill from the House of Representatives (H.R. 1) 
entitled ``An Act to amend title XVIII of the Social Security Act to 
provide for a voluntary program for prescription drug coverage under 
the Medicare Program, to modernize the Medicare Program, to amend the 
Internal Revenue Code of 1986 to allow a deduction to individuals for 
amounts contributed to health savings security accounts and health 
savings accounts, to provide for the disposition of unused health 
benefits in cafeteria plans and flexible spending arrangements, and for 
other purposes.'', do pass with the following

                              AMENDMENTS:

            Strike out all after the enacting clause and insert:

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

    (a) Short Title.--This Act may be cited as the ``Prescription Drug 
and Medicare Improvement Act of 2003''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (c) BIPA; Secretary.--In this Act:
            (1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid, 
        and SCHIP Benefits Improvement and Protection Act of 2000, as 
        enacted into law by section 1(a)(6) of Public Law 106-554.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
    (d) Table of Contents.--The table of contents of this Act is as 
follows:

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

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

   Subtitle A--Medicare Voluntary Prescription Drug Delivery Program

Sec. 101. Medicare voluntary prescription drug delivery program.

         ``Part D--Voluntary Prescription Drug Delivery Program

        ``Sec. 1860D. Definitions; treatment of references to 
                            provisions in MedicareAdvantage program.

  ``Subpart 1--Establishment of Voluntary Prescription Drug Delivery 
                                Program

        ``Sec. 1860D-1. Establishment of voluntary prescription drug 
                            delivery program.
        ``Sec. 1860D-2. Enrollment under program.
        ``Sec. 1860D-3. Election of a Medicare Prescription Drug plan.
        ``Sec. 1860D-4. Providing information to beneficiaries.
        ``Sec. 1860D-5. Beneficiary protections.
        ``Sec. 1860D-6. Prescription drug benefits.
        ``Sec. 1860D-7. Requirements for entities offering Medicare 
                            Prescription Drug plans; establishment of 
                            standards.

             ``Subpart 2--Prescription Drug Delivery System

        ``Sec. 1860D-10. Establishment of service areas.
        ``Sec. 1860D-11. Publication of risk adjusters.
        ``Sec. 1860D-12. Submission of bids for proposed Medicare 
                            Prescription Drug plans.
        ``Sec. 1860D-13. Approval of proposed Medicare Prescription 
                            Drug plans.
        ``Sec. 1860D-14. Computation of monthly standard prescription 
                            drug coverage premiums.
        ``Sec. 1860D-15. Computation of monthly national average 
                            premium.
        ``Sec. 1860D-16. Payments to eligible entities.
        ``Sec. 1860D-17. Computation of monthly beneficiary obligation.
        ``Sec. 1860D-18. Collection of monthly beneficiary obligation.
        ``Sec. 1860D-19. Premium and cost-sharing subsidies for low-
                            income individuals.
        ``Sec. 1860D-20. Reinsurance payments for expenses incurred in 
                            providing prescription drug coverage above 
                            the annual out-of-pocket threshold.
        ``Sec. 1860D-21. Direct subsidy for sponsor of a qualified 
                            retiree prescription drug plan for plan 
                            enrollees eligible for, but not enrolled 
                            in, this part.
        ``Sec. 1860D-22. Direct subsidies for qualified State offering 
                            a State pharmaceutical assistance program 
                            for program enrollees eligible for, but not 
                            enrolled in, this part.

                 ``Subpart 3--Miscellaneous Provisions

        ``Sec. 1860D-25. Prescription Drug Account in the Federal 
                            Supplementary Medical Insurance Trust Fund.
        ``Sec. 1860D-26. Other related provisions.

Sec. 102. Study and report on permitting part B only individuals to 
                            enroll in medicare voluntary prescription 
                            drug delivery program.
Sec. 103. Rules relating to medigap policies that provide prescription 
                            drug coverage.
Sec. 104. Medicaid and other amendments related to low-income 
                            beneficiaries.
Sec. 105. Expansion of membership and duties of Medicare Payment 
                            Advisory Commission (MedPAC).
Sec. 106. Study regarding variations in spending and drug utilization.
Sec. 107. Limitation on prescription drug benefits of Members of 
                            Congress.
Sec. 108. Protecting seniors with cancer.
Sec. 109. Protecting seniors with cardiovascular disease, cancer, or 
                            Alzheimer's disease.
Sec. 110. Review and report on current standards of practice for 
                            pharmacy services provided to patients in 
                            nursing facilities.
Sec. 110A. Medication therapy management assessment program.

 Subtitle B--Medicare Prescription Drug Discount Card and Transitional 
                Assistance for Low-Income Beneficiaries

Sec. 111. Medicare prescription drug discount card and transitional 
                            assistance for low-income beneficiaries.

            Subtitle C--Standards for Electronic Prescribing

Sec. 121. Standards for electronic prescribing.

                      Subtitle D--Other Provisions

Sec. 131. Additional requirements for annual financial report and 
                            oversight on medicare program.
Sec. 132. Trustees' report on medicare's unfunded obligations.
Sec. 133. Pharmacy benefit managers transparency requirements.
Sec. 134. Office of the Medicare Beneficiary Advocate.

                      TITLE II--MEDICAREADVANTAGE

               Subtitle A--MedicareAdvantage Competition

Sec. 201. Eligibility, election, and enrollment.
Sec. 202. Benefits and beneficiary protections.
Sec. 203. Payments to MedicareAdvantage organizations.
Sec. 204. Submission of bids; premiums.
Sec. 205. Special rules for prescription drug benefits.
Sec. 206. Facilitating employer participation.
Sec. 207. Administration by the Center for Medicare Choices.
Sec. 208. Conforming amendments.
Sec. 209. Effective date.
Sec. 210. Improvements in MedicareAdvantage benchmark determinations.

              Subtitle B--Preferred Provider Organizations

Sec. 211. Establishment of MedicareAdvantage preferred provider program 
                            option.

                 Subtitle C--Other Managed Care Reforms

Sec. 221. Extension of reasonable cost contracts.
Sec. 222. Specialized Medicare+Choice plans for special needs 
                            beneficiaries.
Sec. 223. Payment by PACE providers for medicare and medicaid services 
                            furnished by noncontract providers.
Sec. 224. Institute of Medicine evaluation and report on health care 
                            performance measures.
Sec. 225. Expanding the work of medicare quality improvement 
                            organizations to include parts C and D.
Sec. 226. Extension of demonstration for ESRD managed care.

   Subtitle D--Evaluation of Alternative Payment and Delivery Systems

Sec. 231. Establishment of alternative payment system for preferred 
                            provider organizations in highly 
                            competitive regions.
Sec. 232. Fee-for-service modernization projects.

     Subtitle E--National Bipartisan Commission on Medicare Reform

Sec. 241. MedicareAdvantage goal; establishment of Commission.
Sec. 242. National bipartisan commission on medicare reform.
Sec. 243. Congressional consideration of reform proposals.
Sec. 244. Authorization of appropriations.

                 TITLE III--CENTER FOR MEDICARE CHOICES

Sec. 301. Establishment of the Center for Medicare Choices.
Sec. 302. Miscellaneous administrative provisions.

            TITLE IV--MEDICARE FEE-FOR-SERVICE IMPROVEMENTS

               Subtitle A--Provisions Relating to Part A

Sec. 401. Equalizing urban and rural standardized payment amounts under 
                            the medicare inpatient hospital prospective 
                            payment system.
Sec. 402. Adjustment to the medicare inpatient hospital PPS wage index 
                            to revise the labor-related share of such 
                            index.
Sec. 403. Medicare inpatient hospital payment adjustment for low-volume 
                            hospitals.
Sec. 404. Fairness in the medicare disproportionate share hospital 
                            (DSH) adjustment for rural hospitals.
Sec. 404A. Medpac study and report regarding medicare Disproportionate 
                            Share Hospital (DSH) adjustment payments.
Sec. 405. Critical access hospital (CAH) improvements.
Sec. 406. Authorizing use of arrangements to provide core hospice 
                            services in certain circumstances.
Sec. 407. Services provided to hospice patients by nurse practitioners, 
                            clinical nurse specialists, and physician 
                            assistants.
Sec. 408. Authority to include costs of training of psychologists in 
                            payments to hospitals under medicare.
Sec. 409. Revision of Federal rate for hospitals in Puerto Rico.
Sec. 410. Exception to initial residency period for geriatric residency 
                            or fellowship programs.
Sec. 411. Clarification of congressional intent regarding the counting 
                            of residents in a nonprovider setting and a 
                            technical amendment regarding the 3-year 
                            rolling average and the IME ratio.
Sec. 412. Limitation on charges for inpatient hospital contract health 
                            services provided to Indians by medicare 
                            participating hospitals.
Sec. 413. GAO study and report on appropriateness of payments under the 
                            prospective payment system for inpatient 
                            hospital services.
Sec. 414. Rural community hospital demonstration program.
Sec. 415. Critical access hospital improvement demonstration program.
Sec. 416. Treatment of grandfathered long-term care hospitals.
Sec. 417. Treatment of certain entities for purposes of payments under 
                            the medicare program.
Sec. 418. Revision of the indirect medical education (IME) adjustment 
                            percentage.
Sec. 419. Calculation of wage indices for hospitals.
Sec. 420. Conforming changes regarding federally qualified health 
                            centers.
Sec. 420A. Increase for hospitals with disproportionate indigent care 
                            revenues.
Sec. 420B. Treatment of grandfathered long-term care hospitals.

               Subtitle B--Provisions Relating to Part B

Sec. 421. Establishment of floor on geographic adjustments of payments 
                            for physicians' services.
Sec. 422. Medicare incentive payment program improvements.
Sec. 423. Extension of hold harmless provisions for small rural 
                            hospitals and treatment of certain sole 
                            community hospitals to limit decline in 
                            payment under the OPD PPS.
Sec. 424. Increase in payments for certain services furnished by small 
                            rural and sole community hospitals under 
                            medicare prospective payment system for 
                            hospital outpatient department services.
Sec. 425. Temporary increase for ground ambulance services.
Sec. 426. Ensuring appropriate coverage of air ambulance services under 
                            ambulance fee schedule.
Sec. 427. Treatment of certain clinical diagnostic laboratory tests 
                            furnished by a sole community hospital.
Sec. 428. Improvement in rural health clinic reimbursement.
Sec. 429. Elimination of consolidated billing for certain services 
                            under the medicare PPS for skilled nursing 
                            facility services.
Sec. 430. Freeze in payments for certain items of durable medical 
                            equipment and certain orthotics; 
                            establishment of quality standards and 
                            accreditation requirements for DME 
                            providers.
Sec. 431. Application of coinsurance and deductible for clinical 
                            diagnostic laboratory tests.
Sec. 432. Basing medicare payments for covered outpatient drugs on 
                            market prices.
Sec. 433. Indexing part B deductible to inflation.
Sec. 434. Revisions to reassignment provisions.
Sec. 435. Extension of treatment of certain physician pathology 
                            services under medicare.
Sec. 436. Adequate reimbursement for outpatient pharmacy therapy under 
                            the hospital outpatient PPS.
Sec. 437. Limitation of application of functional equivalence standard.
Sec. 438. Medicare coverage of routine costs associated with certain 
                            clinical trials.
Sec. 439. Waiver of part B late enrollment penalty for certain military 
                            retirees; special enrollment period.
Sec. 440. Demonstration of coverage of chiropractic services under 
                            medicare.
Sec. 441. Medicare health care quality demonstration programs.
Sec. 442. Medicare complex clinical care management payment 
                            demonstration.
Sec. 443. Medicare fee-for-service care coordination demonstration 
                            program.
Sec. 444. GAO study of geographic differences in payments for 
                            physicians' services.
Sec. 445. Improved payment for certain mammography services.
Sec. 446. Improvement of outpatient vision services under Part B.
Sec. 447. GAO study and report on the propagation of concierge care.
Sec. 448. Coverage of marriage and family therapist services and mental 
                            health counselor services under Part B of 
                            the medicare program.
Sec. 449. Medicare demonstration project for direct access to physical 
                            therapy services.
Sec. 450.  Demonstration project to clarify the definition of 
                            homebound.
Sec. 450A. Demonstration project for exclusion of brachytherapy devices 
                            from prospective payment system for 
                            outpatient hospital services.
Sec. 450B. Reimbursement for total body orthotic management for certain 
                            nursing home patients.
Sec. 450C. Authorization of reimbursement for all medicare part B 
                            services furnished by certain Indian 
                            hospitals and clinics.
Sec. 450D. Coverage of cardiovascular screening tests.
Sec. 450E. Medicare coverage of self-injected biologicals.
Sec. 450F. Extension of medicare secondary payer rules for individuals 
                            with end-stage renal disease.
Sec. 450G. Requiring the Internal Revenue Service to deposit 
                            installment agreement and other fees in the 
                            Treasury as miscellaneous receipts.
Sec. 450H. Increasing types of originating telehealth sites and 
                            facilitating the provision of telehealth 
                            services across State lines.
Sec. 450I. Demonstration project for coverage of surgical first 
                            assisting services of certified registered 
                            nurse first assistants.
Sec. 450J. Equitable treatment for children's hospitals.
Sec. 450K. Treatment of physicians' services furnished in Alaska.
Sec. 450L. Demonstration project to examine what weight loss weight 
                            management services can cost effectively 
                            reach the same result as the NIH Diabetes 
                            Primary Prevention Trial study: A 50 
                            percent reduction in the risk for type 2 
                            diabetes for individuals who have impaired 
                            glucose tolerance and are obese.

            Subtitle C--Provisions Relating to Parts A and B

Sec. 451. Increase for home health services furnished in a rural area.
Sec. 452. Limitation on reduction in area wage adjustment factors under 
                            the prospective payment system for home 
                            health services.
Sec. 453. Clarifications to certain exceptions to medicare limits on 
                            physician referrals.
Sec. 454. Demonstration program for substitute adult day services.
Sec. 455. MEDPAC study on medicare payments and efficiencies in the 
                            health care system.
Sec. 456. Medicare coverage of kidney disease education services.
Sec. 457. Frontier extended stay clinic demonstration project.
Sec. 458. Improvements in national coverage determination process to 
                            respond to changes in technology.
Sec. 459. Increase in medicare payment for certain home health 
                            services.
Sec. 460. Frontier extended stay clinic demonstration project.
Sec. 461. Medicare secondary payor (MSP) provisions.
Sec. 462. Medicare pancreatic islet cell transplant demonstration 
                            project.
Sec. 463. Increase in medicare payment for certain home health 
                            services.
Sec. 464. Sense of the Senate concerning medicare payment update for 
                            physicians and other health professionals.

  TITLE V--MEDICARE APPEALS, REGULATORY, AND CONTRACTING IMPROVEMENTS

                     Subtitle A--Regulatory Reform

Sec. 501. Rules for the publication of a final regulation based on the 
                            previous publication of an interim final 
                            regulation.
Sec. 502. Compliance with changes in regulations and policies.
Sec. 503. Report on legal and regulatory inconsistencies.
Sec. 504. Streamlining and simplification of medicare regulations.

                   Subtitle B--Appeals Process Reform

Sec. 511. Submission of plan for transfer of responsibility for 
                            medicare appeals.
Sec. 512. Expedited access to judicial review.
Sec. 513. Expedited review of certain provider agreement 
                            determinations.
Sec. 514. Revisions to medicare appeals process.
Sec. 515. Hearing rights related to decisions by the Secretary to deny 
                            or not renew a medicare enrollment 
                            agreement; consultation before changing 
                            provider enrollment forms.
Sec. 516. Appeals by providers when there is no other party available.
Sec. 517. Provider access to review of local coverage determinations.
Sec. 518. Revisions to appeals timeframes.
Sec. 519. Elimination of requirement to use Social Security 
                            Administration Administrative Law Judges.
Sec. 520. Elimination of requirement for de novo review by the 
                            departmental appeals board.

                     Subtitle C--Contracting Reform

Sec. 521. Increased flexibility in medicare administration.

            Subtitle D--Education and Outreach Improvements

Sec. 531. Provider education and technical assistance.
Sec. 532. Access to and prompt responses from medicare contractors.
Sec. 533. Reliance on guidance.
Sec. 534. Medicare provider ombudsman.
Sec. 535. Beneficiary outreach demonstration programs.

          Subtitle E--Review, Recovery, and Enforcement Reform

Sec. 541. Prepayment review.
Sec. 542. Recovery of overpayments.
Sec. 543. Process for correction of minor errors and omissions on 
                            claims without pursuing appeals process.
Sec. 544. Authority to waive a program exclusion.

                     Subtitle F--Other Improvements

Sec. 551. Inclusion of additional information in notices to 
                            beneficiaries about skilled nursing 
                            facility and hospital benefits.
Sec. 552. Information on medicare-certified skilled nursing facilities 
                            in hospital discharge plans.
Sec. 553. Evaluation and management documentation guidelines 
                            consideration.
Sec. 554. Council for Technology and Innovation.
Sec. 555. Treatment of certain dental claims.

                       TITLE VI--OTHER PROVISIONS

Sec. 601. Increase in medicaid DSH allotments for fiscal years 2004 and 
                            2005.
Sec. 602. Increase in floor for treatment as an extremely low DSH State 
                            under the medicaid program for fiscal years 
                            2004 and 2005.
Sec. 603. Increased reporting requirements to ensure the 
                            appropriateness of payment adjustments to 
                            disproportionate share hospitals under the 
                            medicaid program.
Sec. 604. Clarification of inclusion of inpatient drug prices charged 
                            to certain public hospitals in the best 
                            price exemptions for the medicaid drug 
                            rebate program.
Sec. 605. Assistance with coverage of legal immigrants under the 
                            medicaid program and SCHIP.
Sec. 606. Establishment of consumer ombudsman account.
Sec. 607. GAO study regarding impact of assets test for low-income 
                            beneficiaries.
Sec. 608. Health care infrastructure improvement.
Sec. 609. Capital infrastructure revolving loan program.
Sec. 610. Federal reimbursement of emergency health services furnished 
                            to undocumented aliens.
Sec. 611. Increase in appropriation to the health care fraud and abuse 
                            control account.
Sec. 612. Increase in civil penalties under the False Claims Act.
Sec. 613. Increase in civil monetary penalties under the Social 
                            Security Act.
Sec. 614. Extension of customs user fees.
Sec. 615. Reimbursement for federally qualified health centers 
                            participating in medicare managed care.
Sec. 616. Provision of information on advance directives.
Sec. 617. Sense of the Senate regarding implementation of the 
                            Prescription Drug and Medicare Improvement 
                            Act of 2003.
Sec. 618. Extension of municipal health service demonstration projects.
Sec. 619. Study on making prescription pharmaceutical information 
                            accessible for blind and visually-impaired 
                            individuals.
Sec. 620. Health care that works for all americans-citizens health care 
                            working group.
Sec. 621. GAO study of pharmaceutical price controls and patent 
                            protections in the G-7 countries.
Sec. 622. Sense of the Senate concerning medicare payment update for 
                            physicians and other health professionals.
Sec. 623. Restoration of Federal Hospital Insurance Trust Fund.
Sec. 624. Safety net organizations and Patient Advisory Commission.
Sec. 625. Urban health provider adjustment.
Sec. 626. Committee on drug compounding.
Sec. 627. Sense of the Senate concerning the structure of medicare 
                            reform and the prescription drug benefit.
Sec. 628. Sense of the Senate regarding the establishment of a 
                            nationwide permanent lifestyle modification 
                            program for medicare beneficiaries.
Sec. 629. Sense of the Senate on payment reductions under medicare 
                            physician fee schedule.
Sec. 630. Temporary suspension of oasis requirement for collection of 
                            data on non-medicare and non-medicaid 
                            patients.
Sec. 631. Employer flexibility.
Sec. 632. One Hundred percent FMAP for medical assistance provided to a 
                            Native Hawaiian through a federally-
                            qualified health center or a Native 
                            Hawaiian health care system under the 
                            medicaid program.
Sec. 633. Extension of moratorium.
Sec. 634. GAO study of pharmaceutical price controls and patent 
                            protections in the G-7 countries.
Sec. 635. Safety Net Organizations and Patient Advisory Commission.
Sec. 636. Establishment of program to prevent abuse of nursing facility 
                            residents.
Sec. 637. Office of Rural Health Policy Improvements.

            TITLE VII--ACCESS TO AFFORDABLE PHARMACEUTICALS

Sec. 701. Short title.
Sec. 702. 30-month stay-of-effectiveness period.
Sec. 703. Forfeiture of 180-day exclusivity period.
Sec. 704. Bioavailability and bioequivalence.
Sec. 705. Remedies for infringement.
Sec. 706. Conforming amendments.

             TITLE VIII--IMPORTATION OF PRESCRIPTION DRUGS

Sec. 801. Importation of prescription drugs.

                 TITLE IX--DRUG COMPETITION ACT OF 2003

Sec. 901. Short title.
Sec. 902. Findings.
Sec. 903. Purposes.
Sec. 904. Definitions.
Sec. 905. Notification of agreements.
Sec. 906. Filing deadlines.
Sec. 907. Disclosure exemption.
Sec. 908. Enforcement.
Sec. 909. Rulemaking.
Sec. 910. Savings clause.
Sec. 911. Effective date.

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

   Subtitle A--Medicare Voluntary Prescription Drug Delivery Program

SEC. 101. MEDICARE VOLUNTARY PRESCRIPTION DRUG DELIVERY PROGRAM.

    (a) Establishment.--Title XVIII (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--Voluntary Prescription Drug Delivery Program

        ``definitions; treatment of references to provisions in 
                       medicareadvantage program

    ``Sec. 1860D. (a) Definitions.--In this part:
            ``(1) Administrator.--The term `Administrator' means the 
        Administrator of the Center for Medicare Choices as established 
        under section 1808.
            ``(2) Covered drug.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B), (C), and (D), the term `covered 
                drug' means--
                            ``(i) a drug that may be dispensed only 
                        upon a prescription and that is described in 
                        clause (i) or (ii) of subparagraph (A) of 
                        section 1927(k)(2); or
                            ``(ii) a biological product described in 
                        clauses (i) through (iii) of subparagraph (B) 
                        of such section; or
                            ``(iii) insulin described in subparagraph 
                        (C) of such section (including syringes, and 
                        necessary medical supplies associated with the 
                        administration of insulin, as defined by the 
                        Administrator);
                and such term includes a vaccine licensed under section 
                351 of the Public Health Service Act and any use of a 
                covered drug for a medically accepted indication (as 
                defined in section 1927(k)(6)).
                    ``(B) Exclusions.--
                            ``(i) In general.--The term `covered drug' 
                        does not include drugs or classes of drugs, or 
                        their medical uses, which may be excluded from 
                        coverage or otherwise restricted under section 
                        1927(d)(2), other than subparagraph (E) thereof 
                        (relating to smoking cessation agents), or 
                        under section 1927(d)(3).
                            ``(ii) Avoidance of duplicate coverage.--A 
                        drug prescribed for an individual that would 
                        otherwise be a covered 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 under part A or B or because benefits 
                        under such parts have been exhausted.
                    ``(C) Application of formulary restrictions.--A 
                drug prescribed for an individual that would otherwise 
                be a covered drug under this part shall not be so 
                considered under a plan if the plan excludes the drug 
                under a formulary and such exclusion is not 
                successfully resolved under subsection (d) or (e)(2) of 
                section 1860D-5.
                    ``(D) Application of general exclusion 
                provisions.--A Medicare Prescription Drug plan or a 
                MedicareAdvantage plan may exclude from qualified 
                prescription drug coverage any covered drug--
                            ``(i) for which payment would not be made 
                        if section 1862(a) applied to part D; or
                            ``(ii) which are not prescribed in 
                        accordance with the plan or this part.
                Such exclusions are determinations subject to 
                reconsideration and appeal pursuant to section 1860D-
                5(e).
            ``(3) Eligible beneficiary.--The term `eligible 
        beneficiary' means an individual who is entitled to, or 
        enrolled for, benefits under part A and enrolled under part B 
        (other than a dual eligible individual, as defined in section 
        1860D-19(a)(4)(E)).
            ``(4) Eligible entity.--The term `eligible entity' means 
        any risk-bearing entity that the Administrator determines to be 
        appropriate to provide eligible beneficiaries with the benefits 
        under a Medicare Prescription Drug plan, including--
                    ``(A) a pharmaceutical benefit management company;
                    ``(B) a wholesale or retail pharmacist delivery 
                system;
                    ``(C) an insurer (including an insurer that offers 
                medicare supplemental policies under section 1882);
                    ``(D) any other risk-bearing entity; or
                    ``(E) any combination of the entities described in 
                subparagraphs (A) through (D).
            ``(5) Initial coverage limit.--The term `initial coverage 
        limit' means the limit as established under section 1860D-
        6(c)(3), or, in the case of coverage that is not standard 
        prescription drug coverage, the comparable limit (if any) 
        established under the coverage.
            ``(6) Medicareadvantage organization; medicareadvantage 
        plan.--The terms `MedicareAdvantage organization' and 
        `MedicareAdvantage plan' have the meanings given such terms in 
        subsections (a)(1) and (b)(1), respectively, of section 1859 
        (relating to definitions relating to MedicareAdvantage 
        organizations).
            ``(7) Medicare prescription drug plan.--The term `Medicare 
        Prescription Drug plan' means prescription drug coverage that 
        is offered under a policy, contract, or plan--
                    ``(A) that has been approved under section 1860D-
                13; and
                    ``(B) by an eligible entity pursuant to, and in 
                accordance with, a contract between the Administrator 
                and the entity under section 1860D-7(b).
            ``(8) Prescription drug account.--The term `Prescription 
        Drug Account' means the Prescription Drug Account (as 
        established under section 1860D-25) in the Federal 
        Supplementary Medical Insurance Trust Fund under section 1841.
            ``(9) Qualified prescription drug coverage.--The term 
        `qualified prescription drug coverage' means the coverage 
        described in section 1860D-6(a)(1).
            ``(10) Standard prescription drug coverage.--The term 
        `standard prescription drug coverage' means the coverage 
        described in section 1860D-6(c).
    ``(b) Application of MedicareAdvantage Provisions Under This 
Part.--For purposes of applying provisions of part C under this part 
with respect to a Medicare Prescription Drug plan and an eligible 
entity, unless otherwise provided in this part such provisions shall be 
applied as if--
            ``(1) any reference to a MedicareAdvantage plan included a 
        reference to a Medicare Prescription Drug plan;
            ``(2) any reference to a provider-sponsored organization 
        included a reference to an eligible entity;
            ``(3) any reference to a contract under section 1857 
        included a reference to a contract under section 1860D-7(b); 
        and
            ``(4) any reference to part C included a reference to this 
        part.

  ``Subpart 1--Establishment of Voluntary Prescription Drug Delivery 
                                Program

    ``establishment of voluntary prescription drug delivery program

    ``Sec. 1860D-1. (a) Provision of Benefit.--
            ``(1) In general.--The Administrator shall provide for and 
        administer a voluntary prescription drug delivery program under 
        which each eligible beneficiary enrolled under this part shall 
        be provided with access to qualified prescription drug coverage 
        as follows:
                    ``(A) Medicareadvantage enrollees receive coverage 
                through medicareadvantage plan.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), an eligible beneficiary who is 
                        enrolled under this part and enrolled in a 
                        MedicareAdvantage plan offered by a 
                        MedicareAdvantage organization shall receive 
                        coverage of benefits under this part through 
                        such plan.
                            ``(ii) Exception for enrollees in 
                        medicareadvantage msa plans.--An eligible 
                        beneficiary who is enrolled under this part and 
                        enrolled in an MSA plan under part C shall 
                        receive coverage of benefits under this part 
                        through enrollment in a Medicare Prescription 
                        Drug plan that is offered in the geographic 
                        area in which the beneficiary resides. For 
                        purposes of this part, the term `MSA plan' has 
                        the meaning given such term in section 
                        1859(b)(3).
                            ``(iii) Exception for enrollees in 
                        medicareadvantage private fee-for-service 
                        plans.--An eligible beneficiary who is enrolled 
                        under this part and enrolled in a private fee-
                        for-service plan under part C shall--
                                    ``(i) receive benefits under this 
                                part through such plan if the plan 
                                provides qualified prescription drug 
                                coverage; and
                                    ``(ii) if the plan does not provide 
                                qualified prescription drug coverage, 
                                receive coverage of benefits under this 
                                part through enrollment in a Medicare 
                                Prescription Drug plan that is offered 
                                in the geographic area in which the 
                                beneficiary resides. For purposes of 
                                this part, the term `private fee-for-
                                service plan' has the meaning given 
                                such term in section 1859(b)(2).
                    ``(B) Fee-for-service enrollees receive coverage 
                through a medicare prescription drug plan.--An eligible 
                beneficiary who is enrolled under this part but is not 
                enrolled in a MedicareAdvantage plan (except for an MSA 
                plan or a private fee-for-service plan that does not 
                provide qualified prescription drug coverage) shall 
                receive coverage of benefits under this part through 
                enrollment in a Medicare Prescription Drug plan that is 
                offered in the geographic area in which the beneficiary 
                resides.
            ``(2) Voluntary nature of program.--Nothing in this part 
        shall be construed as requiring an eligible beneficiary to 
        enroll in the program under this part.
            ``(3) Scope of benefits.--Pursuant to section 1860D-
        6(b)(3)(C), the program established under this part shall 
        provide for coverage of all therapeutic categories and classes 
        of covered drugs (although not necessarily for all drugs within 
        such categories and classes).
            ``(4) Program to begin in 2006.--The Administrator shall 
        establish the program under this part in a manner so that 
        benefits are first provided beginning on January 1, 2006.
    ``(b) Access to Alternative Prescription Drug Coverage.--In the 
case of an eligible beneficiary who has creditable prescription drug 
coverage (as defined in section 1860D-2(b)(1)(F)), such beneficiary--
            ``(1) may continue to receive such coverage and not enroll 
        under this part; and
            ``(2) pursuant to section 1860D-2(b)(1)(C), is permitted to 
        subsequently enroll under this part without any penalty and 
        obtain access to qualified prescription drug coverage in the 
        manner described in subsection (a) if the beneficiary 
        involuntarily loses such coverage.
    ``(c) Financing.--The costs of providing benefits under this part 
shall be payable from the Prescription Drug Account.

                       ``enrollment under program

    ``Sec. 1860D-2. (a) Establishment of Enrollment Process.--
            ``(1) Process similar to part b enrollment.--The 
        Administrator shall establish a process through which an 
        eligible beneficiary (including an eligible beneficiary 
        enrolled in a MedicareAdvantage plan offered by a 
        MedicareAdvantage organization) may make an election to enroll 
        under this part. Such process shall be similar to the process 
        for enrollment in part B under section 1837, including the 
        deeming provisions of such section.
            ``(2) Condition of enrollment.--An eligible beneficiary 
        must be enrolled under this part in order to be eligible to 
        receive access to qualified prescription drug coverage.
    ``(b) Special Enrollment Procedures.--
            ``(1) Late enrollment penalty.--
                    ``(A) Increase in monthly beneficiary obligation.--
                Subject to the succeeding provisions of this paragraph, 
                in the case of an eligible beneficiary whose coverage 
                period under this part began pursuant to an enrollment 
                after the beneficiary's initial enrollment period under 
                part B (determined pursuant to section 1837(d)) and not 
                pursuant to the open enrollment period described in 
                paragraph (2), the Administrator shall establish 
                procedures for increasing the amount of the monthly 
                beneficiary obligation under section 1860D-17 
                applicable to such beneficiary by an amount that the 
                Administrator determines is actuarially sound for each 
                full 12-month period (in the same continuous period of 
                eligibility) in which the eligible beneficiary could 
                have been enrolled under this part but was not so 
                enrolled.
                    ``(B) Periods taken into account.--For purposes of 
                calculating any 12-month period under subparagraph (A), 
                there shall be taken into account--
                            ``(i) the months which elapsed between the 
                        close of the eligible beneficiary's initial 
                        enrollment period and the close of the 
                        enrollment period in which the beneficiary 
                        enrolled; and
                            ``(ii) in the case of an eligible 
                        beneficiary who reenrolls under this part, the 
                        months which elapsed between the date of 
                        termination of a previous coverage period and 
                        the close of the enrollment period in which the 
                        beneficiary reenrolled.
                    ``(C) Periods not taken into account.--
                            ``(i) In general.--For purposes of 
                        calculating any 12-month period under 
                        subparagraph (A), subject to clause (ii), there 
                        shall not be taken into account months for 
                        which the eligible beneficiary can demonstrate 
                        that the beneficiary had creditable 
                        prescription drug coverage (as defined in 
                        subparagraph (F)).
                            ``(ii) Beneficiary must involuntarily lose 
                        coverage.--Clause (i) shall only apply with 
                        respect to coverage--
                                    ``(I) in the case of coverage 
                                described in clause (ii) of 
                                subparagraph (F), if the plan 
                                terminates, ceases to provide, or 
                                reduces the value of the prescription 
                                drug coverage under such plan to below 
                                the actuarial value of standard 
                                prescription drug coverage (as 
                                determined under section 1860D-6(f));
                                    ``(II) in the case of coverage 
                                described in clause (i), (iii), or (iv) 
                                of subparagraph (F), if the beneficiary 
                                is involuntarily disenrolled or becomes 
                                ineligible for such coverage; or
                                    ``(III) in the case of a 
                                beneficiary with coverage described in 
                                clause (v) of subparagraph (F), if the 
                                issuer of the policy terminates 
                                coverage under the policy.
                    ``(D) Periods treated separately.--Any increase in 
                an eligible beneficiary's monthly beneficiary 
                obligation under subparagraph (A) with respect to a 
                particular continuous period of eligibility shall not 
                be applicable with respect to any other continuous 
                period of eligibility which the beneficiary may have.
                    ``(E) Continuous period of eligibility.--
                            ``(i) In general.--Subject to clause (ii), 
                        for purposes of this paragraph, an eligible 
                        beneficiary's `continuous period of 
                        eligibility' is the period that begins with the 
                        first day on which the beneficiary is eligible 
                        to enroll under section 1836 and ends with the 
                        beneficiary's death.
                            ``(ii) Separate period.--Any period during 
                        all of which an eligible beneficiary satisfied 
                        paragraph (1) of section 1836 and which 
                        terminated in or before the month preceding the 
                        month in which the beneficiary attained age 65 
                        shall be a separate `continuous period of 
                        eligibility' with respect to the beneficiary 
                        (and each such period which terminates shall be 
                        deemed not to have existed for purposes of 
                        subsequently applying this paragraph).
                    ``(F) Creditable prescription drug coverage 
                defined.--Subject to subparagraph (G), for purposes of 
                this part, the term `creditable prescription drug 
                coverage' means any of the following:
                            ``(i) Drug-only coverage under Medicaid.--
                        Coverage of covered outpatient drugs (as 
                        defined in section 1927) under title XIX or a 
                        waiver under 1115 that is provided to an 
                        individual who is not a dual eligible 
                        individual (as defined in section 1860D-
                        19(a)(4)(E)).
                            ``(ii) Prescription drug coverage under a 
                        group health plan.--Any outpatient prescription 
                        drug coverage under a group health plan, 
                        including a health benefits plan under chapter 
                        89 of title 5, United States Code (commonly 
                        known as the Federal employees health benefits 
                        program), and a qualified retiree prescription 
                        drug plan (as defined in section 1860D-
                        20(e)(4)).
                            ``(iii) State pharmaceutical assistance 
                        program.--Coverage of prescription drugs under 
                        a State pharmaceutical assistance program.
                            ``(iv) Veterans' coverage of prescription 
                        drugs.--Coverage of prescription drugs for 
                        veterans, and survivors and dependents of 
                        veterans, under chapter 17 of title 38, United 
                        States Code.
                            ``(v) Prescription drug coverage under 
                        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)).
                    ``(G) Requirement for creditable coverage.--
                Coverage described in clauses (i) through (v) of 
                subparagraph (F) shall not be considered to be 
                creditable coverage under this part unless the coverage 
                provides coverage of the cost of prescription drugs the 
                actuarial value of which (as defined by the 
                Administrator) to the beneficiary equals or exceeds the 
                actuarial value of standard prescription drug coverage 
                (as determined under section 1860D-6(f)).
                    ``(H) Disclosure.--
                            ``(i) In general.--Each entity that offers 
                        coverage of the type described in clause (ii) 
                        (iii), (iv), or (v) of subparagraph (F) shall 
                        provide for disclosure, consistent with 
                        standards established by the Administrator, of 
                        whether the coverage provides coverage of the 
                        cost of prescription drugs the actuarial value 
                        of which (as defined by the Administrator) to 
                        the beneficiary equals or exceeds the actuarial 
                        value of standard prescription drug coverage 
                        (as determined under section 1860D-6(f)).
                            ``(ii) Waiver of limitations.--An 
                        individual may apply to the Administrator to 
                        waive the application of subparagraph (G) if 
                        the individual establishes that the individual 
                        was not adequately informed that the coverage 
                        the beneficiary was enrolled in did not provide 
                        the level of benefits required in order for the 
                        coverage to be considered creditable coverage 
                        under subparagraph (F).
            ``(2) Initial election periods.--
                    ``(A) Open enrollment period for current 
                beneficiaries in which late enrollment procedures do 
                not apply.--In the case of an individual who is an 
                eligible beneficiary as of November 1, 2005, there 
                shall be an open enrollment period of 6 months 
                beginning on that date under which such beneficiary may 
                enroll under this part without the application of the 
                late enrollment procedures established under paragraph 
                (1)(A).
                    ``(B) Individual covered in future.--In the case of 
                an individual who becomes an eligible beneficiary after 
                such date, there shall be an initial election period 
                which is the same as the initial enrollment period 
                under section 1837(d).
            ``(3) Special enrollment period for beneficiaries who 
        involuntarily lose creditable prescription drug coverage.--
                    ``(A) Establishment.--The Administrator shall 
                establish a special open enrollment period (as 
                described in subparagraph (B)) for an eligible 
                beneficiary that loses creditable prescription drug 
                coverage.
                    ``(B) Special open enrollment period.--The special 
                open enrollment period described in this subparagraph 
                is the 63-day period that begins on--
                            ``(i) in the case of a beneficiary with 
                        coverage described in clause (ii) of paragraph 
                        (1)(F), the later of the date on which the plan 
                        terminates, ceases to provide, or substantially 
                        reduces (as defined by the Administrator) the 
                        value of the prescription drug coverage under 
                        such plan or the date the beneficiary is 
                        provided with notice of such termination or 
                        reduction;
                            ``(ii) in the case of a beneficiary with 
                        coverage described in clause (i), (iii), or 
                        (iv) of paragraph (1)(F), the later of the date 
                        on which the beneficiary is involuntarily 
                        disenrolled or becomes ineligible for such 
                        coverage or the date the beneficiary is 
                        provided with notice of such loss of 
                        eligibility; or
                            ``(iii) in the case of a beneficiary with 
                        coverage described in clause (v) of paragraph 
                        (1)(F), the latter of the date on which the 
                        issuer of the policy terminates coverage under 
                        the policy or the date the beneficiary is 
                        provided with notice of such termination.
    ``(c) Period of Coverage.--
            ``(1) In general.--Except as provided in paragraph (2) and 
        subject to paragraph (3), an eligible beneficiary's coverage 
        under the program under this part shall be effective for the 
        period provided in section 1838, as if that section applied to 
        the program under this part.
            ``(2) Open and special enrollment.--
                    ``(A) Open enrollment.--An eligible beneficiary who 
                enrolls under the program under this part pursuant to 
                subsection (b)(2) shall be entitled to the benefits 
                under this part beginning on January 1, 2006.
                    ``(B) Special enrollment.--Subject to paragraph 
                (3), an eligible beneficiary who enrolls under the 
                program under this part pursuant to subsection (b)(3) 
                shall be entitled to the benefits under this part 
                beginning on the first day of the month following the 
                month in which such enrollment occurs.
            ``(3) Limitation.--Coverage under this part shall not begin 
        prior to January 1, 2006.
    ``(d) Termination.--
            ``(1) In general.--The causes of termination specified in 
        section 1838 shall apply to this part in the same manner as 
        such causes apply to part B.
            ``(2) Coverage terminated by termination of coverage under 
        part a or b.--
                    ``(A) In general.--In addition to the causes of 
                termination specified in paragraph (1), the 
                Administrator shall terminate an individual's coverage 
                under this part if the individual is no longer enrolled 
                in both parts A and B.
                    ``(B) Effective date.--The termination described in 
                subparagraph (A) shall be effective on the effective 
                date of termination of coverage under part A or (if 
                earlier) under part B.
            ``(3) Procedures regarding termination of a beneficiary 
        under a plan.--The Administrator shall establish procedures for 
        determining the status of an eligible beneficiary's enrollment 
        under this part if the beneficiary's enrollment in a Medicare 
        Prescription Drug plan offered by an eligible entity under this 
        part is terminated by the entity for cause (pursuant to 
        procedures established by the Administrator under section 
        1860D-3(a)(1)).

            ``election of a medicare prescription drug plan

    ``Sec. 1860D-3. (a) In General.--
            ``(1) Process.--
                    ``(A) Election.--
                            ``(i) In general.--The Administrator shall 
                        establish a process through which an eligible 
                        beneficiary who is enrolled under this part but 
                        not enrolled in a MedicareAdvantage plan 
                        (except for an MSA plan or a private fee-for-
                        service plan that does not provide qualified 
                        prescription drug coverage) offered by a 
                        MedicareAdvantage organization--
                                    ``(I) shall make an election to 
                                enroll in any Medicare Prescription 
                                Drug plan that is offered by an 
                                eligible entity and that serves the 
                                geographic area in which the 
                                beneficiary resides; and
                                    ``(II) may make an annual election 
                                to change the election under this 
                                clause.
                            ``(ii) Clarification regarding 
                        enrollment.--The process established under 
                        clause (i) shall include, in the case of an 
                        eligible beneficiary who is enrolled under this 
                        part but who has failed to make an election of 
                        a Medicare Prescription Drug plan in an area, 
                        for the enrollment in any Medicare Prescription 
                        Drug plan that has been designated by the 
                        Administrator in the area. The Administrator 
                        shall establish a process for designating a 
                        plan or plans in order to carry out the 
                        preceding sentence.
                    ``(B) Requirements for process.--In establishing 
                the process under subparagraph (A), the Administrator 
                shall--
                            ``(i) use rules similar to the rules for 
                        enrollment, disenrollment, and termination of 
                        enrollment with a MedicareAdvantage plan under 
                        section 1851, including--
                                    ``(I) the establishment of special 
                                election periods under subsection 
                                (e)(4) of such section; and
                                    ``(II) the application of the 
                                guaranteed issue and renewal provisions 
                                of section 1851(g) (other than clause 
                                (i) and the second sentence of clause 
                                (ii) of paragraph (3)(C), relating to 
                                default enrollment); and
                            ``(ii) coordinate enrollments, 
                        disenrollments, and terminations of enrollment 
                        under part C with enrollments, disenrollments, 
                        and terminations of enrollment under this part.
            ``(2) First enrollment period for plan enrollment.--The 
        process developed under paragraph (1) shall ensure that 
        eligible beneficiaries who enroll under this part during the 
        open enrollment period under section 1860D-2(b)(2) are 
        permitted to elect an eligible entity prior to January 1, 2006, 
        in order to ensure that coverage under this part is effective 
        as of such date.
    ``(b) Enrollment in a MedicareAdvantage Plan.--
            ``(1) In general.--An eligible beneficiary who is enrolled 
        under this part and enrolled in a MedicareAdvantage plan 
        (except for an MSA plan or a private fee-for-service plan that 
        does not provide qualified prescription drug coverage) offered 
        by a MedicareAdvantage organization shall receive access to 
        such coverage under this part through such plan.
            ``(2) Rules.--Enrollment in a MedicareAdvantage plan is 
        subject to the rules for enrollment in such plan under section 
        1851.
    ``(c) Information to Entities to Facilitate Enrollment.--
Notwithstanding any other provision of law, the Administrator may 
provide to each eligible entity with a contract under this part such 
information about eligible beneficiaries as the Administrator 
determines to be necessary to facilitate efficient enrollment by such 
beneficiaries with such entities. The Administrator may provide such 
information only so long as and to the extent necessary to carry out 
such objective.

                ``providing information to beneficiaries

    ``Sec. 1860D-4. (a) Activities.--
            ``(1) In general.--The Administrator shall conduct 
        activities that are designed to broadly disseminate information 
        to eligible beneficiaries (and prospective eligible 
        beneficiaries) regarding the coverage provided under this part.
            ``(2) Special rule for first enrollment under the 
        program.--The activities described in paragraph (1) shall 
        ensure that eligible beneficiaries are provided with such 
        information at least 30 days prior to the first enrollment 
        period described in section 1860D-3(a)(2).
    ``(b) Requirements.--
            ``(1) In general.--The activities described in subsection 
        (a) shall--
                    ``(A) be similar to the activities performed by the 
                Administrator under section 1851(d);
                    ``(B) be coordinated with the activities performed 
                by--
                            ``(i) the Administrator under such section; 
                        and
                            ``(ii) the Secretary under section 1804; 
                        and
                    ``(C) provide for the dissemination of information 
                comparing the plans offered by eligible entities under 
                this part that are available to eligible beneficiaries 
                residing in an area.
            ``(2) Comparative information.--The comparative information 
        described in paragraph (1)(C) shall include a comparison of the 
        following:
                    ``(A) Benefits.--The benefits provided under the 
                plan and the formularies and grievance and appeals 
                processes under the plan.
                    ``(B) Monthly beneficiary obligation.--The monthly 
                beneficiary obligation under the plan.
                    ``(C) Quality and performance.--The quality and 
                performance of the eligible entity offering the plan.
                    ``(D) Beneficiary cost-sharing.--The cost-sharing 
                required of eligible beneficiaries under the plan.
                    ``(E) Consumer satisfaction surveys.--The results 
                of consumer satisfaction surveys regarding the plan and 
                the eligible entity offering such plan (conducted 
                pursuant to section 1860D-5(h).
                    ``(F) Additional information.--Such additional 
                information as the Administrator may prescribe.

                       ``beneficiary protections

    ``Sec. 1860D-5. (a) Dissemination of Information.--
            ``(1) General information.--An eligible entity offering a 
        Medicare Prescription Drug plan shall disclose, in a clear, 
        accurate, and standardized form to each enrollee 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 drugs, including access 
                through pharmacy networks.
                    ``(B) How any formulary used by the entity 
                functions.
                    ``(C) Copayments, coinsurance, and deductible 
                requirements.
                    ``(D) Grievance and appeals processes.
        The information described in the preceding sentence shall also 
        be made available on request to prospective enrollees during 
        open enrollment periods.
            ``(2) Disclosure upon request of general coverage, 
        utilization, and grievance information.--Upon request of an 
        individual eligible to enroll in a Medicare Prescription Drug 
        plan, the eligible entity offering such plan shall provide 
        information similar (as determined by the Administrator) to the 
        information described in subparagraphs (A), (B), and (C) of 
        section 1852(c)(2) to such individual.
            ``(3) Response to beneficiary questions.--An eligible 
        entity offering a Medicare Prescription Drug plan shall have a 
        mechanism for providing on a timely basis specific information 
        to enrollees upon request, including information on the 
        coverage of specific drugs and changes in its formulary.
            ``(4) Claims information.--An eligible entity offering a 
        Medicare Prescription Drug plan must furnish to enrolled 
        individuals in a form easily understandable to such 
        individuals--
                    ``(A) an explanation of benefits (in accordance 
                with section 1806(a) or in a comparable manner); and
                    ``(B) when prescription drug benefits are provided 
                under this part, a notice of the benefits in relation 
                to the initial coverage limit and annual out-of-pocket 
                limit for the current year (except that such notice 
                need not be provided more often than monthly).
            ``(5) Approval of marketing material and application 
        forms.--The provisions of section 1851(h) shall apply to 
        marketing material and application forms under this part in the 
        same manner as such provisions apply to marketing material and 
        application forms under part C.
    ``(b) Access to Covered Drugs.--
            ``(1) Access to negotiated prices for prescription drugs.--
        An eligible entity offering a Medicare Prescription Drug plan 
        shall have in place procedures to ensure that beneficiaries are 
        not charged more than the negotiated price of a covered drug. 
        Such procedures shall include the issuance of a card (or other 
        technology) that may be used by an enrolled beneficiary for the 
        purchase of prescription drugs for which coverage is not 
        otherwise provided under the Medicare Prescription Drug plan.
            ``(2) Assuring pharmacy access.--
                    ``(A) In general.--An eligible entity offering a 
                Medicare Prescription Drug plan shall secure the 
                participation in its network of a sufficient number of 
                pharmacies that dispense (other than by mail order) 
                drugs directly to patients to ensure convenient access 
                (as determined by the Administrator and including 
                adequate emergency access) for enrolled beneficiaries, 
                in accordance with standards established by the 
                Administrator under section 1860D-7(g) that ensure such 
                convenient access. Such standards shall take into 
                account reasonable distances to pharmacy services in 
                urban and rural areas and access to pharmacy services 
                of the Indian Health Service and Indian tribes and 
                tribal organizations.
                    ``(B) Use of point-of-service system.--An eligible 
                entity offering a Medicare Prescription Drug plan shall 
                establish an optional point-of-service method of 
                operation under which--
                            ``(i) the plan provides access to any or 
                        all pharmacies that are not participating 
                        pharmacies in its network; and
                            ``(ii) the plan may charge beneficiaries 
                        through adjustments in copayments any 
                        additional costs associated with the point-of-
                        service option.
                The additional copayments so charged shall not count 
                toward the application of section 1860D-6(c).
                    ``(C) Level playing field.--An eligible entity 
                offering a Medicare Prescription Drug plan shall permit 
                enrollees to receive benefits (which may include a 90-
                day supply of drugs or biologicals) through a community 
                pharmacy, rather than through mail order, and may 
                permit a differential amount to be paid by such 
                enrollees.
            ``(3) Requirements on development and application of 
        formularies.--If an eligible entity offering a Medicare 
        Prescription Drug plan uses a formulary, the following 
        requirements must be met:
                    ``(A) Pharmacy and therapeutic (p&t) committee.--
                            ``(i) In general.--The eligible entity must 
                        establish a pharmacy and therapeutic committee 
                        that develops and reviews the formulary.
                            ``(ii) Composition.--A pharmacy and 
                        therapeutic committee shall include at least 1 
                        academic expert, at least 1 practicing 
                        physician, and at least 1 practicing 
                        pharmacist, all of whom have expertise in the 
                        care of elderly or disabled persons, and a 
                        majority of the members of such committee shall 
                        consist of individuals who are a practicing 
                        physician or a practicing pharmacist (or both).
                    ``(B) Formulary development.--In developing and 
                reviewing the formulary, the committee shall base 
                clinical decisions on the strength of scientific 
                evidence and standards of practice, including assessing 
                peer-reviewed medical literature, such as randomized 
                clinical trials, pharmacoeconomic studies, outcomes 
                research data, and on such other information as the 
                committee determines to be appropriate.
                    ``(C) Inclusion of drugs in all therapeutic 
                categories and classes.--
                            ``(i) In general.--The formulary must 
                        include drugs within each therapeutic category 
                        and class of covered drugs (as defined by the 
                        Administrator), although not necessarily for 
                        all drugs within such categories and classes.
                            ``(ii) Requirement.--In defining 
                        therapeutic categories and classes of covered 
                        drugs pursuant to clause (i), the Administrator 
                        shall use--
                                    ``(I) the compendia referred to 
                                section 1927(g)(1)(B)(i); and
                                    ``(II) other recognized sources of 
                                drug classifications and 
                                categorizations determined appropriate 
                                by the Administrator.
                    ``(D) Provider education.--The committee shall 
                establish policies and procedures to educate and inform 
                health care providers concerning the formulary.
                    ``(E) Notice before removing drugs from 
                formulary.--Any removal of a drug from a formulary 
                shall take effect only after appropriate notice is made 
                available to beneficiaries, physicians, and 
                pharmacists.
                    ``(F) Appeals and exceptions to application.--The 
                eligible entity must have, as part of the appeals 
                process under subsection (e), a process for timely 
                appeals for denials of coverage based on such 
                application of the formulary.
    ``(c) Cost and Utilization Management; Quality Assurance; 
Medication Therapy Management Program.--
            ``(1) In general.--An eligible entity shall have in place 
        the following with respect to covered drugs:
                    ``(A) A cost-effective drug utilization management 
                program, including incentives to reduce costs when 
                appropriate.
                    ``(B) Quality assurance measures to reduce medical 
                errors and adverse drug interactions and to improve 
                medication use, which--
                            ``(i) shall include a medication therapy 
                        management program described in paragraph (2); 
                        and
                            ``(ii) may include beneficiary education 
                        programs, counseling, medication refill 
                        reminders, and special packaging.
                    ``(C) A program to control fraud, abuse, and waste.
        Nothing in this section shall be construed as impairing an 
        eligible entity from applying cost management tools (including 
        differential payments) under all methods of operation.
            ``(2) Medication therapy management program.--
                    ``(A) In general.--A medication therapy management 
                program described in this paragraph is a program of 
                drug therapy management and medication administration 
                that is designed to assure, with respect to 
                beneficiaries with chronic diseases (such as diabetes, 
                asthma, hypertension, hyperlipidemia, and congestive 
                heart failure) or multiple prescriptions, that covered 
                drugs under the Medicare Prescription Drug plan are 
                appropriately used to optimize therapeutic outcomes 
                through improved medication use and to achieve 
                therapeutic goals and reduce the risk of adverse 
                events, including adverse drug interactions.
                    ``(B) Elements.--Such program may include--
                            ``(i) enhanced beneficiary understanding of 
                        such appropriate use through beneficiary 
                        education, counseling, and other appropriate 
                        means;
                            ``(ii) increased beneficiary adherence with 
                        prescription medication regimens through 
                        medication refill reminders, special packaging, 
                        and other appropriate means; and
                            ``(iii) detection of patterns of overuse 
                        and underuse of prescription drugs.
                    ``(C) Development of program in cooperation with 
                licensed pharmacists.--The program shall be developed 
                in cooperation with licensed and practicing pharmacists 
                and physicians.
                    ``(D) Considerations in pharmacy fees.--The 
                eligible entity offering a Medicare Prescription Drug 
                plan 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) Public disclosure of pharmaceutical prices for 
        equivalent drugs.--The eligible entity offering a Medicare 
        Prescription Drug plan shall provide that each pharmacy or 
        other dispenser that arranges for the dispensing of a covered 
        drug shall inform the beneficiary at the time of purchase of 
        the drug of any differential between the price of the 
        prescribed drug to the enrollee and the price of the lowest 
        cost generic drug covered under the plan that is 
        therapeutically equivalent and bioequivalent.
    ``(d) Grievance Mechanism, Coverage Determinations, and 
Reconsiderations.--
            ``(1) In general.--An eligible entity shall provide 
        meaningful procedures for hearing and resolving grievances 
        between the eligible entity (including any entity or individual 
        through which the eligible entity provides covered benefits) 
        and enrollees with Medicare Prescription Drug plans of the 
        eligible entity under this part in accordance with section 
        1852(f).
            ``(2) Application of coverage determination and 
        reconsideration provisions.--The requirements of paragraphs (1) 
        through (3) of section 1852(g) shall apply to an eligible 
        entity with respect to covered benefits under the Medicare 
        Prescription Drug plan it offers under this part in the same 
        manner as such requirements apply to a MedicareAdvantage 
        organization with respect to benefits it offers under a 
        MedicareAdvantage plan under part C.
            ``(3) Request for review of tiered formulary 
        determinations.--In the case of a Medicare Prescription Drug 
        plan offered by an eligible entity that provides for tiered 
        cost-sharing for drugs included within a formulary and provides 
        lower cost-sharing for preferred drugs included within the 
        formulary, an individual who is enrolled in the plan may 
        request coverage of a nonpreferred drug under the terms 
        applicable for preferred drugs if the prescribing physician 
        determines that the preferred drug for treatment of the same 
        condition is not as effective for the individual or has adverse 
        effects for the individual.
    ``(e) Appeals.--
            ``(1) In general.--Subject to paragraph (2), the 
        requirements of paragraphs (4) and (5) of section 1852(g) shall 
        apply to an eligible entity with respect to drugs not included 
        on any formulary in a manner that is similar (as determined by 
        the Administrator) to the manner that such requirements apply 
        to a MedicareAdvantage organization with respect to benefits it 
        offers under a MedicareAdvantage plan under part C.
            ``(2) Formulary determinations.--An individual who is 
        enrolled in a Medicare Prescription Drug plan offered by an 
        eligible entity may appeal to obtain coverage for a covered 
        drug that is not on a formulary of the entity under the terms 
        applicable for a formulary drug if the prescribing physician 
        determines that the formulary drug for treatment of the same 
        condition is not as effective for the individual or has adverse 
        effects for the individual.
    ``(f) Privacy, Confidentiality, and Accuracy of Enrollee Records.--
Insofar as an eligible entity maintains individually identifiable 
medical records or other health information regarding eligible 
beneficiaries enrolled in the Medicare Prescription Drug plan offered 
by the entity, the entity shall have in place procedures to--
            ``(1) safeguard the privacy of any individually 
        identifiable beneficiary information in a manner consistent 
        with the Federal regulations (concerning the privacy of 
        individually identifiable health information) promulgated under 
        section 264(c) of the Health Insurance Portability and 
        Accountability Act of 1996;
            ``(2) maintain such records and information in a manner 
        that is accurate and timely;
            ``(3) ensure timely access by such beneficiaries to such 
        records and information; and
            ``(4) otherwise comply with applicable laws relating to 
        patient privacy and confidentiality.
    ``(g) Uniform Monthly Plan Premium.--An eligible entity shall 
ensure that the monthly plan premium for a Medicare Prescription Drug 
plan charged under this part is the same for all eligible beneficiaries 
enrolled in the plan. Such requirement shall not apply to enrollees of 
a Medicare Prescription Drug plan who are enrolled in the plan pursuant 
to a contractual agreement between the plan and an employer or other 
group health plan that provides employment-based retiree health 
coverage (as defined in section 1860D-20(d)(4)(B)) if the premium 
amount is the same for all such enrollees under such agreement.
    ``(h) Consumer Satisfaction Surveys.--An eligible entity shall 
conduct consumer satisfaction surveys with respect to the plan and the 
entity. The Administrator shall establish uniform requirements for such 
surveys.

                      ``prescription drug benefits

    ``Sec. 1860D-6. (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 prescription drug coverage with 
                access to negotiated prices.--Standard prescription 
                drug coverage (as defined in subsection (c)) and access 
                to negotiated prices under subsection (e).
                    ``(B) Actuarially equivalent prescription drug 
                coverage with access to negotiated prices.--Coverage of 
                covered drugs which meets the alternative coverage 
                requirements of subsection (d) and access to negotiated 
                prices under subsection (e), but only if it is approved 
                by the Administrator as provided under subsection (d).
            ``(2) Permitting additional prescription drug coverage.--
                    ``(A) In general.--Subject to subparagraph (B) and 
                section 1860D-13(c)(2), nothing in this part shall be 
                construed as preventing qualified prescription drug 
                coverage from including coverage of covered drugs that 
                exceeds the coverage required under paragraph (1).
                    ``(B) Requirement.--An eligible entity may not 
                offer a Medicare Prescription Drug plan that provides 
                additional benefits pursuant to subparagraph (A) in an 
                area unless the eligible entity offering such plan also 
                offers a Medicare Prescription Drug plan in the area 
                that only provides the coverage of prescription drugs 
                that is required under paragraph (1).
            ``(3) Cost control mechanisms.--In providing qualified 
        prescription drug coverage, the entity offering the Medicare 
        Prescription Drug plan or the MedicareAdvantage plan may use a 
        variety of cost control mechanisms, including the use of 
        formularies, tiered copayments, selective contracting with 
        providers of prescription drugs, and mail order pharmacies.
    ``(b) 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.
    ``(c) Standard Prescription Drug Coverage.--For purposes of this 
part and part C, the term `standard prescription drug coverage' means 
coverage of covered drugs that meets the following requirements:
            ``(1) Deductible.--
                    ``(A) In general.--The coverage has an annual 
                deductible--
                            ``(i) for 2006, that is equal to $275; or
                            ``(ii) for a subsequent year, that is equal 
                        to the amount specified under this paragraph 
                        for the previous year increased by the 
                        percentage specified in paragraph (5) for the 
                        year involved.
                    ``(B) Rounding.--Any amount determined under 
                subparagraph (A)(ii) that is not a multiple of $1 shall 
                be rounded to the nearest multiple of $1.
            ``(2) Limits on cost-sharing.--The coverage has cost-
        sharing (for costs above the annual deductible specified in 
        paragraph (1) and up to the initial coverage limit under 
        paragraph (3)) that is equal to 50 percent or that is 
        actuarially consistent (using processes established under 
        subsection (f)) with an average expected payment of 50 percent 
        of such costs.
            ``(3) Initial coverage limit.--
                    ``(A) In general.--Subject to paragraph (4), the 
                coverage has an initial coverage limit on the maximum 
                costs that may be recognized for payment purposes 
                (including the annual deductible)--
                            ``(i) for 2006, that is equal to $4,500; or
                            ``(ii) for a subsequent year, that is equal 
                        to the amount specified in this paragraph for 
                        the previous year, increased by the annual 
                        percentage increase described in paragraph (5) 
                        for the year involved.
                    ``(B) Rounding.--Any amount determined under 
                subparagraph (A)(ii) that is not a multiple of $1 shall 
                be rounded to the nearest multiple of $1.
            ``(4) Limitation on out-of-pocket expenditures by 
        beneficiary.--
                    ``(A) In general.--The coverage provides benefits 
                with cost-sharing that is equal to 10 percent after the 
                individual has incurred costs (as described in 
                subparagraph (C)) for covered drugs in a year equal to 
                the annual out-of-pocket limit specified in 
                subparagraph (B).
                    ``(B) Annual out-of-pocket limit.--
                            ``(i) In general.--For purposes of this 
                        part, the `annual out-of-pocket limit' 
                        specified in this subparagraph--
                                    ``(I) for 2006, is equal to $3,700; 
                                or
                                    ``(II) for a subsequent year, is 
                                equal to the amount specified in this 
                                subparagraph for the previous year, 
                                increased by the annual percentage 
                                increase described in paragraph (5) for 
                                the year involved.
                            ``(ii) Rounding.--Any amount determined 
                        under clause (i)(II) that is not a multiple of 
                        $1 shall be rounded to the nearest multiple of 
                        $1.
                    ``(C) Application.--In applying subparagraph (A)--
                            ``(i) incurred costs shall only include 
                        costs incurred, with respect to covered drugs, 
                        for the annual deductible (described in 
                        paragraph (1)), cost-sharing (described in 
                        paragraph (2)), and amounts for which benefits 
                        are not provided because of the application of 
                        the initial coverage limit described in 
                        paragraph (3) (including costs incurred for 
                        covered drugs described in section 
                        1860D(a)(2)(C)); and
                            ``(ii) such costs shall be treated as 
                        incurred only if they are paid by the 
                        individual (or by another individual, such as a 
                        family member, on behalf of the individual), 
                        under section 1860D-19 (but only with respect 
                        to the percentage of such costs that the 
                        individual is responsible for under that 
                        section), under title XIX, or under a State 
                        pharmaceutical assistance program and the 
                        individual (or other individual) is not 
                        reimbursed through insurance or otherwise, a 
                        group health plan, or other third-party payment 
                        arrangement for such costs.
                    ``(D) Information regarding third-party 
                reimbursement.--In order to ensure compliance with the 
                requirements of subparagraph (C)(ii), the Administrator 
                is authorized to establish procedures, in coordination 
                with the Secretary of Treasury and the Secretary of 
                Labor, for determining whether costs for individuals 
                are being reimbursed through insurance or otherwise, a 
                group health plan, or other third-party payment 
                arrangement, and for alerting the entities in which 
                such individuals are enrolled about such reimbursement 
                arrangements. An entity with a contract under this part 
                may also periodically ask individuals enrolled in a 
                plan offered by the entity whether the individuals have 
                or expect to receive such third-party reimbursement. A 
                material misrepresentation of the information described 
                in the preceding sentence by an individual (as defined 
                in standards set by the Administrator and determined 
                through a process established by the Administrator) 
                shall constitute grounds for termination of enrollment 
                under section 1860D-2(d).
            ``(5) Annual percentage increase.--For purposes of this 
        part, the annual percentage increase specified in this 
        paragraph for a year is equal to the annual percentage increase 
        in average per capita aggregate expenditures for covered drugs 
        in the United States for beneficiaries under this title, as 
        determined by the Administrator for the 12-month period ending 
        in July of the previous year.
    ``(d) Alternative Coverage Requirements.--A Medicare Prescription 
Drug plan or MedicareAdvantage plan may provide a different 
prescription drug benefit design from the standard prescription drug 
coverage described in subsection (c) so long as the Administrator 
determines (based on an actuarial analysis by the Administrator) that 
the following requirements are met and the plan applies for, and 
receives, the approval of the Administrator for such benefit design:
            ``(1) Assuring at least actuarially equivalent prescription 
        drug coverage.--
                    ``(A) Assuring equivalent value of total 
                coverage.--The actuarial value of the total coverage 
                (as determined under subsection (f)) is at least equal 
                to the actuarial value (as so determined) of standard 
                prescription drug coverage.
                    ``(B) Assuring equivalent unsubsidized value of 
                coverage.--The unsubsidized value of the coverage is at 
                least equal to the unsubsidized value of standard 
                prescription drug 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 (f)) exceeds the actuarial 
                value of the amounts associated with the application of 
                section 1860D-17(c) and reinsurance payments under 
                section 1860D-20 with respect to such coverage.
                    ``(C) Assuring standard payment for costs at 
                initial coverage limit.--The coverage is designed, 
                based upon an actuarially representative pattern of 
                utilization (as determined under subsection (f)), to 
                provide for the payment, with respect to costs incurred 
                that are equal to the initial coverage limit under 
                subsection (c)(3), of an amount equal to at least the 
                product of--
                            ``(i) such initial coverage limit minus the 
                        deductible under subsection (c)(1); and
                            ``(ii) the percentage specified in 
                        subsection (c)(2).
        Benefits other than qualified prescription drug coverage shall 
        not be taken into account for purposes of this paragraph.
            ``(2) Deductible and limitation on out-of-pocket 
        expenditures by beneficiaries may not vary.--The coverage may 
        not vary the deductible under subsection (c)(1) for the year or 
        the limitation on out-of-pocket expenditures by beneficiaries 
        described in subsection (c)(4) for the year.
    ``(e) Access to Negotiated Prices.--
            ``(1) Access.--
                    ``(A) In general.--Under qualified prescription 
                drug coverage offered by an eligible entity or a 
                MedicareAdvantage organization, the entity or 
                organization shall provide beneficiaries with access to 
                negotiated prices used for payment for covered drugs, 
                regardless of the fact that no benefits may be payable 
                under the coverage with respect to such drugs because 
                of the application of the deductible, any cost-sharing, 
                or an initial coverage limit (described in subsection 
                (c)(3)). For purposes of this part, the term 
                `negotiated prices' includes all discounts, direct or 
                indirect subsidies, rebates, or other price concessions 
                or direct or indirect remunerations.
                    ``(B) Medicaid related provisions.--Insofar as a 
                State elects to provide medical assistance under title 
                XIX for a drug based on the prices negotiated under a 
                Medicare Prescription Drug plan under this part--
                            ``(i) the medical assistance for such a 
                        drug shall be disregarded for purposes of a 
                        rebate agreement entered into under section 
                        1927 which would otherwise apply to the 
                        provision of medical assistance for the drug 
                        under title XIX; and
                            ``(ii) the prices negotiated under a 
                        Medicare Prescription Drug plan with respect to 
                        covered drugs, under a MedicareAdvantage plan 
                        with respect to such drugs, or under a 
                        qualified retiree prescription drug plan (as 
                        defined in section 1860D-20(e)(4)) with respect 
                        to such drugs, on behalf of eligible 
                        beneficiaries, shall (notwithstanding any other 
                        provision of law) not be taken into account for 
                        the purposes of establishing the best price 
                        under section 1927(c)(1)(C).
            ``(2) Cards or other technology.--
                    ``(A) In general.--In providing the access under 
                paragraph (1), the eligible entity or MedicareAdvantage 
                organization shall issue a card or use other technology 
                pursuant to section 1860D-5(b)(1).
                    ``(B) National standards.--
                            ``(i) Development.--The Administrator shall 
                        provide for the development of national 
                        standards relating to a standardized format for 
                        the card or other technology required under 
                        subparagraph (A). Such standards shall be 
                        compatible with parts C and D of title XI and 
                        may be based on standards developed by an 
                        appropriate standard setting organization.
                            ``(ii) Consultation.--In developing the 
                        standards under clause (i), the Administrator 
                        shall consult with the National Council for 
                        Prescription Drug Programs and other standard-
                        setting organizations determined appropriate by 
                        the Administrator.
                            ``(iii) Implementation.--The Administrator 
                        shall implement the standards developed under 
                        clause (i) by January 1, 2008.
            ``(3) Disclosure.--The eligible entity offering a Medicare 
        Prescription Drug plan and the MedicareAdvantage organization 
        offering a MedicareAdvantage plan shall disclose to the 
        Administrator (in a manner specified by the Administrator) the 
        extent to which discounts, direct or indirect subsidies, 
        rebates, or other price concessions or direct or indirect 
        remunerations made available to the entity or organization by a 
        manufacturer are passed through to enrollees through pharmacies 
        and other dispensers or otherwise. The provisions of section 
        1927(b)(3)(D) shall apply to information disclosed to the 
        Administrator under this paragraph in the same manner as such 
        provisions apply to information disclosed under such section.
            ``(4) Audits and reports.--To protect against fraud and 
        abuse and to ensure proper disclosures and accounting under 
        this part, in addition to any protections against fraud and 
        abuse provided under section 1860D-7(f)(1), the Administrator 
        may periodically audit the financial statements and records of 
        an eligible entity offering a Medicare Prescription Drug plan 
        and a MedicareAdvantage organization offering a 
        MedicareAdvantage plan with the auditor of the Administrator's 
        choice.
    ``(f) Actuarial Valuation; Determination of Annual Percentage 
Increases.--
            ``(1) Processes.--For purposes of this section, the 
        Administrator shall establish processes and methods--
                    ``(A) for determining the actuarial valuation of 
                prescription drug coverage, including--
                            ``(i) an actuarial valuation of standard 
                        prescription drug coverage and of the 
                        reinsurance payments under section 1860D-20;
                            ``(ii) the use of generally accepted 
                        actuarial principles and methodologies; and
                            ``(iii) applying the same methodology for 
                        determinations of alternative coverage under 
                        subsection (d) as is used with respect to 
                        determinations of standard prescription drug 
                        coverage under subsection (c); and
                    ``(B) for determining annual percentage increases 
                described in subsection (c)(5).
        Such processes shall take into account any effect that 
        providing actuarially equivalent prescription drug coverage 
        rather than standard prescription drug coverage has on drug 
        utilization.
            ``(2) Use of outside actuaries.--Under the processes under 
        paragraph (1)(A), eligible entities and MedicareAdvantage 
        organizations may use actuarial opinions certified by 
        independent, qualified actuaries to establish actuarial values, 
        but the Administrator shall determine whether such actuarial 
        values meet the requirements under subsection (c)(1).

``requirements for entities offering medicare prescription drug plans; 
                       establishment of standards

    ``Sec. 1860D-7. (a) General Requirements.--An eligible entity 
offering a Medicare Prescription Drug plan shall meet the following 
requirements:
            ``(1) Licensure.--Subject to subsection (c), the entity 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 Medicare Prescription Drug 
        plan.
            ``(2) Assumption of financial risk.--
                    ``(A) In general.--Subject to subparagraph (B) and 
                subsections (d)(2) and (e) of section 1860D-13, to the 
                extent that the entity is at risk pursuant to such 
                section 1860D-16, the entity assumes financial risk on 
                a prospective basis for the benefits that it offers 
                under a Medicare Prescription Drug plan and that is not 
                covered under section 1860D-20.
                    ``(B) Reinsurance permitted.--To the extent that 
                the entity is at risk pursuant to section 1860D-16, 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 entities.--In the case of an 
        eligible entity that is not described in paragraph (1) and for 
        which a waiver has been approved under subsection (c), such 
        entity shall meet solvency standards established by the 
        Administrator under subsection (d).
    ``(b) Contract Requirements.--The Administrator shall not permit an 
eligible beneficiary to elect a Medicare Prescription Drug plan offered 
by an eligible entity under this part, and the entity shall not be 
eligible for payments under section 1860D-16 or 1860D-20, unless the 
Administrator has entered into a contract under this subsection with 
the entity with respect to the offering of such plan. Such a contract 
with an entity may cover more than 1 Medicare Prescription Drug plan. 
Such contract shall provide that the entity 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.
    ``(c) Waiver of Certain Requirements in Order To Ensure Beneficiary 
Choice.--
            ``(1) In general.--In the case of an eligible entity that 
        seeks to offer a Medicare Prescription Drug plan in a State, 
        the Administrator shall waive the requirement of subsection 
        (a)(1) that the entity be licensed in that State if the 
        Administrator determines, based on the application and other 
        evidence presented to the Administrator, that any of the 
        grounds for approval of the application described in paragraph 
        (2) have been met.
            ``(2) Grounds for approval.--The grounds for approval under 
        this paragraph are the grounds for approval described in 
        subparagraphs (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) References to certain provisions.--For purposes of 
        this subsection, in applying the provisions of section 
        1855(a)(2) under this subsection to Medicare Prescription Drug 
        plans and eligible entities--
                    ``(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 were 
                treated as a reference to solvency standards 
                established under subsection (d).
    ``(d) Solvency Standards for Non-Licensed Entities.--
            ``(1) Establishment and publication.--The Administrator, in 
        consultation with the National Association of Insurance 
        Commissioners, shall establish and publish, by not later than 
        January 1, 2005, financial solvency and capital adequacy 
        standards for entities described in paragraph (2).
            ``(2) Compliance with standards.--An eligible entity that 
        is not licensed by a State under subsection (a)(1) and for 
        which a waiver application has been approved under subsection 
        (c) shall meet solvency and capital adequacy standards 
        established under paragraph (1). The Administrator shall 
        establish certification procedures for such eligible entities 
        with respect to such solvency standards in the manner described 
        in section 1855(c)(2).
    ``(e) Licensure Does Not Substitute for or Constitute 
Certification.--The fact that an entity is licensed in accordance with 
subsection (a)(1) or has a waiver application approved under subsection 
(c) does not deem the eligible entity to meet other requirements 
imposed under this part for an eligible entity.
    ``(f) Incorporation of Certain MedicareAdvantage Contract 
Requirements.--The following provisions of section 1857 shall apply, 
subject to subsection (c)(4), to contracts under this section in the 
same manner as they apply to contracts under section 1857(a):
            ``(1) Protections against fraud and beneficiary 
        protections.--Section 1857(d).
            ``(2) Intermediate sanctions.--Section 1857(g), except that 
        in applying such section--
                    ``(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.
            ``(3) Procedures for termination.--Section 1857(h).
    ``(g) Other Standards.--The Administrator shall establish by 
regulation other standards (not described in subsection (d)) for 
eligible entities and Medicare Prescription Drug plans consistent with, 
and to carry out, this part. The Administrator shall publish such 
regulations by January 1, 2005.
    ``(h) Periodic Review and Revision of Standards.--
            ``(1) In general.--Subject to paragraph (2), the 
        Administrator shall periodically review the standards 
        established under this section and, based on such review, may 
        revise such standards if the Administrator determines such 
        revision to be appropriate.
            ``(2) Prohibition of midyear implementation of significant 
        new regulatory requirements.--The Administrator may not 
        implement, other than at the beginning of a calendar year, 
        regulations under this section that impose new, significant 
        regulatory requirements on an eligible entity or a Medicare 
        Prescription Drug plan.
    ``(h) Relation to State Laws.--
            ``(1) In general.--The standards established under this 
        part shall supersede any State law or regulation (including 
        standards described in paragraph (2)) with respect to Medicare 
        Prescription Drug plans which are offered by eligible entities 
        under this part--
                    ``(A) to the extent such law or regulation is 
                inconsistent with such standards; and
                    ``(B) in the same manner as such laws and 
                regulations are superseded under section 1856(b)(3).
            ``(2) Standards specifically superseded.--State standards 
        relating to the following are superseded under this section:
                    ``(A) Benefit requirements, including requirements 
                relating to cost-sharing and the structure of 
                formularies.
                    ``(B) Premiums.
                    ``(C) Requirements relating to inclusion or 
                treatment of providers.
                    ``(D) Coverage determinations (including related 
                appeals and grievance processes).
                    ``(E) Requirements relating to marketing materials 
                and summaries and schedules of benefits regarding a 
                Medicare Prescription Drug plan.
            ``(3) Prohibition of state imposition of premium taxes.--No 
        State may impose a premium tax or similar tax with respect to--
                    ``(A) monthly beneficiary obligations paid to the 
                Administrator for Medicare Prescription Drug plans 
                under this part; or
                    ``(B) any payments made by the Administrator under 
                this part to an eligible entity offering such a plan.

             ``Subpart 2--Prescription Drug Delivery System

                    ``establishment of service areas

    ``Sec. 1860D-10. (a) Establishment.--
            ``(1) Initial establishment.--Not later than April 15, 
        2005, the Administrator shall establish and publish the service 
        areas in which Medicare Prescription Drug plans may offer 
        benefits under this part.
            ``(2) Periodic review and revision of service areas.--The 
        Administrator shall periodically review the service areas 
        applicable under this section and, based on such review, may 
        revise such service areas if the Administrator determines such 
        revision to be appropriate.
    ``(b) Requirements for Establishment of Service Areas.--
            ``(1) In general.--The Administrator shall establish the 
        service areas under subsection (a) in a manner that--
                    ``(A) maximizes the availability of Medicare 
                Prescription Drug plans to eligible beneficiaries; and
                    ``(B) minimizes the ability of eligible entities 
                offering such plans to favorably select eligible 
                beneficiaries.
            ``(2) Additional requirements.--The Administrator shall 
        establish the service areas under subsection (a) consistent 
        with the following requirements:
                    ``(A) There shall be at least 10 service areas.
                    ``(B) Each service area must include at least 1 
                State.
                    ``(C) The Administrator may not divide States so 
                that portions of the State are in different service 
                areas.
                    ``(D) To the extent possible, the Administrator 
                shall include multistate metropolitan statistical areas 
                in a single service area. The Administrator may divide 
                metropolitan statistical areas where it is necessary to 
                establish service areas of such size and geography as 
                to maximize the participation of Medicare Prescription 
                Drug plans.
            ``(3) May conform to medicareadvantage preferred provider 
        regions.--The Administrator may conform the service areas 
        established under this section to the preferred provider 
        regions established under section 1858(a)(3).

                    ``publication of risk adjusters

    ``Sec. 1860D-11. (a) Publication.--Not later than April 15 of each 
year (beginning in 2005), the Administrator shall publish the risk 
adjusters established under subsection (b) to be used in computing--
            ``(1) the amount of payment to Medicare Prescription Drug 
        plans in the subsequent year under section 1860D-16(a), insofar 
        as it is attributable to standard prescription drug coverage 
        (or actuarially equivalent prescription drug coverage); and
            ``(2) the amount of payment to MedicareAdvantage plans in 
        the subsequent year under section 1858A(c), insofar as it is 
        attributable to standard prescription drug coverage (or 
        actuarially equivalent prescription drug coverage).
    ``(b) Establishment of Risk Adjusters.--
            ``(1) In general.--Subject to paragraph (2), the 
        Administrator shall establish an appropriate methodology for 
        adjusting the amount of payment to plans referred to in 
        subsection (a) to take into account variation in costs based on 
        the differences in actuarial risk of different enrollees being 
        served. Any such risk adjustment shall be designed in a manner 
        as to not result in a change in the aggregate payments 
        described in paragraphs (1) and (2) of subsection (a).
            ``(2) Considerations.--In establishing the methodology 
        under paragraph (1), the Administrator may take into account 
        the similar methodologies used under section 1853(a)(3) to 
        adjust payments to MedicareAdvantage organizations.
            ``(3) Data collection.--In order to carry out this 
        subsection, the Administrator shall require--
                    ``(A) eligible entities to submit data regarding 
                drug claims that can be linked at the beneficiary level 
                to part A and part B data and such other information as 
                the Administrator determines necessary; and
                    ``(B) MedicareAdvantage organizations (except MSA 
                plans or a private fee-for-service plan that does not 
                provide qualified prescription drug coverage) to submit 
                data regarding drug claims that can be linked to other 
                data that such organizations are required to submit to 
                the Administrator and such other information as the 
                Administrator determines necessary.

   ``submission of bids for proposed medicare prescription drug plans

    ``Sec. 1860D-12. (a) Submission.--
            ``(1) In general.--Each eligible entity that intends to 
        offer a Medicare Prescription Drug plan in an area in a year 
        (beginning with 2006) shall submit to the Administrator, at 
        such time in the previous year and in such manner as the 
        Administrator may specify, such information as the 
        Administrator may require, including the information described 
        in subsection (b).
            ``(2) Annual submission.--An eligible entity shall submit 
        the information required under paragraph (1) with respect to a 
        Medicare Prescription Drug plan that the entity intends to 
        offer on an annual basis.
    ``(b) Information Described.--The information described in this 
subsection includes information on each of the following:
            ``(1) The benefits under the plan (as required under 
        section 1860D-6).
            ``(2) The actuarial value of the qualified prescription 
        drug coverage.
            ``(3) The amount of the monthly plan premium under the 
        plan, including an actuarial certification of--
                    ``(A) the actuarial basis for such monthly plan 
                premium;
                    ``(B) the portion of such monthly plan premium 
                attributable to standard prescription drug coverage or 
                actuarially equivalent prescription drug coverage and, 
                if applicable, to benefits that are in addition to such 
                coverage; and
                    ``(C) the reduction in such monthly plan premium 
                resulting from the payments provided under section 
                1860D-20.
            ``(4) The service area for the plan.
            ``(5) Whether the entity plans to use any funds in the plan 
        stabilization reserve fund in the Prescription Drug Account 
        that are available to the entity to stabilize or reduce the 
        monthly plan premium submitted under paragraph (3), and if so, 
        the amount in such reserve fund that is to be used.
            ``(6) Such other information as the Administrator may 
        require to carry out this part.
    ``(c) Options Regarding Service Areas.--
            ``(1) In general.--The service area of a Medicare 
        Prescription Drug plan shall be either--
                    ``(A) the entire area of 1 of the service areas 
                established by the Administrator under section 1860D-
                10; or
                    ``(B) the entire area covered by the medicare 
                program.
            ``(2) Rule of construction.--Nothing in this part shall be 
        construed as prohibiting an eligible entity from submitting 
        separate bids in multiple service areas as long as each bid is 
        for a single service area.

        ``approval of proposed medicare prescription drug plans

    ``Sec. 1860D-13. (a) Approval.--
            ``(1) In general.--The Administrator shall review the 
        information filed under section 1860D-12 and shall approve or 
        disapprove the Medicare Prescription Drug plan.
            ``(2) Requirements for approval.--The Administrator may not 
        approve a Medicare Prescription Drug plan unless the following 
        requirements are met:
                    ``(A) Compliance with requirements.--The plan and 
                the entity offering the plan comply with the 
                requirements under this part.
                    ``(B) Application of fehbp standard.--(i) The 
                portion of the monthly plan premium submitted under 
                section 1860D-12(b) that is attributable to standard 
                prescription drug coverage reasonably and equitably 
                reflects the actuarial value of the standard 
                prescription drug coverage less the actuarial value of 
                the reinsurance payments under section 1860D-20 and the 
                amount of any funds in the plan stabilization reserve 
                fund in the Prescription Drug Account used to stabilize 
                or reduce the monthly plan premium.
                    ``(ii) If the plan provides additional prescription 
                drug coverage pursuant to section 1860D-6(a)(2), the 
                monthly plan premium reasonably and equitably reflects 
                the actuarial value of the coverage provided less the 
                actuarial value of the reinsurance payments under 
                section 1860D-20 and the amount of any funds in the 
                plan stabilization reserve fund in the Prescription 
                Drug Account used to stabilize or reduce the monthly 
                plan premium.
    ``(b) Negotiation.--In exercising the authority under subsection 
(a), the Administrator shall have the authority to--
            ``(1) negotiate the terms and conditions of the proposed 
        monthly plan premiums submitted and other terms and conditions 
        of a proposed plan; and
            ``(2) disapprove, or limit enrollment in, a proposed plan 
        based on--
                    ``(A) the costs to beneficiaries under the plan;
                    ``(B) the quality of the coverage and benefits 
                under the plan;
                    ``(C) the adequacy of the network under the plan;
                    ``(D) the average aggregate projected cost of 
                covered drugs under the plan relative to other Medicare 
                Prescription Drug plans and MedicareAdvantage plans; or
                    ``(E) other factors determined appropriate by the 
                Administrator.
    ``(c) Special Rules for Approval.--The Administrator may approve a 
Medicare Prescription Drug plan submitted under section 1860D-12 only 
if the benefits under such plan--
            ``(1) include the required benefits under section 1860D-
        6(a)(1); and
            ``(2) are not designed in such a manner that the 
        Administrator finds is likely to result in favorable selection 
        of eligible beneficiaries.
    ``(d) Access to Competitive Coverage.--
            ``(1) Number of contracts.--The Administrator, consistent 
        with the requirements of this part and the goal of containing 
        costs under this title, shall, with respect to a year, approve 
        at least 2 contracts to offer a Medicare Prescription Drug plan 
        in each service area (established under section 1860D-10) for 
        the year.
            ``(2) Authority to reduce risk to ensure access.--
                    ``(A) In general.--Subject to subparagraph (B), if 
                the Administrator determines, with respect to an area, 
                that the access required under paragraph (1) is not 
                going to be provided in the area during the subsequent 
                year, the Administrator shall--
                            ``(i) adjust the percents specified in 
                        paragraphs (2) and (4) of section 1860D-16(b) 
                        in an area in a year; or
                            ``(ii) increase the percent specified in 
                        section 1860D-20(c)(1) in an area in a year.
                The administrator shall exercise the authority under 
                the preceding sentence only so long as (and to the 
                extent) necessary to assure the access guaranteed under 
                paragraph (1).
                    ``(B) Requirements for use of authority.--In 
                exercising authority under subparagraph (A), the 
                Administrator--
                            ``(i) shall not provide for the full 
                        underwriting of financial risk for any eligible 
                        entity;
                            ``(ii) shall not provide for any 
                        underwriting of financial risk for a public 
                        eligible entity with respect to the offering of 
                        a nationwide Medicare Prescription Drug plan; 
                        and
                            ``(iii) shall seek to maximize the 
                        assumption of financial risk by eligible 
                        entities to ensure fair competition among 
                        Medicare Prescription Drug plans.
                    ``(C) Requirement to accept 2 full-risk qualified 
                bids before exercising authority.--The Administrator 
                may not exercise the authority under subparagraph (A) 
                with respect to an area and year if 2 or more qualified 
                bids are submitted by eligible entities to offer a 
                Medicare Prescription Drug plan in the area for the 
                year under paragraph (1) before the application of 
                subparagraph (A).
                    ``(D) Reports.--The Administrator, in each annual 
                report to Congress under section 1808(c)(1)(D), shall 
                include information on the exercise of authority under 
                subparagraph (A). The Administrator also shall include 
                such recommendations as may be appropriate to limit the 
                exercise of such authority.
    ``(e) Guaranteed Access.--
            ``(1) Access.--In order to assure access to qualified 
        prescription drug coverage in an area, the Administrator shall 
        take the following steps:
                    ``(A) Determination.--Not later than September 1 of 
                each year (beginning in 2005) and for each area 
                (established under section 1860D-10), the Administrator 
                shall make a determination as to whether the access 
                required under subsection (d)(1) is going to be 
                provided in the area during the subsequent year. Such 
                determination shall be made after the Administrator has 
                exercised the authority under subsection (d)(2).
                    ``(B) Contract with an entity to provide coverage 
                in an area.--Subject to paragraph (3), if the 
                Administrator makes a determination under subparagraph 
                (A) that the access required under subsection (d)(1) is 
                not going to be provided in an area during the 
                subsequent year, the Administrator shall enter into a 
                contract with an entity to provide eligible 
                beneficiaries enrolled under this part (and not, except 
                for an MSA plan or a private fee-for-service plan that 
                does not provide qualified prescription drug coverage 
                enrolled in a MedicareAdvantage plan) and residing in 
                the area with standard prescription drug coverage 
                (including access to negotiated prices for such 
                beneficiaries pursuant to section 1860D-6(e)) during 
                the subsequent year. An entity may be awarded a 
                contract for more than 1 of the areas for which the 
                Administrator is required to enter into a contract 
                under this paragraph but the Administrator may enter 
                into only 1 such contract in each such area.
                    ``(C) Requirement to accept 2 reduced-risk 
                qualified bids before entering into contract.--The 
                Administrator may not enter into a contract under 
                subparagraph (B) with respect to an area and year if 2 
                or more qualified bids are submitted by eligible 
                entities to offer a Medicare Prescription Drug plan in 
                the area for the year after the Administrator has 
                exercised the authority under subsection (d)(2) in the 
                area for the year.
                    ``(D) Entity required to meet beneficiary 
                protection and other requirements.--An entity with a 
                contract under subparagraph (B) shall meet the 
                requirements described in section 1860D-5 and such 
                other requirements determined appropriate by the 
                Administrator.
                    ``(E) Competitive procedures.--Competitive 
                procedures (as defined in section 4(5) of the Office of 
                Federal Procurement Policy Act (41 U.S.C. 403(5))) 
                shall be used to enter into a contract under 
                subparagraph (B).
            ``(2) Monthly beneficiary obligation for enrollment.--
                    ``(A) In general.--In the case of an eligible 
                beneficiary receiving access to qualified prescription 
                drug coverage through enrollment with an entity with a 
                contract under paragraph (1)(B), the monthly 
                beneficiary obligation of such beneficiary for such 
                enrollment shall be an amount equal to the applicable 
                percent (as determined under section 1860D-17(c)) of 
                the monthly national average premium (as computed under 
                section 1860D-15) for the area for the year, as 
                adjusted using the geographic adjuster under 
                subparagraph (B).
                    ``(B) Establishment of geographic adjuster.--The 
                Administrator shall establish an appropriate 
                methodology for adjusting the monthly beneficiary 
                obligation (as computed under subparagraph (A)) for the 
                year in an area to take into account differences in 
                drug prices among areas. In establishing such 
                methodology, the Administrator may take into account 
                differences in drug utilization between eligible 
                beneficiaries in an area and eligible beneficiaries in 
                other areas and the results of the ongoing study 
                required under section 106 of the Prescription Drug and 
                Medicare Improvement Act of 2003. Any such adjustment 
                shall be applied in a manner so as to not result in a 
                change in the aggregate payments made under this part 
                that would have been made if the Administrator had not 
                applied such adjustment.
            ``(3) Payments under the contract.--
                    ``(A) In general.--A contract entered into under 
                paragraph (1)(B) shall provide for--
                            ``(i) payment for the negotiated costs of 
                        covered drugs provided to eligible 
                        beneficiaries enrolled with the entity; and
                            ``(ii) payment of prescription management 
                        fees that are tied to performance requirements 
                        established by the Administrator for the 
                        management, administration, and delivery of the 
                        benefits under the contract.
                    ``(B) Performance requirements.--The performance 
                requirements established by the Administrator pursuant 
                to subparagraph (A)(ii) shall include the following:
                            ``(i) The entity contains costs to the 
                        Prescription Drug Account and to eligible 
                        beneficiaries enrolled under this part and with 
                        the entity.
                            ``(ii) The entity provides such 
                        beneficiaries with quality clinical care.
                            ``(iii) The entity provides such 
                        beneficiaries with quality services.
                    ``(C) Entity only at risk to the extent of the fees 
                tied to performance requirements.--An entity with a 
                contract under paragraph (1)(B) shall only be at risk 
                for the provision of benefits under the contract to the 
                extent that the management fees paid to the entity are 
                tied to performance requirements under subparagraph 
                (A)(ii).
            ``(4) Eligible entity that submitted a bid for the area not 
        eligible to be awarded the contract.--An eligible entity that 
        submitted a bid to offer a Medicare Prescription Drug plan for 
        an area for a year under section 1860D-12, including a bid 
        submitted after the Administrator has exercised the authority 
        under subsection (d)(2), may not be awarded a contract under 
        paragraph (1)(B) for that area and year. The previous sentence 
        shall apply to an entity that was awarded a contract under 
        paragraph (1)(B) for the area in the previous year and 
        submitted such a bid under section 1860D-12 for the year.
            ``(5) Term of contract.--A contract entered into under 
        paragraph (1)(B) shall be for a 1-year period. Such contract 
        may provide for renewal at the discretion of the Administrator 
        if the Administrator is required to enter into a contract under 
        such paragraph with respect to the area covered by such 
        contract for the subsequent year.
            ``(6) Entity not permitted to market or brand the 
        contract.--An entity with a contract under paragraph (1)(B) may 
        not engage in any marketing or branding of such contract.
            ``(7) Rules for areas where only 1 competitively bid plan 
        was approved.--In the case of an area where (before the 
        application of this subsection) only 1 Medicare Prescription 
        Drug plan was approved for a year--
                    ``(A) the plan may (at the option of the plan) be 
                offered in the area for the year (under rules 
                applicable to such plans under this part and not under 
                this subsection);
                    ``(B) eligible beneficiaries described in paragraph 
                (1)(B) may receive access to qualified prescription 
                drug coverage through enrollment in the plan or with an 
                entity with a contract under paragraph (1)(B); and
                    ``(C) for purposes of applying section 1860D-
                3(a)(1)(A)(ii), such plan shall be the plan designated 
                in the area under such section.
    ``(f) Two-Year Contracts.--Except for a contract entered into under 
subsection (e)(1)(B), a contract approved under this part shall be for 
a 2-year period.

 ``computation of monthly standard prescription drug coverage premiums

    ``Sec. 1860D-14. (a) In General.--For each year (beginning with 
2006), the Administrator shall compute a monthly standard prescription 
drug coverage premium for each Medicare Prescription Drug plan approved 
under section 1860D-13 and for each MedicareAdvantage plan.
    ``(b) Requirements.--The monthly standard prescription drug 
coverage premium for a plan for a year shall be equal to--
            ``(1) in the case of a plan offered by an eligible entity 
        or MedicareAdvantage organization that provides standard 
        prescription drug coverage or an actuarially equivalent 
        prescription drug coverage and does not provide additional 
        prescription drug coverage pursuant to section 1860D-6(a)(2), 
        the monthly plan premium approved for the plan under section 
        1860D-13 for the year; and
            ``(2) in the case of a plan offered by an eligible entity 
        or MedicareAdvantage organization that provides additional 
        prescription drug coverage pursuant to section 1860D-6(a)(2)--
                    ``(A) an amount that reflects only the actuarial 
                value of the standard prescription drug coverage 
                offered under the plan; or
                    ``(B) if determined appropriate by the 
                Administrator, the monthly plan premium approved under 
                section 1860D-13 for the year for the Medicare 
                Prescription Drug plan (or, if applicable, the 
                MedicareAdvantage plan) that, as required under section 
                1860D-6(a)(2)(B) for a Medicare Prescription Drug plans 
                and a MedicareAdvantage plan--
                            ``(i) is offered by such entity or 
                        organization in the same area as the plan; and
                            ``(ii) does not provide additional 
                        prescription drug coverage pursuant to such 
                        section.

           ``computation of monthly national average premium

    ``Sec. 1860D-15. (a) Computation.--
            ``(1) In general.--For each year (beginning with 2006) the 
        Administrator shall compute a monthly national average premium 
        equal to the average of the monthly standard prescription drug 
        coverage premium for each Medicare Prescription Drug plan and 
        each MedicareAdvantage plan (as computed under section 1860D-
        14). Such premium may be adjusted pursuant to any methodology 
        determined under subsection (b), as determined appropriate by 
        the Administrator.
            ``(2) Weighted average.--The monthly national average 
        premium computed under paragraph (1) shall be a weighted 
        average, with the weight for each plan being equal to the 
        average number of beneficiaries enrolled under such plan in the 
        previous year.
    ``(b) Geographic Adjustment.--The Administrator shall establish an 
appropriate methodology for adjusting the monthly national average 
premium (as computed under subsection (a)) for the year in an area to 
take into account differences in prices for covered drugs among 
different areas. In establishing such methodology, the Administrator 
may take into account differences in drug utilization between eligible 
beneficiaries in that area and other eligible beneficiaries and the 
results of the ongoing study required under section 106 of the 
Prescription Drug and Medicare Improvement Act of 2003. Any such 
adjustment shall be applied in a manner as to not result in a change in 
aggregate payments made under this part than would have been made if 
the Administrator had not applied such adjustment.
    ``(c) Special Rule for 2006.--For purposes of applying this section 
for 2006, the Administrator shall establish procedures for determining 
the weighted average under subsection (a)(2) for 2005.

                    ``payments to eligible entities

    ``Sec. 1860D-16. (a) Payment of Monthly Plan Premiums.--For each 
year (beginning with 2006), the Administrator shall pay to each entity 
offering a Medicare Prescription Drug plan in which an eligible 
beneficiary is enrolled an amount equal to the full amount of the 
monthly plan premium approved for the plan under section 1860D-13 on 
behalf of each eligible beneficiary enrolled in such plan for the year, 
as adjusted using the risk adjusters that apply to the standard 
prescription drug coverage published under section 1860D-11.
    ``(b) Portion of Total Payments of Monthly Plan Premiums Subject to 
Risk.--
            ``(1) Notification of spending under the plan.--
                    ``(A) In general.--For each year (beginning in 
                2007), the eligible entity offering a Medicare 
                Prescription Drug plan shall notify the Administrator 
                of the following:
                            ``(i) Total actual costs.--The total amount 
                        of costs that the entity incurred in providing 
                        standard prescription drug coverage (or 
                        prescription drug coverage that is actuarially 
                        equivalent pursuant to section 1860D-
                        6(a)(1)(B)) for all enrollees under the plan in 
                        the previous year.
                            ``(ii) Amounts resulting in actual costs.--
                        With respect to the total amount under clause 
                        (i) for the year--
                                    ``(I) the aggregate amount of 
                                payments made by the entity to 
                                pharmacies and other entities with 
                                respect to such coverage for such 
                                enrollees; and
                                    ``(II) the aggregate amount of 
                                discounts, direct or indirect 
                                subsidies, rebates, or other price 
                                concessions or direct or indirect 
                                remunerations made to the entity with 
                                respect to such coverage for such 
                                enrollees.
                    ``(B) Certain expenses not included.--The amount 
                under subparagraph (A)(i) may not include--
                            ``(i) administrative expenses incurred in 
                        providing the coverage described in 
                        subparagraph (A)(i);
                            ``(ii) amounts expended on providing 
                        additional prescription drug coverage pursuant 
                        to section 1860D-6(a)(2);
                            ``(iii) amounts expended for which the 
                        entity is subsequently provided with 
                        reinsurance payments under section 1860D-20; or
                            ``(iv) discounts, direct or indirect 
                        subsidies, rebates, or other price concessions 
                        or direct or indirect remunerations made to the 
                        entity with respect to coverage described in 
                        subparagraph (A)(i).
            ``(2) Adjustment of payment.--
                    ``(A) No adjustment if allowable costs within risk 
                corridor.--If the allowable costs (specified in 
                paragraph (3)) for the plan for the year are not more 
                than the first threshold upper limit of the risk 
                corridor (specified in paragraph (4)(A)(iii)) and are 
                not less than the first threshold lower limit of the 
                risk corridor (specified in paragraph (4)(A)(i)) for 
                the plan for the year, then no additional payments 
                shall be made by the Administrator and no payments 
                shall be made by (or collected from) the eligible 
                entity offering the plan.
                    ``(B) Increase in payment if allowable costs above 
                upper limit of risk corridor.--
                            ``(i) In general.--If the allowable costs 
                        for the plan for the year are more than the 
                        first threshold upper limit of the risk 
                        corridor for the plan for the year, then the 
                        Administrator shall increase the total of the 
                        monthly payments made to the entity offering 
                        the plan for the year under subsection (a) by 
                        an amount equal to the sum of--
                                    ``(I) the applicable percent (as 
                                defined in subparagraph (D)) of such 
                                allowable costs which are more than 
                                such first threshold upper limit of the 
                                risk corridor and not more than the 
                                second threshold upper limit of the 
                                risk corridor for the plan for the year 
                                (as specified under paragraph 
                                (4)(A)(iv)); and
                                    ``(II) 90 percent of such allowable 
                                costs which are more than such second 
                                threshold upper limit of the risk 
                                corridor.
                            ``(ii) Special transitional corridor for 
                        2006 and 2007.--If the Administrator determines 
                        with respect to 2006 or 2007 that at least 60 
                        percent of Medicare Prescription Drug plans and 
                        MedicareAdvantage Plans (excluding MSA plans or 
                        private fee-for-service plans that do not 
                        provide qualified prescription drug coverage) 
                        have allowable costs for the plan for the year 
                        that are more than the first threshold upper 
                        limit of the risk corridor for the plan for the 
                        year and that such plans represent at least 60 
                        percent of eligible beneficiaries enrolled 
                        under this part, clause (i)(I) shall be applied 
                        by substituting `90 percent' for `applicable 
                        percent'.
                    ``(C) Plan payment if allowable costs below lower 
                limit of risk corridor.--If the allowable costs for the 
                plan for the year are less than the first threshold 
                lower limit of the risk corridor for the plan for the 
                year, then the entity offering the plan shall a make a 
                payment to the Administrator of an amount (or the 
                Administrator shall otherwise recover from the plan an 
                amount) equal to--
                            ``(i) the applicable percent (as so 
                        defined) of such allowable costs which are less 
                        than such first threshold lower limit of the 
                        risk corridor and not less than the second 
                        threshold lower limit of the risk corridor for 
                        the plan for the year (as specified under 
                        paragraph (4)(A)(ii)); and
                            ``(ii) 90 percent of such allowable costs 
                        which are less than such second threshold lower 
                        limit of the risk corridor.
                    ``(D) Applicable percent defined.--For purposes of 
                this paragraph, the term `applicable percent' means--
                            ``(i) for 2006 and 2007, 75 percent; and
                            ``(ii) for 2008 and subsequent years, 50 
                        percent.
            ``(3) Establishment of allowable costs.--For each year, the 
        Administrator shall establish the allowable costs for each 
        Medicare Prescription Drug plan for the year. The allowable 
        costs for a plan for a year shall be equal to the amount 
        described in paragraph (1)(A)(i) for the plan for the year.
            ``(4) Establishment of risk corridors.--
                    ``(A) In general.--For each year (beginning with 
                2006), the Administrator shall establish a risk 
                corridor for each Medicare Prescription Drug plan. The 
                risk corridor for a plan for a year shall be equal to a 
                range as follows:
                            ``(i) First threshold lower limit.--The 
                        first threshold lower limit of such corridor 
                        shall be equal to--
                                    ``(I) the target amount described 
                                in subparagraph (B) for the plan; minus
                                    ``(II) an amount equal to the first 
                                threshold risk percentage for the plan 
                                (as determined under subparagraph 
                                (C)(i)) of such target amount.
                            ``(ii) Second threshold lower limit.--The 
                        second threshold lower limit of such corridor 
                        shall be equal to--
                                    ``(I) the target amount described 
                                in subparagraph (B) for the plan; minus
                                    ``(II) an amount equal to the 
                                second threshold risk percentage for 
                                the plan (as determined under 
                                subparagraph (C)(ii)) of such target 
                                amount.
                            ``(iii) First threshold upper limit.--The 
                        first threshold upper limit of such corridor 
                        shall be equal to the sum of--
                                    ``(I) such target amount; and
                                    ``(II) the amount described in 
                                clause (i)(II).
                            ``(iv) Second threshold upper limit.--The 
                        second threshold upper limit of such corridor 
                        shall be equal to the sum of--
                                    ``(I) such target amount; and
                                    ``(II) the amount described in 
                                clause (ii)(II).
                    ``(B) Target amount described.--The target amount 
                described in this paragraph is, with respect to a 
                Medicare Prescription Drug plan offered by an eligible 
                entity in a year--
                            ``(i) in the case of a plan offered by an 
                        eligible entity that provides standard 
                        prescription drug coverage or actuarially 
                        equivalent prescription drug coverage and does 
                        not provide additional prescription drug 
                        coverage pursuant to section 1860D-6(a)(2), an 
                        amount equal to the total of the monthly plan 
                        premiums paid to such entity for such plan for 
                        the year pursuant to subsection (a), reduced by 
                        the percentage specified in subparagraph (D); 
                        and
                            ``(ii) in the case of a plan offered by an 
                        eligible entity that provides additional 
                        prescription drug coverage pursuant to section 
                        1860D-6(a)(2), an amount equal to the total of 
                        the monthly plan premiums paid to such entity 
                        for such plan for the year pursuant to 
                        subsection (a) that are related to standard 
                        prescription drug coverage (determined using 
                        the rules under section 1860D-14(b)), reduced 
                        by the percentage specified in subparagraph 
                        (D).
                    ``(C) First and second threshold risk percentage 
                defined.--
                            ``(i) First threshold risk percentage.--
                        Subject to clause (iii), for purposes of this 
                        section, the first threshold risk percentage 
                        is--
                                    ``(I) for 2006 and 2007, and 2.5 
                                percent;
                                    ``(II) for 2008 through 2011, 5 
                                percent; and
                                    ``(III) for 2012 and subsequent 
                                years, a percentage established by the 
                                Administrator, but in no case less than 
                                5 percent.
                            ``(ii) Second threshold risk percentage.--
                        Subject to clause (iii), for purposes of this 
                        section, the second threshold risk percentage 
                        is--
                                    ``(I) for 2006 and 2007, 5.0 
                                percent;
                                    ``(II) for 2008 through 2011, 10 
                                percent
                                    ``(III) for 2012 and subsequent 
                                years, a percentage established by the 
                                Administrator that is greater than the 
                                percent established for the year under 
                                clause (i)(III), but in no case less 
                                than 10 percent.
                            ``(iii) Reduction of risk percentage to 
                        ensure 2 plans in an area.--Pursuant to 
                        paragraph (2) of section 1860D-13(d), the 
                        Administrator may reduce the applicable first 
                        or second threshold risk percentage in an area 
                        in a year in order to ensure the access to 
                        plans required under paragraph (1) of such 
                        section.
                    ``(D) Target amount not to include administrative 
                expenses negotiated between the administrator and the 
                entity offering the plan.--For each year (beginning in 
                2006), the Administrator and the entity offering a 
                Medicare Prescription Drug plan shall negotiate, as 
                part of the negotiation process described in section 
                1860D-13(b) during the previous year, the percentage of 
                the payments to the entity under subsection (a) with 
                respect to the plan that are attributable and 
                reasonably incurred for administrative expenses for 
                providing standard prescription drug coverage or 
                actuarially equivalent prescription drug coverage in 
                the year.
            ``(5) Plans at risk for entire amount of additional 
        prescription drug coverage.--An eligible entity that offers a 
        Medicare Prescription Drug plan that provides additional 
        prescription drug coverage pursuant to section 1860D-6(a)(2) 
        shall be at full financial risk for the provision of such 
        additional coverage.
            ``(6) No effect on eligible beneficiaries.--No change in 
        payments made by reason of this subsection shall affect the 
        beneficiary obligation under section 1860D-17 for the year in 
        which such change in payments is made.
            ``(7) Disclosure of information.--
                    ``(A) In general.--Each contract under this part 
                shall provide that--
                            ``(i) the entity offering a Medicare 
                        Prescription Drug plan shall provide the 
                        Administrator with such information as the 
                        Administrator determines is necessary to carry 
                        out this section; and
                            ``(ii) the Administrator shall have the 
                        right to inspect and audit any books and 
                        records of the eligible entity that pertain to 
                        the information regarding costs provided to the 
                        Administrator under paragraph (1).
                    ``(B) Restriction on use of information.--
                Information disclosed or obtained pursuant to the 
                provisions of this section may be used by officers and 
                employees of the Department of Health and Human 
                Services only for the purposes of, and to the extent 
                necessary in, carrying out this section.
    ``(c) Stabilization Reserve Fund.--
            ``(1) Establishment.--
                    ``(A) In general.--There is established, within the 
                Prescription Drug Account, a stabilization reserve fund 
                in which the Administrator shall deposit amounts on 
                behalf of eligible entities in accordance with 
                paragraph (2) and such amounts shall be made available 
                by the Secretary for the use of eligible entities in 
                contract year 2008 and subsequent contract years in 
                accordance with paragraph (3).
                    ``(B) Reversion of unused amounts.--Any amount in 
                the stabilization reserve fund established under 
                subparagraph (A) that is not expended by an eligible 
                entity in accordance with paragraph (3) or that was 
                deposited for the use of an eligible entity that no 
                longer has a contract under this part shall revert for 
                the use of the Prescription Drug Account.
            ``(2) Deposit of amounts for 5 years.--
                    ``(A) In general.--If the target amount for a 
                Medicare Prescription Drug plan for 2006, 2007, 2008, 
                2009, or 2010 (as determined under subsection 
                (b)(4)(B)) exceeds the applicable costs for the plan 
                for the year by more than 3 percent, then--
                            ``(i) the entity offering the plan shall 
                        make a payment to the Administrator of an 
                        amount (or the Administrator shall otherwise 
                        recover from the plan an amount) equal to the 
                        portion of such excess that is in excess of 3 
                        percent of the target amount; and
                            ``(ii) the Administrator shall deposit an 
                        amount equal to the amount collected or 
                        otherwise recovered under clause (i) in the 
                        stabilization reserve fund on behalf of the 
                        eligible entity offering such plan.
                    ``(B) Applicable costs.--For purposes of 
                subparagraph (A), the term `applicable costs' means, 
                with respect to a Medicare Prescription Drug plan and 
                year, an amount equal the sum of--
                            ``(i) the allowable costs for the plan and 
                        year (as determined under subsection (b)(3)(A); 
                        and
                            ``(ii) the total amount by which monthly 
                        payments to the plan were reduced (or otherwise 
                        recovered from the plan) for the year under 
                        subsection (b)(2)(C).
            ``(3) Use of reserve fund to stabilize or reduce monthly 
        plan premiums.--
                    ``(A) In general.--For any contract year beginning 
                after 2007, an eligible entity offering a Medicare 
                Prescription Drug plan may use funds in the 
                stabilization reserve fund in the Prescription Drug 
                Account that were deposited in such fund on behalf of 
                the entity to stabilize or reduce monthly plan premiums 
                submitted under section 1860D-12(b)(3).
                    ``(B) Procedures.--The Administrator shall 
                establish procedures for--
                            ``(i) reducing monthly plan premiums 
                        submitted under section 1860D-12(b)(3) pursuant 
                        to subparagraph (A); and
                            ``(ii) making payments from the plan 
                        stabilization reserve fund in the Prescription 
                        Drug Account to eligible entities that inform 
                        the Secretary under section 1860D-12(b)(5) of 
                        the entity's intent to use funds in such 
                        reserve fund to reduce such premiums.
    ``(d) Portion of Payments of Monthly Plan Premiums Attributable to 
Administrative Expenses Tied to Performance Requirements.--
            ``(1) In general.--The Administrator shall establish 
        procedures to adjust the portion of the payments made to an 
        entity under subsection (a) that are attributable to 
        administrative expenses (as determined pursuant to subsection 
        (b)(4)(D)) to ensure that the entity meets the performance 
        requirements described in clauses (ii) and (iii) of section 
        1860D-13(e)(4)(B).
            ``(2) No effect on eligible beneficiaries.--No change in 
        payments made by reason of this subsection shall affect the 
        beneficiary obligation under section 1860D-17 for the year in 
        which such change in payments is made.
    ``(e) Payment Terms.--
            ``(1) Administrator payments.--Payments to an entity 
        offering a Medicare Prescription Drug plan under this section 
        shall be made in a manner determined by the Administrator and 
        based upon the manner in which payments are made under section 
        1853(a) (relating to payments to MedicareAdvantage 
        organizations).
            ``(2) Plan payments.--The Administrator shall establish a 
        process for collecting (or other otherwise recovering) amounts 
        that an entity offering a Medicare Prescription Drug plan is 
        required to make to the Administrator under this section.
    ``(f) Payments to MedicareAdvantage Plans.--For provisions related 
to payments to MedicareAdvantage organizations offering 
MedicareAdvantage plans for qualified prescription drug coverage made 
available under the plan, see section 1858A(c).
    ``(g) Secondary Payer Provisions.--The provisions of section 
1862(b) shall apply to the benefits provided under this part.

            ``computation of monthly beneficiary obligation

    ``Sec. 1860D-17. (a) Beneficiaries Enrolled in a Medicare 
Prescription Drug Plan.--In the case of an eligible beneficiary 
enrolled under this part and in a Medicare Prescription Drug plan, the 
monthly beneficiary obligation for enrollment in such plan in a year 
shall be determined as follows:
            ``(1) Monthly plan premium equals monthly national average 
        premium.--If the amount of the monthly plan premium approved by 
        the Administrator under section 1860D-13 for a Medicare 
        Prescription Drug plan for the year is equal to the monthly 
        national average premium (as computed under section 1860D-15) 
        for the area for the year, the monthly beneficiary obligation 
        of the eligible beneficiary in that year shall be an amount 
        equal to the applicable percent (as determined in subsection 
        (c)) of the amount of such monthly national average premium.
            ``(2) Monthly plan premium less than monthly national 
        average premium.--If the amount of the monthly plan premium 
        approved by the Administrator under section 1860D-13 for the 
        Medicare Prescription Drug plan for the year is less than the 
        monthly national average premium (as computed under section 
        1860D-15) for the area for the year, the monthly beneficiary 
        obligation of the eligible beneficiary in that year shall be an 
        amount equal to--
                    ``(A) the applicable percent of the amount of such 
                monthly national average premium; minus
                    ``(B) the amount by which such monthly national 
                average premium exceeds the amount of the monthly plan 
                premium approved by the Administrator for the plan.
            ``(3) Monthly plan premium exceeds monthly national average 
        premium.--If the amount of the monthly plan premium approved by 
        the Administrator under section 1860D-13 for a Medicare 
        Prescription Drug plan for the year exceeds the monthly 
        national average premium (as computed under section 1860D-15) 
        for the area for the year, the monthly beneficiary obligation 
        of the eligible beneficiary in that year shall be an amount 
        equal to the sum of--
                    ``(A) the applicable percent of the amount of such 
                monthly national average premium; plus
                    ``(B) the amount by which the monthly plan premium 
                approved by the Administrator for the plan exceeds the 
                amount of such monthly national average premium.
    ``(b) Beneficiaries Enrolled in a MedicareAdvantage Plan.--In the 
case of an eligible beneficiary that is enrolled in a MedicareAdvantage 
plan (except for an MSA plan or a private fee-for-service plan that 
does not provide qualified prescription drug coverage), the Medicare 
monthly beneficiary obligation for qualified prescription drug coverage 
shall be determined pursuant to section 1858A(d).
    ``(c) Applicable Percent.--For purposes of this section, except as 
provided in section 1860D-19 (relating to premium subsidies for low-
income individuals), the applicable percent for any year is the 
percentage equal to a fraction--
            ``(1) the numerator of which is 30 percent; and
            ``(2) the denominator of which is 100 percent minus a 
        percentage equal to--
                    ``(A) the total reinsurance payments which the 
                Administrator estimates will be made under section 
                1860D-20 to qualifying entities described in subsection 
                (e)(3) of such section during the year; divided by
                    ``(B) the sum of--
                            ``(i) the amount estimated under 
                        subparagraph (A) for the year; and
                            ``(ii) the total payments which the 
                        Administrator estimates will be made under 
                        sections 1860D-16 and 1858A(c) during the year 
                        that relate to standard prescription drug 
                        coverage (or actuarially equivalent 
                        prescription drug coverage).

             ``collection of monthly beneficiary obligation

    ``Sec. 1860D-18. (a) Collection of Amount in Same Manner as Part B 
Premium.--
            ``(1) In general.--Subject to paragraph (2), the amount of 
        the monthly beneficiary obligation (determined under section 
        1860D-17) applicable to an eligible beneficiary under this part 
        (after application of any increase under section 1860D-
        2(b)(1)(A)) shall be collected and credited to the Prescription 
        Drug Account in the same manner as the monthly premium 
        determined under section 1839 is collected and credited to the 
        Federal Supplementary Medical Insurance Trust Fund under 
        section 1840.
            ``(2) Procedures for sponsor to pay obligation on behalf of 
        retiree.--The Administrator shall establish procedures under 
        which an eligible beneficiary enrolled in a Medicare 
        Prescription Drug plan may elect to have the sponsor (as 
        defined in paragraph (5) of section 1860D-20(e)) of employment-
        based retiree health coverage (as defined in paragraph (4)(B) 
        of such section) in which the beneficiary is enrolled pay the 
        amount of the monthly beneficiary obligation applicable to the 
        beneficiary under this part directly to the Administrator.
    ``(b) Information Necessary for Collection.--In order to carry out 
subsection (a), the Administrator shall transmit to the Commissioner of 
Social Security--
            ``(1) by the beginning of each year, the name, social 
        security account number, monthly beneficiary obligation owed by 
        each individual enrolled in a Medicare Prescription Drug plan 
        for each month during the year, and other information 
        determined appropriate by the Administrator; and
            ``(2) periodically throughout the year, information to 
        update the information previously transmitted under this 
        paragraph for the year.
    ``(c) Collection for Beneficiaries Enrolled in a MedicareAdvantage 
Plan.--For provisions related to the collection of the monthly 
beneficiary obligation for qualified prescription drug coverage under a 
MedicareAdvantage plan, see section 1858A(e).

    ``premium and cost-sharing subsidies for low-income individuals

    ``Sec. 1860D-19. (a) Amount of Subsidies.--
            ``(1) Full premium subsidy and reduction of cost-sharing 
        for qualified medicare beneficiaries.--In the case of a 
        qualified medicare beneficiary (as defined in paragraph 
        (4)(A))--
                    ``(A) section 1860D-17 shall be applied--
                            ``(i) in subsection (c), by substituting `0 
                        percent' for the applicable percent that would 
                        otherwise apply under such subsection; and
                            ``(ii) in subsection (a)(3)(B), by 
                        substituting `the amount of the monthly plan 
                        premium for the Medicare Prescription Drug plan 
                        with the lowest monthly plan premium in the 
                        area that the beneficiary resides' for `the 
                        amount of such monthly national average 
                        premium', but only if there is no Medicare 
                        Prescription Drug plan offered in the area in 
                        which the individual resides that has a monthly 
                        plan premium for the year that is equal to or 
                        less than the monthly national average premium 
                        (as computed under section 1860D-15) for the 
                        area for the year;
                    ``(B) the annual deductible applicable under 
                section 1860D-6(c)(1) in a year shall be reduced to $0;
                    ``(C) section 1860D-6(c)(2) shall be applied by 
                substituting `2.5 percent' for `50 percent' each place 
                it appears;
                    ``(D) such individual shall be responsible for 
                cost-sharing for the cost of any covered drug provided 
                in the year (after the individual has reached the 
                initial coverage limit described in section 1860D-
                6(c)(3) and before the individual has reached the 
                annual out-of-pocket limit under section 1860D-
                6(c)(4)(A)), that is equal to 5.0 percent; and
                    ``(E) section 1860D-6(c)(4)(A) shall be applied by 
                substituting `2.5 percent' for `10 percent'.
        In no case may the application of subparagraph (A) result in a 
        monthly beneficiary obligation that is below 0.
            ``(2) Full premium subsidy and reduction of cost-sharing 
        for specified low income medicare beneficiaries and qualifying 
        individuals.--In the case of a specified low income medicare 
        beneficiary (as defined in paragraph (4)(B)) or a qualifying 
        individual (as defined in paragraph (4)(C))--
                    ``(A) section 1860D-17 shall be applied--
                            ``(i) in subsection (c), by substituting `0 
                        percent' for the applicable percent that would 
                        otherwise apply under such subsection; and
                            ``(ii) in subsection (a)(3)(B), by 
                        substituting `the amount of the monthly plan 
                        premium for the Medicare Prescription Drug plan 
                        with the lowest monthly plan premium in the 
                        area that the beneficiary resides' for `the 
                        amount of such monthly national average 
                        premium', but only if there is no Medicare 
                        Prescription Drug plan offered in the area in 
                        which the individual resides that has a monthly 
                        plan premium for the year that is equal to or 
                        less than the monthly national average premium 
                        (as computed under section 1860D-15) for the 
                        area for the year;
                    ``(B) the annual deductible applicable under 
                section 1860D-6(c)(1) in a year shall be reduced to $0;
                    ``(C) section 1860D-6(c)(2) shall be applied by 
                substituting `5.0 percent' for `50 percent' each place 
                it appears;
                    ``(D) such individual shall be responsible for 
                cost-sharing for the cost of any covered drug provided 
                in the year (after the individual has reached the 
                initial coverage limit described in section 1860D-
                6(c)(3) and before the individual has reached the 
                annual out-of-pocket limit under section 1860D-
                6(c)(4)(A)), that is equal to 10.0 percent; and
                    ``(E) section 1860D-6(c)(4)(A) shall be applied by 
                substituting `2.5 percent' for `10 percent'.
        In no case may the application of subparagraph (A) result in a 
        monthly beneficiary obligation that is below 0.
            ``(3) Sliding scale premium subsidy and reduction of cost-
        sharing for subsidy-eligible individuals.--
                    ``(A) In general.--In the case of a subsidy-
                eligible individual (as defined in paragraph (4)(D))--
                            ``(i) section 1860D-17 shall be applied--
                                    ``(I) in subsection (c), by 
                                substituting `subsidy percent' for the 
                                applicable percentage that would 
                                otherwise apply under such subsection; 
                                and
                                    ``(II) in subparagraphs (A) and (B) 
                                of subsection (a)(3), by substituting 
                                `the amount of the monthly plan premium 
                                for the Medicare Prescription Drug plan 
                                with the lowest monthly plan premium in 
                                the area that the beneficiary resides' 
                                for `the amount of such monthly 
                                national average premium', but only if 
                                there is no Medicare Prescription Drug 
                                plan offered in the area in which the 
                                individual resides that has a monthly 
                                plan premium for the year that is equal 
                                to or less than the monthly national 
                                average premium (as computed under 
                                section 1860D-15) for the area for the 
                                year; and
                            ``(ii) the annual deductible applicable 
                        under section 1860D-6(c)(1)--
                                    ``(I) for 2006, shall be reduced to 
                                $50; and
                                    ``(II) for a subsequent year, shall 
                                be reduced to the amount specified 
                                under this clause for the previous year 
                                increased by the percentage specified 
                                in section 1860D-6(c)(5) for the year 
                                involved;
                            ``(iii) section 1860D-6(c)(2) shall be 
                        applied by substituting `10.0 percent' for `50 
                        percent' each place it appears;
                            ``(iv) such individual shall be responsible 
                        for cost-sharing for the cost of any covered 
                        drug provided in the year (after the individual 
                        has reached the initial coverage limit 
                        described in section 1860D-6(c)(3) and before 
                        the individual has reached the annual out-of-
                        pocket limit under section 1860D-6(c)(4)(A)), 
                        that is equal to 20.0 percent; and
                            ``(v) such individual shall be responsible 
                        for the cost-sharing described in section 
                        1860D-6(c)(4)(A).
                In no case may the application of clause (i) result in 
                a monthly beneficiary obligation that is below 0.
                    ``(B) Subsidy percent defined.--For purposes of 
                subparagraph (A)(i), the term `subsidy percent' means, 
                with respect to a State, a percent determined on a 
                linear sliding scale ranging from--
                            ``(i) 0 percent with respect to a subsidy-
                        eligible individual residing in the State whose 
                        income does not exceed 135 percent of the 
                        poverty line; to
                            ``(ii) the highest percentage that would 
                        otherwise apply under section 1860D-17 in the 
                        service area in which the subsidy-eligible 
                        individual resides, in the case of a subsidy-
                        eligible individual residing in the State whose 
                        income equals 160 percent of the poverty line.
            ``(4) Definitions.--In this part:
                    ``(A) Qualified medicare beneficiary.--Subject to 
                subparagraph (H), the term `qualified medicare 
                beneficiary' means an individual who--
                            ``(i) is enrolled under this part, 
                        including an individual who is enrolled under a 
                        MedicareAdvantage plan;
                            ``(ii) is eligible for medicare cost-
                        sharing described in section 1905(p)(3) under 
                        the State plan under title XIX (or under a 
                        waiver of such plan), on the basis of being 
                        described in section 1905(p)(1), as determined 
                        under such plan (or under a waiver of plan); 
                        and
                            ``(iii) is not--
                                    ``(I) a specified low-income 
                                medicare beneficiary;
                                    ``(II) a qualifying individual; or
                                    ``(III) a dual eligible individual.
                    ``(B) Specified low income medicare beneficiary.--
                Subject to subparagraph (H), the term `specified low 
                income medicare beneficiary' means an individual who--
                            ``(i) is enrolled under this part, 
                        including an individual who is enrolled under a 
                        MedicareAdvantage plan;
                            ``(ii) is eligible for medicare cost-
                        sharing described in section 1905(p)(3)(A)(ii) 
                        under the State plan under title XIX (or under 
                        a waiver of such plan), on the basis of being 
                        described in section 1902(a)(10)(E)(iii), as 
                        determined under such plan (or under a waiver 
                        of plan); and
                            ``(iii) is not--
                                    ``(I) a qualified medicare 
                                beneficiary;
                                    ``(II) a qualifying individual; or
                                    ``(III) a dual eligible individual.
                    ``(C) Qualifying individual.--Subject to 
                subparagraph (H), the term `qualifying individual' 
                means an individual who--
                            ``(i) is enrolled under this part, 
                        including an individual who is enrolled under a 
                        MedicareAdvantage plan;
                            ``(ii) is eligible for medicare cost-
                        sharing described in section 1905(p)(3)(A)(ii) 
                        under the State plan under title XIX (or under 
                        a waiver of such plan), on the basis of being 
                        described in section 1902(a)(10)(E)(iv) 
                        (without regard to any termination of the 
                        application of such section under title XIX), 
                        as determined under such plan (or under a 
                        waiver of such plan); and
                            ``(iii) is not--
                                    ``(I) a qualified medicare 
                                beneficiary;
                                    ``(II) a specified low-income 
                                medicare beneficiary; or
                                    ``(III) a dual eligible individual.
                    ``(D) Subsidy-eligible individual.--Subject to 
                subparagraph (H), the term `subsidy-eligible 
                individual' means an individual--
                            ``(i) who is enrolled under this part, 
                        including an individual who is enrolled under a 
                        MedicareAdvantage plan;
                            ``(ii) whose income is less than 160 
                        percent of the poverty line; and
                            ``(iii) who is not--
                                    ``(I) a qualified medicare 
                                beneficiary;
                                    ``(II) a specified low-income 
                                medicare beneficiary;
                                    ``(III) a qualifying individual; or
                                    ``(IV) a dual eligible individual.
                    ``(E) Dual eligible individual.--
                            ``(i) In general.--The term `dual eligible 
                        individual' means an individual who is--
                                    ``(I) enrolled under title XIX or 
                                under a waiver under section 1115 of 
                                the requirements of such title for 
                                medical assistance that is not less 
                                than the medical assistance provided to 
                                an individual described in section 
                                1902(a)(10)(A)(i) and includes covered 
                                outpatient drugs (as such term is 
                                defined for purposes of section 1927); 
                                and
                                    ``(II) entitled to benefits under 
                                part A and enrolled under part B.
                            ``(ii) Inclusion of medically needy.--Such 
                        term includes an individual described in 
                        section 1902(a)(10)(C).
                    ``(F) Poverty line.--The term `poverty line' has 
                the meaning given such term in section 673(2) of the 
                Community Services Block Grant Act (42 U.S.C. 9902(2)), 
                including any revision required by such section.
                    ``(G) Eligibility determinations.--Beginning on 
                November 1, 2005, the determination of whether an 
                individual residing in a State is an individual 
                described in subparagraph (A), (B), (C), (D), or (E) 
                and, for purposes of paragraph (3), the amount of an 
                individual's income, shall be determined under the 
                State medicaid plan for the State under section 
                1935(a). In the case of a State that does not operate 
                such a medicaid plan (either under title XIX or under a 
                statewide waiver granted under section 1115), such 
                determination shall be made under arrangements made by 
                the Administrator.
                    ``(H) Nonapplication to dual eligible individuals 
                and territorial residents.--In the case of an 
                individual who is a dual eligible individual or an 
                individual who is not a resident of the 50 States or 
                the District of Columbia--
                            ``(i) the subsidies provided under this 
                        section shall not apply; and
                            ``(ii) in the case of such an individual 
                        who is not a resident of the 50 States or the 
                        District of Columbia, such individual may be 
                        provided with medical assistance for covered 
                        outpatient drugs (as such term is defined for 
                        purposes of section 1927) in accordance with 
                        section 1935 under the State medicaid program 
                        under title XIX.
                    ``(I) Update of asset or resource test.--With 
                respect to eligibility determinations for premium and 
                cost-sharing subsidies under this section that are made 
                on or after January 1, 2009, such determinations shall 
                be made (to the extent a State, as of such date, has 
                not already eliminated the application of an asset or 
                resource test under section 1905(p)(1)(C)) in 
                accordance with the following:
                            ``(i) Self-declaration of value.--
                                    ``(I) In general.--A State shall 
                                permit an individual applying for such 
                                subsidies to declare and certify by 
                                signature under penalty of perjury on 
                                the application form that the value of 
                                the individual's assets or resources 
                                (or the combined value of the 
                                individual's assets or resources and 
                                the assets or resources of the 
                                individual's spouse), as determined 
                                under section 1613 for purposes of the 
                                supplemental security income program, 
                                does not exceed $10,000 ($20,000 in the 
                                case of the combined value of the 
                                individual's assets or resources and 
                                the assets or resources of the 
                                individual's spouse).
                                    ``(II) Annual adjustment.--
                                Beginning on January 1, 2010, and for 
                                each subsequent year, the dollar 
                                amounts specified in subclause (I) for 
                                the preceding year shall be increased 
                                by the percentage increase in the 
                                Consumer Price Index for all urban 
                                consumers (U.S. urban average) for the 
                                12-month period ending with June of the 
                                previous year.
                            ``(ii) Methodology flexibility.--Nothing in 
                        clause (i) shall be construed as prohibiting a 
                        State in making eligibility determinations for 
                        premium and cost-sharing subsidies under this 
                        section from using asset or resource 
                        methodologies that are less restrictive than 
                        the methodologies used under 1613 for purposes 
                        of the supplemental security income program.
                    ``(J) Development of model declaration form.--The 
                Secretary shall--
                            ``(i) develop a model, simplified 
                        application form for individuals to use in 
                        making a self-declaration of assets or 
                        resources in accordance with subparagraph 
                        (I)(i); and
                            ``(ii) provide such form to States and, for 
                        purposes of outreach under section 1144, the 
                        Commissioner of Social Security.''.
    ``(b) Rules in Applying Cost-Sharing Subsidies.--Nothing in this 
section shall be construed as preventing an eligible entity offering a 
Medicare Prescription Drug plan or a MedicareAdvantage organization 
offering a MedicareAdvantage plan from waiving or reducing the amount 
of the deductible or other cost-sharing otherwise applicable pursuant 
to section 1860D-6(a)(2).
    ``(c) Administration of Subsidy Program.--The Administrator shall 
establish a process whereby, in the case of an individual eligible for 
a cost-sharing subsidy under subsection (a) who is enrolled in a 
Medicare Prescription Drug plan or a MedicareAdvantage plan--
            ``(1) the Administrator provides for a notification of the 
        eligible entity or MedicareAdvantage organization involved that 
        the individual is eligible for a cost-sharing subsidy and the 
        amount of the subsidy under such subsection;
            ``(2) the entity or organization involved reduces the cost-
        sharing otherwise imposed by the amount of the applicable 
        subsidy and submits to the Administrator information on the 
        amount of such reduction; and
            ``(3) the Administrator periodically and on a timely basis 
        reimburses the entity or organization for the amount of such 
        reductions.
The reimbursement under paragraph (3) 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.
    ``(d) Relation to Medicaid Program.--For provisions providing for 
eligibility determinations and additional Federal payments for 
expenditures related to providing prescription drug coverage for dual 
eligible individuals and territorial residents under the medicaid 
program, see section 1935.

``reinsurance payments for expenses incurred in providing prescription 
         drug coverage above the annual out-of-pocket threshold

    ``Sec. 1860D-20. (a) Reinsurance Payments.--
            ``(1) In general.--Subject to section 1860D-21(b), the 
        Administrator shall provide in accordance with this section for 
        payment to a qualifying entity of the reinsurance payment 
        amount (as specified in subsection (c)(1)) for costs incurred 
        by the entity in providing prescription drug coverage for a 
        qualifying covered individual after the individual has reached 
        the annual out-of-pocket threshold specified in section 1860D-
        6(c)(4)(B) for the year.
            ``(2) Budget authority.--This section constitutes budget 
        authority in advance of appropriations Acts and represents the 
        obligation of the Administrator to provide for the payment of 
        amounts provided under this section.
    ``(b) Notification of Spending Under the Plan for Costs Incurred in 
Providing Prescription Drug Coverage Above the Annual Out-of-Pocket 
Threshold.--
            ``(1) In general.--Each qualifying entity shall notify the 
        Administrator of the following with respect to a qualifying 
        covered individual for a coverage year:
                    ``(A) Total actual costs.--The total amount (if 
                any) of costs that the qualifying entity incurred in 
                providing prescription drug coverage for the individual 
                in the year after the individual had reached the annual 
                out-of-pocket threshold specified in section 1860D-
                6(c)(4)(B) for the year.
                    ``(B) Amounts resulting in actual costs.--With 
                respect to the total amount under subparagraph (A) for 
                the year--
                            ``(i) the aggregate amount of payments made 
                        by the entity to pharmacies and other entities 
                        with respect to such coverage for such 
                        enrollees; and
                            ``(ii) the aggregate amount of discounts, 
                        direct or indirect subsidies, rebates, or other 
                        price concessions or direct or indirect 
                        remunerations made to the entity with respect 
                        to such coverage for such enrollees.
            ``(2) Certain expenses not included.--The amount under 
        paragraph (1)(A) may not include--
                    ``(A) administrative expenses incurred in providing 
                the coverage described in paragraph (1)(A);
                    ``(B) amounts expended on providing additional 
                prescription drug coverage pursuant to section 1860D-
                6(a)(2); or
                    ``(C) discounts, direct or indirect subsidies, 
                rebates, or other price concessions or direct or 
                indirect remunerations made to the entity with respect 
                to coverage described in paragraph (1)(A).
            ``(3) Restriction on use of information.--The restriction 
        specified in section 1860D-16(b)(7)(B) shall apply to 
        information disclosed or obtained pursuant to the provisions of 
        this section.
    ``(c) Reinsurance Payment Amount.--
            ``(1) In general.--The reinsurance payment amount under 
        this subsection for a qualifying covered individual for a 
        coverage year is an amount equal to 80 percent (or 65 percent 
        with respect to a qualifying covered individual described in 
        subsection (e)(2)(D)) of the allowable costs (as specified in 
        paragraph (2)) incurred by the qualifying entity with respect 
        to the individual and year.
            ``(2) Establishment of allowable costs.--In the case of a 
        qualifying entity that has incurred costs described in 
        subsection (b)(1)(A) with respect to a qualifying covered 
        individual for a coverage year, the Administrator shall 
        establish the allowable costs for the individual and year. Such 
        allowable costs shall be equal to the amount described in such 
        subsection for the individual and year.
    ``(d) Payment Methods.--
            ``(1) In general.--Payments under this section shall be 
        based on such a method as the Administrator determines. The 
        Administrator may establish a payment method by which interim 
        payments of amounts under this section are made during a year 
        based on the Administrator's best estimate of amounts that will 
        be payable after obtaining all of the information.
            ``(2) Source of payments.--Payments under this section 
        shall be made from the Prescription Drug Account.
    ``(e) Definitions.--In this section:
            ``(1) Coverage year.--The term `coverage year' means a 
        calendar year in which covered drugs are dispensed if a claim 
        for payment is made under the plan for such drugs, regardless 
        of when the claim is paid.
            ``(2) Qualifying covered individual.--The term `qualifying 
        covered individual' means an individual who--
                    ``(A) is enrolled in this part and in a Medicare 
                Prescription Drug plan;
                    ``(B) is enrolled in this part and in a 
                MedicareAdvantage plan (except for an MSA plan or a 
                private fee-for-service plan that does not provide 
                qualified prescription drug coverage);
                    ``(C) is eligible for, but not enrolled in, the 
                program under this part, and is covered under a 
                qualified retiree prescription drug plan; or
                    ``(D) is eligible for, but not enrolled in, the 
                program under this part, and is covered under a 
                qualified State pharmaceutical assistance program.
            ``(3) Qualifying entity.--The term `qualifying entity' 
        means any of the following that has entered into an agreement 
        with the Administrator to provide the Administrator with such 
        information as may be required to carry out this section:
                    ``(A) An eligible entity offering a Medicare 
                Prescription Drug plan under this part.
                    ``(B) A MedicareAdvantage organization offering a 
                MedicareAdvantage plan under part C (except for an MSA 
                plan or a private fee-for-service plan that does not 
                provide qualified prescription drug coverage).
                    ``(C) The sponsor of a qualified retiree 
                prescription drug plan.
                    ``(D) A State offering a qualified State 
                pharmaceutical assistance program.
            ``(4) Qualified retiree prescription drug plan.--
                    ``(A) In general.--The term `qualified retiree 
                prescription drug plan' means employment-based retiree 
                health coverage if, with respect to a qualifying 
                covered individual who is covered under the plan, the 
                following requirements are met:
                            ``(i) Attestation of actuarial value of 
                        coverage.--The sponsor of the plan shall, 
                        annually or at such other time as the 
                        Administrator may require, provide the 
                        Administrator an attestation, in accordance 
                        with the procedures established under section 
                        1860D-6(f), that the actuarial value of 
                        prescription drug coverage under the plan is at 
                        least equal to the actuarial value of standard 
                        prescription drug coverage.
                            ``(ii) Audits.--The sponsor of the plan, or 
                        an administrator of the plan designated by the 
                        sponsor, shall maintain (and afford the 
                        Administrator access to) such records as the 
                        Administrator may require for purposes of 
                        audits and other oversight activities necessary 
                        to ensure the adequacy of prescription drug 
                        coverage and the accuracy of payments made 
                        under this part to and by the plan.
                    ``(B) Employment-based retiree health coverage.--
                The term `employment-based retiree health coverage' 
                means health insurance or other coverage, whether 
                provided by voluntary insurance coverage or pursuant to 
                statutory or contractual obligation, of health care 
                costs for retired individuals (or for such individuals 
                and their spouses and dependents) based on their status 
                as former employees or labor union members.
            ``(5) Qualified State pharmaceutical assistance program.--
                    ``(A) In general.--The term `qualified State 
                pharmaceutical assistance program' means a State 
                pharmaceutical assistance program if, with respect to a 
                qualifying covered individual who is covered under the 
                program, the following requirements are met:
                            ``(i) Assurance.--The State offering the 
                        program shall, annually or at such other times 
                        as the Administrator may require, provide the 
                        Administrator an attestation that, in 
                        accordance with the procedures established 
                        under section 1860D-6(f), that--
                                    ``(I) the actuarial value of 
                                prescription drug coverage under the 
                                program is at least equal to the 
                                actuarial value of standard 
                                prescription drug coverage; and
                                    ``(II) the actuarial value of 
                                subsidies to individuals provided under 
                                the program are at least equal to the 
                                actuarial value of the subsidies that 
                                would apply under section 1860D-19 if 
                                the individual was enrolled under this 
                                part rather than under the program.
                            ``(ii) Disclosure of information.--The 
                        State complies with the requirements described 
                        in clauses (i) and (ii) of section 1860D-
                        16(b)(7)(A).
                    ``(B) State pharmaceutical assistance program.--For 
                purposes of subparagraph (A), the term `State 
                pharmaceutical assistance program' means a program--
                            ``(i) that is in operation as of the date 
                        of enactment of the Prescription Drug and 
                        Medicare Improvement Act of 2003;
                            ``(ii) that is sponsored and financed by a 
                        State; and
                            ``(iii) that provides coverage for 
                        outpatient drugs for individuals in the State 
                        who meet income- and resource-related 
                        qualifications specified under such program.
            ``(6) Sponsor.--The term `sponsor' means a plan sponsor, as 
        defined in section 3(16)(B) of the Employee Retirement Income 
        Security Act of 1974.
    ``(f) Distribution of Reinsurance Payment Amounts.--
            ``(1) In general.--Any sponsor meeting the requirements of 
        subsection (e)(3) with respect to a quarter in a calendar year, 
        but which is not an employer, shall distribute the reinsurance 
        payments received for such quarter under subsection (c) to the 
        employers contributing to the qualified retiree prescription 
        drug plan maintained by such sponsor during that quarter, in 
        the manner described in paragraphs (2) and (3).
            ``(2) Allocation.--The reinsurance payments to be 
        distributed pursuant to paragraph (1) shall be allocated 
        proportionally among all employers who contribute to the plan 
        during the quarter with respect to which the payments are 
        received. The share allocated to each employer contributing to 
        the plan during a quarter shall be determined by multiplying 
        the total reinsurance payments received by the sponsor for the 
        quarter by a fraction, the numerator of which is the total 
        contributions made by an employer for that quarter, and the 
        denominator of which is the total contributions required to be 
        made to the plan by all employers for that quarter. Any share 
        allocated to an employer required to contribute for a quarter 
        who does not make the contributions required for that quarter 
        on or before the date due shall be retained by the sponsor for 
        the benefit of the plan as a whole.
            ``(3) Timing.--Reinsurance payments required to be 
        distributed to employers pursuant to this subsection shall be 
        distributed as soon as practicable after received by the 
        sponsor, but in no event later than the end of the quarter 
        immediately following the quarter in which such reinsurance 
        payments are received by the sponsor.
            ``(4) Regulations.--The Secretary shall promulgate 
        regulations providing that any sponsor subject to the 
        requirements of this subsection who fails to meet such 
        requirements shall not be eligible for a payment under this 
        section.

 ``direct subsidy for sponsor of a qualified retiree prescription drug 
  plan for plan enrollees eligible for, but not enrolled in, this part

    ``Sec. 1860D-21. (a) Direct Subsidy.--
            ``(1) In general.--The Administrator shall provide for the 
        payment to a sponsor of a qualified retiree prescription drug 
        plan (as defined in section 1860D-20(e)(4)) for each qualifying 
        covered individual (described in subparagraph (C) of section 
        1860D-20(e)(2)) enrolled in the plan for each month for which 
        such individual is so enrolled.
            ``(2) Amount of payment.--
                    ``(A) In general.--The amount of the payment under 
                paragraph (1) shall be an amount equal to the direct 
                subsidy percent determined for the year of the monthly 
                national average premium for the area for the year 
                (determined under section 1860D-15), as adjusted using 
                the risk adjusters that apply to the standard 
                prescription drug coverage published under section 
                1860D-11.
                    ``(B) Direct subsidy percent.--For purposes of 
                subparagraph (A), the term `direct subsidy percent' 
                means the percentage equal to--
                            ``(i) 100 percent; minus
                            ``(ii) the applicable percent for the year 
                        (as determined under section 1860D-17(c).
    ``(b) Payment Methods.--
            ``(1) In general.--Payments under this section shall be 
        based on such a method as the Administrator determines. The 
        Administrator may establish a payment method by which interim 
        payments of amounts under this section are made during a year 
        based on the Administrator's best estimate of amounts that will 
        be payable after obtaining all of the information.
            ``(2) Source of payments.--Payments under this section 
        shall be made from the Prescription Drug Account.

``direct subsidies for qualified state offering a state pharmaceutical 
assistance program for program enrollees eligible for, but not enrolled 
                             in, this part

    ``Sec. 1860D-22. (a) Direct Subsidy.--
            ``(1) In general.--The Administrator shall provide for the 
        payment to a State offering a qualified State pharmaceutical 
        assistance program (as defined in section 1860D-20(e)(6)) for 
        each qualifying covered individual (described in subparagraph 
        (D) of section 1860D-(e)(2)) enrolled in the program for each 
        month for which such individual is so enrolled.
            ``(2) Amount of payment.--
                    ``(A) In general.--The amount of the payment under 
                paragraph (1) shall be an amount equal to the amount of 
                payment for the area and year made under section 1860D-
                21(a)(2).
    ``(b) Additional Subsidy.--
            ``(1) In general.--The Administrator shall provide for the 
        payment to a State offering a qualified State pharmaceutical 
        program (as defined in section 1860D-20(e)(6)) for each 
        applicable low-income individual enrolled in the program for 
        each month for which such individual is so enrolled.
            ``(2) Amount of payment.--
                    ``(A) In general.--The amount of the payment under 
                paragraph (1) shall be the amount the Administrator 
                estimates would have been made to an entity or 
                organization under section 1860D-19 with respect to the 
                applicable low-income individual if such individual was 
                enrolled in this part and under a Medicare Prescription 
                Drug plan or a MedicareAdvantage plan.
                    ``(B) Maximum payments.--In no case may the amount 
                of the payment determined under subparagraph (A) with 
                respect to an applicable low-income individual exceed, 
                as estimated by the Administrator, the average amounts 
                made in a year under section 1860D-19 on behalf of an 
                eligible beneficiary enrolled under this part with 
                income that is the same as the income of the applicable 
                low-income individual.
            ``(3) Applicable low-income individual.--For purposes of 
        this subsection, the term `applicable low-income individual' 
        means an individual who is both--
                    ``(A) a qualifying covered individual (described in 
                subparagraph (D) of section 1860D-(e)(2)); and
                    ``(B) a qualified medicare beneficiary, a specified 
                low income medicare beneficiary, or a subsidy-eligible 
                individual, as such terms are defined in section 1860D-
                19(a)(4).
    ``(c) Payment Methods.--
            ``(1) In general.--Payments under this section shall be 
        based on such a method as the Administrator determines. The 
        Administrator may establish a payment method by which interim 
        payments of amounts under this section are made during a year 
        based on the Administrator's best estimate of amounts that will 
        be payable after obtaining all of the information.
            ``(2) Source of payments.--Payments under this section 
        shall be made from the Prescription Drug Account.
    ``(d) Construction.--Nothing in this section or section 1860D-20 
shall effect the provisions of section 1860D-26(b).

                 ``Subpart 3--Miscellaneous Provisions

   ``prescription drug account in the federal supplementary medical 
                          insurance trust fund

    ``Sec. 1860D-25. (a) Establishment.--
            ``(1) In general.--There is created within the Federal 
        Supplementary Medical Insurance Trust Fund established by 
        section 1841 an account to be known as the `Prescription Drug 
        Account' (in this section referred to as the `Account').
            ``(2) Funds.--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, the 
        Account as provided in this part.
            ``(3) Separate from rest of trust fund.--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 payments to operate the program 
        under this part, including--
                    ``(A) payments to eligible entities under section 
                1860D-16;
                    ``(B) payments under 1860D-19 for low-income 
                subsidy payments for cost-sharing;
                    ``(C) reinsurance payments under section 1860D-20;
                    ``(D) payments to sponsors of qualified retiree 
                prescription drug plans under section 1860D-21;
                    ``(E) payments to MedicareAdvantage organizations 
                for the provision of qualified prescription drug 
                coverage under section 1858A(c); and
                    ``(F) payments with respect to administrative 
                expenses under this part in accordance with section 
                201(g).
            ``(2) Treatment in relation to part b premium.--Amounts 
        payable from the Account shall not be taken into account in 
        computing actuarial rates or premium amounts under section 
        1839.
    ``(c) Appropriations To Cover Benefits and Administrative Costs.--
There are appropriated to the Account in a fiscal year, out of any 
moneys in the Treasury not otherwise appropriated, an amount equal to 
the payments and transfers made from the Account in the year.

                       ``other related provisions

    ``Sec. 1860D-26. (a) Restriction on Enrollment in a Medicare 
Prescription Drug Plan Offered by a Sponsor of Employment-Based Retiree 
Health Coverage.--
            ``(1) In general.--In the case of a Medicare Prescription 
        Drug plan offered by an eligible entity that is a sponsor (as 
        defined in paragraph (5) of section 1860D-20(e)) of employment-
        based retiree health coverage (as defined in paragraph (4)(B) 
        of such section), notwithstanding any other provision of this 
        part and in accordance with regulations of the Administrator, 
        the entity offering the plan may restrict the enrollment of 
        eligible beneficiaries enrolled under this part to eligible 
        beneficiaries who are enrolled in such coverage.
            ``(2) Limitation.--The sponsor of the employment-based 
        retiree health coverage described in paragraph (1) may not 
        offer enrollment in the Medicare Prescription Drug plan 
        described in such paragraph based on the health status of 
        eligible beneficiaries enrolled for such coverage.
    ``(b) Coordination With State Pharmaceutical Assistance Programs.--
            ``(1) In general.--An eligible entity offering a Medicare 
        Prescription Drug plan, or a MedicareAdvantage organization 
        offering a MedicareAdvantage plan (other than an MSA plan or a 
        private fee-for-service plan that does not provide qualified 
        prescription drug coverage), may enter into an agreement with a 
        State pharmaceutical assistance program described in paragraph 
        (2) to coordinate the coverage provided under the plan with the 
        assistance provided under the State pharmaceutical assistance 
        program.
            ``(2) State pharmaceutical assistance program described.--
        For purposes of paragraph (1), a State pharmaceutical 
        assistance program described in this paragraph is a program 
        that has been established pursuant to a waiver under section 
        1115 or otherwise.
    ``(c) Regulations To Carry Out This Part.--
            ``(1) Authority for interim final regulations.--The 
        Secretary may promulgate initial regulations implementing this 
        part in interim final form without prior opportunity for public 
        comment.
            ``(2) Final regulations.--A final regulation reflecting 
        public comments must be published within 1 year of the interim 
        final regulation promulgated under paragraph (1).''.
    ``(d) Waiver Authority.--The Secretary shall have authority similar 
to the waiver authority under section 1857(i) to facilitate the 
offering of Medicare Prescription Drug plans by employer or other group 
health plans as part of employment-based retiree health coverage (as 
defined in section 1860D-20(d)(4)(B)), including the authority to 
establish separate premium amounts for enrollees in a Medicare 
Prescription Drug plan by reason of such coverage.''.
    (b) Conforming Amendments to Federal Supplementary Medical 
Insurance Trust Fund.--Section 1841 (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 Prescription Drug Account 
                established by section 1860D-25'';
            (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 be made from the Prescription 
        Drug Account in the Trust Fund),'';
            (3) in subsection (h), by inserting after ``1840(d)'' the 
        following: ``and sections 1860D-18 and 1858A(e) (in which case 
        the payments shall be made from the Prescription Drug Account 
        in the Trust Fund)''; and
            (4) in subsection (i), by inserting after ``section 
        1840(b)(1)'' the following: ``, sections 1860D-18 and 1858A(e) 
        (in which case the payments shall be made from the Prescription 
        Drug Account in the Trust Fund),''.
    (c) Conforming References to Previous Part D.--Any reference in law 
(in effect before the date of enactment of this Act) to part D of title 
XVIII of the Social Security Act is deemed a reference to part F of 
such title (as in effect after such date).
    (d) Submission of Legislative Proposal.--Not later than 6 months 
after the date of the enactment of this Act, the Secretary 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 Act.

SEC. 102. STUDY AND REPORT ON PERMITTING PART B ONLY INDIVIDUALS TO 
              ENROLL IN MEDICARE VOLUNTARY PRESCRIPTION DRUG DELIVERY 
              PROGRAM.

    (a) Study.--The Administrator of the Center for Medicare Choices 
(as established under section 1808 of the Social Security Act, as added 
by section 301(a)) shall conduct a study on the need for rules relating 
to permitting individuals who are enrolled under part B of title XVIII 
of the Social Security Act but are not entitled to benefits under part 
A of such title to buy into the medicare voluntary prescription drug 
delivery program under part D of such title (as so added).
    (b) Report.--Not later than January 1, 2005, the Administrator of 
the Center for Medicare Choices shall submit a report to Congress on 
the study conducted under subsection (a), together with any 
recommendations for legislation that the Administrator determines to be 
appropriate as a result of such study.

SEC. 103. RULES RELATING TO MEDIGAP POLICIES THAT PROVIDE PRESCRIPTION 
              DRUG COVERAGE.

    (a) Rules Relating to Medigap Policies That Provide Prescription 
Drug Coverage.--Section 1882 (42 U.S.C. 1395ss) is amended by adding at 
the end the following new subsection:
    ``(v) Rules Relating to Medigap Policies That Provide Prescription 
Drug Coverage.--
            ``(1) Prohibition on sale, issuance, and renewal of 
        policies that provide prescription drug coverage to part d 
        enrollees.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, on or after January 1, 2006, no 
                medicare supplemental policy that provides coverage of 
                expenses for prescription drugs may be sold, issued, or 
                renewed under this section to an individual who is 
                enrolled under part D.
                    ``(B) Penalties.--The penalties described in 
                subsection (d)(3)(A)(ii) shall apply with respect to a 
                violation of subparagraph (A).
            ``(2) Issuance of substitute policies if the policyholder 
        obtains prescription drug coverage under part d.--
                    ``(A) In general.--The issuer of a medicare 
                supplemental policy--
                            ``(i) may not deny or condition the 
                        issuance or effectiveness of a medicare 
                        supplemental policy that has a benefit package 
                        classified as `A', `B', `C', `D', `E', `F' 
                        (including the benefit package classified as 
                        `F' with a high deductible feature, as 
                        described in subsection (p)(11)), or `G' (under 
                        the standards established under subsection 
                        (p)(2)) and that is offered and is available 
                        for issuance to new enrollees by such issuer;
                            ``(ii) may not discriminate in the pricing 
                        of such policy, because of health status, 
                        claims experience, receipt of health care, or 
                        medical condition; and
                            ``(iii) may not impose an exclusion of 
                        benefits based on a pre-existing condition 
                        under such policy,
                in the case of an individual described in subparagraph 
                (B) who seeks to enroll under the policy during the 
                open enrollment period established under section 1860D-
                2(b)(2) and who submits evidence that they meet the 
                requirements under subparagraph (B) along with the 
                application for such medicare supplemental policy.
                    ``(B) Individual described.--An individual 
                described in this subparagraph is an individual who--
                            ``(i) enrolls in the medicare prescription 
                        drug delivery program under part D; and
                            ``(ii) at the time of such enrollment was 
                        enrolled and terminates enrollment in a 
                        medicare supplemental policy which has a 
                        benefit package classified as `H', `I', or `J' 
                        (including the benefit package classified as 
                        `J' with a high deductible feature, as 
                        described in section 1882(p)(11)) under the 
                        standards referred to in subparagraph (A)(i) or 
                        terminates enrollment in a policy to which such 
                        standards do not apply but which provides 
                        benefits for prescription drugs.
                    ``(C) Enforcement.--The provisions of subparagraph 
                (A) shall be enforced as though they were included in 
                subsection (s).
            ``(3) Notice required to be provided to current 
        policyholders with prescription drug coverage.--No medicare 
        supplemental policy of an issuer shall be deemed to meet the 
        standards in subsection (c) unless the issuer provides written 
        notice during the 60-day period immediately preceding the 
        period established for the open enrollment period established 
        under section 1860D-2(b)(2), to each individual who is a 
        policyholder or certificate holder of a medicare supplemental 
        policy issued by that issuer that provides some coverage of 
        expenses for prescription drugs (at the most recent available 
        address of that individual) of--
                    ``(A) the ability to enroll in a new medicare 
                supplemental policy pursuant to paragraph (2); and
                    ``(B) the fact that, so long as such individual 
                retains coverage under such policy, the individual 
                shall be ineligible for coverage of prescription drugs 
                under part D.''.
    (b) Rule of Construction    (1) In general.--Nothing in this Act 
shall be construed to require an issuer of a medicare supplemental 
policy under section 1882 of the Social Security Act (42 U.S.C. 1395rr) 
to participate as an eligible entity under part D of such Act, as added 
by section 101, as a condition for issuing such policy.
            (2) Prohibition on state requirement.--A State may not 
        require an issuer of a medicare supplemental policy under 
        section 1882 of the Social Security Act (42 U.S.C. 1395rr) to 
        participate as an eligible entity under part D of such Act, as 
        added by section 101, as a condition for issuing such policy.

SEC. 104. MEDICAID AND OTHER AMENDMENTS RELATED TO LOW-INCOME 
              BENEFICIARIES.

    (a) Determinations of Eligibility for Low-Income Subsidies.--
Section 1902(a) (42 U.S.C. 1396a(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (64);
            (2) by striking the period at the end of paragraph (65) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (65) the following new 
        paragraph:
            ``(66) provide for making eligibility determinations under 
        section 1935(a).''.
    (b) New Section.--
            (1) In general.--Title XIX (42 U.S.C. 1396 et seq.) is 
        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 satisfy the following:
            ``(1) Determination of eligibility for transitional 
        prescription drug assistance card program for eligible low-
        income beneficiaries.--For purposes of section 1807A, submit to 
        the Secretary an eligibility plan under which the State--
                    ``(A) establishes eligibility standards consistent 
                with the provisions of that section;
                    ``(B) establishes procedures for providing 
                presumptive eligibility for eligible low-income 
                beneficiaries (as defined in section 1807A(i)(2)) under 
                that section;
                    ``(C) makes determinations of eligibility and 
                income for purposes of identifying eligible low-income 
                beneficiaries (as so defined) under that section; and
                    ``(D) communicates to the Secretary determinations 
                of eligibility or discontinuation of eligibility under 
                that section for purposes of notifying prescription 
                drug card sponsors under that section of the identity 
                of eligible medicare low-income beneficiaries.
            ``(2) Determination of eligibility for premium and cost-
        sharing subsidies under part D of title XVIII for low-income 
        individuals.--Beginning November 1, 2005, for purposes of 
        section 1860D-19--
                    ``(A) make determinations of eligibility for 
                premium and cost-sharing subsidies under and in 
                accordance with such section;
                    ``(B) establish procedures for providing 
                presumptive eligibility for individuals eligible for 
                subsidies under that section;
                    ``(C) inform the Administrator of the Center for 
                Medicare Choices of such determinations in cases in 
                which such eligibility is established; and
                    ``(D) otherwise provide such Administrator with 
                such information as may be required to carry out part D 
                of title XVIII (including section 1860D-19).
            ``(3) Agreement to establish information and enrollment 
        sites at social security field offices.--Enter into an 
        agreement with the Commissioner of Social Security to use all 
        Social Security field offices located in the State as 
        information and enrollment sites for making the eligibility 
        determinations required under paragraphs (1) and (2).
            ``(4) Screen and enroll individuals eligible for medicare 
        cost-sharing.--As part of making an eligibility determination 
        required under paragraph (1) or (2), screen an individual who 
        applies for such a determination for eligibility for medical 
        assistance for any medicare cost-sharing described in section 
        1905(p)(3) and, if the individual is eligible for any such 
        medicare cost-sharing, enroll the individual under the State 
        plan (or under a waiver of such plan).
    ``(b) Federal Subsidy of Administrative Costs.--
            ``(1) Enhanced match for eligibility determinations.--
        Subject to paragraphs (2) and (4), with respect to calendar 
        quarters beginning on or after January 1, 2004, the amounts 
        expended by a State in carrying out subsection (a) are 
        expenditures reimbursable under section 1903(a)(7) except that, 
        in applying such section with respect to such expenditures 
        incurred for--
                    ``(A) such calendar quarters occurring in fiscal 
                year 2004 or 2005, `75 percent' shall be substituted 
                for `50 per centum';
                    ``(B) calendar quarters occurring in fiscal year 
                2006, `70 percent' shall be substituted for `50 per 
                centum';
                    ``(C) calendar quarters occurring in fiscal year 
                2007, `65 percent' shall be substituted for `50 per 
                centum'; and
                    ``(D) calendar quarters occurring in fiscal year 
                2008 or any fiscal year thereafter, `60 percent' shall 
                be substituted for `50 per centum'.
            ``(2) 100 percent match for eligibility determinations for 
        subsidy-eligible individuals.--In the case of amounts expended 
        by a State on or after November 1, 2005, to determine whether 
        an individual is a subsidy-eligible individual for purposes of 
        section 1860D-19, such expenditures shall be reimbursed under 
        section 1903(a)(7) by substituting `100 percent' for `50 per 
        centum'.
            ``(3) Enhanced match for updates or improvements to 
        eligibility determination systems.--With respect to calendar 
        quarters occurring in fiscal year 2004, 2005, or 2006, the 
        Secretary, in addition to amounts otherwise paid under section 
        1903(a), shall pay to each State which has a plan approved 
        under this title, for each such quarter an amount equal to 90 
        percent of so much of the sums expended during such quarter as 
        are attributable to the design, development, acquisition, or 
        installation of improved eligibility determination systems 
        (including hardware and software for such systems) in order to 
        carry out the requirements of subsection (a) and section 
        1807A(h)(1). No payment shall be made to a State under the 
        preceding sentence unless the State's improved eligibility 
        determination system--
                    ``(A) satisfies such standards for improvement as 
                the Secretary may establish; and
                    ``(B) complies, and is compatible, with the 
                standards established under part C of title XI and any 
                regulations promulgated under section 264(c) of the 
                Health Insurance Portability and Accountability Act of 
                1996 (42 U.S.C. 1320d-2 note).
            ``(4) Coordination.--The State shall provide the Secretary 
        with such information as may be necessary to properly allocate 
        expenditures described in paragraph (1), (2), or (3) that may 
        otherwise be made for similar eligibility determinations or 
        expenditures.
    ``(c) Federal Payment of Medicare Part B Premium for States 
Providing Prescription Drug Coverage for Dual Eligible Individuals.--
            ``(1) In general.--Subject to paragraph (4) and 
        notwithstanding section 1905(b), in the case of a State that 
        provides medical assistance for covered drugs (as such term is 
        defined in section 1860D(a)(2)) to dual eligible individuals 
        under this title that satisfies the minimum standards described 
        in paragraph (2), the Federal medical assistance percentage 
        shall be 100 percent for medicare cost-sharing described in 
        section 1905(p)(3)(A)(ii) (relating to premiums under section 
        1839) for individuals--
                    ``(A) who are dual eligible individuals or 
                qualified medicare beneficiaries; and
                    ``(B) whose income is at least the income required 
                for an individual to be an eligible individual under 
                section 1611 for purposes of the supplemental security 
                income program (as determined under section 1612), but 
                does not exceed 100 percent of the poverty line (as 
                defined in section 2110(c)(5)) applicable to a family 
                of the size involved.
            ``(2) Minimum standards described.--For purposes of 
        paragraph (1), the minimum standards described in this 
        paragraph are the following:
                    ``(A) In providing medical assistance for dual 
                eligible individuals for such covered drugs, the State 
                satisfies the requirements of this title (including 
                limitations on cost-sharing imposed under section 1916) 
                applicable to the provision of medical assistance for 
                prescribed drugs to dual eligible individuals.
                    ``(B) In providing medical assistance for dual 
                eligible individuals for such covered drugs, the State 
                provides such individuals with beneficiary protections 
                that the Secretary determines are equivalent to the 
                beneficiary protections applicable under section 1860D-
                5 to eligible entities offering a Medicare Prescription 
                Drug plan under part D of title XVIII.
                    ``(C) In providing medical assistance for dual 
                eligible individuals for such covered drugs, the State 
                does not impose a limitation on the number of 
                prescriptions an individual may have filled.
            ``(3) Nonapplication.--Section 1927(d)(2)(E) shall not 
        apply to a State for purposes of providing medical assistance 
        for covered drugs (as such term is defined in section 
        1860D(a)(2)) to dual eligible individuals that satisfies the 
        minimum standards described in paragraph (2).
            ``(4) Limitation.--Paragraph (1) shall not apply to any 
        State before January 1, 2006.
    ``(d) Federal Payment of Medicare Part A Cost-Sharing for Certain 
States.--
            ``(1) In general.--Subject to paragraph (2) and 
        notwithstanding section 1905(b), in the case of a State that, 
        as of the date of enactment of the Prescription Drug and 
        Medicare Improvement Act of 2003, provides medical assistance 
        for individuals described in section 1902(a)(10)(A)(ii))(X), 
        the Federal medical assistance percentage shall be 100 percent 
        for medicare cost-sharing described in subparagraphs (B) and 
        (C) of section 1905(p)(3) (relating to coinsurance and 
        deductibles established under title XVIII) for the individuals 
        provided medical assistance under section 
        1902(a)(10)(A)(ii)(X), but only--
                    ``(A) with respect to such medicare cost-sharing 
                that is incurred under part A of title XVIII; and
                    ``(B) for so long as the State elects to provide 
                medical assistance under section 1902(a)(10)(A)(ii)(X).
            ``(2) Limitation.--Paragraph (1) shall not apply to any 
        State before January 1, 2006.
    ``(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), the amount otherwise determined under 
                section 1108(f) (as increased under section 1108(g)) 
                for the State shall be further 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 drugs (as defined in section 
                1860D(a)(2)) to individuals described in subparagraph 
                (A), (B), (C), or (D) of section 1860D-19(a)(3); and
                    ``(B) ensures 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 fiscal 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) the last 3 quarters of fiscal year 
                        2006, is equal to $37,500,000;
                            ``(ii) fiscal year 2007, is equal to 
                        $50,000,000; and
                            ``(iii) any subsequent fiscal year, is 
                        equal to the aggregate amount specified in this 
                        subparagraph for the previous fiscal year 
                        increased by the annual percentage increase 
                        specified in section 1860D-6(c)(5) for the 
                        calendar year beginning in such fiscal year.
            ``(4) Nonapplication.--Section 1927(d)(2)(E) shall not 
        apply to a State described in paragraph (1) for purposes of 
        providing medical assistance described in paragraph (2)(A).
            ``(5) 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.
    ``(f) Definitions.--For purposes of this section, the terms 
`qualified medicare beneficiary', `subsidy-eligible individual', and 
`dual eligible individual' have the meanings given such terms in 
subparagraphs (A), (D), and (E), respectively, of section 1860D-
19(a)(4).''.
            (2) Conforming amendments.--
                    (A) Section 1905(b) (42 U.S.C. 1396d(b)) is amended 
                by inserting ``and subsections (c)(1) and (d)(1) of 
                section 1935'' after ``1933(d)''.
                    (B) Section 1108(f) (42 U.S.C. 1308(f)) is amended 
                by inserting ``and section 1935(e)(1)(B)'' after 
                ``Subject to subsection (g)''.
            (3) Transfer of federally assumed portions of medicare 
        cost-sharing.--
                    (A) Transfer of assumption of part b premium for 
                states providing prescription drug coverage for dual 
                eligible individuals to the federal supplementary 
                medical insurance trust fund.--Section 1841(f) (42 
                U.S.C. 1395t(f)) is amended--
                            (i) by inserting ``(1)'' after ``(f)''; and
                            (ii) by adding at the end the following new 
                        paragraph:
    ``(2) There shall be transferred periodically (but not less often 
than once each fiscal year) to the Trust Fund from the Treasury amounts 
which the Secretary of Health and Human Services shall have certified 
are equivalent to the amounts determined under section 1935(c)(1) with 
respect to all States for a fiscal year.''.
                    (B) Transfer of assumption of part a cost-sharing 
                for certain states.--Section 1817(g) (42 U.S.C. 
                1395i(g)) is amended--
                            (i) by inserting ``(1)'' after ``(g)''; and
                            (ii) by adding at the end the following new 
                        paragraph:
    ``(2) There shall be transferred periodically (but not less often 
than once each fiscal year) to the Trust Fund from the Treasury amounts 
which the Secretary of Health and Human Services shall have certified 
are equivalent to the amounts determined under section 1935(d)(1) with 
respect to certain States for a fiscal year.''.
            (4) Amendment to best price.--Section 1927(c)(1)(C)(i) (42 
        U.S.C. 1396r-8(c)(1)(C)(i)), as amended by section 111(b), is 
        amended--
                    (A) by striking ``and'' at the end of subclause 
                (IV);
                    (B) by striking the period at the end of subclause 
                (V) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                subclause:
                                    ``(VI) any prices charged which are 
                                negotiated under a Medicare 
                                Prescription Drug plan under part D of 
                                title XVIII with respect to covered 
                                drugs, under a MedicareAdvantage plan 
                                under part C of such title with respect 
                                to such drugs, or under a qualified 
                                retiree prescription drug plan (as 
                                defined in section 1860D-20(f)(1)) with 
                                respect to such drugs, on behalf of 
                                eligible beneficiaries (as defined in 
                                section 1860D(a)(3).''.
    (c) Extension of Medicare Cost-Sharing for Part B Premium for 
Qualifying Individuals Through 2008.--
            (1) In general.--Section 1902(a)(10)(E)(iv) (42 U.S.C. 
        1396a(a)(10)(E)(iv)) is amended to read as follows:
                    ``(iv) subject to sections 1933 and 1905(p)(4), for 
                making medical assistance available (but only for 
                premiums payable with respect to months during the 
                period beginning with January 1998, and ending with 
                December 2008) for medicare cost-sharing described in 
                section 1905(p)(3)(A)(ii) for individuals who would be 
                qualified medicare beneficiaries described in section 
                1905(p)(1) but for the fact that their income exceeds 
                the income level established by the State under section 
                1905(p)(2) and is at least 120 percent, but less than 
                135 percent, of the official poverty line (referred to 
                in such section) for a family of the size involved and 
                who are not otherwise eligible for medical assistance 
                under the State plan;''.
            (2) Total amount available for allocation.--Section 1933(c) 
        (42 U.S.C. 1396u-3(c)) is amended--
                    (A) in paragraph (1)--
                            (i) in subparagraph (D), by striking 
                        ``and'' at the end;
                            (ii) in subparagraph (E)--
                                    (I) by striking ``fiscal year 
                                2002'' and inserting ``each of fiscal 
                                years 2002 through 2008''; and
                                    (II) by striking the period and 
                                inserting ``; and''; and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(F) the first quarter of fiscal year 2009, 
                $100,000,000.''; and
                    (B) in paragraph (2)(A), by striking ``the sum of'' 
                and all that follows through ``1902(a)(10)(E)(iv)(II) 
                in the State; to'' and inserting ``twice the total 
                number of individuals described in section 
                1902(a)(10)(E)(iv) in the State; to''.
    (d) Outreach by the Commissioner of Social Security.--Section 1144 
(42 U.S.C. 1320b-14) is amended--
            (1) in the section heading, by inserting ``and subsidies 
        for low-income individuals under title xviii'' after ``cost-
        sharing'';
            (2) in subsection (a)--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by inserting ``for 
                        the transitional prescription drug assistance 
                        card program under section 1807A, or for 
                        premium and cost-sharing subsidies under 
                        section 1860D-19'' before the semicolon; and
                            (ii) in subparagraph (B), by inserting ``, 
                        program, and subsidies'' after ``medical 
                        assistance''; and
                    (B) in paragraph (2)--
                            (i) in the matter preceding subparagraph 
                        (A), by inserting ``, the transitional 
                        prescription drug assistance card program under 
                        section 1807A, or premium and cost-sharing 
                        subsidies under section 1860D-19'' after 
                        ``assistance''; and
                            (ii) in subparagraph (A), by striking 
                        ``such eligibility'' and inserting 
                        ``eligibility for medicare cost-sharing under 
                        the medicaid program''; and
            (3) in subsection (b)--
                    (A) in paragraph (1)(A), by inserting ``, for the 
                transitional prescription drug assistance card program 
                under section 1807A, or for premium and cost-sharing 
                subsidies for low-income individuals under section 
                1860D-19'' after ``1933'';
                    (B) in paragraph (2), by inserting ``, program, and 
                subsidies'' after ``medical assistance''; and
                    (C) by adding at the end the following:
            ``(3) Agreements to establish information and enrollment 
        sites at social security field offices.--
                    ``(A) In general.--The Commissioner shall enter 
                into an agreement with each State operating a State 
                plan under title XIX (including under a waiver of such 
                plan) to establish information and enrollment sites 
                within all the Social Security field offices located in 
                the State for purposes of--
                            ``(i) the State determining the eligibility 
                        of individuals residing in the State for 
                        medical assistance for payment of the cost of 
                        medicare cost-sharing under the medicaid 
                        program pursuant to sections 1902(a)(10)(E) and 
                        1933, the transitional prescription drug 
                        assistance card program under section 1807A, or 
                        premium and cost-sharing subsidies under 
                        section 1860D-19; and
                            ``(ii) enrolling individuals who are 
                        determined eligible for such medical 
                        assistance, program, or subsidies in the State 
                        plan (or waiver), the transitional prescription 
                        drug assistance card program under section 
                        1807A, or the appropriate category for premium 
                        and cost-sharing subsidies under section 1860D-
                        19.
                    ``(B) Agreement terms.--The Secretary and the 
                Commissioner jointly shall develop terms for the State 
                agreements required under subparagraph (A) that shall 
                specify the responsibilities of the State and the 
                Commissioner in the establishment and operation of such 
                sites.
                    ``(C) Authorization of appropriations.--There are 
                authorized to be appropriated to the Commissioner, such 
                sums as may be necessary to carry out this 
                paragraph.''.
    (e) Report Regarding Voluntary Enrollment of Dual Eligible 
Individuals in Part D.--Not later than January 1, 2005, the Secretary 
shall submit a report to Congress that contains such recommendations 
for legislation as the Secretary determines are necessary in order to 
establish a voluntary option for dual eligible individuals (as defined 
in 1860D-19(a)(4)(E) of the Social Security Act (as added by section 
101)) to enroll under part D of title XVIII of such Act for 
prescription drug coverage.

SEC. 105. EXPANSION OF MEMBERSHIP AND DUTIES OF MEDICARE PAYMENT 
              ADVISORY COMMISSION (MEDPAC).

    (a) Expansion of Membership.--
            (1) In general.--Section 1805(c) (42 U.S.C. 1395b-6(c)) is 
        amended--
                    (A) in paragraph (1), by striking ``17'' and 
                inserting ``19''; and
                    (B) in paragraph (2)(B), by inserting ``experts in 
                the area of pharmacology and prescription drug benefit 
                programs,'' after ``other health professionals,''.
            (2) Initial terms of additional members.--
                    (A) In general.--For purposes of staggering the 
                initial terms of members of the Medicare Payment 
                Advisory Commission under section 1805(c)(3) of the 
                Social Security Act (42 U.S.C. 1395b-6(c)(3)), the 
                initial terms of the 2 additional members of the 
                Commission provided for by the amendment under 
                paragraph (1)(A) are as follows:
                            (i) One member shall be appointed for 1 
                        year.
                            (ii) One member shall be appointed for 2 
                        years.
                    (B) Commencement of terms.--Such terms shall begin 
                on January 1, 2005.
    (b) Expansion of Duties.--Section 1805(b)(2) (42 U.S.C. 1395b-
6(b)(2)) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Voluntary prescription drug delivery 
                program.--Specifically, the Commission shall review, 
                with respect to the voluntary prescription drug 
                delivery program under part D, competition among 
                eligible entities offering Medicare Prescription Drug 
                plans and beneficiary access to such plans and covered 
                drugs, particularly in rural areas. As part of such 
                review, the Commission shall hold 3 field hearings in 
                2007.''.

SEC. 106. STUDY REGARDING VARIATIONS IN SPENDING AND DRUG UTILIZATION.

    (a) Study.--The Secretary shall study on an ongoing basis 
variations in spending and drug utilization under part D of title XVIII 
of the Social Security Act for covered drugs to determine the impact of 
such variations on premiums imposed by eligible entities offering 
Medicare Prescription Drug plans under that part. In conducting such 
study, the Secretary shall examine the impact of geographic adjustments 
of the monthly national average premium under section 1860D-15 of such 
Act on--
            (1) maximization of competition under part D of title XVIII 
        of such Act; and
            (2) the ability of eligible entities offering Medicare 
        Prescription Drug plans to contain costs for covered drugs.
    (b) Report.--Beginning with 2007, the Secretary shall submit annual 
reports to Congress on the study required under subsection (a).

SEC. 107. LIMITATION ON PRESCRIPTION DRUG BENEFITS OF MEMBERS OF 
              CONGRESS.

    (a) Limitation on Benefits.--Notwithstanding any other provision of 
law, during calendar year 2004, the actuarial value of the prescription 
drug benefit of any Member of Congress enrolled in a health benefits 
plan under chapter 89 of title 5, United States Code, may not exceed 
the actuarial value of any prescription drug benefit under title XVIII 
of the Social Security Act passed by the 1st session of the 108th 
Congress and enacted in law.
    (b) Regulations.--The Office of Personnel Management shall 
promulgate regulations to carry out this section.

SEC. 108. PROTECTING SENIORS WITH CANCER.

  Any eligible beneficiary (as defined in section 1860D(3) of the 
Social Security Act) who is diagnosed with cancer shall be protected 
from high prescription drug costs in the following manner:
            (1) Subsidy eligible individuals with an income below 100 
        percent of the federal poverty line.--If the individual is a 
        qualified medicare beneficiary (as defined in section 1860D-
        19(a)(4) of such Act), such individual shall receive the full 
        premium subsidy and reduction of cost-sharing described in 
        section 1860D-19(a)(1) of such Act, including the payment of--
                    (A) no deductible;
                    (B) no monthly beneficiary premium for at least one 
                Medicare Prescription Drug plan available in the area 
                in which the individual resides; and
                    (C) reduced cost-sharing described in subparagraphs 
                (C), (D), and (E) of section 1860D-19(a)(1) of such 
                Act.
            (2) Subsidy eligible individuals with an income between 100 
        and 135 percent of the federal poverty line.--If the individual 
        is a specified low income medicare beneficiary (as defined in 
        paragraph 1860D-19(4)(B) of such Act) or a qualifying 
        individual (as defined in paragraph 1860D-19(4)(C) of such Act) 
        who is diagnosed with cancer, such individual shall receive the 
        full premium subsidy and reduction of cost-sharing described in 
        section 1860D-19(a)(2) of such Act, including payment of--
                    (A) no deductible;
                    (B) no monthly premium for any Medicare 
                Prescription Drug plan described paragraph (1) or (2) 
                of section 1860D-17(a) of such Act; and
                    (C) reduced cost-sharing described in subparagraphs 
                (C), (D), and (E) of section 1860D-19(a)(2) of such 
                Act.
            (3) Subsidy-eligible individuals with income between 135 
        percent and 160 percent of the federal poverty level.--If the 
        individual is a subsidy-eligible individual (as defined in 
        section 1860D-19(a)(4)(D) of such Act) who is diagnosed with 
        cancer, such individual shall receive sliding scale premium 
        subsidy and reduction of cost-sharing for subsidy-eligible 
        individuals, including payment of--
                    (A) for 2006, a deductible of only $50;
                    (B) only a percentage of the monthly premium (as 
                described in section 1860D-19(a)(3)(A)(i)); and
                    (C) reduced cost-sharing described in clauses 
                (iii), (iv), and (v) of section 1860D-19(a)(3)(A).
            (4) Eligible beneficiaries with income above 160 percent of 
        the federal poverty level.--If an individual is an eligible 
        beneficiary (as defined in section 1860D(3) of such Act), is 
        not described in paragraphs (1) through (3), and is diagnosed 
        with cancer, such individual shall have access to qualified 
        prescription drug coverage (as described in section 1860D-
        6(a)(1) of such Act), including payment of--
                    (A) for 2006, a deductible of $275;
                    (B) the limits on cost-sharing described section 
                1860D-6(c)(2) of such Act up to, for 2006, an initial 
                coverage limit of $4,500; and
                    (C) for 2006, an annual out-of-pocket limit of 
                $3,700 with 10 percent cost-sharing after that limit is 
                reached.

SEC. 109. PROTECTING SENIORS WITH CARDIOVASCULAR DISEASE, CANCER, OR 
              ALZHEIMER'S DISEASE.

  Any eligible beneficiary (as defined in section 1860D(3) of the 
Social Security Act) who is diagnosed with cardiovascular disease, 
cancer, diabetes or Alzheimer's disease shall be protected from high 
prescription drug costs in the following manner:
            (1) Subsidy eligible individuals with an income below 100 
        percent of the federal poverty line.--If the individual is a 
        qualified medicare beneficiary (as defined in section 1860D-
        19(a)(4) of such Act), such individual shall receive the full 
        premium subsidy and reduction of cost-sharing described in 
        section 1860D-19(a)(1) of such Act, including the payment of--
                    (A) no deductible;
                    (B) no monthly beneficiary premium for at least one 
                Medicare Prescription Drug plan available in the area 
                in which the individual resides; and
                    (C) reduced cost-sharing described in subparagraphs 
                (C), (D), and (E) of section 1860D-19(a)(1) of such 
                Act.
            (2) Subsidy eligible individuals with an income between 100 
        and 135 percent of the federal poverty line.--If the individual 
        is a specified low income medicare beneficiary (as defined in 
        paragraph 1860D-19(4)(B) of such Act) or a qualifying 
        individual (as defined in paragraph 1860D-19(4)(C) of such Act) 
        who is diagnosed with cardiovascular disease, cancer, or 
        Alzheimer's disease, such individual shall receive the full 
        premium subsidy and reduction of cost-sharing described in 
        section 1860D-19(a)(2) of such Act, including payment of--
                    (A) no deductible;
                    (B) no monthly premium for any Medicare 
                Prescription Drug plan described paragraph (1) or (2) 
                of section 1860D-17(a) of such Act; and
                    (C) reduced cost-sharing described in subparagraphs 
                (C), (D), and (E) of section 1860D-19(a)(2) of such 
                Act.
            (3) Subsidy-eligible individuals with income between 135 
        percent and 160 percent of the federal poverty level.--If the 
        individual is a subsidy-eligible individual (as defined in 
        section 1860D-19(a)(4)(D) of such Act) who is diagnosed with 
        cardiovascular disease, cancer, or Alzheimer's disease, such 
        individual shall receive sliding scale premium subsidy and 
        reduction of cost-sharing for subsidy-eligible individuals, 
        including payment of--
                    (A) for 2006, a deductible of only $50;
                    (B) only a percentage of the monthly premium (as 
                described in section 1860D-19(a)(3)(A)(i)); and
                    (C) reduced cost-sharing described in clauses 
                (iii), (iv), and (v) of section 1860D-19(a)(3)(A).
            (4) Eligible beneficiaries with income above 160 percent of 
        the federal poverty level.--If an individual is an eligible 
        beneficiary (as defined in section 1860D(3) of such Act), is 
        not described in paragraphs (1) through (3), and is diagnosed 
        with cardiovascular disease, cancer, or Alzheimer's disease, 
        such individual shall have access to qualified prescription 
        drug coverage (as described in section 1860D-6(a)(1) of such 
        Act), including payment of--
                    (A) for 2006, a deductible of $275;
                    (B) the limits on cost-sharing described section 
                1860D-6(c)(2) of such Act up to, for 2006, an initial 
                coverage limit of $4,500; and
                    (C) for 2006, an annual out-of-pocket limit of 
                $3,700 with 10 percent cost-sharing after that limit is 
                reached.

SEC. 110. REVIEW AND REPORT ON CURRENT STANDARDS OF PRACTICE FOR 
              PHARMACY SERVICES PROVIDED TO PATIENTS IN NURSING 
              FACILITIES.

    (a) Review.--
            (1) In general.--The Secretary shall conduct a thorough 
        review of the current standards of practice for pharmacy 
        services provided to patients in nursing facilities.
            (2) Specific matters reviewed.--In conducting the review 
        under paragraph (1), the Secretary shall--
                    (A) assess the current standards of practice, 
                clinical services, and other service requirements 
                generally used for pharmacy services in long-term care 
                settings; and
                    (B) evaluate the impact of those standards with 
                respect to patient safety, reduction of medication 
                errors and quality of care.
    (b) Report.--
            (1) In general.--Not later than the date that is 18 months 
        after the date of enactment of this Act, the Secretary shall 
        submit a report to Congress on the study conducted under 
        subsection (a)(1), together with any recommendations for 
        legislation that the Administrator determines to be appropriate 
        as a result of such study.
            (2) Contents.--The report submitted under paragraph (1) 
        shall contain--
                    (A) a detailed description of the plans of the 
                Secretary to implement the provisions of this Act in a 
                manner consistent with applicable State and Federal 
                laws designed to protect the safety and quality of care 
                of nursing facility patients; and
                    (B) recommendations regarding necessary actions and 
                appropriate reimbursement to ensure the provision of 
                prescription drugs to medicare beneficiaries residing 
                in nursing facilities in a manner consistent with 
                existing patient safety and quality of care standards 
                under applicable State and Federal laws.

SEC. 110A. MEDICATION THERAPY MANAGEMENT ASSESSMENT PROGRAM.

    (a) Establishment.--
            (1) In general.--The Secretary shall establish an 
        assessment program to contract with qualified pharmacists to 
        provide medication therapy management services to eligible 
        beneficiaries who receive care under the original medicare fee-
        for-service program under parts A and B of title XVIII of the 
        Social Security Act to eligible beneficiaries.
            (2) Sites.--The Secretary shall designate 6 geographic 
        areas, each containing not less than 3 sites, at which to 
        conduct the assessment program under this section. At least 2 
        geographic areas designated under this paragraph shall be 
        located in rural areas.
            (3) Duration.--The Secretary shall conduct the assessment 
        program under this section for a 1-year period.
            (4) Implementation.--The Secretary shall implement the 
        program not later than January 1, 2005, but may not implement 
        the assessment program before October 1, 2004.
    (b) Participants.--Any eligible beneficiary who resides in an area 
designated by the Secretary as an assessment site under subsection 
(a)(2) may participate in the assessment program under this section if 
such beneficiary identifies a qualified pharmacist who agrees to 
furnish medication therapy management services to the eligible 
beneficiary under the assessment program.
    (c) Contracts With Qualified Pharmacists.--
            (1) In general.--The Secretary shall enter into a contract 
        with qualified pharmacists to provide medication therapy 
        management services to eligible beneficiaries residing in the 
        area served by the qualified pharmacist.
            (2) Number of qualified pharmacists.--The Secretary may 
        contract with more than 1 qualified pharmacist at each site.
    (d) Payment to Qualified Pharmacists.--
            (1) In general.--Under an contract entered into under 
        subsection (c), the Secretary shall pay qualified pharmacists a 
        fee for providing medication therapy management services.
            (2) Assessment of payment methodologies.--The Secretary 
        shall, in consultation with national pharmacist and pharmacy 
        associations, design the fee paid under paragraph (1) to test 
        various payment methodologies applicable with respect to 
        medication therapy management services, including a payment 
        methodology that applies a relative value scale and fee-
        schedule with respect to such services that take into account 
        the differences in--
                    (A) the time required to perform the different 
                types of medication therapy management services;
                    (B) the level of risk associated with the use of 
                particular outpatient prescription drugs or groups of 
                drugs; and
                    (C) the health status of individuals to whom such 
                services are provided.
    (e) Funding.--
            (1) In general.--Subject to paragraph (2), the Secretary 
        shall provide for the transfer from the Federal Supplementary 
        Insurance Trust Fund established under section 1841 of the 
        Social Security Act (42 U.S.C. 1395t) of such funds as are 
        necessary for the costs of carrying out the assessment program 
        under this section.
            (2) Budget neutrality.--In conducting the assessment 
        program under this section, the Secretary shall ensure that the 
        aggregate payments made by the Secretary do not exceed the 
        amount which the Secretary would have paid if the assessment 
        program under this section was not implemented.
    (f) Waiver Authority.--The Secretary may waive such requirements of 
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.; 
1395 et seq.) as may be necessary for the purpose of carrying out the 
assessment program under this section.
    (g) Availability of Data.--During the period in which the 
assessment program is conducted, the Secretary annually shall make 
available data regarding--
            (1) the geographic areas and sites designated under 
        subsection (a)(2);
            (2) the number of eligible beneficiaries participating in 
        the program under subsection (b) and the level and types 
        medication therapy management services used by such 
        beneficiaries;
            (3) the number of qualified pharmacists with contracts 
        under subsection (c), the location of such pharmacists, and the 
        number of eligible beneficiaries served by such pharmacists; 
        and
            (4) the types of payment methodologies being tested under 
        subsection (d)(2).
    (h) Report.--
            (1) In general.--Not later than 6 months after the 
        completion of the assessment program under this section, the 
        Secretary shall submit to Congress a final report summarizing 
        the final outcome of the program and evaluating the results of 
        the program, together with recommendations for such legislation 
        and administrative action as the Secretary determines to be 
        appropriate.
            (2) Assessment of payment methodologies.--The final report 
        submitted under paragraph (1) shall include an assessment of 
        the feasibility and appropriateness of the various payment 
        methodologies tested under subsection (d)(2).
    (i) Definitions.--In this section:
            (1) Medication therapy management services.--The term 
        ``medication therapy management services'' means services or 
        programs furnished by a qualified pharmacist to an eligible 
        beneficiary, individually or on behalf of a pharmacy provider, 
        which are designed--
                    (A) to ensure that medications are used 
                appropriately by such individual;
                    (B) to enhance the individual's understanding of 
                the appropriate use of medications;
                    (C) to increase the individual's compliance with 
                prescription medication regimens;
                    (D) to reduce the risk of potential adverse events 
                associated with medications; and
                    (E) to reduce the need for other costly medical 
                services through better management of medication 
                therapy.
            (2) Eligible beneficiary.--The term ``eligible 
        beneficiary'' means an individual who is--
                    (A) entitled to (or enrolled for) benefits under 
                part A and enrolled for benefits under part B of the 
                Social Security Act (42 U.S.C. 1395c et seq.; 1395j et 
                seq.);
                    (B) not enrolled with a Medicare+Choice plan or a 
                MedicareAdvantage plan under part C; and
                    (C) receiving, in accordance with State law or 
                regulation, medication for--
                            (i) the treatment of asthma, diabetes, or 
                        chronic cardiovascular disease, including an 
                        individual on anticoagulation or lipid reducing 
                        medications; or
                            (ii) such other chronic diseases as the 
                        Secretary may specify.
            (3) Qualified pharmacist.--The term ``qualified 
        pharmacist'' means an individual who is a licensed pharmacist 
        in good standing with the State Board of Pharmacy.

 Subtitle B--Medicare Prescription Drug Discount Card and Transitional 
                Assistance for Low-Income Beneficiaries

SEC. 111. MEDICARE PRESCRIPTION DRUG DISCOUNT CARD AND TRANSITIONAL 
              ASSISTANCE FOR LOW-INCOME BENEFICIARIES.

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

     ``medicare prescription drug discount card endorsement program

    ``Sec. 1807. (a) Establishment.--There is established a medicare 
prescription drug discount card endorsement program under which the 
Secretary shall--
            ``(1) endorse prescription drug discount card programs 
        offered by prescription drug card sponsors that meet the 
        requirements of this section; and
            ``(2) make available to eligible beneficiaries information 
        regarding such endorsed programs.
    ``(b) Eligibility, Election of Program, and Enrollment Fees.--
            ``(1) Eligibility and election of program.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall establish procedures--
                            ``(i) for identifying eligible 
                        beneficiaries; and
                            ``(ii) under which such beneficiaries may 
                        make an election to enroll in any prescription 
                        drug discount card program endorsed under this 
                        section and disenroll from such a program.
                    ``(B) Limitation.--An eligible beneficiary may not 
                be enrolled in more than 1 prescription drug discount 
                card program at any time.
            ``(2) Enrollment fees.--
                    ``(A) In general.--A prescription drug card sponsor 
                may charge an annual enrollment fee to each eligible 
                beneficiary enrolled in a prescription drug discount 
                card program offered by such sponsor.
                    ``(B) Amount.--No enrollment fee charged under 
                subparagraph (A) may exceed $25.
                    ``(C) Uniform enrollment fee.--A prescription drug 
                card sponsor shall ensure that the enrollment fee for a 
                prescription drug discount card program endorsed under 
                this section is the same for all eligible medicare 
                beneficiaries enrolled in the program.
                    ``(D) Collection.--Any enrollment fee shall be 
                collected by the prescription drug card sponsor.
    ``(c) Providing Information to Eligible Beneficiaries.--
            ``(1) Promotion of informed choice.--
                    ``(A) By the secretary.--In order to promote 
                informed choice among endorsed prescription drug 
                discount card programs, the Secretary shall provide for 
                the dissemination of information which compares the 
                costs and benefits of such programs. Such dissemination 
                shall be coordinated with the dissemination of 
                educational information on other medicare options.
                    ``(B) By prescription drug card sponsors.--Each 
                prescription drug card sponsor shall make available to 
                each eligible beneficiary (through the Internet and 
                otherwise) information--
                            ``(i) that the Secretary identifies as 
                        being necessary to promote informed choice 
                        among endorsed prescription drug discount card 
                        programs by eligible beneficiaries, including 
                        information on enrollment fees, negotiated 
                        prices for prescription drugs charged to 
                        beneficiaries, and services relating to 
                        prescription drugs offered under the program;
                            ``(ii) on how any formulary used by such 
                        sponsor functions.
            ``(2) Use of medicare toll-free number.--The Secretary 
        shall provide through the 1-800-MEDICARE toll free telephone 
        number for the receipt and response to inquiries and complaints 
        concerning the medicare prescription drug discount card 
        endorsement program established under this section and 
        prescription drug discount card programs endorsed under such 
        program.
    ``(d) Beneficiary Protections.--
            ``(1) In general.--Each prescription drug discount card 
        program endorsed under this section shall meet such 
        requirements as the Secretary identifies to protect and promote 
        the interest of eligible beneficiaries, including requirements 
        that--
                    ``(A) relate to appeals by eligible beneficiaries 
                and marketing practices; and
                    ``(B) ensure that beneficiaries are not charged 
                more than the lower of the negotiated retail price or 
                the usual and customary price.
            ``(2) Ensuring pharmacy access.--Each prescription drug 
        card sponsor offering a prescription drug discount card program 
        endorsed under this section shall secure the participation in 
        its network of a sufficient number of pharmacies that dispense 
        (other than by mail order) drugs directly to patients to ensure 
        convenient access (as determined by the Secretary and including 
        adequate emergency access) for enrolled beneficiaries. Such 
        standards shall take into account reasonable distances to 
        pharmacy services in urban and rural areas and access to 
        pharmacy services of the Indian Health Service and Indian 
        tribes and tribal organizations.
            ``(3) Quality assurance.--Each prescription drug card 
        sponsor offering a prescription drug discount card program 
        endorsed under this section shall have in place adequate 
        procedures for assuring that quality service is provided to 
        eligible beneficiaries enrolled in a prescription drug discount 
        card program offered by such sponsor.
            ``(4) Confidentiality of enrollee records.--Insofar as a 
        prescription drug card sponsor maintains individually 
        identifiable medical records or other health information 
        regarding eligible beneficiaries enrolled in a prescription 
        drug discount card program endorsed under this section, the 
        prescription drug card sponsor shall have in place procedures 
        to safeguard the privacy of any individually identifiable 
        beneficiary information in a manner that the Secretary 
        determines is consistent with the Federal regulations 
        (concerning the privacy of individually identifiable health 
        information) promulgated under section 264(c) of the Health 
        Insurance Portability and Accountability Act of 1996.
            ``(5) No other fees.--A prescription drug card sponsor may 
        not charge any fee to an eligible beneficiary under a 
        prescription drug discount card program endorsed under this 
        section other than an enrollment fee charged under subsection 
        (b)(2)(A).
            ``(6) Prices.--
                    ``(A) Avoidance of high priced drugs.--A 
                prescription drug card sponsor may not recommend 
                switching an eligible beneficiary to a drug with a 
                higher negotiated price absent a recommendation by a 
                licensed health professional that there is a clinical 
                indication with respect to the patient for such a 
                switch.
                    ``(B) Price stability.--Negotiated prices charged 
                for prescription drugs covered under a prescription 
                drug discount card program endorsed under this section 
                may not change more frequently than once every 60 days.
    ``(e) Prescription Drug Benefits.--
            ``(1) In general.--Each prescription drug card sponsor may 
        only provide benefits that relate to prescription drugs (as 
        defined in subsection (i)(2)) under a prescription drug 
        discount card program endorsed under this section.
            ``(2) Savings to eligible beneficiaries.--
                    ``(A) In general.--Subject to subparagraph (D), 
                each prescription drug card sponsor shall provide 
                eligible beneficiaries who enroll in a prescription 
                drug discount card program offered by such sponsor that 
                is endorsed under this section with access to 
                negotiated prices used by the sponsor with respect to 
                prescription drugs dispensed to eligible beneficiaries.
                    ``(B) Inapplicability of medicaid best price 
                rules.--The requirements of section 1927 relating to 
                manufacturer best price shall not apply to the 
                negotiated prices for prescription drugs made available 
                under a prescription drug discount card program 
                endorsed under this section.
                    ``(C) Guaranteed access to negotiated prices.--The 
                Secretary, in consultation with the Inspector General 
                of the Department of Health and Human Services, shall 
                establish procedures to ensure that eligible 
                beneficiaries have access to the negotiated prices for 
                prescription drugs provided under subparagraph (A).
                    ``(D) Application of formulary restrictions.--A 
                drug prescribed for an eligible beneficiary that would 
                otherwise be a covered drug under this section shall 
                not be so considered under a prescription drug discount 
                card program if the program excludes the drug under a 
                formulary.
            ``(3) Beneficiary services.--Each prescription drug 
        discount card program endorsed under this section shall provide 
        pharmaceutical support services, such as education, counseling, 
        and services to prevent adverse drug interactions.
            ``(4) Discount cards.--Each prescription drug card sponsor 
        shall issue a card to eligible beneficiaries enrolled in a 
        prescription drug discount card program offered by such sponsor 
        that the beneficiary may use to obtain benefits under the 
        program.
    ``(f) Submission of Applications for Endorsement and Approval.--
            ``(1) Submission of applications for endorsement.--Each 
        prescription drug card sponsor that seeks endorsement of a 
        prescription drug discount card program under this section 
        shall submit to the Secretary, at such time and in such manner 
        as the Secretary may specify, such information as the Secretary 
        may require.
            ``(2) Approval.--The Secretary shall review the information 
        submitted under paragraph (1) and shall determine whether to 
        endorse the prescription drug discount card program to which 
        such information relates. The Secretary may not approve a 
        program unless the program and prescription drug card sponsor 
        offering the program comply with the requirements under this 
        section.
    ``(g) Requirements on Development and Application of Formularies.--
If a prescription drug card sponsor offering a prescription drug 
discount card program uses a formulary, the following requirements must 
be met:
            ``(1) Pharmacy and therapeutic (p&t) committee.--
                    ``(A) In general.--The eligible entity must 
                establish a pharmacy and therapeutic committee that 
                develops and reviews the formulary.
                    ``(B) Composition.--A pharmacy and therapeutic 
                committee shall include at least 1 academic expert, at 
                least 1 practicing physician, and at least 1 practicing 
                pharmacist, all of whom have expertise in the care of 
                elderly or disabled persons, and a majority of the 
                members of such committee shall consist of individuals 
                who are a practicing physician or a practicing 
                pharmacist (or both).
            ``(2) Formulary development.--In developing and reviewing 
        the formulary, the committee shall base clinical decisions on 
        the strength of scientific evidence and standards of practice, 
        including assessing peer-reviewed medical literature, such as 
        randomized clinical trials, pharmacoeconomic studies, outcomes 
        research data, and such other information as the committee 
        determines to be appropriate.
            ``(3) Inclusion of drugs in all therapeutic categories and 
        classes.--
                    ``(A) In general.--The formulary must include drugs 
                within each therapeutic category and class of covered 
                outpatient drugs (as defined by the Secretary), 
                although not necessarily for all drugs within such 
                categories and classes.
                    ``(B) Requirement.--In defining therapeutic 
                categories and classes of covered outpatient drugs 
                pursuant to subparagraph (A), the Secretary shall use 
                the compendia referred to section 1927(g)(1)(B)(i) or 
                other recognized sources for categorizing drug 
                therapeutic categories and classes.
            ``(4) Provider education.--The committee shall establish 
        policies and procedures to educate and inform health care 
        providers concerning the formulary.
            ``(5) Notice before removing drugs from formulary.--Any 
        removal of a drug from a formulary shall take effect only after 
        appropriate notice is made available to beneficiaries and 
        pharmacies.
    ``(h) Fraud and Abuse Prevention.--
            ``(1) In general.--The Secretary shall provide appropriate 
        oversight to ensure compliance of endorsed programs with the 
        requirements of this section, including verification of the 
        negotiated prices and services provided.
            ``(2) Disqualification for abusive practices.--The 
        Secretary may implement intermediate sanctions and may revoke 
        the endorsement of a program that the Secretary determines no 
        longer meets the requirements of this section or that has 
        engaged in false or misleading marketing practices.
            ``(3) Authority with respect to civil money penalties.--The 
        Secretary may impose a civil money penalty in an amount not to 
        exceed $10,000 for any violation of this section. The 
        provisions of section 1128A (other than subsections (a) and 
        (b)) shall apply to a civil money penalty under the previous 
        sentence in the same manner as such provisions apply to a 
        penalty or proceeding under section 1128A(a).
            ``(4) Reporting to secretary.--Each prescription drug card 
        sponsor offering a prescription drug discount card program 
        endorsed under this section shall report information relating 
        to program performance, use of prescription drugs by eligible 
        beneficiaries enrolled in the program, financial information of 
        the sponsor, and such other information as the Secretary may 
        specify. The Secretary may not disclose any proprietary data 
        reported under this paragraph.
            ``(5) Drug utilization review.--The Secretary may use 
        claims data from parts A and B for purposes of conducting a 
        drug utilization review program.
    ``(i) Definitions.--In this section:
            ``(1) Eligible beneficiary.--
                    ``(A) In general.--The term `eligible beneficiary' 
                means an individual who--
                            ``(i) is entitled to, or enrolled for, 
                        benefits under part A and enrolled under part 
                        B; and
                            ``(ii) is not a dual eligible individual 
                        (as defined in subparagraph (B)).
                    ``(B) Dual eligible individual.--
                            ``(i) In general.--The term `dual eligible 
                        individual' means an individual who is--
                                    ``(I) enrolled under title XIX or 
                                under a waiver under section 1115 of 
                                the requirements of such title for 
                                medical assistance that is not less 
                                than the medical assistance provided to 
                                an individual described in section 
                                1902(a)(10)(A)(i) and includes covered 
                                outpatient drugs (as such term is 
                                defined for purposes of section 1927); 
                                and
                                    ``(II) entitled to benefits under 
                                part A and enrolled under part B.
                            ``(ii) Inclusion of medically needy.--Such 
                        term includes an individual described in 
                        section 1902(a)(10)(C).
            ``(2) Prescription drug.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `prescription drug' means--
                            ``(i) a drug that may be dispensed only 
                        upon a prescription and that is described in 
                        clause (i) or (ii) of subparagraph (A) of 
                        section 1927(k)(2); or
                            ``(ii) a biological product or insulin 
                        described in subparagraph (B) or (C) of such 
                        section (including syringes, and necessary 
                        medical supplies associated with the 
                        administration of insulin, as defined by the 
                        Secretary),
                and such term includes a vaccine licensed under section 
                351 of the Public Health Service Act and any use of a 
                covered outpatient drug for a medically accepted 
                indication (as defined in section 1927(k)(6)).
                    ``(B) Exclusions.--The term `prescription drug' 
                does not include drugs or classes of drugs, or their 
                medical uses, which may be excluded from coverage or 
                otherwise restricted under section 1927(d)(2), other 
                than subparagraph (E) thereof (relating to smoking 
                cessation agents), or under section 1927(d)(3).
            ``(3) Negotiated price.--The term `negotiated price' 
        includes all discounts, direct or indirect subsidies, rebates, 
        price concessions, and direct or indirect remunerations.
            ``(4) Prescription drug card sponsor.--The term 
        `prescription drug card sponsor' means any entity with 
        demonstrated experience and expertise in operating a 
        prescription drug discount card program, an insurance program 
        that provides coverage for prescription drugs, or a similar 
        program that the Secretary determines to be appropriate to 
        provide eligible beneficiaries with the benefits under a 
        prescription drug discount card program endorsed by the 
        Secretary under this section, including--
                    ``(A) a pharmaceutical benefit management company;
                    ``(B) a wholesale or retail pharmacist delivery 
                system;
                    ``(C) an insurer (including an insurer that offers 
                medicare supplemental policies under section 1882);
                    ``(D) any other entity; or
                    ``(E) any combination of the entities described in 
                subparagraphs (A) through (D).

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

    ``Sec. 1807A. (a) Establishment.--
            ``(1) In general.--There is established a program under 
        which the Secretary shall award contracts to prescription drug 
        card sponsors offering a prescription drug discount card that 
        has been endorsed by the Secretary under section 1807 under 
        which such sponsors shall offer a prescription drug assistance 
        card program to eligible low-income beneficiaries in accordance 
        with the requirements of this section.
            ``(2) Application of discount card provisions.--Except as 
        otherwise provided in this section, the provisions of section 
        1807 shall apply to the program established under this section.
    ``(b) Eligibility, Election of Program, and Enrollment Fees.--
            ``(1) Eligibility and election of program.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this paragraph, the enrollment procedures 
                established under section 1807(b)(1)(A)(ii) shall apply 
                for purposes of this section.
                    ``(B) Enrollment of any eligible low-income 
                beneficiary.--Each prescription drug card sponsor 
                offering a prescription drug assistance card program 
                under this section shall permit any eligible low-income 
                beneficiary to enroll in such program if it serves the 
                geographic area in which the beneficiary resides.
                    ``(C) Simultaneous enrollment in prescription drug 
                discount card program.--An eligible low-income 
                beneficiary who enrolls in a prescription drug 
                assistance card program offered by a prescription drug 
                card sponsor under this section shall be simultaneously 
                enrolled in a prescription drug discount card program 
                offered by such sponsor.
            ``(2) Waiver of enrollment fees.--
                    ``(A) In general.--A prescription drug card sponsor 
                may not charge an enrollment fee to any eligible low-
                income beneficiary enrolled in a prescription drug 
                discount card program offered by such sponsor.
                    ``(B) Payment by secretary.--Under a contract 
                awarded under subsection (f)(2), the Secretary shall 
                pay to each prescription drug card sponsor an amount 
                equal to any enrollment fee charged under section 
                1807(b)(2)(A) on behalf of each eligible low-income 
                beneficiary enrolled in a prescription drug discount 
                card program under paragraph (1)(C) offered by such 
                sponsor.
    ``(c) Additional Beneficiary Protections.--
            ``(1) Providing information to eligible low-income 
        beneficiaries.--In addition to the information provided to 
        eligible beneficiaries under section 1807(c), the prescription 
        drug card sponsor shall--
                    ``(A) periodically notify each eligible low-income 
                beneficiary enrolled in a prescription drug assistance 
                card program offered by such sponsor of the amount of 
                coverage for prescription drugs remaining under 
                subsection (d)(2)(A); and
                    ``(B) notify each eligible low-income beneficiary 
                enrolled in a prescription drug assistance card program 
                offered by such sponsor of the grievance and appeals 
                processes under the program.
            ``(2) Convenient access in long-term care facilities.--For 
        purposes of determining whether convenient access has been 
        provided under section 1807(d)(2) with respect to eligible low-
        income beneficiaries enrolled in a prescription drug assistance 
        card program, the Secretary may only make a determination that 
        such access has been provided if an appropriate arrangement is 
        in place for eligible low-income beneficiaries who are in a 
        long-term care facility (as defined by the Secretary) to 
        receive prescription drug benefits under the program.
            ``(3) Coordination of benefits.--
                    ``(A) In general.--The Secretary shall establish 
                procedures under which eligible low-income 
                beneficiaries who are enrolled for coverage described 
                in subparagraph (B) and enrolled in a prescription drug 
                assistance card program have access to the prescription 
                drug benefits available under such program.
                    ``(B) Coverage described.--Coverage described in 
                this subparagraph is as follows:
                            ``(i) Coverage of prescription drugs under 
                        a State pharmaceutical assistance program.
                            ``(ii) Enrollment in a Medicare+Choice plan 
                        under part C.
            ``(4) Grievance mechanism.--Each prescription drug card 
        sponsor with a contract under this section shall provide in 
        accordance with section 1852(f) meaningful procedures for 
        hearing and resolving grievances between the prescription drug 
        card sponsor (including any entity or individual through which 
        the prescription drug card sponsor provides covered benefits) 
        and enrollees in a prescription drug assistance card program 
        offered by such sponsor.
            ``(5) Application of coverage determination and 
        reconsideration provisions.--
                    ``(A) In general.--The requirements of paragraphs 
                (1) through (3) of section 1852(g) shall apply with 
                respect to covered benefits under a prescription drug 
                assistance card program under this section 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.
                    ``(B) Request for review of tiered formulary 
                determinations.--In the case of a prescription drug 
                assistance card program offered by a prescription drug 
                card sponsor that provides for tiered pricing for drugs 
                included within a formulary and provides lower prices 
                for preferred drugs included within the formulary, an 
                eligible low-income beneficiary who is enrolled in the 
                program may request coverage of a nonpreferred drug 
                under the terms applicable for preferred drugs if the 
                prescribing physician determines that the preferred 
                drug for treatment of the same condition is not as 
                effective for the eligible low-income beneficiary or 
                has adverse effects for the eligible low-income 
                beneficiary.
                    ``(C) Formulary determinations.--An eligible low-
                income beneficiary who is enrolled in a prescription 
                drug assistance card program offered by a prescription 
                drug card sponsor may appeal to obtain coverage for a 
                covered drug that is not on a formulary of the entity 
                if the prescribing physician determines that the 
                formulary drug for treatment of the same condition is 
                not as effective for the eligible low-income 
                beneficiary or has adverse effects for the eligible 
                low-income beneficiary.
            ``(6) Appeals.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                prescription drug card sponsor shall meet the 
                requirements of paragraphs (4) and (5) of section 
                1852(g) with respect to drugs not included on any 
                formulary in a similar manner (as determined by the 
                Secretary) as such requirements apply to a 
                Medicare+Choice organization with respect to benefits 
                it offers under a Medicare+Choice plan under part C.
                    ``(B) Formulary determinations.--An eligible low-
                income beneficiary who is enrolled in a prescription 
                drug assistance card program offered by a prescription 
                drug card sponsor may appeal to obtain coverage for a 
                covered drug that is not on a formulary of the entity 
                if the prescribing physician determines that the 
                formulary drug for treatment of the same condition is 
                not as effective for the eligible low-income 
                beneficiary or has adverse effects for the eligible 
                low-income beneficiary.
                    ``(C) Appeals and exceptions to application.--The 
                prescription drug card sponsor must have, as part of 
                the appeals process under this paragraph, a process for 
                timely appeals for denials of coverage based on the 
                application of the formulary.
    ``(d) Prescription Drug Benefits.--
            ``(1) In general.--Subject to paragraph (5), all the 
        benefits available under a prescription drug discount card 
        program offered by a prescription drug card sponsor and 
        endorsed under section 1807 shall be available to eligible low-
        income beneficiaries enrolled in a prescription drug assistance 
        card program offered by such sponsor.
            ``(2) Assistance for eligible low-income beneficiaries.--
                    ``(A) $600 annual assistance.--Subject to 
                subparagraphs (B) and (C) and paragraph (5), each 
                prescription drug card sponsor with a contract under 
                this section shall provide coverage for the first $600 
                of expenses for prescription drugs incurred during each 
                calendar year by an eligible low-income beneficiary 
                enrolled in a prescription drug assistance card program 
                offered by such sponsor.
                    ``(B) Coinsurance.--
                            ``(i) In general.--The prescription drug 
                        card sponsor shall determine an amount of 
                        coinsurance to collect from each eligible low-
                        income beneficiary enrolled in a prescription 
                        drug assistance card program offered by such 
                        sponsor for which coverage is available under 
                        subparagraph (A).
                            ``(ii) Amount.--The amount of coinsurance 
                        collected under clause (i) shall be at least 10 
                        percent of the negotiated price of each 
                        prescription drug dispensed to an eligible low-
                        income beneficiary.
                            ``(iii) Construction.--Amounts collected 
                        under clause (i) shall not be counted against 
                        the total amount of coverage available under 
                        subparagraph (A).
                    ``(C) Reduction for late enrollment.--For each 
                month during a calendar quarter in which an eligible 
                low-income beneficiary is not enrolled in a 
                prescription drug assistance card program offered by a 
                prescription drug card sponsor with a contract under 
                this section, the amount of assistance available under 
                subparagraph (A) shall be reduced by $50.
                    ``(D) Crediting of unused benefits toward future 
                years.--The dollar amount of coverage described in 
                subparagraph (A) shall be increased by any amount of 
                coverage described in such subparagraph that was not 
                used during the previous calendar year.
                    ``(E) Waiver to ensure provision of benefit.--The 
                Secretary may waive such requirements of this section 
                and section 1807 as may be necessary to ensure that 
                each eligible low-income beneficiaries has access to 
                the assistance described in subparagraph (A).
            ``(3) Additional discounts.--A prescription drug card 
        sponsor with a contract under this section shall provide each 
        eligible low-income beneficiary enrolled in a prescription drug 
        assistance program offered by the sponsor with access to 
        negotiated prices that reflect a minimum average discount of at 
        least 20 percent of the average wholesale price for 
        prescription drugs covered under that program.
            ``(4) Assistance cards.--Each prescription drug card 
        sponsor shall permit eligible low-income beneficiaries enrolled 
        in a prescription drug assistance card program offered by such 
        sponsor to use the discount card issued under section 
        1807(e)(4) to obtain benefits under the program.
            ``(5) Application of formulary restrictions.--A drug 
        prescribed for an eligible low-income beneficiary that would 
        otherwise be a covered drug under this section shall not be so 
        considered under a prescription drug assistance card program if 
        the program excludes the drug under a formulary and such 
        exclusion is not successfully resolved under paragraph (4), 
        (5), or (6) of subsection (c).
    ``(e) Requirements for Prescription Drug Card Sponsors That Offer 
Prescription Drug Assistance Card Programs.--
            ``(1) In general.--Each prescription drug card sponsor 
        shall--
                    ``(A) process claims made by eligible low-income 
                beneficiaries;
                    ``(B) negotiate with brand name and generic 
                prescription drug manufacturers and others for low 
                prices on prescription drugs;
                    ``(C) track individual beneficiary expenditures in 
                a format and periodicity specified by the Secretary; 
                and
                    ``(D) perform such other functions as the Secretary 
                may assign.
            ``(2) Data exchanges.--Each prescription drug card sponsor 
        shall receive data exchanges in a format specified by the 
        Secretary and shall maintain real-time beneficiary files.
            ``(3) Public disclosure of pharmaceutical prices for 
        equivalent drugs.--The prescription drug card sponsor offering 
        the prescription drug assistance card program shall provide 
        that each pharmacy or other dispenser that arranges for the 
        dispensing of a covered drug shall inform the eligible low-
        income 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 priced generic drug 
        covered under the plan that is therapeutically equivalent and 
        bioequivalent and available at such pharmacy or other 
        dispenser.
    ``(f) Submission of Bids and Awarding of Contracts.--
            ``(1) Submission of bids.--Each prescription drug card 
        sponsor that seeks to offer a prescription drug assistance card 
        program under this section shall submit to the Secretary, at 
        such time and in such manner as the Secretary may specify, such 
        information as the Secretary may require.
            ``(2) Awarding of contracts.--The Secretary shall review 
        the information submitted under paragraph (1) and shall 
        determine whether to award a contract to the prescription drug 
        card sponsor offering the program to which such information 
        relates. The Secretary may not approve a program unless the 
        program and prescription drug card sponsor offering the program 
        comply with the requirements under this section.
            ``(3) Number of contracts.--There shall be no limit on the 
        number of prescription drug card sponsors that may be awarded 
        contracts under paragraph (2).
            ``(4) Contract provisions.--
                    ``(A) Duration.--A contract awarded under paragraph 
                (2) shall be for the lifetime of the program under this 
                section.
                    ``(B) Withdrawal.--A prescription drug card sponsor 
                that desires to terminate the contract awarded under 
                paragraph (2) may terminate such contract without 
                penalty if such sponsor gives notice--
                            ``(i) to the Secretary 90 days prior to the 
                        termination of such contract; and
                            ``(ii) to each eligible low-income 
                        beneficiary that is enrolled in a prescription 
                        drug assistance card program offered by such 
                        sponsor 60 days prior to such termination.
                    ``(C) Service area.--The service area under the 
                contract shall be the same as the area served by the 
                prescription drug card sponsor under section 1807.
            ``(5) Simultaneous approval of discount card and assistance 
        programs.--A prescription drug card sponsor may submit an 
        application for endorsement under section 1807 as part of the 
        bid submitted under paragraph (1) and the Secretary may approve 
        such application at the same time as the Secretary awards a 
        contract under this section.
    ``(g) Payments to Prescription Drug Card Sponsors.--
            ``(1) In general.--The Secretary shall pay to each 
        prescription drug card sponsor offering a prescription drug 
        assistance card program in which an eligible low-income 
        beneficiary is enrolled an amount equal to the amount agreed to 
        by the Secretary and the sponsor in the contract awarded under 
        subsection (f)(2).
            ``(2) Payment from part b trust fund.--The costs of 
        providing benefits under this section shall be payable from the 
        Federal Supplementary Medical Insurance Trust Fund established 
        under section 1841.
    ``(h) Eligibility Determinations Made by States; Presumptive 
Eligibility.--States shall perform the functions described in section 
1935(a)(1).
    ``(i) Appropriations.--There are appropriated from the Federal 
Supplementary Medical Insurance Trust Fund established under section 
1841 such sums as may be necessary to carry out the program under this 
section.
    ``(j) Definitions.--In this section:
            ``(1) Eligible beneficiary; negotiated price; prescription 
        drug.--The terms `eligible beneficiary', `negotiated price', 
        and `prescription drug' have the meanings given those terms in 
        section 1807(i).
            ``(2) Eligible low-income beneficiary.--The term `eligible 
        low-income beneficiary' means an individual who--
                    ``(A) is an eligible beneficiary (as defined in 
                section 1807(i)); and
                    ``(B) is described in clause (iii) or (iv) of 
                section 1902(a)(10)(E) or in section 1905(p)(1).
            ``(3) Prescription drug card sponsor.--The term 
        `prescription drug card sponsor' has the meaning given that 
        term in section 1807(i), except that such sponsor shall also be 
        an entity that the Secretary determines is--
                    ``(A) is appropriate to provide eligible low-income 
                beneficiaries with the benefits under a prescription 
                drug assistance card program under this section; and
                    ``(B) is able to manage the monetary assistance 
                made available under subsection (d)(2);
                    ``(C) agrees to submit to audits by the Secretary; 
                and
                    ``(D) provides such other assurances as the 
                Secretary may require.
            ``(4) State.--The term `State' has the meaning given such 
        term for purposes of title XIX.''.
    (b) Exclusion of Prices From Determination of Best Price.--Section 
1927(c)(1)(C)(i) (42 U.S.C. 1396r-8(c)(1)(C)(i)) is amended--
            (1) by striking ``and'' at the end of subclause (III);
            (2) by striking the period at the end of subclause (IV) and 
        inserting ``; and''; and
            (3) by adding at the end the following new subclause:
                                    ``(V) any negotiated prices charged 
                                under the medicare prescription drug 
                                discount card endorsement program under 
                                section 1807 or under the transitional 
                                prescription drug assistance card 
                                program for eligible low-income 
                                beneficiaries under section 1807A.''.
    (c) Exclusion of Prescription Drug Assistance Card Costs From 
Determination of Part B Monthly Premium.--Section 1839(g) of the Social 
Security Act (42 U.S.C. 1395r(g)) is amended--
            (1) by striking ``attributable to the application of 
        section'' and inserting ``attributable to--
            ``(1) the application of section'';
            (2) by striking the period and inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(2) the prescription drug assistance card program under 
        section 1807A.''.
    (d) Regulations.--
            (1) Authority for interim final regulations.--The Secretary 
        may promulgate initial regulations implementing sections 1807 
        and 1807A of the Social Security Act (as added by this section) 
        in interim final form without prior opportunity for public 
        comment.
            (2) Final regulations.--A final regulation reflecting 
        public comments must be published within 1 year of the interim 
        final regulation promulgated under paragraph (1).
            (3) Exemption from the paperwork reduction act.--The 
        promulgation of the regulations under this subsection and the 
        administration the programs established by sections 1807 and 
        1807A of the Social Security Act (as added by this section) 
        shall be made without regard to chapter 35 of title 44, United 
        States Code (commonly known as the ``Paperwork Reduction 
        Act'').
    (e) Implementation; Transition.--
            (1) Implementation.--The Secretary shall implement the 
        amendments made by this section in a manner that discounts are 
        available to eligible beneficiaries under section 1807 of the 
        Social Security Act and assistance is available to eligible 
        low-income beneficiaries under section 1807A of such Act not 
        later than January 1, 2004.
            (2) Transition.--The Secretary shall provide for an 
        appropriate transition and discontinuation of the programs 
        under section 1807 and 1807A of the Social Security Act. Such 
        transition and discontinuation shall ensure that such programs 
        continue to operate until the date on which the first 
        enrollment period under part D ends.

            Subtitle C--Standards for Electronic Prescribing

 SEC. 121. STANDARDS FOR ELECTRONIC PRESCRIBING.

    Title XI (42 U.S.C. 1301 et seq.) is amended by adding at the end 
the following new part:

                    ``Part D--Electronic Prescribing

                 ``standards for electronic prescribing

    ``Sec. 1180. (a) Standards.--
            ``(1) Development and Adoption.--
                    ``(A) In general.--The Secretary shall develop or 
                adopt standards for transactions and data elements for 
                such transactions (in this section referred to as 
                `standards') to enable the electronic transmission of 
                medication history, eligibility, benefit, and other 
                prescription information.
                    ``(B) Consultation.--In developing and adopting the 
                standards under subparagraph (A), the Secretary shall 
                consult with representatives of physicians, hospitals, 
                pharmacists, standard setting organizations, pharmacy 
                benefit managers, beneficiary information exchange 
                networks, technology experts, and representatives of 
                the Departments of Veterans Affairs and Defense and 
                other interested parties.
            ``(2) Objective.--Any standards developed or adopted under 
        this part shall be consistent with the objectives of 
        improving--
                    ``(A) patient safety; and
                    ``(B) the quality of care provided to patients.
            ``(3) Requirements.--Any standards developed or adopted 
        under this part shall comply with the following:
                    ``(A) Patient may request a written prescription.--
                The standards provide that--
                            ``(i) a prescription shall be written and 
                        not transmitted electronically if the patient 
                        makes such a request; and
                            ``(ii) no additional charges may be imposed 
                        on the patient for making such a request.
                    ``(B) Patient-specific medication history, 
                eligibility, benefit, and other prescription 
                information.--
                            ``(i) In general.--The standards shall 
                        accommodate electronic transmittal of patient-
                        specific medication history, eligibility, 
                        benefit, and other prescription information 
                        among prescribing and dispensing professionals 
                        at the point of care.
                            ``(ii) Required information.--The 
                        information described in clause (i) shall 
                        include the following:
                                    ``(I) Information (to the extent 
                                available and feasible) on the drugs 
                                being prescribed for that patient and 
                                other information relating to the 
                                medication history of the patient that 
                                may be relevant to the appropriate 
                                prescription for that patient.
                                    ``(II) Cost-effective alternatives 
                                (if any) to the drug prescribed.
                                    ``(III) Information on eligibility 
                                and benefits, including the drugs 
                                included in the applicable formulary 
                                and any requirements for prior 
                                authorization.
                                    ``(IV) Information on potential 
                                interactions with drugs listed on the 
                                medication history, graded by severity 
                                of the potential interaction.
                                    ``(V) Other information to improve 
                                the quality of patient care and to 
                                reduce medical errors.
                    ``(C) Undue burden.--The standards shall be 
                designed so that, to the extent practicable, the 
                standards do not impose an undue administrative burden 
                on the practice of medicine, pharmacy, or other health 
                professions.
                    ``(D) Compatibility with administrative 
                simplification and privacy laws.--The standards shall 
                be--
                            ``(i) consistent with the Federal 
                        regulations (concerning the privacy of 
                        individually identifiable health information) 
                        promulgated under section 264(c) of the Health 
                        Insurance Portability and Accountability Act of 
                        1996; and
                            ``(ii) compatible with the standards 
                        adopted under part C.
            ``(4) Transfer of information.--The Secretary shall develop 
        and adopt standards for transferring among prescribing and 
        insurance entities and other necessary entities appropriate 
        standard data elements needed for the electronic exchange of 
        medication history, eligibility, benefit, and other 
        prescription drug information and other health information 
        determined appropriate in compliance with the standards adopted 
        or modified under this part.
    ``(b) Timetable for Adoption of Standards.--
            ``(1) In general.--The Secretary shall adopt the standards 
        under this part by January 1, 2006.
            ``(2) Additions and modifications to standards.--The 
        Secretary shall, in consultation with appropriate 
        representatives of interested parties, review the standards 
        developed or adopted under this part and adopt modifications to 
        the standards (including additions to the standards), as 
        determined appropriate. Any addition or modification to such 
        standards shall be completed in a manner which minimizes the 
        disruption and cost of compliance.
    ``(c) Compliance With Standards.--
            ``(1) Requirement for all individuals and entities that 
        transmit or receive prescriptions electronically.--
                    ``(A) In general.--Individuals or entities that 
                transmit or receive prescriptions electronically shall 
                comply with the standards adopted or modified under 
                this part.
                    ``(B) Relation to state laws.--The standards 
                adopted or modified under this part shall supersede any 
                State law or regulations pertaining to the electronic 
                transmission of medication history, eligibility, 
                benefit and prescription information.
            ``(2) Timetable for compliance.--
                    ``(A) Initial compliance.--
                            ``(i) In general.--Not later than 24 months 
                        after the date on which an initial standard is 
                        adopted under this part, each individual or 
                        entity to whom the standard applies shall 
                        comply with the standard.
                            ``(ii) Special rule for small health 
                        plans.--In the case of a small health plan, as 
                        defined by the Secretary for purposes of 
                        section 1175(b)(1)(B), clause (i) shall be 
                        applied by substituting `36 months' for `24 
                        months'.
    ``(d) Consultation With Attorney General.--The Secretary shall 
consult with the Attorney General before developing, adopting, or 
modifying a standard under this part to ensure that the standard 
accommodates secure electronic transmission of prescriptions for 
controlled substances in a manner that minimizes the possibility of 
violations under the Comprehensive Drug Abuse Prevention and Control 
Act of 1970 and related Federal laws.
    ``(e) No Requirement to Transmit or Receive Prescriptions 
Electronically.--Nothing in this part shall be construed to require an 
individual or entity to transmit or receive prescriptions 
electronically.

``grants to health care providers to implement electronic prescription 
                                programs

    ``Sec. 1180A. (a) In General.--The Secretary is authorized to make 
grants to health care providers for the purpose of assisting such 
entities to implement electronic prescription programs that comply with 
the standards adopted or modified under this part.
    ``(b) Application.--No grant may be made under this section except 
pursuant to a grant application that is submitted in a time, manner, 
and form approved by the Secretary.
    ``(c) Authorization of Appropriations.--There are authorized to be 
appropriated for each of fiscal years 2006, 2007, and 2008, such sums 
as may be necessary to carry out this section.''.

                      Subtitle D--Other Provisions

SEC. 131. ADDITIONAL REQUIREMENTS FOR ANNUAL FINANCIAL REPORT AND 
              OVERSIGHT ON MEDICARE PROGRAM.

    (a) In General.--Section 1817 (42 U.S.C. 1395i) is amended by 
adding at the end the following new subsection:
    ``(l) Combined Report on Operation and Status of the Trust Fund and 
the Federal Supplementary Medical Insurance Trust Fund (Including the 
Prescription Drug Account).--In addition to the duty of the Board of 
Trustees to report to Congress under subsection (b), on the date the 
Board submits the report required under subsection (b)(2), the Board 
shall submit to Congress a report on the operation and status of the 
Trust Fund and the Federal Supplementary Medical Insurance Trust Fund 
established under section 1841 (including the Prescription Drug Account 
within such Trust Fund), in this subsection referred to as the `Trust 
Funds'. Such report shall include the following information:
            ``(1) Overall spending from the general fund of the 
        treasury.--A statement of total amounts obligated during the 
        preceding fiscal year from the General Revenues of the Treasury 
        to the Trust Funds, separately stated in terms of the total 
        amount and in terms of the percentage such amount bears to all 
        other amounts obligated from such General Revenues during such 
        fiscal year, for each of the following amounts:
                    ``(A) Medicare benefits.--The amount expended for 
                payment of benefits covered under this title.
                    ``(B) Administrative and other expenses.--The 
                amount expended for payments not related to the 
                benefits described in subparagraph (A).
            ``(2) Historical overview of spending.--From the date of 
        the inception of the program of insurance under this title 
        through the fiscal year involved, a statement of the total 
        amounts referred to in paragraph (1), separately stated for the 
        amounts described in subparagraphs (A) and (B) of such 
        paragraph.
            ``(3) 10-year and 50-year projections.--An estimate of 
        total amounts referred to in paragraph (1), separately stated 
        for the amounts described in subparagraphs (A) and (B) of such 
        paragraph, required to be obligated for payment for benefits 
        covered under this title for each of the 10 fiscal years 
        succeeding the fiscal year involved and for the 50-year period 
        beginning with the succeeding fiscal year.
            ``(4) Relation to other measures of growth.--A comparison 
        of the rate of growth of the total amounts referred to in 
        paragraph (1), separately stated for the amounts described in 
        subparagraphs (A) and (B) of such paragraph, to the rate of 
        growth for the same period in--
                    ``(A) the gross domestic product;
                    ``(B) health insurance costs in the private sector;
                    ``(C) employment-based health insurance costs in 
                the public and private sectors; and
                    ``(D) other areas as determined appropriate by the 
                Board of Trustees.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to fiscal years beginning on or after the date of 
enactment of this Act.
    (c) Congressional Hearings.--It is the sense of Congress that the 
committees of jurisdiction of Congress shall hold hearings on the 
reports submitted under section 1817(l) of the Social Security Act (as 
added by subsection (a)).

SEC. 132. TRUSTEES' REPORT ON MEDICARE'S UNFUNDED OBLIGATIONS.

    (a) Report.--The report submitted under sections 1817(b)(2) and 
1841(b)(2) of the Social Security Act (42 U.S.C. 1395i(b)(2) and 
1395t(b)(2)) during 2004 shall include an analysis of the total amount 
of the unfunded obligations of the Medicare program under title XVIII 
of the Social Security Act.
    (b) Matters Analyzed.--The analysis described in subsection (A) 
shall compare the long-term obligations of the Medicare program to the 
dedicated funding sources for that program (other than general revenue 
transfers), including the combined obligations of the Federal Hospital 
Insurance Trust Fund established under section 1817 of such Act (42 
U.S.C. 1395i) and the Federal Supplementary Medical Insurance Trust 
Fund established under section 1841 of such Act (42 U.S.C. 1395t).

SEC. 133. PHARMACY BENEFIT MANAGERS TRANSPARENCY REQUIREMENTS.

    Subpart 3 of part D of title XVIII of the Social Security Act (as 
added by section 101) is amended by adding at the end the following new 
section:

         ``pharmacy benefit managers transparency requirements

    ``Sec. 1860D-27. (a) Prohibition.--
            ``(1) In General.--Notwithstanding any other provision of 
        law, an eligible entity offering a Medicare Prescription Drug 
        plan under this part or a MedicareAdvantage organization 
        offering a MedicareAdvantage plan under part C shall not enter 
        into a contract with any pharmacy benefit manager (in this 
        section referred to as a `PBM') that is owned by a 
        pharmaceutical manufacturing company.
            ``(2) Provision of information.--A PBM that manages 
        prescription drug coverage under this part or part C shall 
        provide the following information, on an annual basis, to the 
        Assistant Attorney General for Antitrust of the Department of 
        Justice and the Inspector General of the Health and Human 
        Services Department:
                    ``(A) The aggregate amount of any and all rebates, 
                discounts, administrative fees, promotional allowances, 
                and other payments received or recovered from each 
                pharmaceutical manufacturer.
                    ``(B) The amount of payments received or recovered 
                from each pharmaceutical manufacturer for each of the 
                top 50 drugs as measured by volume (as determined by 
                the Secretary).
                    ``(C) The percentage differential between the price 
                the PBM pays pharmacies for a drug described in 
                subparagraph (B) and the price the PBM charges a 
                Medicare Prescription Drug Plan or a MedicareAdvantage 
                organization for such drug.
    ``(b) Failure to Disclose.--
            ``(1) Civil Penalty.--Any PBM that fails to comply with 
        subsection (a) shall be liable for a civil penalty as 
        determined appropriate through regulations promulgated by the 
        Attorney General. Such penalty may be recovered in a civil 
        action brought by the United States.
            ``(2) Compliance and equitable relief.--If any PBM fails to 
        comply with subsection (a), the United States district court 
        may order compliance, and may grant such other equitable relief 
        as the court in its discretion determines necessary or 
        appropriate, upon application of the Assistant Attorney 
        General.
    ``(c) Disclosure Exemption.--Any information filed with the 
Assistant Attorney General under subsection (a)(2) shall be exempt from 
disclosure under section 552 of title 5, and no such information may be 
made public, except as may be relevant to any administrative or 
judicial action or proceeding. Nothing in this section is intended to 
prevent disclosure to either body of Congress or to any duly authorized 
committee or subcommittee of the Congress.''.

SEC. 134. OFFICE OF THE MEDICARE BENEFICIARY ADVOCATE.

    (a) Establishment.--Not later than 1 year after the date of 
enactment of this Act, the Secretary shall establish within the 
Department of Health and Human Services, an Office of the Medicare 
Beneficiary Advocate (in this section referred to as the ``Office'').
    (b) Duties.--The Office shall carry out the following activities:
            (1) Establishing a toll-free telephone number for medicare 
        beneficiaries to use to obtain information on the medicare 
        program, and particularly with respect to the benefits provided 
        under part D of title XVIII of the Social Security Act and the 
        Medicare Prescription Drug plans and MedicareAdvantage plans 
        offering such benefits. The Office shall ensure that the toll-
        free telephone number accommodates beneficiaries with 
        disabilities and limited-English proficiency.
            (2) Establishing an Internet website with easily accessible 
        information regarding Medicare Prescription Drug plans and 
        MedicareAdvantage plans and the benefits offered under such 
        plans. The website shall--
                    (A) be updated regularly to reflect changes in 
                services and benefits, including with respect to the 
                plans offered in a region and the associated monthly 
                premiums, benefits offered, formularies, and contact 
                information for such plans, and to ensure that there 
                are no broken links or errors;
                    (B) have printer-friendly, downloadable fact sheets 
                on the medicare coverage options and benefits;
                    (C) be easy to navigate, with large print and 
                easily recognizable links; and
                    (D) provide links to the websites of the eligible 
                entities participating in part D of title XVIII.
            (3) Providing regional publications to medicare 
        beneficiaries that include regional contacts for information, 
        and that inform the beneficiaries of the prescription drug 
        benefit options under title XVIII of the Social Security Act, 
        including with respect to--
                    (A) monthly premiums;
                    (B) formularies; and
                    (C) the scope of the benefits offered.
            (4) Conducting outreach to medicare beneficiaries to inform 
        the beneficiaries of the medicare coverage options and benefits 
        under parts A, B, C, and D of title XVIII of the Social 
        Security Act.
            (5) Working with local benefits administrators, ombudsmen, 
        local benefits specialists, and advocacy groups to ensure that 
        medicare beneficiaries are aware of the medicare coverage 
        options and benefits under parts A, B, C, and D of title XVIII 
        of the Social Security Act.
    (c) Funding.--
            (1) Establishment.--Of the amounts authorized to be 
        appropriated under the Secretary's discretion for 
        administrative expenditures, $2,000,000 may be used to 
        establish the Office in accordance with this section.
            (2) Operation.--With respect to each fiscal year occurring 
        after the fiscal year in which the Office is established under 
        this section, the Secretary may use, out of amounts authorized 
        to be appropriated under the Secretary's discretion for 
        administrative expenditures for such fiscal year, such sums as 
        may be necessary to operate the Office in that fiscal year.

                      TITLE II--MEDICAREADVANTAGE

               Subtitle A--MedicareAdvantage Competition

SEC. 201. ELIGIBILITY, ELECTION, AND ENROLLMENT.

    Section 1851 (42 U.S.C. 1395w-21) is amended to read as follows:

                ``eligibility, election, and enrollment

    ``Sec. 1851. (a) Choice of Medicare Benefits Through 
MedicareAdvantage Plans.--
            ``(1) In general.--Subject to the provisions of this 
        section, each MedicareAdvantage eligible individual (as defined 
        in paragraph (3)) is entitled to elect to receive benefits 
        under this title--
                    ``(A) through--
                            ``(i) the original Medicare fee-for-service 
                        program under parts A and B; and
                            ``(ii) the voluntary prescription drug 
                        delivery program under part D; or
                    ``(B) through enrollment in a MedicareAdvantage 
                plan under this part.
            ``(2) Types of medicareadvantage plans that may be 
        available.--A MedicareAdvantage plan may be any of the 
        following types of plans of health insurance:
                    ``(A) Coordinated care plans.--Coordinated care 
                plans which provide health care services, including 
                health maintenance organization plans (with or without 
                point of service options) and plans offered by 
                provider-sponsored organizations (as defined in section 
                1855(d)).
                    ``(B) Combination of msa plan and contributions to 
                medicareadvantage msa.--An MSA plan, as defined in 
                section 1859(b)(3), and a contribution into a 
                MedicareAdvantage medical savings account (MSA).
                    ``(C) Private fee-for-service plans.--A 
                MedicareAdvantage private fee-for-service plan, as 
                defined in section 1859(b)(2).
            ``(3) Medicareadvantage eligible individual.--
                    ``(A) In general.--Subject to subparagraph (B), in 
                this title, the term `MedicareAdvantage eligible 
                individual' means an individual who is entitled to (or 
                enrolled for) benefits under part A, enrolled under 
                part B, and enrolled under part D.
                    ``(B) Special rule for end-stage renal disease.--
                Such term shall not include an individual medically 
                determined to have end-stage renal disease, except 
                that--
                            ``(i) an individual who develops end-stage 
                        renal disease while enrolled in a 
                        Medicare+Choice or a MedicareAdvantage plan may 
                        continue to be enrolled in that plan; and
                            ``(ii) in the case of such an individual 
                        who is enrolled in a Medicare+Choice plan or a 
                        MedicareAdvantage plan under clause (i) (or 
                        subsequently under this clause), if the 
                        enrollment is discontinued under circumstances 
                        described in section 1851(e)(4)(A), then the 
                        individual will be treated as a 
                        `MedicareAdvantage eligible individual' for 
                        purposes of electing to continue enrollment in 
                        another MedicareAdvantage plan.
    ``(b) Special Rules.--
            ``(1) Residence requirement.--
                    ``(A) In general.--Except as the Secretary may 
                otherwise provide and except as provided in 
                subparagraph (C), an individual is eligible to elect a 
                MedicareAdvantage plan offered by a MedicareAdvantage 
                organization only if the plan serves the geographic 
                area in which the individual resides.
                    ``(B) Continuation of enrollment permitted.--
                Pursuant to rules specified by the Secretary, the 
                Secretary shall provide that a plan may offer to all 
                individuals residing in a geographic area the option to 
                continue enrollment in the plan, notwithstanding that 
                the individual no longer resides in the service area of 
                the plan, so long as the plan provides that individuals 
                exercising this option have, as part of the basic 
                benefits described in section 1852(a)(1)(A), reasonable 
                access within that geographic area to the full range of 
                basic benefits, subject to reasonable cost-sharing 
                liability in obtaining such benefits.
                    ``(C) Continuation of enrollment permitted where 
                service changed.--Notwithstanding subparagraph (A) and 
                in addition to subparagraph (B), if a MedicareAdvantage 
                organization eliminates from its service area a 
                MedicareAdvantage payment area that was previously 
                within its service area, the organization may elect to 
                offer individuals residing in all or portions of the 
                affected area who would otherwise be ineligible to 
                continue enrollment the option to continue enrollment 
                in a MedicareAdvantage plan it offers so long as--
                            ``(i) the enrollee agrees to receive the 
                        full range of basic benefits (excluding 
                        emergency and urgently needed care) exclusively 
                        at facilities designated by the organization 
                        within the plan service area; and
                            ``(ii) there is no other MedicareAdvantage 
                        plan offered in the area in which the enrollee 
                        resides at the time of the organization's 
                        election.
            ``(2) Special rule for certain individuals covered under 
        fehbp or eligible for veterans or military health benefits.--
                    ``(A) FEHBP.--An individual who is enrolled in a 
                health benefit plan under chapter 89 of title 5, United 
                States Code, is not eligible to enroll in an MSA plan 
                until such time as the Director of the Office of 
                Management and Budget certifies to the Secretary that 
                the Office of Personnel Management has adopted policies 
                which will ensure that the enrollment of such 
                individuals in such plans will not result in increased 
                expenditures for the Federal Government for health 
                benefit plans under such chapter.
                    ``(B) VA and dod.--The Secretary may apply rules 
                similar to the rules described in subparagraph (A) in 
                the case of individuals who are eligible for health 
                care benefits under chapter 55 of title 10, United 
                States Code, or under chapter 17 of title 38 of such 
                Code.
            ``(3) Limitation on eligibility of qualified medicare 
        beneficiaries and other medicaid beneficiaries to enroll in an 
        msa plan.--An individual who is a qualified medicare 
        beneficiary (as defined in section 1905(p)(1)), a qualified 
        disabled and working individual (described in section 1905(s)), 
        an individual described in section 1902(a)(10)(E)(iii), or 
        otherwise entitled to medicare cost-sharing under a State plan 
        under title XIX is not eligible to enroll in an MSA plan.
            ``(4) Coverage under msa plans on a demonstration basis.--
                    ``(A) In general.--An individual is not eligible to 
                enroll in an MSA plan under this part--
                            ``(i) on or after January 1, 2004, unless 
                        the enrollment is the continuation of such an 
                        enrollment in effect as of such date; or
                            ``(ii) as of any date if the number of such 
                        individuals so enrolled as of such date has 
                        reached 390,000.
                Under rules established by the Secretary, an individual 
                is not eligible to enroll (or continue enrollment) in 
                an MSA plan for a year unless the individual provides 
                assurances satisfactory to the Secretary that the 
                individual will reside in the United States for at 
                least 183 days during the year.
                    ``(B) Evaluation.--The Secretary shall regularly 
                evaluate the impact of permitting enrollment in MSA 
                plans under this part on selection (including adverse 
                selection), use of preventive care, access to care, and 
                the financial status of the Trust Funds under this 
                title.
                    ``(C) Reports.--The Secretary shall submit to 
                Congress periodic reports on the numbers of individuals 
                enrolled in such plans and on the evaluation being 
                conducted under subparagraph (B).
    ``(c) Process for Exercising Choice.--
            ``(1) In general.--The Secretary shall establish a process 
        through which elections described in subsection (a) are made 
        and changed, including the form and manner in which such 
        elections are made and changed. Such elections shall be made or 
        changed only during coverage election periods specified under 
        subsection (e) and shall become effective as provided in 
        subsection (f).
            ``(2) Coordination through medicareadvantage 
        organizations.--
                    ``(A) Enrollment.--Such process shall permit an 
                individual who wishes to elect a MedicareAdvantage plan 
                offered by a MedicareAdvantage organization to make 
                such election through the filing of an appropriate 
                election form with the organization.
                    ``(B) Disenrollment.--Such process shall permit an 
                individual, who has elected a MedicareAdvantage plan 
                offered by a MedicareAdvantage organization and who 
                wishes to terminate such election, to terminate such 
                election through the filing of an appropriate election 
                form with the organization.
            ``(3) Default.--
                    ``(A) Initial election.--
                            ``(i) In general.--Subject to clause (ii), 
                        an individual who fails to make an election 
                        during an initial election period under 
                        subsection (e)(1) is deemed to have chosen the 
                        original medicare fee-for-service program 
                        option.
                            ``(ii) Seamless continuation of coverage.--
                        The Secretary may establish procedures under 
                        which an individual who is enrolled in a 
                        Medicare+Choice plan or another health plan 
                        (other than a MedicareAdvantage plan) offered 
                        by a MedicareAdvantage organization at the time 
                        of the initial election period and who fails to 
                        elect to receive coverage other than through 
                        the organization is deemed to have elected the 
                        MedicareAdvantage plan offered by the 
                        organization (or, if the organization offers 
                        more than 1 such plan, such plan or plans as 
                        the Secretary identifies under such 
                        procedures).
                    ``(B) Continuing periods.--An individual who has 
                made (or is deemed to have made) an election under this 
                section is considered to have continued to make such 
                election until such time as--
                            ``(i) the individual changes the election 
                        under this section; or
                            ``(ii) the MedicareAdvantage plan with 
                        respect to which such election is in effect is 
                        discontinued or, subject to subsection 
                        (b)(1)(B), no longer serves the area in which 
                        the individual resides.
    ``(d) Providing Information To Promote Informed Choice.--
            ``(1) In general.--The Secretary shall provide for 
        activities under this subsection to broadly disseminate 
        information to medicare beneficiaries (and prospective medicare 
        beneficiaries) on the coverage options provided under this 
        section in order to promote an active, informed selection among 
        such options.
            ``(2) Provision of notice.--
                    ``(A) Open season notification.--At least 15 days 
                before the beginning of each annual, coordinated 
                election period (as defined in subsection (e)(3)(B)), 
                the Secretary shall mail to each MedicareAdvantage 
                eligible individual residing in an area the following:
                            ``(i) General information.--The general 
                        information described in paragraph (3).
                            ``(ii) List of plans and comparison of plan 
                        options.--A list identifying the 
                        MedicareAdvantage plans that are (or will be) 
                        available to residents of the area and 
                        information described in paragraph (4) 
                        concerning such plans. Such information shall 
                        be presented in a comparative form.
                            ``(iii) Additional information.--Any other 
                        information that the Secretary determines will 
                        assist the individual in making the election 
                        under this section.
                The mailing of such information shall be coordinated, 
                to the extent practicable, with the mailing of any 
                annual notice under section 1804.
                    ``(B) Notification to newly eligible 
                medicareadvantage eligible individuals.--To the extent 
                practicable, the Secretary shall, not later than 30 
                days before the beginning of the initial 
                MedicareAdvantage enrollment period for an individual 
                described in subsection (e)(1), mail to the individual 
                the information described in subparagraph (A).
                    ``(C) Form.--The information disseminated under 
                this paragraph shall be written and formatted using 
                language that is easily understandable by medicare 
                beneficiaries.
                    ``(D) Periodic updating.--The information described 
                in subparagraph (A) shall be updated on at least an 
                annual basis to reflect changes in the availability of 
                MedicareAdvantage plans, the benefits under such plans, 
                and the MedicareAdvantage monthly basic beneficiary 
                premium, MedicareAdvantage monthly beneficiary premium 
                for enhanced medical benefits, and MedicareAdvantage 
                monthly beneficiary obligation for qualified 
                prescription drug coverage for such plans.
            ``(3) General information.--General information under this 
        paragraph, with respect to coverage under this part during a 
        year, shall include the following:
                    ``(A) Benefits under the original medicare fee-for-
                service program option.--A general description of the 
                benefits covered under parts A and B of the original 
                medicare fee-for-service program, including--
                            ``(i) covered items and services;
                            ``(ii) beneficiary cost-sharing, such as 
                        deductibles, coinsurance, and copayment 
                        amounts; and
                            ``(iii) any beneficiary liability for 
                        balance billing.
                    ``(B) Catastrophic coverage and combined 
                deductible.--A description of the catastrophic coverage 
                and unified deductible applicable under the plan.
                    ``(C) Outpatient prescription drug coverage 
                benefits.--The information required under section 
                1860D-4 with respect to coverage for prescription drugs 
                under the plan.
                    ``(D) Election procedures.--Information and 
                instructions on how to exercise election options under 
                this section.
                    ``(E) Rights.--A general description of procedural 
                rights (including grievance and appeals procedures) of 
                beneficiaries under the original medicare fee-for-
                service program (including such rights under part D) 
                and the MedicareAdvantage program and the right to be 
                protected against discrimination based on health 
                status-related factors under section 1852(b).
                    ``(F) Information on medigap and medicare select.--
                A general description of the benefits, enrollment 
                rights, and other requirements applicable to medicare 
                supplemental policies under section 1882 and provisions 
                relating to medicare select policies described in 
                section 1882(t).
                    ``(G) Potential for contract termination.--The fact 
                that a MedicareAdvantage organization may terminate its 
                contract, refuse to renew its contract, or reduce the 
                service area included in its contract, under this part, 
                and the effect of such a termination, nonrenewal, or 
                service area reduction may have on individuals enrolled 
                with the MedicareAdvantage plan under this part.
            ``(4) Information comparing plan options.--Information 
        under this paragraph, with respect to a MedicareAdvantage plan 
        for a year, shall include the following:
                    ``(A) Benefits.--The benefits covered under the 
                plan, including the following:
                            ``(i) Covered items and services beyond 
                        those provided under the original medicare fee-
                        for-service program option.
                            ``(ii) Beneficiary cost-sharing for any 
                        items and services described in clause (i) and 
                        paragraph (3)(A)(i), including information on 
                        the unified deductible under section 
                        1852(a)(1)(C).
                            ``(iii) The maximum limitations on out-of-
                        pocket expenses under section 1852(a)(1)(C).
                            ``(iv) In the case of an MSA plan, 
                        differences in cost-sharing, premiums, and 
                        balance billing under such a plan compared to 
                        under other MedicareAdvantage plans.
                            ``(v) In the case of a MedicareAdvantage 
                        private fee-for-service plan, differences in 
                        cost-sharing, premiums, and balance billing 
                        under such a plan compared to under other 
                        MedicareAdvantage plans.
                            ``(vi) The extent to which an enrollee may 
                        obtain benefits through out-of-network health 
                        care providers.
                            ``(vii) The extent to which an enrollee may 
                        select among in-network providers and the types 
                        of providers participating in the plan's 
                        network.
                            ``(viii) The organization's coverage of 
                        emergency and urgently needed care.
                            ``(ix) The comparative information 
                        described in section 1860D-4(b)(2) relating to 
                        prescription drug coverage under the plan.
                    ``(B) Premiums.--
                            ``(i) In general.--The MedicareAdvantage 
                        monthly basic beneficiary premium and 
                        MedicareAdvantage monthly beneficiary premium 
                        for enhanced medical benefits, if any, for the 
                        plan or, in the case of an MSA plan, the 
                        MedicareAdvantage monthly MSA premium.
                            ``(ii) Reductions.--The reduction in part B 
                        premiums, if any.
                            ``(iii) Nature of the premium for enhanced 
                        medical benefits.--Whether the 
                        MedicareAdvantage monthly premium for enhanced 
                        benefits is optional or mandatory.
                    ``(C) Service area.--The service area of the plan.
                    ``(D) Quality and performance.--Plan quality and 
                performance indicators for the benefits under the plan 
                (and how such indicators compare to quality and 
                performance indicators under the original medicare fee-
                for-service program under parts A and B and under the 
                voluntary prescription drug delivery program under part 
                D in the area involved), including--
                            ``(i) disenrollment rates for medicare 
                        enrollees electing to receive benefits through 
                        the plan for the previous 2 years (excluding 
                        disenrollment due to death or moving outside 
                        the plan's service area);
                            ``(ii) information on medicare enrollee 
                        satisfaction;
                            ``(iii) information on health outcomes; and
                            ``(iv) the recent record regarding 
                        compliance of the plan with requirements of 
                        this part (as determined by the Secretary).
            ``(5) Maintaining a toll-free number and internet site.--
        The Secretary shall maintain a toll-free number for inquiries 
        regarding MedicareAdvantage options and the operation of this 
        part in all areas in which MedicareAdvantage plans are offered 
        and an Internet site through which individuals may 
        electronically obtain information on such options and 
        MedicareAdvantage plans.
            ``(6) Use of non-federal entities.--The Secretary may enter 
        into contracts with non-Federal entities to carry out 
        activities under this subsection.
            ``(7) Provision of information.--A MedicareAdvantage 
        organization shall provide the Secretary with such information 
        on the organization and each MedicareAdvantage plan it offers 
        as may be required for the preparation of the information 
        referred to in paragraph (2)(A).
    ``(e) Coverage Election Periods.--
            ``(1) Initial choice upon eligibility to make election if 
        medicareadvantage plans available to individual.--If, at the 
        time an individual first becomes eligible to elect to receive 
        benefits under part B or D (whichever is later), there is 1 or 
        more MedicareAdvantage plans offered in the area in which the 
        individual resides, the individual shall make the election 
        under this section during a period specified by the Secretary 
        such that if the individual elects a MedicareAdvantage plan 
        during the period, coverage under the plan becomes effective as 
        of the first date on which the individual may receive such 
        coverage.
            ``(2) Open enrollment and disenrollment opportunities.--
        Subject to paragraph (5), the following rules shall apply:
                    ``(A) Continuous open enrollment and disenrollment 
                through 2005.--At any time during the period beginning 
                January 1, 1998, and ending on December 31, 2005, a 
                Medicare+Choice eligible individual may change the 
                election under subsection (a)(1).
                    ``(B) Continuous open enrollment and disenrollment 
                for first 6 months during 2006.--
                            ``(i) In general.--Subject to clause (ii) 
                        and subparagraph (D), at any time during the 
                        first 6 months of 2006, or, if the individual 
                        first becomes a MedicareAdvantage eligible 
                        individual during 2006, during the first 6 
                        months during 2006 in which the individual is a 
                        MedicareAdvantage eligible individual, a 
                        MedicareAdvantage eligible individual may 
                        change the election under subsection (a)(1).
                            ``(ii) Limitation of 1 change.--An 
                        individual may exercise the right under clause 
                        (i) only once. The limitation under this clause 
                        shall not apply to changes in elections 
                        effected during an annual, coordinated election 
                        period under paragraph (3) or during a special 
                        enrollment period under the first sentence of 
                        paragraph (4).
                    ``(C) Continuous open enrollment and disenrollment 
                for first 3 months in subsequent years.--
                            ``(i) In general.--Subject to clause (ii) 
                        and subparagraph (D), at any time during the 
                        first 3 months of 2007 and each subsequent 
                        year, or, if the individual first becomes a 
                        MedicareAdvantage eligible individual during 
                        2007 or any subsequent year, during the first 3 
                        months of such year in which the individual is 
                        a MedicareAdvantage eligible individual, a 
                        MedicareAdvantage eligible individual may 
                        change the election under subsection (a)(1).
                            ``(ii) Limitation of 1 change during open 
                        enrollment period each year.--An individual may 
                        exercise the right under clause (i) only once 
                        during the applicable 3-month period described 
                        in such clause in each year. The limitation 
                        under this clause shall not apply to changes in 
                        elections effected during an annual, 
                        coordinated election period under paragraph (3) 
                        or during a special enrollment period under 
                        paragraph (4).
                    ``(D) Continuous open enrollment for 
                institutionalized individuals.--At any time during 2006 
                or any subsequent year, in the case of a 
                MedicareAdvantage eligible individual who is 
                institutionalized (as defined by the Secretary), the 
                individual may elect under subsection (a)(1)--
                            ``(i) to enroll in a MedicareAdvantage 
                        plan; or
                            ``(ii) to change the MedicareAdvantage plan 
                        in which the individual is enrolled.
            ``(3) Annual, coordinated election period.--
                    ``(A) In general.--Subject to paragraph (5), each 
                individual who is eligible to make an election under 
                this section may change such election during an annual, 
                coordinated election period.
                    ``(B) Annual, coordinated election period.--For 
                purposes of this section, the term `annual, coordinated 
                election period' means, with respect to a year before 
                2003 and after 2006, the month of November before such 
                year and with respect to 2003, 2004, 2005, and 2006, 
                the period beginning on November 15 and ending on 
                December 31 of the year before such year.
                    ``(C) Medicareadvantage health information fairs.--
                During the fall season of each year (beginning with 
                2006), in conjunction with the annual coordinated 
                election period defined in subparagraph (B), the 
                Secretary shall provide for a nationally coordinated 
                educational and publicity campaign to inform 
                MedicareAdvantage eligible individuals about 
                MedicareAdvantage plans and the election process 
                provided under this section.
                    ``(D) Special information campaign in 2005.--During 
                the period beginning on November 15, 2005, and ending 
                on December 31, 2005, the Secretary shall provide for 
                an educational and publicity campaign to inform 
                MedicareAdvantage eligible individuals about the 
                availability of MedicareAdvantage plans, and eligible 
                organizations with risk-sharing contracts under section 
                1876, offered in different areas and the election 
                process provided under this section.
            ``(4) Special election periods.--Effective on and after 
        January 1, 2006, an individual may discontinue an election of a 
        MedicareAdvantage plan offered by a MedicareAdvantage 
        organization other than during an annual, coordinated election 
        period and make a new election under this section if--
                    ``(A)(i) the certification of the organization or 
                plan under this part has been terminated, or the 
                organization or plan has notified the individual of an 
                impending termination of such certification; or
                    ``(ii) the organization has terminated or otherwise 
                discontinued providing the plan in the area in which 
                the individual resides, or has notified the individual 
                of an impending termination or discontinuation of such 
                plan;
                    ``(B) the individual is no longer eligible to elect 
                the plan because of a change in the individual's place 
                of residence or other change in circumstances 
                (specified by the Secretary, but not including 
                termination of the individual's enrollment on the basis 
                described in clause (i) or (ii) of subsection 
                (g)(3)(B));
                    ``(C) the individual demonstrates (in accordance 
                with guidelines established by the Secretary) that--
                            ``(i) the organization offering the plan 
                        substantially violated a material provision of 
                        the organization's contract under this part in 
                        relation to the individual (including the 
                        failure to provide an enrollee on a timely 
                        basis medically necessary care for which 
                        benefits are available under the plan or the 
                        failure to provide such covered care in 
                        accordance with applicable quality standards); 
                        or
                            ``(ii) the organization (or an agent or 
                        other entity acting on the organization's 
                        behalf) materially misrepresented the plan's 
                        provisions in marketing the plan to the 
                        individual; or
                    ``(D) the individual meets such other exceptional 
                conditions as the Secretary may provide.
        Effective on and after January 1, 2006, an individual who, upon 
        first becoming eligible for benefits under part A at age 65, 
        enrolls in a MedicareAdvantage plan under this part, the 
        individual may discontinue the election of such plan, and elect 
        coverage under the original fee-for-service plan, at any time 
        during the 12-month period beginning on the effective date of 
        such enrollment.
            ``(5) Special rules for msa plans.--Notwithstanding the 
        preceding provisions of this subsection, an individual--
                    ``(A) may elect an MSA plan only during--
                            ``(i) an initial open enrollment period 
                        described in paragraph (1);
                            ``(ii) an annual, coordinated election 
                        period described in paragraph (3)(B); or
                            ``(iii) the month of November 1998;
                    ``(B) subject to subparagraph (C), may not 
                discontinue an election of an MSA plan except during 
                the periods described in clause (ii) or (iii) of 
                subparagraph (A) and under the first sentence of 
                paragraph (4); and
                    ``(C) who elects an MSA plan during an annual, 
                coordinated election period, and who never previously 
                had elected such a plan, may revoke such election, in a 
                manner determined by the Secretary, by not later than 
                December 15 following the date of the election.
            ``(6) Open enrollment periods.--Subject to paragraph (5), a 
        MedicareAdvantage organization--
                    ``(A) shall accept elections or changes to 
                elections during the initial enrollment periods 
                described in paragraph (1), during the period beginning 
                on November 15, 2005, and ending on December 31, 2005, 
                and during the annual, coordinated election period 
                under paragraph (3) for each subsequent year, and 
                during special election periods described in the first 
                sentence of paragraph (4); and
                    ``(B) may accept other changes to elections at such 
                other times as the organization provides.
    ``(f) Effectiveness of Elections and Changes of Elections.--
            ``(1) During initial coverage election period.--An election 
        of coverage made during the initial coverage election period 
        under subsection (e)(1)(A) shall take effect upon the date the 
        individual becomes entitled to (or enrolled for) benefits under 
        part A, enrolled under part B, and enrolled under part D, 
        except as the Secretary may provide (consistent with sections 
        1838 and 1860D-2)) in order to prevent retroactive coverage.
            ``(2) During continuous open enrollment periods.--An 
        election or change of coverage made under subsection (e)(2) 
        shall take effect with the first day of the first calendar 
        month following the date on which the election or change is 
        made.
            ``(3) Annual, coordinated election period.--An election or 
        change of coverage made during an annual, coordinated election 
        period (as defined in subsection (e)(3)(B)) in a year shall 
        take effect as of the first day of the following year.
            ``(4) Other periods.--An election or change of coverage 
        made during any other period under subsection (e)(4) shall take 
        effect in such manner as the Secretary provides in a manner 
        consistent (to the extent practicable) with protecting 
        continuity of health benefit coverage.
    ``(g) Guaranteed Issue and Renewal.--
            ``(1) In general.--Except as provided in this subsection, a 
        MedicareAdvantage organization shall provide that at any time 
        during which elections are accepted under this section with 
        respect to a MedicareAdvantage plan offered by the 
        organization, the organization will accept without restrictions 
        individuals who are eligible to make such election.
            ``(2) Priority.--If the Secretary determines that a 
        MedicareAdvantage organization, in relation to a 
        MedicareAdvantage plan it offers, has a capacity limit and the 
        number of MedicareAdvantage eligible individuals who elect the 
        plan under this section exceeds the capacity limit, the 
        organization may limit the election of individuals of the plan 
        under this section but only if priority in election is 
        provided--
                    ``(A) first to such individuals as have elected the 
                plan at the time of the determination; and
                    ``(B) then to other such individuals in such a 
                manner that does not discriminate, on a basis described 
                in section 1852(b), among the individuals (who seek to 
                elect the plan).
        The preceding sentence shall not apply if it would result in 
        the enrollment of enrollees substantially nonrepresentative, as 
        determined in accordance with regulations of the Secretary, of 
        the medicare population in the service area of the plan.
            ``(3) Limitation on termination of election.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                MedicareAdvantage organization may not for any reason 
                terminate the election of any individual under this 
                section for a MedicareAdvantage plan it offers.
                    ``(B) Basis for termination of election.--A 
                MedicareAdvantage organization may terminate an 
                individual's election under this section with respect 
                to a MedicareAdvantage plan it offers if--
                            ``(i) any MedicareAdvantage monthly basic 
                        beneficiary premium, MedicareAdvantage monthly 
                        beneficiary obligation for qualified 
                        prescription drug coverage, or 
                        MedicareAdvantage monthly beneficiary premium 
                        for required or optional enhanced medical 
                        benefits required with respect to such plan are 
                        not paid on a timely basis (consistent with 
                        standards under section 1856 that provide for a 
                        grace period for late payment of such 
                        premiums);
                            ``(ii) the individual has engaged in 
                        disruptive behavior (as specified in such 
                        standards); or
                            ``(iii) the plan is terminated with respect 
                        to all individuals under this part in the area 
                        in which the individual resides.
                    ``(C) Consequence of termination.--
                            ``(i) Terminations for cause.--Any 
                        individual whose election is terminated under 
                        clause (i) or (ii) of subparagraph (B) is 
                        deemed to have elected to receive benefits 
                        under the original medicare fee-for-service 
                        program option.
                            ``(ii) Termination based on plan 
                        termination or service area reduction.--Any 
                        individual whose election is terminated under 
                        subparagraph (B)(iii) shall have a special 
                        election period under subsection (e)(4)(A) in 
                        which to change coverage to coverage under 
                        another MedicareAdvantage plan. Such an 
                        individual who fails to make an election during 
                        such period is deemed to have chosen to change 
                        coverage to the original medicare fee-for-
                        service program option.
                    ``(D) Organization obligation with respect to 
                election forms.--Pursuant to a contract under section 
                1857858., each MedicareAdvantage organization receiving 
                an election form under subsection (c)(2) shall transmit 
                to the Secretary (at such time and in such manner as 
                the Secretary may specify) a copy of such form or such 
                other information respecting the election as the 
                Secretary may specify.
    ``(h) Approval of Marketing Material and Application Forms.--
            ``(1) Submission.--No marketing material or application 
        form may be distributed by a MedicareAdvantage organization to 
        (or for the use of) MedicareAdvantage eligible individuals 
        unless--
                    ``(A) at least 45 days (or 10 days in the case 
                described in paragraph (5)) before the date of 
                distribution the organization has submitted the 
                material or form to the Secretary for review; and
                    ``(B) the Secretary has not disapproved the 
                distribution of such material or form.
            ``(2) Review.--The standards established under section 1856 
        shall include guidelines for the review of any material or form 
        submitted and under such guidelines the Secretary shall 
        disapprove (or later require the correction of) such material 
        or form if the material or form is materially inaccurate or 
        misleading or otherwise makes a material misrepresentation.
            ``(3) Deemed approval (1-stop shopping).--In the case of 
        material or form that is submitted under paragraph (1)(A) to 
        the Secretary or a regional office of the Department of Health 
        and Human Services and the Secretary or the office has not 
        disapproved the distribution of marketing material or form 
        under paragraph (1)(B) with respect to a MedicareAdvantage plan 
        in an area, the Secretary is deemed not to have disapproved 
        such distribution in all other areas covered by the plan and 
        organization except with regard to that portion of such 
        material or form that is specific only to an area involved.
            ``(4) Prohibition of certain marketing practices.--Each 
        MedicareAdvantage organization shall conform to fair marketing 
        standards, in relation to MedicareAdvantage plans offered under 
        this part, included in the standards established under section 
        1856. Such standards--
                    ``(A) shall not permit a MedicareAdvantage 
                organization to provide for cash or other monetary 
                rebates as an inducement for enrollment or otherwise 
                (other than as an additional benefit described in 
                section 1854(g)(1)(C)(i)); and
                    ``(B) may include a prohibition against a 
                MedicareAdvantage organization (or agent of such an 
                organization) completing any portion of any election 
                form used to carry out elections under this section on 
                behalf of any individual.
            ``(5) Special treatment of marketing material following 
        model marketing language.--In the case of marketing material of 
        an organization that uses, without modification, proposed model 
        language specified by the Secretary, the period specified in 
        paragraph (1)(A) shall be reduced from 45 days to 10 days.
    ``(i) Effect of Election of MedicareAdvantage Plan Option.--
            ``(1) Payments to organizations.--Subject to sections 
        1852(a)(5), 1853(h), 1853(i), 1886(d)(11), and 1886(h)(3)(D), 
        payments under a contract with a MedicareAdvantage organization 
        under section 1853(a) with respect to an individual electing a 
        MedicareAdvantage plan offered by the organization shall be 
        instead of the amounts which (in the absence of the contract) 
        would otherwise be payable under parts A, B, and D for items 
        and services furnished to the individual.
            ``(2) Only organization entitled to payment.--Subject to 
        sections 1853(f), 1853(h), 1853(i), 1857(f)(2), 1886(d)(11), 
        and 1886(h)(3)(D), only the MedicareAdvantage organization 
        shall be entitled to receive payments from the Secretary under 
        this title for services furnished to the individual.''.

SEC. 202. BENEFITS AND BENEFICIARY PROTECTIONS.

    Section 1852 (42 U.S.C. 1395w-22) is amended to read as follows:

                 ``benefits and beneficiary protections

    ``Sec. 1852. (a) Basic Benefits.--
            ``(1) In general.--Except as provided in section 1859(b)(3) 
        for MSA plans, each MedicareAdvantage plan shall provide to 
        members enrolled under this part, through providers and other 
        persons that meet the applicable requirements of this title and 
        part A of title XI--
                    ``(A) those items and services (other than hospice 
                care) for which benefits are available under parts A 
                and B to individuals residing in the area served by the 
                plan;
                    ``(B) except as provided in paragraph (2)(D), 
                qualified prescription drug coverage under part D to 
                individuals residing in the area served by the plan;
                    ``(C) a maximum limitation on out-of-pocket 
                expenses and a unified deductible; and
                    ``(D) additional benefits required under section 
                1854(d)(1).
            ``(2) Satisfaction of requirement.--
                    ``(A) In general.--A MedicareAdvantage plan (other 
                than an MSA plan) offered by a MedicareAdvantage 
                organization satisfies paragraph (1)(A), with respect 
                to benefits for items and services furnished other than 
                through a provider or other person that has a contract 
                with the organization offering the plan, if the plan 
                provides payment in an amount so that--
                            ``(i) the sum of such payment amount and 
                        any cost-sharing provided for under the plan; 
                        is equal to at least
                            ``(ii) the total dollar amount of payment 
                        for such items and services as would otherwise 
                        be authorized under parts A and B (including 
                        any balance billing permitted under such 
                        parts).
                    ``(B) Reference to related provisions.--For 
                provisions relating to--
                            ``(i) limitations on balance billing 
                        against MedicareAdvantage organizations for 
                        noncontract providers, see sections 1852(k) and 
                        1866(a)(1)(O); and
                            ``(ii) limiting actuarial value of enrollee 
                        liability for covered benefits, see section 
                        1854(f).
                    ``(C) Election of uniform coverage policy.--In the 
                case of a MedicareAdvantage organization that offers a 
                MedicareAdvantage plan in an area in which more than 1 
                local coverage policy is applied with respect to 
                different parts of the area, the organization may elect 
                to have the local coverage policy for the part of the 
                area that is most beneficial to MedicareAdvantage 
                enrollees (as identified by the Secretary) apply with 
                respect to all MedicareAdvantage enrollees enrolled in 
                the plan.
                    ``(D) Special rule for private fee-for-service 
                plans.--
                            ``(i) In general.--A private fee-for-
                        service plan may elect not to provide qualified 
                        prescription drug coverage under part D to 
                        individuals residing in the area served by the 
                        plan.
                            ``(ii) Availability of drug coverage for 
                        enrollees.--If a beneficiary enrolls in a plan 
                        making the election described in clause (i), 
                        the beneficiary may enroll for drug coverage 
                        under part D with an eligible entity under such 
                        part.
            ``(3) Enhanced medical benefits.--
                    ``(A) Benefits included subject to secretary's 
                approval.--Each MedicareAdvantage organization may 
                provide to individuals enrolled under this part, other 
                than under an MSA plan (without affording those 
                individuals an option to decline the coverage), 
                enhanced medical benefits that the Secretary may 
                approve. The Secretary shall approve any such enhanced 
                medical benefits unless the Secretary determines that 
                including such enhanced medical benefits would 
                substantially discourage enrollment by 
                MedicareAdvantage eligible individuals with the 
                organization.
                    ``(B) At enrollees' option.--A MedicareAdvantage 
                organization may not provide, under an MSA plan, 
                enhanced medical benefits that cover the deductible 
                described in section 1859(b)(2)(B). In applying the 
                previous sentence, health benefits described in section 
                1882(u)(2)(B) shall not be treated as covering such 
                deductible.
                    ``(C) Application to medicareadvantage private fee-
                for-service plans.--Nothing in this paragraph shall be 
                construed as preventing a MedicareAdvantage private 
                fee-for-service plan from offering enhanced medical 
                benefits that include payment for some or all of the 
                balance billing amounts permitted consistent with 
                section 1852(k) and coverage of additional services 
                that the plan finds to be medically necessary.
                    ``(D) Rule for approval of medical and prescription 
                drug benefits.--Notwithstanding the preceding 
                provisions of this paragraph, the Secretary may not 
                approve any enhanced medical benefit that provides for 
                the coverage of any prescription drug (other than that 
                relating to prescription drugs covered under the 
                original medicare fee-for-service program option).
            ``(4) Organization as secondary payer.--Notwithstanding any 
        other provision of law, a MedicareAdvantage organization may 
        (in the case of the provision of items and services to an 
        individual under a MedicareAdvantage plan under circumstances 
        in which payment under this title is made secondary pursuant to 
        section 1862(b)(2)) charge or authorize the provider of such 
        services to charge, in accordance with the charges allowed 
        under a law, plan, or policy described in such section--
                    ``(A) the insurance carrier, employer, or other 
                entity which under such law, plan, or policy is to pay 
                for the provision of such services; or
                    ``(B) such individual to the extent that the 
                individual has been paid under such law, plan, or 
                policy for such services.
            ``(5) National coverage determinations and legislative 
        changes in benefits.--If there is a national coverage 
        determination or legislative change in benefits required to be 
        provided under this part made in the period beginning on the 
        date of an announcement under section 1853(b) and ending on the 
        date of the next announcement under such section and the 
        Secretary projects that the determination will result in a 
        significant change in the costs to a MedicareAdvantage 
        organization of providing the benefits that are the subject of 
        such national coverage determination and that such change in 
        costs was not incorporated in the determination of the 
        benchmark amount announced under section 1853(b)(1)(A) at the 
        beginning of such period, then, unless otherwise required by 
        law--
                    ``(A) such determination or legislative change in 
                benefits shall not apply to contracts under this part 
                until the first contract year that begins after the end 
                of such period; and
                    ``(B) if such coverage determination or legislative 
                change provides for coverage of additional benefits or 
                coverage under additional circumstances, section 
                1851(i)(1) shall not apply to payment for such 
                additional benefits or benefits provided under such 
                additional circumstances until the first contract year 
                that begins after the end of such period.
        The projection under the previous sentence shall be based on an 
        analysis by the Secretary of the actuarial costs associated 
        with the coverage determination or legislative change in 
        benefits.
            ``(6) Authority to prohibit risk selection.--The Secretary 
        shall have the authority to disapprove any MedicareAdvantage 
        plan that the Secretary determines is designed to attract a 
        population that is healthier than the average population 
        residing in the service area of the plan.
            ``(7) Unified deductible defined.--In this part, the term 
        `unified deductible' means an annual deductible amount that is 
        applied in lieu of the inpatient hospital deductible under 
        section 1813(b)(1) and the deductible under section 1833(b). 
        Nothing in this part shall be construed as preventing a 
        MedicareAdvantage organization from requiring coinsurance or a 
        copayment for inpatient hospital services after the unified 
        deductible is satisfied, subject to the limitation on enrollee 
        liability under section 1854(f).
    ``(b) Antidiscrimination.--
            ``(1) Beneficiaries.--
                    ``(A) In general.--A MedicareAdvantage organization 
                may not deny, limit, or condition the coverage or 
                provision of benefits under this part, for individuals 
                permitted to be enrolled with the organization under 
                this part, based on any health status-related factor 
                described in section 2702(a)(1) of the Public Health 
                Service Act.
                    ``(B) Construction.--Except as provided under 
                section 1851(a)(3)(B), subparagraph (A) shall not be 
                construed as requiring a MedicareAdvantage organization 
                to enroll individuals who are determined to have end-
                stage renal disease.
            ``(2) Providers.--A MedicareAdvantage organization shall 
        not discriminate with respect to participation, reimbursement, 
        or indemnification as to any provider who is acting within the 
        scope of the provider's license or certification under 
        applicable State law, solely on the basis of such license or 
        certification. This paragraph shall not be construed to 
        prohibit a plan from including providers only to the extent 
        necessary to meet the needs of the plan's enrollees or from 
        establishing any measure designed to maintain quality and 
        control costs consistent with the responsibilities of the plan.
    ``(c) Disclosure Requirements.--
            ``(1) Detailed description of plan provisions.--A 
        MedicareAdvantage organization shall disclose, in clear, 
        accurate, and standardized form to each enrollee with a 
        MedicareAdvantage plan offered by the organization under this 
        part at the time of enrollment and at least annually 
        thereafter, the following information regarding such plan:
                    ``(A) Service area.--The plan's service area.
                    ``(B) Benefits.--Benefits offered under the plan, 
                including information described section 1852(a)(1) 
                (relating to benefits under the original medicare fee-
                for-service program option, the maximum limitation in 
                out-of-pocket expenses and the unified deductible, and 
                qualified prescription drug coverage under part D, 
                respectively) and exclusions from coverage and, if it 
                is an MSA plan, a comparison of benefits under such a 
                plan with benefits under other MedicareAdvantage plans.
                    ``(C) Access.--The number, mix, and distribution of 
                plan providers, out-of-network coverage (if any) 
                provided by the plan, and any point-of-service option 
                (including the MedicareAdvantage monthly beneficiary 
                premium for enhanced medical benefits for such option).
                    ``(D) Out-of-area coverage.--Out-of-area coverage 
                provided by the plan.
                    ``(E) Emergency coverage.--Coverage of emergency 
                services, including--
                            ``(i) the appropriate use of emergency 
                        services, including use of the 911 telephone 
                        system or its local equivalent in emergency 
                        situations and an explanation of what 
                        constitutes an emergency situation;
                            ``(ii) the process and procedures of the 
                        plan for obtaining emergency services; and
                            ``(iii) the locations of--
                                    ``(I) emergency departments; and
                                    ``(II) other settings, in which 
                                plan physicians and hospitals provide 
                                emergency services and post-
                                stabilization care.
                    ``(F) Enhanced medical benefits.--Enhanced medical 
                benefits available from the organization offering the 
                plan, including--
                            ``(i) whether the enhanced medical benefits 
                        are optional;
                            ``(ii) the enhanced medical benefits 
                        covered; and
                            ``(iii) the MedicareAdvantage monthly 
                        beneficiary premium for enhanced medical 
                        benefits.
                    ``(G) Prior authorization rules.--Rules regarding 
                prior authorization or other review requirements that 
                could result in nonpayment.
                    ``(H) Plan grievance and appeals procedures.--All 
                plan appeal or grievance rights and procedures.
                    ``(I) Quality assurance program.--A description of 
                the organization's quality assurance program under 
                subsection (e).
            ``(2) Disclosure upon request.--Upon request of a 
        MedicareAdvantage eligible individual, a MedicareAdvantage 
        organization must provide the following information to such 
        individual:
                    ``(A) The general coverage information and general 
                comparative plan information made available under 
                clauses (i) and (ii) of section 1851(d)(2)(A).
                    ``(B) Information on procedures used by the 
                organization to control utilization of services and 
                expenditures.
                    ``(C) Information on the number of grievances, 
                reconsiderations, and appeals and on the disposition in 
                the aggregate of such matters.
                    ``(D) An overall summary description as to the 
                method of compensation of participating physicians.
                    ``(E) The information described in subparagraphs 
                (A) through (C) in relation to the qualified 
                prescription drug coverage provided by the 
                organization.
    ``(d) Access to Services.--
            ``(1) In general.--A MedicareAdvantage organization 
        offering a MedicareAdvantage plan may select the providers from 
        whom the benefits under the plan are provided so long as--
                    ``(A) the organization makes such benefits 
                available and accessible to each individual electing 
                the plan within the plan service area with reasonable 
                promptness and in a manner which assures continuity in 
                the provision of benefits;
                    ``(B) when medically necessary the organization 
                makes such benefits available and accessible 24 hours a 
                day and 7 days a week;
                    ``(C) the plan provides for reimbursement with 
                respect to services which are covered under 
                subparagraphs (A) and (B) and which are provided to 
                such an individual other than through the organization, 
                if--
                            ``(i) the services were not emergency 
                        services (as defined in paragraph (3)), but--
                                    ``(I) the services were medically 
                                necessary and immediately required 
                                because of an unforeseen illness, 
                                injury, or condition; and
                                    ``(II) it was not reasonable given 
                                the circumstances to obtain the 
                                services through the organization;
                            ``(ii) the services were renal dialysis 
                        services and were provided other than through 
                        the organization because the individual was 
                        temporarily out of the plan's service area; or
                            ``(iii) the services are maintenance care 
                        or post-stabilization care covered under the 
                        guidelines established under paragraph (2);
                    ``(D) the organization provides access to 
                appropriate providers, including credentialed 
                specialists, for medically necessary treatment and 
                services; and
                    ``(E) coverage is provided for emergency services 
                (as defined in paragraph (3)) without regard to prior 
                authorization or the emergency care provider's 
                contractual relationship with the organization.
            ``(2) Guidelines respecting coordination of post-
        stabilization care.--A MedicareAdvantage plan shall comply with 
        such guidelines as the Secretary may prescribe relating to 
        promoting efficient and timely coordination of appropriate 
        maintenance and post-stabilization care of an enrollee after 
        the enrollee has been determined to be stable under section 
        1867.
            ``(3) Definition of emergency services.--In this 
        subsection--
                    ``(A) In general.--The term `emergency services' 
                means, with respect to an individual enrolled with an 
                organization, covered inpatient and outpatient services 
                that--
                            ``(i) are furnished by a provider that is 
                        qualified to furnish such services under this 
                        title; and
                            ``(ii) are needed to evaluate or stabilize 
                        an emergency medical condition (as defined in 
                        subparagraph (B)).
                    ``(B) Emergency medical condition based on prudent 
                layperson.--The term `emergency medical condition' 
                means a medical condition manifesting itself by acute 
                symptoms of sufficient severity (including severe pain) 
                such that a prudent layperson, who possesses an average 
                knowledge of health and medicine, could reasonably 
                expect the absence of immediate medical attention to 
                result in--
                            ``(i) placing the health of the individual 
                        (or, with respect to a pregnant woman, the 
                        health of the woman or her unborn child) in 
                        serious jeopardy;
                            ``(ii) serious impairment to bodily 
                        functions; or
                            ``(iii) serious dysfunction of any bodily 
                        organ or part.
                    ``(4) Assuring access to services in 
                medicareadvantage private fee-for-service plans.--In 
                addition to any other requirements under this part, in 
                the case of a MedicareAdvantage private fee-for-service 
                plan, the organization offering the plan must 
                demonstrate to the Secretary that the organization has 
                sufficient number and range of health care 
                professionals and providers willing to provide services 
                under the terms of the plan. The Secretary shall find 
                that an organization has met such requirement with 
                respect to any category of health care professional or 
                provider if, with respect to that category of 
                provider--
                            ``(A) the plan has established payment 
                        rates for covered services furnished by that 
                        category of provider that are not less than the 
                        payment rates provided for under part A, B, or 
                        D for such services; or
                            ``(B) the plan has contracts or agreements 
                        (other than deemed contracts or agreements 
                        under subsection (j)(6), with a sufficient 
                        number and range of providers within such 
                        category to provide covered services under the 
                        terms of the plan,
                or a combination of both. The previous sentence shall 
                not be construed as restricting the persons from whom 
                enrollees under such a plan may obtain covered 
                benefits, except that, if a plan entirely meets such 
                requirement with respect to a category of health care 
                professional or provider on the basis of subparagraph 
                (B), it may provide for a higher beneficiary copayment 
                in the case of health care professionals and providers 
                of that category who do not have contracts or 
                agreements (other than deemed contracts or agreements 
                under subsection (j)(6)) to provide covered services 
                under the terms of the plan.
    ``(e) Quality Assurance Program.--
            ``(1) In general.--Each MedicareAdvantage organization must 
        have arrangements, consistent with any regulation, for an 
        ongoing quality assurance program for health care services it 
        provides to individuals enrolled with MedicareAdvantage plans 
        of the organization.
            ``(2) Elements of program.--
                    ``(A) In general.--The quality assurance program of 
                an organization with respect to a MedicareAdvantage 
                plan (other than a MedicareAdvantage private fee-for-
                service plan or a nonnetwork MSA plan) it offers 
                shall--
                            ``(i) stress health outcomes and provide 
                        for the collection, analysis, and reporting of 
                        data (in accordance with a quality measurement 
                        system that the Secretary recognizes) that will 
                        permit measurement of outcomes and other 
                        indices of the quality of MedicareAdvantage 
                        plans and organizations;
                            ``(ii) monitor and evaluate high volume and 
                        high risk services and the care of acute and 
                        chronic conditions;
                            ``(iii) provide access to disease 
                        management and chronic care services;
                            ``(iv) provide access to preventive 
                        benefits and information for enrollees on such 
                        benefits;
                            ``(v) evaluate the continuity and 
                        coordination of care that enrollees receive;
                            ``(vi) be evaluated on an ongoing basis as 
                        to its effectiveness;
                            ``(vii) include measures of consumer 
                        satisfaction;
                            ``(viii) provide the Secretary with such 
                        access to information collected as may be 
                        appropriate to monitor and ensure the quality 
                        of care provided under this part;
                            ``(ix) provide review by physicians and 
                        other health care professionals of the process 
                        followed in the provision of such health care 
                        services;
                            ``(x) provide for the establishment of 
                        written protocols for utilization review, based 
                        on current standards of medical practice;
                            ``(xi) have mechanisms to detect both 
                        underutilization and overutilization of 
                        services;
                            ``(xii) after identifying areas for 
                        improvement, establish or alter practice 
                        parameters;
                            ``(xiii) take action to improve quality and 
                        assesses the effectiveness of such action 
                        through systematic followup; and
                            ``(xiv) make available information on 
                        quality and outcomes measures to facilitate 
                        beneficiary comparison and choice of health 
                        coverage options (in such form and on such 
                        quality and outcomes measures as the Secretary 
                        determines to be appropriate).
                Such program shall include a separate focus (with 
                respect to all the elements described in this 
                subparagraph) on racial and ethnic minorities.
                    ``(B) Elements of program for organizations 
                offering medicareadvantage private fee-for-service 
                plans, and nonnetwork msa plans.--The quality assurance 
                program of an organization with respect to a 
                MedicareAdvantage private fee-for-service plan or a 
                nonnetwork MSA plan it offers shall--
                            ``(i) meet the requirements of clauses (i) 
                        through (viii) of subparagraph (A);
                            ``(ii) insofar as it provides for the 
                        establishment of written protocols for 
                        utilization review, base such protocols on 
                        current standards of medical practice; and
                            ``(iii) have mechanisms to evaluate 
                        utilization of services and inform providers 
                        and enrollees of the results of such 
                        evaluation.
                Such program shall include a separate focus (with 
                respect to all the elements described in this 
                subparagraph) on racial and ethnic minorities.
                    ``(C) Definition of nonnetwork msa plan.--In this 
                subsection, the term `nonnetwork MSA plan' means an MSA 
                plan offered by a MedicareAdvantage organization that 
                does not provide benefits required to be provided by 
                this part, in whole or in part, through a defined set 
                of providers under contract, or under another 
                arrangement, with the organization.
            ``(3) External review.--
                    ``(A) In general.--Each MedicareAdvantage 
                organization shall, for each MedicareAdvantage plan it 
                operates, have an agreement with an independent quality 
                review and improvement organization approved by the 
                Secretary to perform functions of the type described in 
                paragraphs (4)(B) and (14) of section 1154(a) with 
                respect to services furnished by MedicareAdvantage 
                plans for which payment is made under this title. The 
                previous sentence shall not apply to a 
                MedicareAdvantage private fee-for-service plan or a 
                nonnetwork MSA plan that does not employ utilization 
                review.
                    ``(B) Nonduplication of accreditation.--Except in 
                the case of the review of quality complaints, and 
                consistent with subparagraph (C), the Secretary shall 
                ensure that the external review activities conducted 
                under subparagraph (A) are not duplicative of review 
                activities conducted as part of the accreditation 
                process.
                    ``(C) Waiver authority.--The Secretary may waive 
                the requirement described in subparagraph (A) in the 
                case of an organization if the Secretary determines 
                that the organization has consistently maintained an 
                excellent record of quality assurance and compliance 
                with other requirements under this part.
            ``(4) Treatment of accreditation.--
                    ``(A) In general.--The Secretary shall provide that 
                a MedicareAdvantage organization is deemed to meet all 
                the requirements described in any specific clause of 
                subparagraph (B) if the organization is accredited (and 
                periodically reaccredited) by a private accrediting 
                organization under a process that the Secretary has 
                determined assures that the accrediting organization 
                applies and enforces standards that meet or exceed the 
                standards established under section 1856 to carry out 
                the requirements in such clause.
                    ``(B) Requirements described.--The provisions 
                described in this subparagraph are the following:
                            ``(i) Paragraphs (1) and (2) of this 
                        subsection (relating to quality assurance 
                        programs).
                            ``(ii) Subsection (b) (relating to 
                        antidiscrimination).
                            ``(iii) Subsection (d) (relating to access 
                        to services).
                            ``(iv) Subsection (h) (relating to 
                        confidentiality and accuracy of enrollee 
                        records).
                            ``(v) Subsection (i) (relating to 
                        information on advance directives).
                            ``(vi) Subsection (j) (relating to provider 
                        participation rules).
                    ``(C) Timely action on applications.--The Secretary 
                shall determine, within 210 days after the date the 
                Secretary receives an application by a private 
                accrediting organization and using the criteria 
                specified in section 1865(b)(2), whether the process of 
                the private accrediting organization meets the 
                requirements with respect to any specific clause in 
                subparagraph (B) with respect to which the application 
                is made. The Secretary may not deny such an application 
                on the basis that it seeks to meet the requirements 
                with respect to only one, or more than one, such 
                specific clause.
                    ``(D) Construction.--Nothing in this paragraph 
                shall be construed as limiting the authority of the 
                Secretary under section 1857, including the authority 
                to terminate contracts with MedicareAdvantage 
                organizations under subsection (c)(2) of such section.
            ``(5) Report to congress.--
                    ``(A) In general.--The Secretary shall submit to 
                Congress a biennial report regarding how quality 
                assurance programs conducted under this subsection 
                focus on racial and ethnic minorities.
                    ``(B) Contents of report.--Each such report shall 
                include the following:
                            ``(i) A description of the means by which 
                        such programs focus on such racial and ethnic 
                        minorities.
                            ``(ii) An evaluation of the impact of such 
                        programs on eliminating health disparities and 
                        on improving health outcomes, continuity and 
                        coordination of care, management of chronic 
                        conditions, and consumer satisfaction.
                            ``(iii) Recommendations on ways to reduce 
                        clinical outcome disparities among racial and 
                        ethnic minorities.
    ``(f) Grievance Mechanism.--Each MedicareAdvantage organization 
must provide meaningful procedures for hearing and resolving grievances 
between the organization (including any entity or individual through 
which the organization provides health care services) and enrollees 
with MedicareAdvantage plans of the organization under this part.
    ``(g) Coverage Determinations, Reconsiderations, and Appeals.--
            ``(1) Determinations by organization.--
                    ``(A) In general.--A MedicareAdvantage organization 
                shall have a procedure for making determinations 
                regarding whether an individual enrolled with the plan 
                of the organization under this part is entitled to 
                receive a health service under this section and the 
                amount (if any) that the individual is required to pay 
                with respect to such service. Subject to paragraph (3), 
                such procedures shall provide for such determination to 
                be made on a timely basis.
                    ``(B) Explanation of determination.--Such a 
                determination that denies coverage, in whole or in 
                part, shall be in writing and shall include a statement 
                in understandable language of the reasons for the 
                denial and a description of the reconsideration and 
                appeals processes.
            ``(2) Reconsiderations.--
                    ``(A) In general.--The organization shall provide 
                for reconsideration of a determination described in 
                paragraph (1)(B) upon request by the enrollee involved. 
                The reconsideration shall be within a time period 
                specified by the Secretary, but shall be made, subject 
                to paragraph (3), not later than 60 days after the date 
                of the receipt of the request for reconsideration.
                    ``(B) Physician decision on certain 
                reconsiderations.--A reconsideration relating to a 
                determination to deny coverage based on a lack of 
                medical necessity shall be made only by a physician 
                with appropriate expertise in the field of medicine 
                which necessitates treatment who is other than a 
                physician involved in the initial determination.
            ``(3) Expedited determinations and reconsiderations.--
                    ``(A) Receipt of requests.--
                            ``(i) Enrollee requests.--An enrollee in a 
                        MedicareAdvantage plan may request, either in 
                        writing or orally, an expedited determination 
                        under paragraph (1) or an expedited 
                        reconsideration under paragraph (2) by the 
                        MedicareAdvantage organization.
                            ``(ii) Physician requests.--A physician, 
                        regardless whether the physician is affiliated 
                        with the organization or not, may request, 
                        either in writing or orally, such an expedited 
                        determination or reconsideration.
                    ``(B) Organization procedures.--
                            ``(i) In general.--The MedicareAdvantage 
                        organization shall maintain procedures for 
                        expediting organization determinations and 
                        reconsiderations when, upon request of an 
                        enrollee, the organization determines that the 
                        application of the normal timeframe for making 
                        a determination (or a reconsideration involving 
                        a determination) could seriously jeopardize the 
                        life or health of the enrollee or the 
                        enrollee's ability to regain maximum function.
                            ``(ii) Expedition required for physician 
                        requests.--In the case of a request for an 
                        expedited determination or reconsideration made 
                        under subparagraph (A)(ii), the organization 
                        shall expedite the determination or 
                        reconsideration if the request indicates that 
                        the application of the normal timeframe for 
                        making a determination (or a reconsideration 
                        involving a determination) could seriously 
                        jeopardize the life or health of the enrollee 
                        or the enrollee's ability to regain maximum 
                        function.
                            ``(iii) Timely response.--In cases 
                        described in clauses (i) and (ii), the 
                        organization shall notify the enrollee (and the 
                        physician involved, as appropriate) of the 
                        determination or reconsideration under time 
                        limitations established by the Secretary, but 
                        not later than 72 hours of the time of receipt 
                        of the request for the determination or 
                        reconsideration (or receipt of the information 
                        necessary to make the determination or 
                        reconsideration), or such longer period as the 
                        Secretary may permit in specified cases.
            ``(4) Independent review of certain coverage denials.--The 
        Secretary shall contract with an independent, outside entity to 
        review and resolve in a timely manner reconsiderations that 
        affirm denial of coverage, in whole or in part. The provisions 
        of section 1869(c)(5) shall apply to independent outside 
        entities under contract with the Secretary under this 
        paragraph.
            ``(5) Appeals.--An enrollee with a MedicareAdvantage plan 
        of a MedicareAdvantage organization under this part who is 
        dissatisfied by reason of the enrollee's failure to receive any 
        health service to which the enrollee believes the enrollee is 
        entitled and at no greater charge than the enrollee believes 
        the enrollee is required to pay is entitled, if the amount in 
        controversy is $100 or more, to a hearing before the Secretary 
        to the same extent as is provided in section 205(b), and in any 
        such hearing the Secretary shall make the organization a party. 
        If the amount in controversy is $1,000 or more, the individual 
        or organization shall, upon notifying the other party, be 
        entitled to judicial review of the Secretary's final decision 
        as provided in section 205(g), and both the individual and the 
        organization shall be entitled to be parties to that judicial 
        review. In applying subsections (b) and (g) of section 205 as 
        provided in this paragraph, and in applying section 205(l) 
        thereto, any reference therein to the Commissioner of Social 
        Security or the Social Security Administration shall be 
        considered a reference to the Secretary or the Department of 
        Health and Human Services, respectively.
    ``(h) Confidentiality and Accuracy of Enrollee Records.--Insofar as 
a MedicareAdvantage organization maintains medical records or other 
health information regarding enrollees under this part, the 
MedicareAdvantage organization shall establish procedures--
            ``(1) to safeguard the privacy of any individually 
        identifiable enrollee information;
            ``(2) to maintain such records and information in a manner 
        that is accurate and timely; and
            ``(3) to assure timely access of enrollees to such records 
        and information.
    ``(i) Information on Advance Directives.--Each MedicareAdvantage 
organization shall meet the requirement of section 1866(f) (relating to 
maintaining written policies and procedures respecting advance 
directives).
    ``(j) Rules Regarding Provider Participation.--
            ``(1) Procedures.--Insofar as a MedicareAdvantage 
        organization offers benefits under a MedicareAdvantage plan 
        through agreements with physicians, the organization shall 
        establish reasonable procedures relating to the participation 
        (under an agreement between a physician and the organization) 
        of physicians under such a plan. Such procedures shall 
        include--
                    ``(A) providing notice of the rules regarding 
                participation;
                    ``(B) providing written notice of participation 
                decisions that are adverse to physicians; and
                    ``(C) providing a process within the organization 
                for appealing such adverse decisions, including the 
                presentation of information and views of the physician 
                regarding such decision.
            ``(2) Consultation in medical policies.--A 
        MedicareAdvantage organization shall consult with physicians 
        who have entered into participation agreements with the 
        organization regarding the organization's medical policy, 
        quality, and medical management procedures.
            ``(3) Prohibiting interference with provider advice to 
        enrollees.--
                    ``(A) In general.--Subject to subparagraphs (B) and 
                (C), a MedicareAdvantage organization (in relation to 
                an individual enrolled under a MedicareAdvantage plan 
                offered by the organization under this part) shall not 
                prohibit or otherwise restrict a covered health care 
                professional (as defined in subparagraph (D)) from 
                advising such an individual who is a patient of the 
                professional about the health status of the individual 
                or medical care or treatment for the individual's 
                condition or disease, regardless of whether benefits 
                for such care or treatment are provided under the plan, 
                if the professional is acting within the lawful scope 
                of practice.
                    ``(B) Conscience protection.--Subparagraph (A) 
                shall not be construed as requiring a MedicareAdvantage 
                plan to provide, reimburse for, or provide coverage of 
                a counseling or referral service if the 
                MedicareAdvantage organization offering the plan--
                            ``(i) objects to the provision of such 
                        service on moral or religious grounds; and
                            ``(ii) in the manner and through the 
                        written instrumentalities such 
                        MedicareAdvantage organization deems 
                        appropriate, makes available information on its 
                        policies regarding such service to prospective 
                        enrollees before or during enrollment and to 
                        enrollees within 90 days after the date that 
                        the organization or plan adopts a change in 
                        policy regarding such a counseling or referral 
                        service.
                    ``(C) Construction.--Nothing in subparagraph (B) 
                shall be construed to affect disclosure requirements 
                under State law or under the Employee Retirement Income 
                Security Act of 1974.
                    ``(D) Health care professional defined.--For 
                purposes of this paragraph, the term `health care 
                professional' means a physician (as defined in section 
                1861(r)) or other health care professional if coverage 
                for the professional's services is provided under the 
                MedicareAdvantage plan for the services of the 
                professional. Such term includes a podiatrist, 
                optometrist, chiropractor, psychologist, dentist, 
                licensed pharmacist, physician assistant, physical or 
                occupational therapist and therapy assistant, speech-
                language pathologist, audiologist, registered or 
                licensed practical nurse (including nurse practitioner, 
                clinical nurse specialist, certified registered nurse 
                anesthetist, and certified nurse-midwife), licensed 
                certified social worker, registered respiratory 
                therapist, and certified respiratory therapy 
                technician.
            ``(4) Limitations on physician incentive plans.--
                    ``(A) In general.--No MedicareAdvantage 
                organization may operate any physician incentive plan 
                (as defined in subparagraph (B)) unless the following 
                requirements are met:
                            ``(i) No specific payment is made directly 
                        or indirectly under the plan to a physician or 
                        physician group as an inducement to reduce or 
                        limit medically necessary services provided 
                        with respect to a specific individual enrolled 
                        with the organization.
                            ``(ii) If the plan places a physician or 
                        physician group at substantial financial risk 
                        (as determined by the Secretary) for services 
                        not provided by the physician or physician 
                        group, the organization--
                                    ``(I) provides stop-loss protection 
                                for the physician or group that is 
                                adequate and appropriate, based on 
                                standards developed by the Secretary 
                                that take into account the number of 
                                physicians placed at such substantial 
                                financial risk in the group or under 
                                the plan and the number of individuals 
                                enrolled with the organization who 
                                receive services from the physician or 
                                group; and
                                    ``(II) conducts periodic surveys of 
                                both individuals enrolled and 
                                individuals previously enrolled with 
                                the organization to determine the 
                                degree of access of such individuals to 
                                services provided by the organization 
                                and satisfaction with the quality of 
                                such services.
                            ``(iii) The organization provides the 
                        Secretary with descriptive information 
                        regarding the plan, sufficient to permit the 
                        Secretary to determine whether the plan is in 
                        compliance with the requirements of this 
                        subparagraph.
                    ``(B) Physician incentive plan defined.--In this 
                paragraph, the term `physician incentive plan' means 
                any compensation arrangement between a 
                MedicareAdvantage organization and a physician or 
                physician group that may directly or indirectly have 
                the effect of reducing or limiting services provided 
                with respect to individuals enrolled with the 
                organization under this part.
            ``(5) Limitation on provider indemnification.--A 
        MedicareAdvantage organization may not provide (directly or 
        indirectly) for a health care professional, provider of 
        services, or other entity providing health care services (or 
        group of such professionals, providers, or entities) to 
        indemnify the organization against any liability resulting from 
        a civil action brought for any damage caused to an enrollee 
        with a MedicareAdvantage plan of the organization under this 
        part by the organization's denial of medically necessary care.
            ``(6) Special rules for medicareadvantage private fee-for-
        service plans.--For purposes of applying this part (including 
        subsection (k)(1)) and section 1866(a)(1)(O), a hospital (or 
        other provider of services), a physician or other health care 
        professional, or other entity furnishing health care services 
        is treated as having an agreement or contract in effect with a 
        MedicareAdvantage organization (with respect to an individual 
        enrolled in a MedicareAdvantage private fee-for-service plan it 
        offers), if--
                    ``(A) the provider, professional, or other entity 
                furnishes services that are covered under the plan to 
                such an enrollee; and
                    ``(B) before providing such services, the provider, 
                professional, or other entity --
                            ``(i) has been informed of the individual's 
                        enrollment under the plan; and
                            ``(ii) either--
                                    ``(I) has been informed of the 
                                terms and conditions of payment for 
                                such services under the plan; or
                                    ``(II) is given a reasonable 
                                opportunity to obtain information 
                                concerning such terms and conditions,
                        in a manner reasonably designed to effect 
                        informed agreement by a provider.
        The previous sentence shall only apply in the absence of an 
        explicit agreement between such a provider, professional, or 
        other entity and the MedicareAdvantage organization.
    ``(k) Treatment of Services Furnished by Certain Providers.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        physician or other entity (other than a provider of services) 
        that does not have a contract establishing payment amounts for 
        services furnished to an individual enrolled under this part 
        with a MedicareAdvantage organization described in section 
        1851(a)(2)(A) shall accept as payment in full for covered 
        services under this title that are furnished to such an 
        individual the amounts that the physician or other entity could 
        collect if the individual were not so enrolled. Any penalty or 
        other provision of law that applies to such a payment with 
        respect to an individual entitled to benefits under this title 
        (but not enrolled with a MedicareAdvantage organization under 
        this part) also applies with respect to an individual so 
        enrolled.
            ``(2) Application to medicareadvantage private fee-for-
        service plans.--
                    ``(A) Balance billing limits under 
                medicareadvantage private fee-for-service plans in case 
                of contract providers.--
                            ``(i) In general.--In the case of an 
                        individual enrolled in a MedicareAdvantage 
                        private fee-for-service plan under this part, a 
                        physician, provider of services, or other 
                        entity that has a contract (including through 
                        the operation of subsection (j)(6)) 
                        establishing a payment rate for services 
                        furnished to the enrollee shall accept as 
                        payment in full for covered services under this 
                        title that are furnished to such an individual 
                        an amount not to exceed (including any 
                        deductibles, coinsurance, copayments, or 
                        balance billing otherwise permitted under the 
                        plan) an amount equal to 115 percent of such 
                        payment rate.
                            ``(ii) Procedures to enforce limits.--The 
                        MedicareAdvantage organization that offers such 
                        a plan shall establish procedures, similar to 
                        the procedures described in section 
                        1848(g)(1)(A), in order to carry out clause 
                        (i).
                            ``(iii) Assuring enforcement.--If the 
                        MedicareAdvantage organization fails to 
                        establish and enforce procedures required under 
                        clause (ii), the organization is subject to 
                        intermediate sanctions under section 1857(g).
                    ``(B) Enrollee liability for noncontract 
                providers.--For provisions--
                            ``(i) establishing a minimum payment rate 
                        in the case of noncontract providers under a 
                        MedicareAdvantage private fee-for-service plan, 
                        see section 1852(a)(2); or
                            ``(ii) limiting enrollee liability in the 
                        case of covered services furnished by such 
                        providers, see paragraph (1) and section 
                        1866(a)(1)(O).
                    ``(C) Information on beneficiary liability.--
                            ``(i) In general.--Each MedicareAdvantage 
                        organization that offers a MedicareAdvantage 
                        private fee-for-service plan shall provide that 
                        enrollees under the plan who are furnished 
                        services for which payment is sought under the 
                        plan are provided an appropriate explanation of 
                        benefits (consistent with that provided under 
                        parts A, B, and D, and, if applicable, under 
                        medicare supplemental policies) that includes a 
                        clear statement of the amount of the enrollee's 
                        liability (including any liability for balance 
                        billing consistent with this subsection) with 
                        respect to payments for such services.
                            ``(ii) Advance notice before receipt of 
                        inpatient hospital services and certain other 
                        services.--In addition, such organization 
                        shall, in its terms and conditions of payments 
                        to hospitals for inpatient hospital services 
                        and for other services identified by the 
                        Secretary for which the amount of the balance 
                        billing under subparagraph (A) could be 
                        substantial, require the hospital to provide to 
                        the enrollee, before furnishing such services 
                        and if the hospital imposes balance billing 
                        under subparagraph (A)--
                                    ``(I) notice of the fact that 
                                balance billing is permitted under such 
                                subparagraph for such services; and
                                    ``(II) a good faith estimate of the 
                                likely amount of such balance billing 
                                (if any), with respect to such 
                                services, based upon the presenting 
                                condition of the enrollee.
    ``(l) Return to Home Skilled Nursing Facilities for Covered Post-
Hospital Extended Care Services.--
            ``(1) Ensuring return to home snf.--
                    ``(A) In general.--In providing coverage of post-
                hospital extended care services, a MedicareAdvantage 
                plan shall provide for such coverage through a home 
                skilled nursing facility if the following conditions 
                are met:
                            ``(i) Enrollee election.--The enrollee 
                        elects to receive such coverage through such 
                        facility.
                            ``(ii) SNF agreement.--The facility has a 
                        contract with the MedicareAdvantage 
                        organization for the provision of such 
                        services, or the facility agrees to accept 
                        substantially similar payment under the same 
                        terms and conditions that apply to similarly 
                        situated skilled nursing facilities that are 
                        under contract with the MedicareAdvantage 
                        organization for the provision of such services 
                        and through which the enrollee would otherwise 
                        receive such services.
                    ``(B) Manner of payment to home snf.--The 
                organization shall provide payment to the home skilled 
                nursing facility consistent with the contract or the 
                agreement described in subparagraph (A)(ii), as the 
                case may be.
            ``(2) No less favorable coverage.--The coverage provided 
        under paragraph (1) (including scope of services, cost-sharing, 
        and other criteria of coverage) shall be no less favorable to 
        the enrollee than the coverage that would be provided to the 
        enrollee with respect to a skilled nursing facility the post-
        hospital extended care services of which are otherwise covered 
        under the MedicareAdvantage plan.
            ``(3) Rule of construction.--Nothing in this subsection 
        shall be construed to do the following:
                    ``(A) To require coverage through a skilled nursing 
                facility that is not otherwise qualified to provide 
                benefits under part A for medicare beneficiaries not 
                enrolled in a MedicareAdvantage plan.
                    ``(B) To prevent a skilled nursing facility from 
                refusing to accept, or imposing conditions upon the 
                acceptance of, an enrollee for the receipt of post-
                hospital extended care services.
            ``(4) Definitions.--In this subsection:
                    ``(A) Home skilled nursing facility.--The term 
                `home skilled nursing facility' means, with respect to 
                an enrollee who is entitled to receive post-hospital 
                extended care services under a MedicareAdvantage plan, 
                any of the following skilled nursing facilities:
                            ``(i) SNF residence at time of admission.--
                        The skilled nursing facility in which the 
                        enrollee resided at the time of admission to 
                        the hospital preceding the receipt of such 
                        post-hospital extended care services.
                            ``(ii) SNF in continuing care retirement 
                        community.--A skilled nursing facility that is 
                        providing such services through a continuing 
                        care retirement community (as defined in 
                        subparagraph (B)) which provided residence to 
                        the enrollee at the time of such admission.
                            ``(iii) SNF residence of spouse at time of 
                        discharge.--The skilled nursing facility in 
                        which the spouse of the enrollee is residing at 
                        the time of discharge from such hospital.
                    ``(B) Continuing care retirement community.--The 
                term `continuing care retirement community' means, with 
                respect to an enrollee in a MedicareAdvantage plan, an 
                arrangement under which housing and health-related 
                services are provided (or arranged) through an 
                organization for the enrollee under an agreement that 
                is effective for the life of the enrollee or for a 
                specified period.''.

SEC. 203. PAYMENTS TO MEDICAREADVANTAGE ORGANIZATIONS.

    Section 1853 (42 U.S.C. 1395w-23) is amended to read as follows:

             ``payments to medicareadvantage organizations

    ``Sec. 1853. (a) Payments to Organizations.--
            ``(1) Monthly payments.--
                    ``(A) In general.--Under a contract under section 
                1857 and subject to subsections (f), (h), and (j) and 
                section 1859(e)(4), the Secretary shall make, to each 
                MedicareAdvantage organization, with respect to 
                coverage of an individual for a month under this part 
                in a MedicareAdvantage payment area, separate monthly 
                payments with respect to--
                            ``(i) benefits under the original medicare 
                        fee-for-service program under parts A and B in 
                        accordance with subsection (d); and
                            ``(ii) benefits under the voluntary 
                        prescription drug program under part D in 
                        accordance with section 1858A and the other 
                        provisions of this part.
                    ``(B) Special rule for end-stage renal disease.--
                The Secretary shall establish separate rates of payment 
                to a MedicareAdvantage organization with respect to 
                classes of individuals determined to have end-stage 
                renal disease and enrolled in a MedicareAdvantage plan 
                of the organization. Such rates of payment shall be 
                actuarially equivalent to rates paid to other enrollees 
                in the MedicareAdvantage payment area (or such other 
                area as specified by the Secretary). In accordance with 
                regulations, the Secretary shall provide for the 
                application of the seventh sentence of section 
                1881(b)(7) to payments under this section covering the 
                provision of renal dialysis treatment in the same 
                manner as such sentence applies to composite rate 
                payments described in such sentence. In establishing 
                such rates, the Secretary shall provide for appropriate 
                adjustments to increase each rate to reflect the 
                demonstration rate (including the risk adjustment 
                methodology associated with such rate) of the social 
                health maintenance organization end-stage renal disease 
                capitation demonstrations (established by section 2355 
                of the Deficit Reduction Act of 1984, as amended by 
                section 13567(b) of the Omnibus Budget Reconciliation 
                Act of 1993), and shall compute such rates by taking 
                into account such factors as renal treatment modality, 
                age, and the underlying cause of the end-stage renal 
                disease.
            ``(2) Adjustment to reflect number of enrollees.--
                    ``(A) In general.--The amount of payment under this 
                subsection may be retroactively adjusted to take into 
                account any difference between the actual number of 
                individuals enrolled with an organization under this 
                part and the number of such individuals estimated to be 
                so enrolled in determining the amount of the advance 
                payment.
                    ``(B) Special rule for certain enrollees.--
                            ``(i) In general.--Subject to clause (ii), 
                        the Secretary may make retroactive adjustments 
                        under subparagraph (A) to take into account 
                        individuals enrolled during the period 
                        beginning on the date on which the individual 
                        enrolls with a MedicareAdvantage organization 
                        under a plan operated, sponsored, or 
                        contributed to by the individual's employer or 
                        former employer (or the employer or former 
                        employer of the individual's spouse) and ending 
                        on the date on which the individual is enrolled 
                        in the organization under this part, except 
                        that for purposes of making such retroactive 
                        adjustments under this subparagraph, such 
                        period may not exceed 90 days.
                            ``(ii) Exception.--No adjustment may be 
                        made under clause (i) with respect to any 
                        individual who does not certify that the 
                        organization provided the individual with the 
                        disclosure statement described in section 
                        1852(c) at the time the individual enrolled 
                        with the organization.
                    ``(C) Equalization of federal contribution.--In 
                applying subparagraph (A), the Secretary shall ensure 
                that the payment to the MedicareAdvantage organization 
                for each individual enrolled with the organization 
                shall equal the MedicareAdvantage benchmark amount for 
                the payment area in which that individual resides (as 
                determined under paragraph (4)), as adjusted--
                            ``(i) by multiplying the benchmark amount 
                        for that payment area by the ratio of--
                                    ``(I) the payment amount determined 
                                under subsection (d)(4); to
                                    ``(II) the weighted service area 
                                benchmark amount determined under 
                                subsection (d)(2); and
                            ``(ii) using such risk adjustment factor as 
                        specified by the Secretary under subsection 
                        (b)(1)(B).
            ``(3) Comprehensive risk adjustment methodology.--
                    ``(A) Application of methodology.--The Secretary 
                shall apply the comprehensive risk adjustment 
                methodology described in subparagraph (B) to 100 
                percent of the amount of payments to plans under 
                subsection (d)(4)(B).
                    ``(B) Comprehensive risk adjustment methodology 
                described.--The comprehensive risk adjustment 
                methodology described in this subparagraph is the risk 
                adjustment methodology that would apply with respect to 
                MedicareAdvantage plans offered by MedicareAdvantage 
                organizations in 2005, except that if such methodology 
                does not apply to groups of beneficiaries who are aged 
                or disabled and groups of beneficiaries who have end-
                stage renal disease, the Secretary shall revise such 
                methodology to apply to such groups.
                    ``(C) Uniform application to all types of plans.--
                Subject to section 1859(e)(4), the comprehensive risk 
                adjustment methodology established under this paragraph 
                shall be applied uniformly without regard to the type 
                of plan.
                    ``(D) Data collection.--In order to carry out this 
                paragraph, the Secretary shall require 
                MedicareAdvantage organizations to submit such data and 
                other information as the Secretary deems necessary.
                    ``(E) Improvement of payment accuracy.--
                Notwithstanding any other provision of this paragraph, 
                the Secretary may revise the comprehensive risk 
                adjustment methodology described in subparagraph (B) 
                from time to time to improve payment accuracy.
            ``(4) Annual calculation of benchmark amounts.--For each 
        year, the Secretary shall calculate a benchmark amount for each 
        MedicareAdvantage payment area for each month for such year 
        with respect to coverage of the benefits available under the 
        original medicare fee-for-service program option equal to the 
        greater of the following amounts (adjusted as appropriate for 
        the application of the risk adjustment methodology under 
        paragraph (3)):
                    ``(A) Minimum amount.--\1/12\ of the annual 
                Medicare+Choice capitation rate determined under 
                subsection (c)(1)(B) for the payment area for the year.
                    ``(B) Local fee-for-service rate.--The local fee-
                for-service rate for such area for the year (as 
                calculated under paragraph (5)).
            ``(5) Annual calculation of local fee-for-service rates.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                term `local fee-for-service rate' means the amount of 
                payment for a month in a MedicareAdvantage payment area 
                for benefits under this title and associated claims 
                processing costs for an individual who has elected to 
                receive benefits under the original medicare fee-for-
                service program option and not enrolled in a 
                MedicareAdvantage plan under this part. The Secretary 
                shall annually calculate such amount in a manner 
                similar to the manner in which the Secretary calculated 
                the adjusted average per capita cost under section 
                1876.
                    ``(B) Removal of medical education costs from 
                calculation of local fee-for-service rate.--
                            ``(i) In general.--In calculating the local 
                        fee-for-service rate under subparagraph (A) for 
                        a year, the amount of payment described in such 
                        subparagraph shall be adjusted to exclude from 
                        such payment the payment adjustments described 
                        in clause (ii).
                            ``(ii) Payment adjustments described.--
                                    ``(I) In general.--Subject to 
                                subclause (II), the payment adjustments 
                                described in this subparagraph are 
                                payment adjustments which the Secretary 
                                estimates are payable during the year--
                                            ``(aa) for the indirect 
                                        costs of medical education 
                                        under section 1886(d)(5)(B); 
                                        and
                                            ``(bb) for direct graduate 
                                        medical education costs under 
                                        section 1886(h).
                                    ``(II) Treatment of payments 
                                covered under state hospital 
                                reimbursement system.--To the extent 
                                that the Secretary estimates that the 
                                amount of the local fee-for-service 
                                rates reflects payments to hospitals 
                                reimbursed under section 1814(b)(3), 
                                the Secretary shall estimate a payment 
                                adjustment that is comparable to the 
                                payment adjustment that would have been 
                                made under clause (i) if the hospitals 
                                had not been reimbursed under such 
                                section.
    ``(b) Annual Announcement of Payment Factors.--
            ``(1) Annual announcement.--Beginning in 2005, at the same 
        time as the Secretary publishes the risk adjusters under 
        section 1860D-11, the Secretary shall annually announce (in a 
        manner intended to provide notice to interested parties) the 
        following payment factors:
                    ``(A) The benchmark amount for each 
                MedicareAdvantage payment area (as calculated under 
                subsection (a)(4)) for the year.
                    ``(B) The factors to be used for adjusting payments 
                under the comprehensive risk adjustment methodology 
                described in subsection (a)(3)(B) with respect to each 
                MedicareAdvantage payment area for the year.
            ``(2) Advance notice of methodological changes.--At least 
        45 days before making the announcement under paragraph (1) for 
        a year, the Secretary shall--
                    ``(A) provide for notice to MedicareAdvantage 
                organizations of proposed changes to be made in the 
                methodology from the methodology and assumptions used 
                in the previous announcement; and
                    ``(B) provide such organizations with an 
                opportunity to comment on such proposed changes.
            ``(3) Explanation of assumptions.--In each announcement 
        made under paragraph (1), the Secretary shall include an 
        explanation of the assumptions and changes in methodology used 
        in the announcement in sufficient detail so that 
        MedicareAdvantage organizations can compute each payment factor 
        described in paragraph (1).
    ``(c) Calculation of Annual Medicare+Choice Capitation Rates.--
            ``(1) In general.--For purposes of making payments under 
        this part for years before 2006 and for purposes of calculating 
        the annual Medicare+Choice capitation rates under paragraph (7) 
        beginning with such year, subject to paragraph (6)(C), each 
        annual Medicare+Choice capitation rate, for a Medicare+Choice 
        payment area before 2006 or a MedicareAdvantage payment area 
        beginning with such year for a contract year consisting of a 
        calendar year, is equal to the largest of the amounts specified 
        in the following subparagraph (A), (B), or (C):
                    ``(A) Blended capitation rate.--The sum of--
                            ``(i) the area-specific percentage (as 
                        specified under paragraph (2) for the year) of 
                        the annual area-specific Medicare+Choice 
                        capitation rate for the MedicareAdvantage 
                        payment area, as determined under paragraph (3) 
                        for the year; and
                            ``(ii) the national percentage (as 
                        specified under paragraph (2) for the year) of 
                        the input-price-adjusted annual national 
                        Medicare+Choice capitation rate, as determined 
                        under paragraph (4) for the year,
                multiplied by the budget neutrality adjustment factor 
                determined under paragraph (5).
                    ``(B) Minimum amount.--12 multiplied by the 
                following amount:
                            ``(i) For 1998, $367 (but not to exceed, in 
                        the case of an area outside the 50 States and 
                        the District of Columbia, 150 percent of the 
                        annual per capita rate of payment for 1997 
                        determined under section 1876(a)(1)(C) for the 
                        area).
                            ``(ii) For 1999 and 2000, the minimum 
                        amount determined under clause (i) or this 
                        clause, respectively, for the preceding year, 
                        increased by the national per capita 
                        Medicare+Choice growth percentage described in 
                        paragraph (6)(A) applicable to 1999 or 2000, 
                        respectively.
                            ``(iii)(I) Subject to subclause (II), for 
                        2001, for any area in a Metropolitan 
                        Statistical Area with a population of more than 
                        250,000, $525, and for any other area $475.
                            ``(II) In the case of an area outside the 
                        50 States and the District of Columbia, the 
                        amount specified in this clause shall not 
                        exceed 120 percent of the amount determined 
                        under clause (ii) for such area for 2000.
                            ``(iv) For 2002 through 2013, the minimum 
                        amount specified in this clause (or clause 
                        (iii)) for the preceding year increased by the 
                        national per capita Medicare+Choice growth 
                        percentage, described in paragraph (6)(A) for 
                        that succeeding year.
                            ``(v) For 2014 and each succeeding year, 
                        the minimum amount specified in this clause (or 
                        clause (iv)) for the preceding year increased 
                        by the percentage increase in the Consumer 
                        Price Index for all urban consumers (U.S. urban 
                        average) for the 12-month period ending with 
                        June of the previous year.
                    ``(C) Minimum percentage increase.--
                            ``(i) For 1998, 102 percent of the annual 
                        per capita rate of payment for 1997 determined 
                        under section 1876(a)(1)(C) for the 
                        Medicare+Choice payment area.
                            ``(ii) For 1999 and 2000, 102 percent of 
                        the annual Medicare+Choice capitation rate 
                        under this paragraph for the area for the 
                        previous year.
                            ``(iii) For 2001, 103 percent of the annual 
                        Medicare+Choice capitation rate under this 
                        paragraph for the area for 2000.
                            ``(iv) For 2002, 2003, and 2004, 102 
                        percent of the annual Medicare+Choice 
                        capitation rate under this paragraph for the 
                        area for the previous year.
                            ``(v) For 2005, 103 percent of the annual 
                        Medicare+Choice capitation rate under this 
                        paragraph for the area for 2003.
                            ``(vi) For 2006 and each succeeding year, 
                        102 percent of the annual Medicare+Choice 
                        capitation rate under this paragraph for the 
                        area for the previous year, except that such 
                        rate shall be determined by substituting `102' 
                        for `103' in clause (v).
            ``(2) Area-specific and national percentages.--For purposes 
        of paragraph (1)(A)--
                    ``(A) for 1998, the `area-specific percentage' is 
                90 percent and the `national percentage' is 10 percent;
                    ``(B) for 1999, the `area-specific percentage' is 
                82 percent and the `national percentage' is 18 percent;
                    ``(C) for 2000, the `area-specific percentage' is 
                74 percent and the `national percentage' is 26 percent;
                    ``(D) for 2001, the `area-specific percentage' is 
                66 percent and the `national percentage' is 34 percent;
                    ``(E) for 2002, the `area-specific percentage' is 
                58 percent and the `national percentage' is 42 percent; 
                and
                    ``(F) for a year after 2002, the `area-specific 
                percentage' is 50 percent and the `national percentage' 
                is 50 percent.
            ``(3) Annual area-specific medicare+choice capitation 
        rate.--
                    ``(A) In general.--For purposes of paragraph 
                (1)(A), subject to subparagraph (B), the annual area-
                specific Medicare+Choice capitation rate for a 
                Medicare+Choice payment area--
                            ``(i) for 1998 is, subject to subparagraph 
                        (D), the annual per capita rate of payment for 
                        1997 determined under section 1876(a)(1)(C) for 
                        the area, increased by the national per capita 
                        Medicare+Choice growth percentage for 1998 
                        (described in paragraph (6)(A)); or
                            ``(ii) for a subsequent year is the annual 
                        area-specific Medicare+Choice capitation rate 
                        for the previous year determined under this 
                        paragraph for the area, increased by the 
                        national per capita Medicare+Choice growth 
                        percentage for such subsequent year.
                    ``(B) Removal of medical education from calculation 
                of adjusted average per capita cost.--
                            ``(i) In general.--In determining the area-
                        specific Medicare+Choice capitation rate under 
                        subparagraph (A) for a year (beginning with 
                        1998), the annual per capita rate of payment 
                        for 1997 determined under section 1876(a)(1)(C) 
                        shall be adjusted to exclude from the rate the 
                        applicable percent (specified in clause (ii)) 
                        of the payment adjustments described in 
                        subparagraph (C).
                            ``(ii) Applicable percent.--For purposes of 
                        clause (i), the applicable percent for--
                                    ``(I) 1998 is 20 percent;
                                    ``(II) 1999 is 40 percent;
                                    ``(III) 2000 is 60 percent;
                                    ``(IV) 2001 is 80 percent; and
                                    ``(V) a succeeding year is 100 
                                percent.
                    ``(C) Payment adjustment.--
                            ``(i) In general.--Subject to clause (ii), 
                        the payment adjustments described in this 
                        subparagraph are payment adjustments which the 
                        Secretary estimates were payable during 1997--
                                    ``(I) for the indirect costs of 
                                medical education under section 
                                1886(d)(5)(B); and
                                    ``(II) for direct graduate medical 
                                education costs under section 1886(h).
                            ``(ii) Treatment of payments covered under 
                        state hospital reimbursement system.--To the 
                        extent that the Secretary estimates that an 
                        annual per capita rate of payment for 1997 
                        described in clause (i) reflects payments to 
                        hospitals reimbursed under section 1814(b)(3), 
                        the Secretary shall estimate a payment 
                        adjustment that is comparable to the payment 
                        adjustment that would have been made under 
                        clause (i) if the hospitals had not been 
                        reimbursed under such section.
                    ``(D) Treatment of areas with highly variable 
                payment rates.--In the case of a Medicare+Choice 
                payment area for which the annual per capita rate of 
                payment determined under section 1876(a)(1)(C) for 1997 
                varies by more than 20 percent from such rate for 1996, 
                for purposes of this subsection the Secretary may 
                substitute for such rate for 1997 a rate that is more 
                representative of the costs of the enrollees in the 
                area.
            ``(4) Input-price-adjusted annual national medicare+choice 
        capitation rate.--
                    ``(A) In general.--For purposes of paragraph 
                (1)(A), the input-price-adjusted annual national 
                Medicare+Choice capitation rate for a Medicare+Choice 
                payment area for a year is equal to the sum, for all 
                the types of medicare services (as classified by the 
                Secretary), of the product (for each such type of 
                service) of--
                            ``(i) the national standardized annual 
                        Medicare+Choice capitation rate (determined 
                        under subparagraph (B)) for the year;
                            ``(ii) the proportion of such rate for the 
                        year which is attributable to such type of 
                        services; and
                            ``(iii) an index that reflects (for that 
                        year and that type of services) the relative 
                        input price of such services in the area 
                        compared to the national average input price of 
                        such services.
                In applying clause (iii), the Secretary may, subject to 
                subparagraph (C), apply those indices under this title 
                that are used in applying (or updating) national 
                payment rates for specific areas and localities.
                    ``(B) National standardized annual medicare+choice 
                capitation rate.--In subparagraph (A)(i), the `national 
                standardized annual Medicare+Choice capitation rate' 
                for a year is equal to--
                            ``(i) the sum (for all Medicare+Choice 
                        payment areas) of the product of--
                                    ``(I) the annual area-specific 
                                Medicare+Choice capitation rate for 
                                that year for the area under paragraph 
                                (3); and
                                    ``(II) the average number of 
                                medicare beneficiaries residing in that 
                                area in the year, multiplied by the 
                                average of the risk factor weights used 
                                to adjust payments under subsection 
                                (a)(1)(A) for such beneficiaries in 
                                such area; divided by
                            ``(ii) the sum of the products described in 
                        clause (i)(II) for all areas for that year.
            ``(5) Payment adjustment budget neutrality factor.--For 
        purposes of paragraph (1)(A), for each year, the Secretary 
        shall determine a budget neutrality adjustment factor so that 
        the aggregate of the payments under this part (other than those 
        attributable to subsections (a)(3)(C)(iii) and (i)) shall equal 
        the aggregate payments that would have been made under this 
        part if payment were based entirely on area-specific capitation 
        rates.
            ``(6) National per capita medicare+choice growth percentage 
        defined.--
                    ``(A) In general.--In this part, the `national per 
                capita Medicare+Choice growth percentage' for a year is 
                the percentage determined by the Secretary, by March 
                1st before the beginning of the year involved, to 
                reflect the Secretary's estimate of the projected per 
                capita rate of growth in expenditures under this title 
                for an individual entitled to (or enrolled for) 
                benefits under part A and enrolled under part B, 
                reduced by the number of percentage points specified in 
                subparagraph (B) for the year. Separate determinations 
                may be made for aged enrollees, disabled enrollees, and 
                enrollees with end-stage renal disease.
                    ``(B) Adjustment.--The number of percentage points 
                specified in this subparagraph is--
                            ``(i) for 1998, 0.8 percentage points;
                            ``(ii) for 1999, 0.5 percentage points;
                            ``(iii) for 2000, 0.5 percentage points;
                            ``(iv) for 2001, 0.5 percentage points;
                            ``(v) for 2002, 0.3 percentage points; and
                            ``(vi) for a year after 2002, 0 percentage 
                        points.
                    ``(C) Adjustment for over or under projection of 
                national per capita medicare+choice growth 
                percentage.--Beginning with rates calculated for 1999, 
                before computing rates for a year as described in 
                paragraph (1), the Secretary shall adjust all area-
                specific and national Medicare+Choice capitation rates 
                (and beginning in 2000, the minimum amount) for the 
                previous year for the differences between the 
                projections of the national per capita Medicare+Choice 
                growth percentage for that year and previous years and 
                the current estimate of such percentage for such years.
            ``(7) Transition to medicareadvantage competition.--
                    ``(A) In general.--For each year (beginning with 
                2006) payments to MedicareAdvantage plans shall not be 
                computed under this subsection, but instead shall be 
                based on the payment amount determined under subsection 
                (d).
                    ``(B) Continued calculation of capitation rates.--
                For each year (beginning with 2006) the Secretary shall 
                calculate and publish the annual Medicare+Choice 
                capitation rates under this subsection and shall use 
                the annual Medicare+Choice capitation rate determined 
                under subsection (c)(1) for purposes of determining the 
                benchmark amount under subsection (a)(4).
    ``(d) Secretary's Determination of Payment Amount.--
            ``(1) Review of plan bids.--The Secretary shall review each 
        plan bid submitted under section 1854(a) for the coverage of 
        benefits under the original medicare fee-for-service program 
        option to ensure that such bids are consistent with the 
        requirements under this part an are based on the assumptions 
        described in section 1854(a)(2)(A)(iii).
            ``(2) Determination of weighted service area benchmark 
        amounts.--The Secretary shall calculate a weighted service area 
        benchmark amount for the benefits under the original medicare 
        fee-for-service program option for each plan equal to the 
        weighted average of the benchmark amounts for benefits under 
        such original medicare fee-for-service program option for the 
        payment areas included in the service area of the plan using 
        the assumptions described in section 1854(a)(2)(A)(iii).
            ``(3) Comparison to benchmark.--The Secretary shall 
        determine the difference between each plan bid (as adjusted 
        under paragraph (1)) and the weighted service area benchmark 
        amount (as determined under paragraph (2)) for purposes of 
        determining--
                    ``(A) the payment amount under paragraph (4); and
                    ``(B) the additional benefits required and 
                MedicareAdvantage monthly basic beneficiary premiums.
            ``(4) Determination of payment amount for original medicare 
        fee-for-service benefits.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall determine the payment amount for 
                MedicareAdvantage plans for the benefits under the 
                original medicare fee-for-service program option as 
                follows:
                            ``(i) Bids that equal or exceed the 
                        benchmark.--In the case of a plan bid that 
                        equals or exceeds the weighted service area 
                        benchmark amount, the amount of each monthly 
                        payment to a MedicareAdvantage organization 
                        with respect to each individual enrolled in a 
                        plan shall be the weighted service area 
                        benchmark amount.
                            ``(ii) Bids below the benchmark.--In the 
                        case of a plan bid that is less than the 
                        weighted service area benchmark amount, the 
                        amount of each monthly payment to a 
                        MedicareAdvantage organization with respect to 
                        each individual enrolled in a plan shall be the 
                        weighted service area benchmark amount reduced 
                        by the amount of any premium reduction elected 
                        by the plan under section 1854(d)(1)(A)(i).
                    ``(B) Application of comprehensive risk adjustment 
                methodology.--The Secretary shall adjust the amounts 
                determined under subparagraph (A) using the 
                comprehensive risk adjustment methodology applicable 
                under subsection (a)(3).
            ``(6) Adjustment for national coverage determinations and 
        legislative changes in benefits.--If the Secretary makes a 
        determination with respect to coverage under this title or 
        there is a change in benefits required to be provided under 
        this part that the Secretary projects will result in a 
        significant increase in the costs to MedicareAdvantage 
        organizations of providing benefits under contracts under this 
        part (for periods after any period described in section 
        1852(a)(5)), the Secretary shall appropriately adjust the 
        benchmark amounts or payment amounts (as determined by the 
        Secretary). Such projection and adjustment shall be based on an 
        analysis by the Secretary of the actuarial costs associated 
        with the new benefits.
            ``(7) Benefits under the original medicare fee-for-service 
        program option defined.--For purposes of this part, the term 
        `benefits under the original medicare fee-for-service program 
        option' means those items and services (other than hospice 
        care) for which benefits are available under parts A and B to 
        individuals entitled to, or enrolled for, benefits under part A 
        and enrolled under part B, with cost-sharing for those services 
        as required under parts A and B or an actuarially equivalent 
        level of cost-sharing as determined in this part.
    ``(e) MedicareAdvantage Payment Area Defined.--
            ``(1) In general.--In this part, except as provided in 
        paragraph (3), the term `MedicareAdvantage payment area' means 
        a county, or equivalent area specified by the Secretary.
            ``(2) Rule for esrd beneficiaries.--In the case of 
        individuals who are determined to have end stage renal disease, 
        the MedicareAdvantage payment area shall be a State or such 
        other payment area as the Secretary specifies.
            ``(3) Geographic adjustment.--
                    ``(A) In general.--Upon written request of the 
                chief executive officer of a State for a contract year 
                (beginning after 2005) made by not later than February 
                1 of the previous year, the Secretary shall make a 
                geographic adjustment to a MedicareAdvantage payment 
                area in the State otherwise determined under paragraph 
                (1)--
                            ``(i) to a single statewide 
                        MedicareAdvantage payment area;
                            ``(ii) to the metropolitan based system 
                        described in subparagraph (C); or
                            ``(iii) to consolidating into a single 
                        MedicareAdvantage payment area noncontiguous 
                        counties (or equivalent areas described in 
                        paragraph (1)) within a State.
                Such adjustment shall be effective for payments for 
                months beginning with January of the year following the 
                year in which the request is received.
                    ``(B) Budget neutrality adjustment.--In the case of 
                a State requesting an adjustment under this paragraph, 
                the Secretary shall initially (and annually thereafter) 
                adjust the payment rates otherwise established under 
                this section for MedicareAdvantage payment areas in the 
                State in a manner so that the aggregate of the payments 
                under this section in the State shall not exceed the 
                aggregate payments that would have been made under this 
                section for MedicareAdvantage payment areas in the 
                State in the absence of the adjustment under this 
                paragraph.
                    ``(C) Metropolitan based system.--The metropolitan 
                based system described in this subparagraph is one in 
                which--
                            ``(i) all the portions of each metropolitan 
                        statistical area in the State or in the case of 
                        a consolidated metropolitan statistical area, 
                        all of the portions of each primary 
                        metropolitan statistical area within the 
                        consolidated area within the State, are treated 
                        as a single MedicareAdvantage payment area; and
                            ``(ii) all areas in the State that do not 
                        fall within a metropolitan statistical area are 
                        treated as a single MedicareAdvantage payment 
                        area.
                    ``(D) Areas.--In subparagraph (C), the terms 
                `metropolitan statistical area', `consolidated 
                metropolitan statistical area', and `primary 
                metropolitan statistical area' mean any area designated 
                as such by the Secretary of Commerce.
    ``(f) Special Rules for Individuals Electing MSA Plans.--
            ``(1) In general.--If the amount of the MedicareAdvantage 
        monthly MSA premium (as defined in section 1854(b)(2)(D)) for 
        an MSA plan for a year is less than \1/12\ of the annual 
        Medicare+Choice capitation rate applied under this section for 
        the area and year involved, the Secretary shall deposit an 
        amount equal to 100 percent of such difference in a 
        MedicareAdvantage MSA established (and, if applicable, 
        designated) by the individual under paragraph (2).
            ``(2) Establishment and designation of MedicareAdvantage 
        medical savings account as requirement for payment of 
        contribution.--In the case of an individual who has elected 
        coverage under an MSA plan, no payment shall be made under 
        paragraph (1) on behalf of an individual for a month unless the 
        individual--
                    ``(A) has established before the beginning of the 
                month (or by such other deadline as the Secretary may 
                specify) a MedicareAdvantage MSA (as defined in section 
                138(b)(2) of the Internal Revenue Code of 1986); and
                    ``(B) if the individual has established more than 1 
                such MedicareAdvantage MSA, has designated 1 of such 
                accounts as the individual's MedicareAdvantage MSA for 
                purposes of this part.
        Under rules under this section, such an individual may change 
        the designation of such account under subparagraph (B) for 
        purposes of this part.
            ``(3) Lump-sum deposit of medical savings account 
        contribution.--In the case of an individual electing an MSA 
        plan effective beginning with a month in a year, the amount of 
        the contribution to the MedicareAdvantage MSA on behalf of the 
        individual for that month and all successive months in the year 
        shall be deposited during that first month. In the case of a 
        termination of such an election as of a month before the end of 
        a year, the Secretary shall provide for a procedure for the 
        recovery of deposits attributable to the remaining months in 
        the year.
    ``(g) Payments From Trust Funds.--Except as provided in section 
1858A(c) (relating to payments for qualified prescription drug 
coverage), the payment to a MedicareAdvantage organization under this 
section for individuals enrolled under this part with the organization 
and payments to a MedicareAdvantage MSA under subsection (e)(1) shall 
be made from the Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund in such proportion as the 
Secretary determines reflects the relative weight that benefits under 
part A and under part B represents of the actuarial value of the total 
benefits under this title. Monthly payments otherwise payable under 
this section for October 2000 shall be paid on the first business day 
of such month. Monthly payments otherwise payable under this section 
for October 2001 shall be paid on the last business day of September 
2001. Monthly payments otherwise payable under this section for October 
2006 shall be paid on the first business day of October 2006.
    ``(h) Special Rule for Certain Inpatient Hospital Stays.--In the 
case of an individual who is receiving inpatient hospital services from 
a subsection (d) hospital (as defined in section 1886(d)(1)(B)) as of 
the effective date of the individual's--
            ``(1) election under this part of a MedicareAdvantage plan 
        offered by a MedicareAdvantage organization--
                    ``(A) payment for such services until the date of 
                the individual's discharge shall be made under this 
                title through the MedicareAdvantage plan or the 
                original medicare fee-for-service program option (as 
                the case may be) elected before the election with such 
                organization,
                    ``(B) the elected organization shall not be 
                financially responsible for payment for such services 
                until the date after the date of the individual's 
                discharge; and
                    ``(C) the organization shall nonetheless be paid 
                the full amount otherwise payable to the organization 
                under this part; or
            ``(2) termination of election with respect to a 
        MedicareAdvantage organization under this part--
                    ``(A) the organization shall be financially 
                responsible for payment for such services after such 
                date and until the date of the individual's discharge;
                    ``(B) payment for such services during the stay 
                shall not be made under section 1886(d) or by any 
                succeeding MedicareAdvantage organization; and
                    ``(C) the terminated organization shall not receive 
                any payment with respect to the individual under this 
                part during the period the individual is not enrolled.
    ``(i) Special Rule for Hospice Care.--
            ``(1) Information.--A contract under this part shall 
        require the MedicareAdvantage organization to inform each 
        individual enrolled under this part with a MedicareAdvantage 
        plan offered by the organization about the availability of 
        hospice care if--
                    ``(A) a hospice program participating under this 
                title is located within the organization's service 
                area; or
                    ``(B) it is common practice to refer patients to 
                hospice programs outside such service area.
            ``(2) Payment.--If an individual who is enrolled with a 
        MedicareAdvantage organization under this part makes an 
        election under section 1812(d)(1) to receive hospice care from 
        a particular hospice program--
                    ``(A) payment for the hospice care furnished to the 
                individual shall be made to the hospice program elected 
                by the individual by the Secretary;
                    ``(B) payment for other services for which the 
                individual is eligible notwithstanding the individual's 
                election of hospice care under section 1812(d)(1), 
                including services not related to the individual's 
                terminal illness, shall be made by the Secretary to the 
                MedicareAdvantage organization or the provider or 
                supplier of the service instead of payments calculated 
                under subsection (a); and
                    ``(C) the Secretary shall continue to make monthly 
                payments to the MedicareAdvantage organization in an 
                amount equal to the value of the additional benefits 
                required under section 1854(f)(1)(A).''.

SEC. 204. SUBMISSION OF BIDS; PREMIUMS.

    Section 1854 (42 U.S.C. 1395w-24) is amended to read as follows:

                     ``submission of bids; premiums

    ``Sec. 1854. (a) Submission of Bids by MedicareAdvantage 
Organizations.--
            ``(1) In general.--Not later than the second Monday in 
        September and except as provided in paragraph (3), each 
        MedicareAdvantage organization shall submit to the Secretary, 
        in such form and manner as the Secretary may specify, for each 
        MedicareAdvantage plan that the organization intends to offer 
        in a service area in the following year--
                    ``(A) notice of such intent and information on the 
                service area of the plan;
                    ``(B) the plan type for each plan;
                    ``(C) if the MedicareAdvantage plan is a 
                coordinated care plan (as described in section 
                1851(a)(2)(A)) or a private fee-for-service plan (as 
                described in section 1851(a)(2)(C)), the information 
                described in paragraph (2) with respect to each payment 
                area;
                    ``(D) the enrollment capacity (if any) in relation 
                to the plan and each payment area;
                    ``(E) the expected mix, by health status, of 
                enrolled individuals; and
                    ``(F) such other information as the Secretary may 
                specify.
            ``(2) Information required for coordinated care plans and 
        private fee-for-service plans.--For a MedicareAdvantage plan 
        that is a coordinated care plan (as described in section 
        1851(a)(2)(A)) or a private fee-for-service plan (as described 
        in section 1851(a)(2)(C)), the information described in this 
        paragraph is as follows:
                    ``(A) Information required with respect to benefits 
                under the original medicare fee-for-service program 
                option.--Information relating to the coverage of 
                benefits under the original medicare fee-for-service 
                program option as follows:
                            ``(i) The plan bid, which shall consist of 
                        a dollar amount that represents the total 
                        amount that the plan is willing to accept (not 
                        taking into account the application of the 
                        comprehensive risk adjustment methodology under 
                        section 1853(a)(3)) for providing coverage of 
                        the benefits under the original medicare fee-
                        for-service program option to an individual 
                        enrolled in the plan that resides in the 
                        service area of the plan for a month.
                            ``(ii) For the enhanced medical benefits 
                        package offered--
                                    ``(I) the adjusted community rate 
                                (as defined in subsection (g)(3)) of 
                                the package;
                                    ``(II) the portion of the actuarial 
                                value of such benefits package (if any) 
                                that will be applied toward satisfying 
                                the requirement for additional benefits 
                                under subsection (g);
                                    ``(III) the MedicareAdvantage 
                                monthly beneficiary premium for 
                                enhanced medical benefits (as defined 
                                in subsection (b)(2)(C));
                                    ``(IV) a description of any cost-
                                sharing;
                                    ``(V) a description of whether the 
                                amount of the unified deductible has 
                                been lowered or the maximum limitations 
                                on out-of-pocket expenses have been 
                                decreased (relative to the levels used 
                                in calculating the plan bid);
                                    ``(VI) such other information as 
                                the Secretary considers necessary.
                            ``(iii) The assumptions that the 
                        MedicareAdvantage organization used in 
                        preparing the plan bid with respect to numbers, 
                        in each payment area, of enrolled individuals 
                        and the mix, by health status, of such 
                        individuals.
                    ``(B) Information required with respect to part 
                d.--The information required to be submitted by an 
                eligible entity under section 1860D-12, including the 
                monthly premiums for standard coverage and any other 
                qualified prescription drug coverage available to 
                individuals enrolled under part D.
                    ``(C) Determining plan costs included in plan 
                bid.--For purposes of submitting its plan bid under 
                subparagraph (A)(i) a MedicareAdvantage plan offered by 
                a MedicareAdvantage organization satisfies 
                subparagraphs (A) and (C) of section 1852(a)(1) if the 
                actuarial value of the deductibles, coinsurance, and 
                copayments applicable on average to individuals 
                enrolled in such plan under this part with respect to 
                benefits under the original medicare fee-for-service 
                program option on which that bid is based (ignoring any 
                reduction in cost-sharing offered by such plan as 
                enhanced medical benefits under paragraph (2)(A)(ii) or 
                required under clause (ii) or (iii) of subsection 
                (g)(1)(C)) equals the amount specified in subsection 
                (f)(1)(B).
            ``(3) Requirements for msa plans.--For an MSA plan 
        described in section 1851(a)(2)(B), the information described 
        in this paragraph is the information that such a plan would 
        have been required to submit under this part if the 
        Prescription Drug and Medicare Improvements Act of 2003 had not 
        been enacted.
            ``(4) Review.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall review the adjusted community rates (as 
                defined in section 1854(g)(3)), the amounts of the 
                MedicareAdvantage monthly basic premium and the 
                MedicareAdvantage monthly beneficiary premium for 
                enhanced medical benefits filed under this subsection 
                and shall approve or disapprove such rates and amounts 
                so submitted. The Secretary shall review the actuarial 
                assumptions and data used by the MedicareAdvantage 
                organization with respect to such rates and amounts so 
                submitted to determine the appropriateness of such 
                assumptions and data.
                    ``(B) Exception.--The Secretary shall not review, 
                approve, or disapprove the amounts submitted under 
                paragraph (3), or, with respect to a private fee-for-
                service plan (as described in section 1851(a)(2)(C)) 
                under subparagraph (A)(i), (A)(ii)(III), or (B) of 
                paragraph (2).
                    ``(C) Clarification of authority regarding 
                disapproval of unreasonable beneficiary cost-sharing.--
                Under the authority under subparagraph (A), the 
                Secretary may disapprove the bid if the Secretary 
                determines that the deductibles, coinsurance, or 
                copayments applicable under the plan discourage access 
                to covered services or are likely to result in 
                favorable selection of MedicareAdvantage eligible 
                individuals.
            ``(5) Application of fehbp standard; prohibition on price 
        gouging.--Each bid amount submitted under paragraph (1) for a 
        MedicareAdvantage plan must reasonably and equitably reflect 
        the cost of benefits provided under that plan.
    ``(b) Monthly Premiums Charged.--
            ``(1) In general.--
                    ``(A) Coordinated care and private fee-for-service 
                plans.--The monthly amount of the premium charged to an 
                individual enrolled in a MedicareAdvantage plan (other 
                than an MSA plan) offered by a MedicareAdvantage 
                organization shall be equal to the sum of the 
                following:
                            ``(i) The MedicareAdvantage monthly basic 
                        beneficiary premium (if any).
                            ``(ii) The MedicareAdvantage monthly 
                        beneficiary premium for enhanced medical 
                        benefits (if any).
                            ``(iii) The MedicareAdvantage monthly 
                        obligation for qualified prescription drug 
                        coverage (if any).
                    ``(B) MSA plans.--The rules under this section that 
                would have applied with respect to an MSA plan if the 
                Prescription Drug and Medicare Improvements Act of 2003 
                had not been enacted shall continue to apply to MSA 
                plans after the date of enactment of such Act.
            ``(2) Premium terminology.--For purposes of this part:
                    ``(A) Medicareadvantage monthly basic beneficiary 
                premium.--The term `MedicareAdvantage monthly basic 
                beneficiary premium' means, with respect to a 
                MedicareAdvantage plan, the amount required to be 
                charged under subsection (d)(2) for the plan.
                    ``(B) Medicareadvantage monthly beneficiary 
                obligation for qualified prescription drug coverage.--
                The term `MedicareAdvantage monthly beneficiary 
                obligation for qualified prescription drug coverage' 
                means, with respect to a MedicareAdvantage plan, the 
                amount determined under section 1858A(d).
                    ``(C) Medicareadvantage monthly beneficiary premium 
                for enhanced medical benefits.--The term 
                `MedicareAdvantage monthly beneficiary premium for 
                enhanced medical benefits' means, with respect to a 
                MedicareAdvantage plan, the amount required to be 
                charged under subsection (f)(2) for the plan, or, in 
                the case of an MSA plan, the amount filed under 
                subsection (a)(3).
                    ``(D) Medicareadvantage monthly msa premium.--The 
                term `MedicareAdvantage monthly MSA premium' means, 
                with respect to a MedicareAdvantage plan, the amount of 
                such premium filed under subsection (a)(3) for the 
                plan.
    ``(c) Uniform Premium.--The MedicareAdvantage monthly basic 
beneficiary premium, the MedicareAdvantage monthly beneficiary 
obligation for qualified prescription drug coverage, the 
MedicareAdvantage monthly beneficiary premium for enhanced medical 
benefits, and the MedicareAdvantage monthly MSA premium charged under 
subsection (b) of a MedicareAdvantage organization under this part may 
not vary among individuals enrolled in the plan. Subject to the 
provisions of section 1858(h), such requirement shall not apply to 
enrollees of a MedicareAdvantage plan who are enrolled in the plan 
pursuant to a contractual agreement between the plan and an employer or 
other group health plan that provides employment-based retiree health 
coverage (as defined in section 1860D-20(d)(4)(B)) if the premium 
amount is the same for all such enrollees under such agreement.
    ``(d) Determination of Premium Reductions, Reduced Cost-Sharing, 
Additional Benefits, and Beneficiary Premiums.--
            ``(1) Bids below the benchmark.--If the Secretary 
        determines under section 1853(d)(3) that the weighted service 
        area benchmark amount exceeds the plan bid, the Secretary shall 
        require the plan to provide additional benefits in accordance 
        with subsection (g).
            ``(2) Bids above the benchmark.--If the Secretary 
        determines under section 1853(d)(3) that the plan bid exceeds 
        the weighted service area benchmark amount (determined under 
        section 1853(d)(2)), the amount of such excess shall be the 
        MedicareAdvantage monthly basic beneficiary premium (as defined 
        in section 1854(b)(2)(A)).
    ``(e) Terms and Conditions of Imposing Premiums.--Each 
MedicareAdvantage organization shall permit the payment of any 
MedicareAdvantage monthly basic premium, the MedicareAdvantage monthly 
beneficiary obligation for qualified prescription drug coverage, and 
the MedicareAdvantage monthly beneficiary premium for enhanced medical 
benefits on a monthly basis, may terminate election of individuals for 
a MedicareAdvantage plan for failure to make premium payments only in 
accordance with section 1851(g)(3)(B)(i), and may not provide for cash 
or other monetary rebates as an inducement for enrollment or otherwise 
(other than as an additional benefit described in subsection 
(g)(1)(C)(i)).
    ``(f) Limitation on Enrollee Liability.--
            ``(1) For benefits under the original medicare fee-for-
        service program option.--The sum of--
                    ``(A) the MedicareAdvantage monthly basic 
                beneficiary premium (multiplied by 12) and the 
                actuarial value of the deductibles, coinsurance, and 
                copayments (determined on the same basis as used in 
                determining the plan's bid under paragraph (2)(C)) 
                applicable on average to individuals enrolled under 
                this part with a MedicareAdvantage plan described in 
                subparagraph (A) of section 1851(a)(2) of an 
                organization with respect to required benefits 
                described in section 1852(a)(1)(A); must equal
                    ``(B) the actuarial value of the deductibles, 
                coinsurance, and copayments that would be applicable on 
                average to individuals who have elected to receive 
                benefits under the original medicare fee-for-service 
                program option if such individuals were not members of 
                a MedicareAdvantage organization for the year (adjusted 
                as determined appropriate by the Secretary to account 
                for geographic differences and for plan cost and 
                utilization differences).
            ``(2) For enhanced medical benefits.--If the 
        MedicareAdvantage organization provides to its members enrolled 
        under this part in a MedicareAdvantage plan described in 
        subparagraph (A) of section 1851(a)(2) with respect to enhanced 
        medical benefits relating to benefits under the original 
        medicare fee-for-service program option, the sum of the 
        MedicareAdvantage monthly beneficiary premium for enhanced 
        medical benefits (multiplied by 12) charged and the actuarial 
        value of its deductibles, coinsurance, and copayments charged 
        with respect to such benefits for a year must equal the 
        adjusted community rate (as defined in subsection (g)(3)) for 
        such benefits for the year minus the actuarial value of any 
        additional benefits pursuant to clause (ii), (iii), or (iv) of 
        subsection (g)(2)(C) that the plan specified under subsection 
        (a)(2)(i)(II).
            ``(3) Determination on other basis.--If the Secretary 
        determines that adequate data are not available to determine 
        the actuarial value under paragraph (1)(A) or (2), the 
        Secretary may determine such amount with respect to all 
        individuals in the same geographic area, the State, or in the 
        United States, eligible to enroll in the MedicareAdvantage plan 
        involved under this part or on the basis of other appropriate 
        data.
            ``(4) Special rule for private fee-for-service plans.--With 
        respect to a MedicareAdvantage private fee-for-service plan 
        (other than a plan that is an MSA plan), in no event may--
                    ``(A) the actuarial value of the deductibles, 
                coinsurance, and copayments applicable on average to 
                individuals enrolled under this part with such a plan 
                of an organization with respect to required benefits 
                described in subparagraphs (A), (C), and (D) of section 
                1852(a)(1); exceed
                    ``(B) the actuarial value of the deductibles, 
                coinsurance, and copayments that would be applicable on 
                average to individuals entitled to (or enrolled for) 
                benefits under part A and enrolled under part B if they 
                were not members of a MedicareAdvantage organization 
                for the year.
    ``(g) Requirement for Additional Benefits.--
            ``(1) Requirement.--
                    ``(A) In general.--Each MedicareAdvantage 
                organization (in relation to a MedicareAdvantage plan, 
                other than an MSA plan, it offers) shall provide that 
                if there is an excess amount (as defined in 
                subparagraph (B)) for the plan for a contract year, 
                subject to the succeeding provisions of this 
                subsection, the organization shall provide to 
                individuals such additional benefits described in 
                subparagraph (C) as the organization may specify in a 
                value which the Secretary determines is at least equal 
                to the adjusted excess amount (as defined in 
                subparagraph (D)).
                    ``(B) Excess amount.--For purposes of this 
                paragraph, the term `excess amount' means, for an 
                organization for a plan, is 100 percent of the amount 
                (if any) by which the weighted service area benchmark 
                amount (determined under section 1853(d)(2)) exceeds 
                the plan bid (as adjusted under section 1853(d)(1)).
                    ``(C) Additional benefits described.--The 
                additional benefits described in this subparagraph are 
                as follows:
                            ``(i) Subject to subparagraph (F), a 
                        monthly part B premium reduction for 
                        individuals enrolled in the plan.
                            ``(ii) Lowering the amount of the unified 
                        deductible and decreasing the maximum 
                        limitations on out-of-pocket expenses for 
                        individuals enrolled in the plan.
                            ``(iii) A reduction in the actuarial value 
                        of plan cost-sharing for plan enrollees.
                            ``(iv) Subject to subparagraph (E), such 
                        additional benefits as the organization may 
                        specify.
                            ``(v) Contributing to the stabilization 
                        fund under paragraph (2).
                            ``(vi) Any combination of the reductions 
                        and benefits described in clauses (i) through 
                        (v).
                    ``(D) Adjusted excess amount.--For purposes of this 
                paragraph, the term `adjusted excess amount' means, for 
                an organization for a plan, is the excess amount 
                reduced to reflect any amount withheld and reserved for 
                the organization for the year under paragraph (2).
                    ``(E) Rule for approval of medical and prescription 
                drug benefits.--An organization may not specify any 
                additional benefit that provides for the coverage of 
                any prescription drug (other than that relating to 
                prescription drugs covered under the original medicare 
                fee-for-service program option).
                    ``(F) Premium reductions.--
                            ``(i) In general.--Subject to clause (ii), 
                        as part of providing any additional benefits 
                        required under subparagraph (A), a 
                        MedicareAdvantage organization may elect a 
                        reduction in its payments under section 
                        1853(a)(1)(A)(i) with respect to a 
                        MedicareAdvantage plan and the Secretary shall 
                        apply such reduction to reduce the premium 
                        under section 1839 of each enrollee in such 
                        plan as provided in section 1840(i).
                            ``(ii) Amount of reduction.--The amount of 
                        the reduction under clause (i) with respect to 
                        any enrollee in a MedicareAdvantage plan--
                                    ``(I) may not exceed 125 percent of 
                                the premium described under section 
                                1839(a)(3); and
                                    ``(II) shall apply uniformly to 
                                each enrollee of the MedicareAdvantage 
                                plan to which such reduction applies.
                    ``(G) Uniform application.--This paragraph shall be 
                applied uniformly for all enrollees for a plan.
                    ``(H) Construction.--Nothing in this subsection 
                shall be construed as preventing a MedicareAdvantage 
                organization from providing enhanced medical benefits 
                (described in section 1852(a)(3)) that are in addition 
                to the health care benefits otherwise required to be 
                provided under this paragraph and from imposing a 
                premium for such enhanced medical benefits.
            ``(2) Stabilization fund.--A MedicareAdvantage organization 
        may provide that a part of the value of an excess amount 
        described in paragraph (1) be withheld and reserved in the 
        Federal Hospital Insurance Trust Fund and in the Federal 
        Supplementary Medical Insurance Trust Fund (in such proportions 
        as the Secretary determines to be appropriate) by the Secretary 
        for subsequent annual contract periods, to the extent required 
        to prevent undue fluctuations in the additional benefits 
        offered in those subsequent periods by the organization in 
        accordance with such paragraph. Any of such value of the amount 
        reserved which is not provided as additional benefits described 
        in paragraph (1)(A) to individuals electing the 
        MedicareAdvantage plan of the organization in accordance with 
        such paragraph prior to the end of such periods, shall revert 
        for the use of such Trust Funds.
            ``(3) Adjusted community rate.--For purposes of this 
        subsection, subject to paragraph (4), the term `adjusted 
        community rate' for a service or services means, at the 
        election of a MedicareAdvantage organization, either--
                    ``(A) the rate of payment for that service or 
                services which the Secretary annually determines would 
                apply to an individual electing a MedicareAdvantage 
                plan under this part if the rate of payment were 
                determined under a `community rating system' (as 
                defined in section 1302(8) of the Public Health Service 
                Act, other than subparagraph (C)); or
                    ``(B) such portion of the weighted aggregate 
                premium, which the Secretary annually estimates would 
                apply to such an individual, as the Secretary annually 
                estimates is attributable to that service or services,
        but adjusted for differences between the utilization 
        characteristics of the individuals electing coverage under this 
        part and the utilization characteristics of the other enrollees 
        with the plan (or, if the Secretary finds that adequate data 
        are not available to adjust for those differences, the 
        differences between the utilization characteristics of 
        individuals selecting other MedicareAdvantage coverage, or 
        MedicareAdvantage eligible individuals in the area, in the 
        State, or in the United States, eligible to elect 
        MedicareAdvantage coverage under this part and the utilization 
        characteristics of the rest of the population in the area, in 
        the State, or in the United States, respectively).
            ``(4) Determination based on insufficient data.--For 
        purposes of this subsection, if the Secretary finds that there 
        is insufficient enrollment experience to determine the average 
        amount of payments to be made under this part at the beginning 
        of a contract period or to determine (in the case of a newly 
        operated provider-sponsored organization or other new 
        organization) the adjusted community rate for the organization, 
        the Secretary may determine such an average based on the 
        enrollment experience of other contracts entered into under 
        this part and may determine such a rate using data in the 
        general commercial marketplace.
    ``(h) Prohibition of State Imposition of Premium Taxes.--No State 
may impose a premium tax or similar tax with respect to payments to 
MedicareAdvantage organizations under section 1853.
    ``(i) Permitting Use of Segments of Service Areas.--The Secretary 
shall permit a MedicareAdvantage organization to elect to apply the 
provisions of this section uniformly to separate segments of a service 
area (rather than uniformly to an entire service area) as long as such 
segments are composed of 1 or more MedicareAdvantage payment areas.''.
    (b) Study and Report on Clarification of Authority Regarding 
Disapproval of Unreasonable Beneficiary Cost-Sharing.--
            (1) Study.--The Secretary, in consultation with 
        beneficiaries, consumer groups, employers, and Medicare+Choice 
        organizations, shall conduct a study to determine the extent to 
        which the cost-sharing structures under Medicare+Choice plans 
        under part C of title XVIII of the Social Security Act 
        discourage access to covered services or discriminate based on 
        the health status of Medicare+Choice eligible individuals (as 
        defined in section 1851(a)(3) of the Social Security Act (42 
        U.S.C. 1395w-21(a)(3))).
            (2) Report.--Not later than December 31, 2004, the 
        Secretary shall submit a report to Congress on the study 
        conducted under paragraph (1) together with recommendations for 
        such legislation and administrative actions as the Secretary 
        considers appropriate.

SEC. 205. SPECIAL RULES FOR PRESCRIPTION DRUG BENEFITS.

    Part C of title XVIII (42 U.S.C. 1395w-21 et seq.) is amended by 
inserting after section 1857 the following new section:

             ``special rules for prescription drug benefits

    ``Sec. 1858A. (a) Availability.--
            ``(1) Plans required to provide qualified prescription drug 
        coverage to enrollees.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), on and after January 1, 2006, a 
                MedicareAdvantage organization offering a 
                MedicareAdvantage plan (except for an MSA plan) shall 
                make available qualified prescription drug coverage 
                that meets the requirements for such coverage under 
                this part and part D to each enrollee of the plan.
                    ``(B) Private fee-for-service plans may, but are 
                not required to, provide qualified prescription drug 
                coverage.--Pursuant to section 1852(a)(2)(D), a private 
                fee-for-service plan may elect not to provide qualified 
                prescription drug coverage under part D to individuals 
                residing in the area served by the plan.
            ``(2) Reference to provision permitting additional 
        prescription drug coverage.--For the provisions of part D,