[House Report 106-703]
[From the U.S. Government Publishing Office]
106th Congress Rept. 106-703
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
MEDICARE RX 2000 ACT
_______
June 27, 2000.--Committed to the Committee of the Whole House on the
state of the Union and ordered to be printed
_______
Mr. Archer, from the Committee on Ways and Means, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 4680]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 4680) 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, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
TABLE OF CONTENTS
Page
I. Introduction....................................................40
A. Purpose and Summary................................. 40
B. Background and Need for Legislation................. 41
C. Legislative History................................. 41
II. Explanation of Provisions.......................................42
III. Votes of the Committee..........................................81
IV. Budget Effects of the Bill......................................84
A. Committee Estimate of Budgetary Effects............. 84
B. Statement Regarding New Budget Authority and Tax
Expenditures....................................... 85
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 85
V. Other Matters to be Discussed under the Rules of the House......88
A. Committee Oversight Findings and Recommendations.... 88
B. Summary of Findings and Recommendations of the
Government Reform Committee........................ 88
C. Constitutional Authority Statement.................. 89
VI. Changes in Existing Law Made by the Bill as Reported............89
VII. Dissenting Views...............................................148
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Medicare Rx 2000
Act''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT
Sec. 101. Establishment of a medicare prescription drug benefit.
``Part D--Voluntary Prescription Drug Benefit Program
``Sec. 1860A. Benefits; eligibility; enrollment; and coverage
period.
``Sec. 1860B. Requirements for qualified prescription drug
coverage.
``Sec. 1860C. Beneficiary protections for qualified
prescription drug coverage.
``Sec. 1860D. Requirements for prescription drug plan (PDP)
sponsors; contracts; establishment of
standards.
``Sec. 1860E. Process for beneficiaries to select qualified
prescription drug coverage.
``Sec. 1860F. Premiums.
``Sec. 1860G. Premium and cost-sharing subsidies for low-income
individuals.
``Sec. 1860H. Subsidies for all medicare beneficiaries through
reinsurance for qualified prescription drug
coverage.
``Sec. 1860I. Medicare Prescription Drug Account in Federal
Supplementary Medical Insurance Trust Fund.
``Sec. 1860J. Definitions; treatment of references to
provisions in part C.''
Sec. 102. Offering of qualified prescription drug coverage under the
Medicare+Choice program.
Sec. 103. Medicaid amendments.
Sec. 104. Medigap transition provisions.
Sec. 105. Demonstration project for disease management for severely
chronically ill medicare beneficiaries.
TITLE II--MODERNIZATION OF ADMINISTRATION OF MEDICARE
Subtitle A--Medicare Benefits Administration
Sec. 201. Establishment of administration.
``Sec. 1807. Medicare Benefits Administration.''
Sec. 202. Miscellaneous administrative provisions.
Subtitle B--Oversight of Financial Sustainability of the Medicare
Program
Sec. 211. Additional requirements for annual financial report and
oversight on medicare program.
Subtitle C--Changes in Medicare Coverage and Appeals Process
Sec. 221. Revisions to medicare appeals process.
Sec. 222. Provisions with respect to limitations on liability of
beneficiaries.
Sec. 223. Waivers of liability for cost sharing amounts.
Sec. 224. Elimination of motions by the Secretary on decisions of the
Provider Reimbursement Review Board.
TITLE III--MEDICARE+CHOICE REFORMS; PRESERVATION OF MEDICARE PART B
DRUG BENEFIT
Subtitle A--Medicare+Choice Reforms
Sec. 301. Increase in national per capita Medicare+Choice growth
percentage in 2001 and 2002.
Sec. 302. Permanently removing application of budget neutrality
beginning in 2002.
Sec. 303. Increasing minimum payment amount.
Sec. 304. Allowing movement to 50:50 percent blend in 2002.
Sec. 305. Increased update for payment areas with only one or no
Medicare+Choice contracts.
Sec. 306. Permitting higher negotiated rates in certain Medicare+Choice
payment areas below national average.
Sec. 307. 10-year phase in of risk adjustment based on data from all
settings.
Subtitle B--Preservation of Medicare Coverage of Drugs and Biologicals
Sec. 311. Preservation of coverage of drugs and biologicals under part
B of the medicare program.
Sec. 312. GAO report on part B payment for drugs and biologicals and
related services.
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT
SEC. 101. ESTABLISHMENT OF A MEDICARE PRESCRIPTION DRUG BENEFIT.
(a) In General.--Title XVIII of the Social Security Act is amended--
(1) by redesignating part D as part E; and
(2) by inserting after part C the following new part:
``Part D--Voluntary Prescription Drug Benefit Program
``SEC. 1860A. BENEFITS; ELIGIBILITY; ENROLLMENT; AND COVERAGE PERIOD.
``(a) Provision of Qualified Prescription Drug Coverage Through
Enrollment in Plans.--Subject to the succeeding provisions of this
part, each individual who is enrolled under part B is entitled to
obtain qualified prescription drug coverage (described in section
1860B(a)) as follows:
``(1) Medicare+choice plan.--If the individual is eligible to
enroll in a Medicare+Choice plan that provides qualified
prescription drug coverage under section 1851(j), the
individual may enroll in the plan and obtain coverage through
such plan.
``(2) Prescription drug plan.--If the individual is not
enrolled in a Medicare+Choice plan that provides qualified
prescription drug coverage, the individual may enroll under
this part in a prescription drug plan (as defined in section
1860C(a)).
Such individuals shall have a choice of such plans under section
1860E(d).
``(b) General Election Procedures.--
``(1) In general.--An individual may elect to enroll in a
prescription drug plan under this part, or elect the option of
qualified prescription drug coverage under a Medicare+Choice
plan under part C, and change such election only in such manner
and form as may be prescribed by regulations of the
Administrator of the Medicare Benefits Administration
(appointed under section 1807(b)) (in this part referred to as
the `Medicare Benefits Administrator') and only during an
election period prescribed in or under this subsection.
``(2) Election periods.--
``(A) In general.--Except as provided in this
paragraph, the election periods under this subsection
shall be the same as the coverage election periods
under the Medicare+Choice program under section
1851(e), including--
``(i) annual coordinated election periods;
and
``(ii) special election periods.
In applying the last sentence of section 1851(e)(4)
(relating to discontinuance of a Medicare+Choice
election during the first year of eligibility) under
this subparagraph, in the case of an election described
in such section in which the individual had elected or
is provided qualified prescription drug coverage at the
time of such first enrollment, the individual shall be
permitted to enroll in a prescription drug plan under
this part at the time of the election of coverage under
the original fee-for-service plan.
``(B) Initial election periods.--
``(i) Individuals currently covered.--In the
case of an individual who is enrolled under
part B as of November 1, 2002, there shall be
an initial election period of 6 months
beginning on that date.
``(ii) Individual covered in future.--In the
case of an individual who is first enrolled
under part B after November 1, 2002, there
shall be an initial election period which is
the same as the initial enrollment period under
section 1837(d).
``(C) Additional special election periods.--The
Medicare Benefits Administrator shall establish special
election periods--
``(i) in cases of individuals who have and
involuntarily lose prescription drug coverage
described in subsection (c)(2)(C);
``(ii) in cases described in section 1837(h)
(relating to errors in enrollment), in the same
manner as such section applies to part B; and
``(iii) in the case of an individual who
meets such exceptional conditions (including
conditions recognized under section
1851(d)(4)(D)) as the Administrator may
provide.
``(D) One-time enrollment permitted for current part
a only beneficiaries.--In the case of an individual who
as of November 1, 2002--
``(i) is entitled to benefits under part A;
and
``(ii) is not (and has not previously been)
enrolled under part B;
the individual shall be eligible to enroll in a
prescription drug plan under this part but only during
the period described in subparagraph (B)(i). If the
individual enrolls in such a plan, the individual may
change such enrollment under this part, but the
individual may not enroll in a Medicare+Choice plan
under part C unless the individual enrolls under part
B. Nothing in this subparagraph shall be construed as
providing for coverage under a prescription drug plan
of benefits that are excluded because of the
application of section 1860B(f)(2)(B).
``(c) Guaranteed Issue; Community Rating; and Nondiscrimination.--
``(1) Guaranteed issue.--
``(A) In general.--An eligible individual who is
eligible to elect qualified prescription drug coverage
under a prescription drug plan or Medicare+Choice plan
at a time during which elections are accepted under
this part with respect to the plan shall not be denied
enrollment based on any health status-related factor
(described in section 2702(a)(1) of the Public Health
Service Act) or any other factor.
``(B) Medicare+choice limitations permitted.--The
provisions of paragraphs (2) and (3) (other than
subparagraph (C)(i), relating to default enrollment) of
section 1851(g) (relating to priority and limitation on
termination of election) shall apply to PDP sponsors
under this subsection.
``(2) Community-rated premium.--
``(A) In general.--In the case of an individual who
maintains (as determined under subparagraph (C))
continuous prescription drug coverage since first
qualifying to elect prescription drug coverage under
this part, a PDP sponsor or Medicare+Choice
organization offering a prescription drug plan or
Medicare+Choice plan that provides qualified
prescription drug coverage and in which the individual
is enrolled may not deny, limit, or condition the
coverage or provision of covered prescription drug
benefits or increase the premium under the plan based
on any health status-related factor described in
section 2702(a)(1) of the Public Health Service Act or
any other factor.
``(B) Late enrollment penalty.--In the case of an
individual who does not maintain such continuous
prescription drug coverage, a PDP sponsor or
Medicare+Choice organization may (notwithstanding any
provision in this title) increase the premium otherwise
applicable or impose a pre-existing condition exclusion
with respect to qualified prescription drug coverage in
a manner that reflects additional actuarial risk
involved. Such a risk shall be established through an
appropriate actuarial opinion of the type described in
subparagraphs (A) through (C) of section 2103(c)(4).
``(C) Continuous prescription drug coverage.--An
individual is considered for purposes of this part to
be maintaining continuous prescription drug coverage on
and after a date if the individual establishes that
there is no period of 63 days or longer on and after
such date (beginning not earlier than January 1, 2003)
during all of which the individual did not have any of
the following prescription drug coverage:
``(i) Coverage under prescription drug plan
or medicare+choice plan.--Qualified
prescription drug coverage under a prescription
drug plan or under a Medicare+Choice plan.
``(ii) Medicaid prescription drug coverage.--
Prescription drug coverage under a medicaid
plan under title XIX, including through the
Program of All-inclusive Care for the Elderly
(PACE) under section 1934, through a social
health maintenance organization (referred to in
section 4104(c) of the Balanced Budget Act of
1997), or through a Medicare+Choice project
that demonstrates the application of capitation
payment rates for frail elderly medicare
beneficiaries through the use of a
interdisciplinary team and through the
provision of primary care services to such
beneficiaries by means of such a team at the
nursing facility involved.
``(iii) Prescription drug coverage under
group health plan.--Any outpatient prescription
drug coverage under a group health plan,
including a health benefits plan under the
Federal Employees Health Benefit Plan under
chapter 89 of title 5, United States Code, and
a qualified retiree prescription drug plan as
defined in section 1860H(f)(1).
``(iv) Prescription drug coverage under
certain medigap policies.--Coverage under a
medicare supplemental policy under section 1882
that provides benefits for prescription drugs
(whether or not such coverage conforms to the
standards for packages of benefits under
section 1882(p)(1)), but only if the policy was
in effect on January 1, 2003, and only until
the date such coverage is terminated.
``(v) State pharmaceutical assistance
program.--Coverage of prescription drugs under
a State pharmaceutical assistance program.
``(vi) Veterans' coverage of prescription
drugs.--Coverage of prescription drugs for
veterans under chapter 17 of title 38, United
States Code.
``(D) Certification.--For purposes of carrying out
this paragraph, the certifications of the type
described in sections 2701(e) of the Public Health
Service Act and in section 9801(e) of the Internal
Revenue Code shall also include a statement for the
period of coverage of whether the individual involved
had prescription drug coverage described in
subparagraph (C).
``(E) Construction.--Nothing in this section shall be
construed as preventing the disenrollment of an
individual from a prescription drug plan or a
Medicare+Choice plan based on the termination of an
election described in section 1851(g)(3), including for
non-payment of premiums or for other reasons specified
in subsection (d)(3), which takes into account a grace
period described in section 1851(g)(3)(B)(i).
``(3) Nondiscrimination.--A PDP sponsor offering a
prescription drug plan shall not establish a service area in a
manner that would discriminate based on health or economic
status of potential enrollees.
``(d) Effective Date of Elections.--
``(1) In general.--Except as provided in this section, the
Medicare Benefits Administrator shall provide that elections
under subsection (b) take effect at the same time as the
Secretary provides that similar elections under section 1851(e)
take effect under section 1851(f).
``(2) No election effective before 2003.--In no case shall
any election take effect before January 1, 2003.
``(3) Termination.--The Medicare Benefits Administrator shall
provide for the termination of an election in the case of--
``(A) termination of coverage under part B (other
than the case of an individual described in subsection
(b)(2)(D) (relating to part A only individuals)); and
``(B) termination of elections described in section
1851(g)(3) (including failure to pay required
premiums).
``SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRESCRIPTION DRUG COVERAGE.
``(a) Requirements.--
``(1) In general.--For purposes of this part and part C, the
term `qualified prescription drug coverage' means either of the
following:
``(A) Standard coverage with access to negotiated
prices.--Standard coverage (as defined in subsection
(b)) and access to negotiated prices under subsection
(d).
``(B) Actuarially equivalent coverage with access to
negotiated prices.--Coverage of covered outpatient
drugs which meets the alternative coverage requirements
of subsection (c) and access to negotiated prices under
subsection (d).
``(2) Permitting additional outpatient prescription drug
coverage.--
``(A) In general.--Subject to subparagraph (B),
nothing in this part shall be construed as preventing
qualified prescription drug coverage from including
coverage of covered outpatient drugs that exceeds the
coverage required under paragraph (1), but any such
additional coverage shall be limited to coverage of
covered outpatient drugs.
``(B) Disapproval authority.--The Medicare Benefits
Administrator shall review the offering of qualified
prescription drug coverage under this part or part C.
If the Administrator finds that, in the case of a
qualified prescription drug coverage under a
prescription drug plan or a Medicare+Choice plan, that
the organization or sponsor offering the coverage is
purposefully engaged in activities intended to result
in favorable selection of those eligible medicare
beneficiaries obtaining coverage through the plan, the
Administrator may terminate the contract with the
sponsor or organization under this part or part C.
``(3) Application of secondary payor provisions.--The
provisions of section 1852(a)(4) shall apply under this part in
the same manner as they apply under part C.
``(b) Standard Coverage.--For purposes of this part, the `standard
coverage' is coverage of covered outpatient drugs (as defined in
subsection (f)) that meets the following requirements:
``(1) Deductible.--The coverage has an annual deductible--
``(A) for 2003, that is equal to $250; or
``(B) 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.
Any amount determined under subparagraph (B) that is not a
multiple of $5 shall be rounded to the nearest multiple of $5.
``(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 (e)) with an
average expected payment of 50 percent of such costs.
``(3) Initial coverage limit.--Subject to paragraph (4), the
coverage has an initial coverage limit on the maximum costs
that may be recognized for payment purposes (above the annual
deductible)--
``(A) for 2003, that is equal to $2,100; or
``(B) 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.
Any amount determined under subparagraph (B) that is not a
multiple of $25 shall be rounded to the nearest multiple of
$25.
``(4) Limitation on out-of-pocket expenditures by
beneficiary.--
``(A) In general.--Notwithstanding paragraph (3), the
coverage provides benefits without any cost-sharing
after the individual has incurred costs (as described
in subparagraph (C)) for covered outpatient drugs in a
year equal to the annual out-of-pocket limit specified
in subparagraph (B).
``(B) Annual out-of-pocket limit.--For purposes of
this part, the `annual out-of-pocket limit' specified
in this subparagraph--
``(i) for 2003, is equal to $6,000; 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.
Any amount determined under clause (ii) that is not a
multiple of $100 shall be rounded to the nearest
multiple of $100.
``(C) Application.--In applying subparagraph (A)--
``(i) incurred costs shall only include costs
incurred 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); and
``(ii) such costs shall be treated as
incurred without regard to whether the
individual or another person, including a State
program or other third-party coverage, has paid
for such costs.
``(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 outpatient drugs
in the United States for medicare beneficiaries, as determined
by the Medicare Benefits Administrator for the 12-month period
ending in July of the previous year.
``(c) Alternative Coverage Requirements.--A prescription drug plan or
Medicare+Choice plan may provide a different prescription drug benefit
design from the standard coverage described in subsection (b) so long
as the following requirements are met:
``(1) Assuring at least actuarially equivalent coverage.--
``(A) Assuring equivalent value of total coverage.--
The actuarial value of the total coverage (as
determined under subsection (e)) is at least equal to
the actuarial value (as so determined) of standard
coverage.
``(B) Assuring equivalent unsubsidized value of
coverage.--The unsubsidized value of the coverage is at
least equal to the unsubsidized value of standard
coverage. For purposes of this subparagraph, the
unsubsidized value of coverage is the amount by which
the actuarial value of the coverage (as determined
under subsection (e)) exceeds the actuarial value of
the reinsurance subsidy payments under section 1860H
with respect to such coverage.
``(C) Assuring standard payment for costs at initial
coverage limit.--The coverage is designed, based upon
an actuarially representative pattern of utilization
(as determined under subsection (e)), to provide for
the payment, with respect to costs incurred that are
equal to the sum of the deductible under subsection
(b)(1) and the initial coverage limit under subsection
(b)(3), of an amount equal to at least such initial
coverage limit multiplied by the percentage specified
in subsection (b)(2).
``(2) Limitation on out-of-pocket expenditures by
beneficiaries.--The coverage provides the limitation on out-of-
pocket expenditures by beneficiaries described in subsection
(b)(4).
``(d) Access to Negotiated Prices.--Under qualified prescription drug
coverage offered by a PDP sponsor or a Medicare+Choice organization,
the sponsor or organization shall provide beneficiaries with access to
negotiated prices (including applicable discounts) used for payment for
covered outpatient drugs, regardless of the fact that no benefits may
be payable under the coverage with respect to such drugs because of the
application of cost-sharing or an initial coverage limit (described in
subsection (b)(3)). Insofar as a State elects to provide medical
assistance under title XIX for a drug based on the prices negotiated by
a prescription drug plan under this part, the requirements of section
1927 shall not apply to such drugs.
``(e) Actuarial Valuation; Determination of Annual Percentage
Increases.--
``(1) Processes.--For purposes of this section, the Medicare
Benefits Administrator shall establish processes and methods--
``(A) for determining the actuarial valuation of
prescription drug coverage, including--
``(i) an actuarial valuation of standard
coverage and of the reinsurance subsidy
payments under section 1860H;
``(ii) the use of generally accepted
actuarial principles and methodologies; and
``(iii) applying the same methodology for
determinations of alternative coverage under
subsection (c) as is used with respect to
determinations of standard coverage under
subsection (b); and
``(B) for determining annual percentage increases
described in subsection (b)(5).
``(2) Use of outside actuaries.--Under the processes under
paragraph (1)(A), PDP sponsors and Medicare+Choice
organizations may use actuarial opinions certified by
independent, qualified actuaries to establish actuarial values.
``(f) Covered Outpatient Drugs Defined.--
``(1) In general.--Except as provided in this subsection, for
purposes of this part, the term `covered outpatient drug'
means--
``(A) a drug that may be dispensed only upon a
prescription and that is described in subparagraph
(A)(i) or (A)(ii) of section 1927(k)(2); or
``(B) a biological product or insulin described in
subparagraph (B) or (C) of such section;
and such term includes any use of a covered outpatient drug for
a medically accepted indication (as defined in section
1927(k)(6)).
``(2) Exclusions.--
``(A) In general.--Such term does not include drugs
or classes of drugs, or their medical uses, which may
be excluded from coverage or otherwise restricted under
section 1927(d)(2), other than subparagraph (E) thereof
(relating to smoking cessation agents).
``(B) Avoidance of duplicate coverage.--A drug
prescribed for an individual that would otherwise be a
covered outpatient drug under this part shall not be so
considered if payment for such drug is available under
part A or B (but shall be so considered if such payment
is not available because benefits under part A or B
have been exhausted), without regard to whether the
individual is entitled to benefits under part A or
enrolled under part B.
``(3) Application of formulary restrictions.--A drug
prescribed for an individual that would otherwise be a covered
outpatient drug under this part shall not be so considered
under a plan if the plan excludes the drug under a formulary
that meets the requirements of section 1860C(f)(2) (including
providing an appeal process).
``(4) Application of general exclusion provisions.--A
prescription drug plan or Medicare+Choice plan may exclude from
qualified prescription drug coverage any covered outpatient
drug--
``(A) for which payment would not be made if section
1862(a) applied to part D; or
``(B) which are not prescribed in accordance with the
plan or this part.
Such exclusions are determinations subject to reconsideration
and appeal pursuant to section 1860C(f).
``(5) Study on inclusion of drugs treating morbid obesity.--
The Medicare Policy Advisory Board shall provide for a study on
removing the exclusion under paragraph (2)(A) for coverage of
agents used for weight loss in the case of morbidly obese
individuals. The Board shall report to Congress on the results
of the study not later than March 1, 2002.
``SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALIFIED PRESCRIPTION DRUG
COVERAGE.
``(a) Guaranteed Issue Community-Related Premiums and
Nondiscrimination.--For provisions requiring guaranteed issue,
community-rated premiums, and nondiscrimination, see sections
1860A(c)(1), 1860A(c)(2), and 1860F(b).
``(b) Dissemination of Information.--
``(1) General information.--A PDP sponsor shall disclose, in
a clear, accurate, and standardized form to each enrollee with
a prescription drug plan offered by the sponsor under this part
at the time of enrollment and at least annually thereafter, the
information described in section 1852(c)(1) relating to such
plan. Such information includes the following:
``(A) Access to covered outpatient drugs, including
access through pharmacy networks.
``(B) How any formulary used by the sponsor
functions.
``(C) Co-payments and deductible requirements.
``(D) Grievance and appeals procedures.
``(2) Disclosure upon request of general coverage,
utilization, and grievance information.--Upon request of an
individual eligible to enroll under a prescription drug plan,
the PDP sponsor shall provide the information described in
section 1852(c)(2) (other than subparagraph (D)) to such
individual.
``(3) Response to beneficiary questions.--Each PDP sponsor
offering a prescription drug plan shall have a mechanism for
providing specific information to enrollees upon request. The
sponsor shall make available, through an Internet website and
in writing upon request, information on specific changes in its
formulary.
``(4) Claims information.--Each PDP sponsor offering a
prescription drug plan must furnish to enrolled individuals in
a form easily understandable to such individuals an explanation
of benefits (in accordance with section 1806(a) or in a
comparable manner) and a notice of the benefits in relation to
initial coverage limit and annual out-of-pocket limit for the
current year, whenever prescription drug benefits are provided
under this part (except that such notice need not be provided
more often than monthly).
``(c) Access to Covered Benefits.--
``(1) Assuring pharmacy access.--The PDP sponsor of the
prescription drug plan shall secure the participation of
sufficient numbers of pharmacies (which may include mail order
pharmacies) to ensure convenient access (including adequate
emergency access) for enrolled beneficiaries, in accordance
with standards established under section 1860D(e) that ensure
such convenient access. Nothing in this paragraph shall be
construed as requiring the participation of (or permitting the
exclusion of) all pharmacies in any area under a plan.
``(2) Access to negotiated prices for prescription drugs.--
The PDP sponsor of a prescription drug plan shall issue such a
card that may be used by an enrolled beneficiary to assure
access to negotiated prices under section 1860B(d) for the
purchase of prescription drugs for which coverage is not
otherwise provided under the prescription drug plan.
``(3) Requirements on development and application of
formularies.--Insofar as a PDP sponsor of a prescription drug
plan uses a formulary, the following requirements must be met:
``(A) Formulary committee.--The sponsor must
establish a pharmaceutical and therapeutic committee
that develops the formulary. Such committee shall
include at least one physician and at least one
pharmacist.
``(B) Inclusion of drugs in all therapeutic
categories.--The formulary must include drugs within
all therapeutic categories and classes of covered
outpatient drugs (although not necessarily for all
drugs within such categories and classes).
``(C) Appeals and exceptions to application.--The PDP
sponsor must have, as part of the appeals process under
subsection (f)(2), a process for appeals for denials of
coverage based on such application of the formulary.
``(d) Cost and Utilization Management; Quality Assurance; Medication
Therapy Management Program.--
``(1) In general.--The PDP sponsor shall have in place--
``(A) an effective cost and drug utilization
management program, including appropriate incentives to
use generic drugs, when appropriate;
``(B) quality assurance measures and systems to
reduce medical errors and adverse drug interactions,
including a medication therapy management program
described in paragraph (2); and
``(C) a program to control fraud, abuse, and waste.
``(2) Medication therapy management program.--
``(A) In general.--A medication therapy management
program described in this paragraph is a program of
drug therapy management and medication administration
that is designed to assure that covered outpatient
drugs under the prescription drug plan are
appropriately used to achieve therapeutic goals and
reduce the risk of adverse events, including adverse
drug interactions.
``(B) Elements.--Such program may include--
``(i) enhanced beneficiary understanding of
such appropriate use through beneficiary
education, counseling, and other appropriate
means; and
``(ii) increased beneficiary adherence with
prescription medication regimens through
medication refill reminders, special packaging,
and other appropriate means.
``(C) Development of program in cooperation with
licensed pharmacists.--The program shall be developed
in cooperation with licensed pharmacists and
physicians.
``(D) Considerations in pharmacy fees.--The PDP
sponsor of a prescription drug program shall take into
account, in establishing fees for pharmacists and
others providing services under the medication therapy
management program, the resources and time used in
implementing the program.
``(3) Treatment of accreditation.--Section 1852(e)(4)
(relating to treatment of accreditation) shall apply to
prescription drug plans under this part with respect to the
following requirements, in the same manner as they apply to
Medicare+Choice plans under part C with respect to the
requirements described in a clause of section 1852(e)(4)(B):
``(A) Paragraph (1) (including quality assurance),
including medication therapy management program under
paragraph (2).
``(B) Subsection (c)(1) (relating to access to
covered benefits).
``(C) Subsection (g) (relating to confidentiality and
accuracy of enrollee records).
``(4) Public disclosure of pharmaceutical prices for generic
equivalent drugs.--Each PDP sponsor shall provide that each
pharmacy or other dispenser that arranges for the dispensing of
a covered outpatient drug shall inform the beneficiary at the
time of purchase of the drug of any differential between the
price of the prescribed drug to the enrollee and the price of
the lowest cost generic drug that is therapeutically and
pharmaceutically equivalent and bioequivalent.
``(e) Grievance Mechanism.--Each PDP sponsor shall provide meaningful
procedures for hearing and resolving grievances between the
organization (including any entity or individual through which the
sponsor provides covered benefits) and enrollees with prescription drug
plans of the sponsor under this part in accordance with section
1852(f).
``(f) Coverage Determinations, Reconsiderations, and Appeals.--
``(1) In general.--A PDP sponsor shall meet the requirements
of section 1852(g) with respect to covered benefits under the
prescription drug plan it offers under this part in the same
manner as such requirements apply to a Medicare+Choice
organization with respect to benefits it offers under a
Medicare+Choice plan under part C.
``(2) Appeals of formulary determinations.--Under the appeals
process under paragraph (1) an individual who is enrolled in a
prescription drug plan offered by a PDP sponsor may appeal to
obtain coverage for a covered outpatient drug that is not on
the formulary of the sponsor (established under subsection (c))
if the prescribing physician determines that the
therapeutically similar drug that is on the formulary is not as
effective for the enrollee or has significant adverse effects
for the enrollee.
``(g) Confidentiality and Accuracy of Enrollee Records.--A PDP
sponsor shall meet the requirements of section 1852(h) with respect to
enrollees under this part in the same manner as such requirements apply
to a Medicare+Choice organization with respect to enrollees under part
C.
``SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG PLAN (PDP) SPONSORS;
CONTRACTS; ESTABLISHMENT OF STANDARDS.
``(a) General Requirements.--Each PDP sponsor of a prescription drug
plan shall meet the following requirements:
``(1) Licensure.--Subject to subsection (c), the sponsor is
organized and licensed under State law as a risk-bearing entity
eligible to offer health insurance or health benefits coverage
in each State in which it offers a prescription drug plan.
``(2) Assumption of full financial risk.--
``(A) In general.--Subject to subparagraph (B) and
section 1860E(d)(2), the entity assumes full financial
risk on a prospective basis for qualified prescription
drug coverage that it offers under a prescription drug
plan and that is not covered under reinsurance under
section 1860H.
``(B) Reinsurance permitted.--The entity may obtain
insurance or make other arrangements for the cost of
coverage provided to any enrolled member under this
part.
``(3) Solvency for unlicensed sponsors.--In the case of a
sponsor that is not described in paragraph (1), the sponsor
shall meet solvency standards established by the Medicare
Benefits Administrator under subsection (d).
``(b) Contract Requirements.--
``(1) In general.--The Medicare Benefits Administrator shall
not permit the election under section 1860A of a prescription
drug plan offered by a PDP sponsor under this part, and the
sponsor shall not be eligible for payments under section 1860G
or 1860H, unless the Administrator has entered into a contract
under this subsection with the sponsor with respect to the
offering of such plan. Such a contract with a sponsor may cover
more than 1 prescription drug plan. Such contract shall provide
that the sponsor agrees to comply with the applicable
requirements and standards of this part and the terms and
conditions of payment as provided for in this part.
``(2) Negotiation regarding terms and conditions.--The
Medicare Benefits Administrator shall have the same authority
to negotiate the terms and conditions of prescription drug
plans under this part as the Director of the Office of
Personnel Management has with respect to health benefits plans
under chapter 89 of title 5, United States Code. In negotiating
the terms and conditions regarding premiums for which
information is submitted under section 1860F(a)(2), the
Administrator shall take into account the reinsurance subsidy
payments under section 1860H and the adjusted community rate
(as defined in section 1854(f)(3)) for the benefits covered.
``(3) Incorporation of certain medicare+choice contract
requirements.--The following provisions of section 1857 shall
apply, subject to subsection (c)(5), to contracts under this
section in the same manner as they apply to contracts under
section 1857(a):
``(A) Minimum enrollment.--Paragraphs (1) and (3) of
section 1857(b).
``(B) Contract period and effectiveness.--Paragraphs
(1) through (3) and (5) of section 1857(c).
``(C) Protections against fraud and beneficiary
protections.--Section 1857(d).
``(D) Additional contract terms.--Section 1857(e);
except that in applying section 1857(e)(2) under this
part--
``(i) such section shall be applied
separately to costs relating to this part (from
costs under part C);
``(ii) in no case shall the amount of the fee
established under this subparagraph for a plan
exceed 20 percent of the maximum amount of the
fee that may be established under subparagraph
(B) of such section; and
``(iii) no fees shall be applied under this
subparagraph with respect to Medicare+Choice
plans.
``(E) Intermediate sanctions.--Section 1857(g).
``(F) Procedures for termination.--Section 1857(h).
``(4) Rules of application for intermediate sanctions.--In
applying paragraph (3)(E)--
``(A) the reference in section 1857(g)(1)(B) to
section 1854 is deemed a reference to this part; and
``(B) the reference in section 1857(g)(1)(F) to
section 1852(k)(2)(A)(ii) shall not be applied.
``(c) Waiver of Certain Requirements to Expand Choice.--
``(1) In general.--In the case of an entity that seeks to
offer a prescription drug plan in a State, the Medicare
Benefits 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) has been met.
``(2) Grounds for approval.--The grounds for approval under
this paragraph are the grounds for approval described in
subparagraph (B), (C), and (D) of section 1855(a)(2), and also
include the application by a State of any grounds other than
those required under Federal law.
``(3) Application of waiver procedures.--With respect to an
application for a waiver (or a waiver granted) under this
subsection, the provisions of subparagraphs (E), (F), and (G)
of section 1855(a)(2) shall apply.
``(4) Licensure does not substitute for or constitute
certification.--The fact that an entity is licensed in
accordance with subsection (a)(1) does not deem the entity to
meet other requirements imposed under this part for a PDP
sponsor.
``(5) References to certain provisions.--For purposes of this
subsection, in applying provisions of section 1855(a)(2) under
this subsection to prescription drug plans and PDP sponsors--
``(A) any reference to a waiver application under
section 1855 shall be treated as a reference to a
waiver application under paragraph (1); and
``(B) any reference to solvency standards shall be
treated as a reference to solvency standards
established under subsection (d).
``(d) Solvency Standards for Non-Licensed Sponsors.--
``(1) Establishment.--The Medicare Benefits Administrator
shall establish, by not later than October 1, 2001, financial
solvency and capital adequacy standards that an entity that
does not meet the requirements of subsection (a)(1) must meet
to qualify as a PDP sponsor under this part.
``(2) Compliance with standards.--Each PDP sponsor that is
not licensed by a State under subsection (a)(1) and for which a
waiver application has been approved under subsection (c) shall
meet solvency and capital adequacy standards established under
paragraph (1). The Medicare Benefits Administrator shall
establish certification procedures for such PDP sponsors with
respect to such solvency standards in the manner described in
section 1855(c)(2).
``(e) Other Standards.--The Medicare Benefits Administrator shall
establish by regulation other standards (not described in subsection
(d)) for PDP sponsors and plans consistent with, and to carry out, this
part. The Administrator shall publish such regulations by October 1,
2001. In order to carry out this requirement in a timely manner, the
Administrator may promulgate regulations that take effect on an interim
basis, after notice and pending opportunity for public comment.
``(f) Relation to State Laws.--
``(1) In general.--The standards established under this
section shall supersede any State law or regulation (including
standards described in paragraph (2)) with respect to
prescription drug plans which are offered by PDP sponsors under
this part to the extent such law or regulation is inconsistent
with such standards.
``(2) Standards specifically superseded.--State standards
relating to the following are superseded under this subsection:
``(A) Benefit requirements.
``(B) Requirements relating to inclusion or treatment
of providers.
``(C) Coverage determinations (including related
appeals and grievance processes).
``(D) Establishment and regulation of premiums.
``(3) Prohibition of state imposition of premium taxes.--No
State may impose a premium tax or similar tax with respect to
premiums paid to PDP sponsors for prescription drug plans under
this part, or with respect to any payments made to such a
sponsor by the Medicare Benefits Administrator under this part.
``SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT QUALIFIED
PRESCRIPTION DRUG COVERAGE.
``(a) In General.--The Medicare Benefits Administrator, through the
Office of Beneficiary Assistance, shall establish, based upon and
consistent with the procedures used under part C (including section
1851), a process for the selection of the prescription drug plan or
Medicare+Choice plan which offer qualified prescription drug coverage
through which eligible individuals elect qualified prescription drug
coverage under this part.
``(b) Elements.--Such process shall include the following:
``(1) Annual, coordinated election periods, in which such
individuals can change the qualifying plans through which they
obtain coverage, in accordance with section 1860A(b)(2).
``(2) Active dissemination of information to promote an
informed selection among qualifying plans based upon price,
quality, and other features, in the manner described in (and in
coordination with) section 1851(d), including the provision of
annual comparative information, maintenance of a toll-free
hotline, and the use of non-federal entities.
``(3) Coordination of elections through filing with a
Medicare+Choice organization or a PDP sponsor, in the manner
described in (and in coordination with) section 1851(c)(2).
``(c) Medicare+Choice Enrollee In Plan Offering Prescription Drug
Coverage May Only Obtain Benefits Through the Plan.--An individual who
is enrolled under a Medicare+Choice plan that offers qualified
prescription drug coverage may only elect to receive qualified
prescription drug coverage under this part through such plan.
``(d) Assuring Access to a Choice of Qualified Prescription Drug
Coverage.--
``(1) Choice of at least 2 plans in each area.--
``(A) In general.--The Medicare Benefits
Administrator shall assure that each individual who is
enrolled under part B and who is residing in an area
has available, consistent with subparagraph (B), a
choice of enrollment in at least 2 qualifying plans (as
defined in paragraph (5)) in the area in which the
individual resides, at least one of which is a
prescription drug plan.
``(B) Requirement for different plan sponsors.--The
requirement in subparagraph (A) is not satisfied with
respect to an area if only one PDP sponsor or
Medicare+Choice organization offers all the qualifying
plans in the area.
``(2) Guaranteeing access to coverage.--In order to assure
access under paragraph (1) and consistent with paragraph (3),
the Medicare Benefits Administrator may provide financial
incentives (including partial underwriting of risk) for a PDP
sponsor to expand the service area under an existing
prescription drug plan to adjoining or additional areas or to
establish such a plan (including offering such a plan on a
regional or nationwide basis), but only so long as (and to the
extent) necessary to assure the access guaranteed under
paragraph (1).
``(3) Limitation on authority.--In exercising authority under
this subsection, the Medicare Benefits Administrator--
``(A) shall not provide for the full underwriting of
financial risk for any PDP sponsor;
``(B) shall not provide for any underwriting of
financial risk for a public PDP sponsor with respect to
the offering of a nationwide prescription drug plan;
and
``(C) shall seek to maximize the assumption of
financial risk by PDP sponsors or Medicare+Choice
organizations.
``(4) Reports.--The Medicare Benefits Administrator shall, in
each annual report to Congress under section 1807(f), include
information on the exercise of authority under this subsection.
The Administrator also shall include such recommendations as
may be appropriate to minimize the exercise of such authority,
including minimizing the assumption of financial risk.
``(5) Qualifying plan defined.--For purposes of this
subsection, the term `qualifying plan' means a prescription
drug plan or a Medicare+Choice plan that includes qualified
prescription drug coverage.
``SEC. 1860F. PREMIUMS.
``(a) Submission of Premiums and Related Information.--
``(1) In general.--Each PDP sponsor shall submit to the
Medicare Benefits Administrator information of the type
described in paragraph (2) in the same manner as information is
submitted by a Medicare+Choice organization under section
1854(a)(1).
``(2) Type of information.--The information described in this
paragraph is the following:
``(A) Information on the qualified prescription drug
coverage to be provided.
``(B) Information on the actuarial value of the
coverage.
``(C) Information on the monthly premium to be
charged for the coverage, including an actuarial
certification of--
``(i) the actuarial basis for such premium;
``(ii) the portion of such premium
attributable to benefits in excess of standard
coverage; and
``(iii) the reduction in such premium
resulting from the reinsurance subsidy payments
provided under section 1860H.
``(D) Such other information as the Medicare Benefits
Administrator may require to carry out this part.
``(3) Review.--The Medicare Benefits Administrator shall
review the information filed under paragraph (2) for the
purpose of conducting negotiations under section 1860D(b)(2).
``(b) Uniform Premium.--The premium for a prescription drug plan
charged under this section may not vary among individuals enrolled in
the plan in the same service area, except as is permitted under section
1860A(c)(2)(B) (relating to late enrollment penalties).
``(c) Terms and Conditions for Imposing Premiums.--The provisions of
section 1854(d) shall apply under this part in the same manner as they
apply under part C, and, for this purpose, the reference in such
section to section 1851(g)(3)(B)(i) is deemed a reference to section
1860A(d)(3)(B) (relating to failure to pay premiums required under this
part).
``(d) Acceptance of Reference Premium as Full Premium if No Standard
(or Equivalent) Coverage in an Area.--
``(1) In general.--If there is no standard prescription drug
coverage (as defined in paragraph (2)) offered in an area, in
the case of an individual who is eligible for a premium subsidy
under section 1860G and resides in the area, the PDP sponsor of
any prescription drug plan offered in the area (and any
Medicare+Choice organization that offers qualified prescription
drug coverage in the area) shall accept the reference premium
under section 1860G(b)(2) as payment in full for the premium
charge for qualified prescription drug coverage.
``(2) Standard prescription drug coverage defined.--For
purposes of this subsection, the term `standard prescription
drug coverage' means qualified prescription drug coverage that
is standard coverage or that has an actuarial value equivalent
to the actuarial value for standard coverage.
``SEC. 1860G. PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME
INDIVIDUALS.
``(a) In General.--
``(1) Full premium subsidy and reduction of cost-sharing for
individuals with income below 135 percent of federal poverty
level.--In the case of a subsidy eligible individual (as
defined in paragraph (3)) who is determined to have income that
does not exceed 135 percent of the Federal poverty level, the
individual is entitled under this section--
``(A) to a premium subsidy equal to 100 percent of
the amount described in subsection (b)(1); and
``(B) subject to subsection (c), to the substitution
for the beneficiary cost-sharing described in
paragraphs (1) and (2) of section 1860B(b) (up to the
initial coverage limit specified in paragraph (3) of
such section) of amounts that are nominal.
``(2) Sliding scale premium subsidy for individuals with
income above 135, but below 150 percent, of federal poverty
level.--In the case of a subsidy eligible individual who is
determined to have income that exceeds 135 percent, but does
not exceed 150 percent, of the Federal poverty level, the
individual is entitled under this section to a premium subsidy
determined on a linear sliding scale ranging from 100 percent
of the amount described in subsection (b)(1) for individuals
with incomes at 135 percent of such level to 0 percent of such
amount for individuals with incomes at 150 percent of such
level.
``(3) Determination of eligibility.--
``(A) Subsidy eligible individual defined.--For
purposes of this section, subject to subparagraph (D),
the term `subsidy eligible individual' means an
individual who--
``(i) is eligible to elect, and has elected,
to obtain qualified prescription drug coverage
under this part;
``(ii) has income below 150 percent of the
Federal poverty line; and
``(iii) meets the resources requirement
described in section 1905(p)(1)(C).
``(B) Determinations.--The determination of whether
an individual residing in a State is a subsidy eligible
individual and the amount of such individual's income
shall be determined under the State medicaid plan for
the State under section 1935(a). In the case of a State
that does not operate such a medicaid plan (either
under title XIX or under a statewide waiver granted
under section 1115), such determination shall be made
under arrangements made by the Medicare Benefits
Administrator.
``(C) Income determinations.--For purposes of
applying this section--
``(i) income shall be determined in the
manner described in section 1905(p)(1)(B); and
``(ii) the term `Federal poverty line' means
the official poverty line (as defined by the
Office of Management and Budget, and revised
annually in accordance with section 673(2) of
the Omnibus Budget Reconciliation Act of 1981)
applicable to a family of the size involved.
``(D) Treatment of territorial residents.--In the
case of an individual who is not a resident of the 50
States or the District of Columbia, the individual is
not eligible to be a subsidy eligible individual but
may be eligible for financial assistance with
prescription drug expenses under section 1935(e).
``(b) Premium Subsidy Amount.--
``(1) In general.--The premium subsidy amount described in
this subsection for an individual residing in an area is the
reference premium (as defined in paragraph (2)) for qualified
prescription drug coverage offered by the prescription drug
plan or the Medicare+Choice plan in which the individual is
enrolled.
``(2) Reference premium defined.--For purposes of this
subsection, the term `reference premium' means, with respect to
qualified prescription drug coverage offered under--
``(A) a prescription drug plan that--
``(i) provides standard coverage (or
alternative prescription drug coverage the
actuarial value is equivalent to that of
standard coverage), the premium imposed for
enrollment under the plan under this part
(determined without regard to any subsidy under
this section or any late enrollment penalty
under section 1860A(c)(2)(B)); or
``(ii) provides alternative prescription drug
coverage the actuarial value of which is
greater than that of standard coverage, the
premium described in clause (i) multiplied by
the ratio of (I) the actuarial value of
standard coverage, to (II) the actuarial value
of the alternative coverage; or
``(B) a Medicare+Choice plan, the standard premium
computed under section 1851(j)(4)(A)(iii), determined
without regard to any reduction effected under section
1851(j)(4)(B).
``(c) Rules in Applying Cost-Sharing Subsidies.--
``(1) In general.--In applying subsection (a)(1)(B)--
``(A) the maximum amount of subsidy that may be
provided with respect to an enrollee for a year may not
exceed 95 percent of the maximum cost-sharing described
in such subsection that may be incurred for standard
coverage;
``(B) the Medicare Benefits Administrator shall
determine what is `nominal' taking into account the
rules applied under section 1916(a)(3); and
``(C) nothing in this part shall be construed as
preventing a plan or provider from waiving or reducing
the amount of cost-sharing otherwise applicable.
``(2) Limitation on charges.--In the case of an individual
receiving cost-sharing subsidies under subsection (a)(1)(B),
the PDP sponsor may not charge more than a nominal amount in
cases in which the cost-sharing subsidy is provided under such
subsection.
``(d) Administration of Subsidy Program.--The Medicare Benefits
Administrator shall provide a process whereby, in the case of an
individual who is determined to be a subsidy eligible individual and
who is enrolled in prescription drug plan or is enrolled in a
Medicare+Choice plan under which qualified prescription drug coverage
is provided--
``(1) the Administrator provides for a notification of the
PDP sponsor or Medicare+Choice organization involved that the
individual is eligible for a subsidy and the amount of the
subsidy under subsection (a);
``(2) the sponsor or organization involved reduces the
premiums or cost-sharing otherwise imposed by the amount of the
applicable subsidy and submits to the Administrator information
on the amount of such reduction; and
``(3) the Administrator periodically and on a timely basis
reimburses the sponsor or organization for the amount of such
reductions.
The reimbursement under paragraph (3) with respect to cost-sharing
subsidies may be computed on a capitated basis, taking into account the
actuarial value of the subsidies and with appropriate adjustments to
reflect differences in the risks actually involved.
``(e) Relation to Medicaid Program.--
``(1) In general.--For provisions providing for eligibility
determinations, and additional financing, under the medicaid
program, see section 1935.
``(2) Medicaid providing wrap around benefits.--The coverage
provided under this part is primary payor to benefits for
prescribed drugs provided under the medicaid program under
title XIX.
``SEC. 1860H. SUBSIDIES FOR ALL MEDICARE BENEFICIARIES THROUGH
REINSURANCE FOR QUALIFIED PRESCRIPTION DRUG
COVERAGE.
``(a) Reinsurance Subsidy Payment.--In order to reduce premium levels
applicable to qualified prescription drug coverage for all medicare
beneficiaries, to reduce adverse selection among prescription drug
plans and Medicare+Choice plans that provide qualified prescription
drug coverage, and to promote the participation of PDP sponsors under
this part, the Medicare Benefits Administrator shall provide in
accordance with this section for payment to a qualifying entity (as
defined in subsection (b)) of the reinsurance payment amount (as
defined in subsection (c)) for excess costs incurred in providing
qualified prescription drug coverage--
``(1) for individuals enrolled with a prescription drug plan
under this part;
``(2) for individuals enrolled with a Medicare+Choice plan
that provides qualified prescription drug coverage under part
C; and
``(3) for medicare primary individuals (described in
subsection (f)(3)(D)) who are enrolled in a qualified retiree
prescription drug plan.
This section constitutes budget authority in advance of appropriations
Acts and represents the obligation of the Administrator to provide for
the payment of amounts provided under this section.
``(b) Qualifying Entity Defined.--For purposes of this section, the
term `qualifying entity' means any of the following that has entered
into an agreement with the Administrator to provide the Administrator
with such information as may be required to carry out this section:
``(1) A PDP sponsor offering a prescription drug plan under
this part.
``(2) A Medicare+Choice organization that provides qualified
prescription drug coverage under a Medicare+Choice plan under
part C.
``(3) The sponsor of a qualified retiree prescription drug
plan (as defined in subsection (f)).
``(c) Reinsurance Payment Amount.--
``(1) In general.--Subject to subsection (d)(2) and paragraph
(4), the reinsurance payment amount under this subsection for a
qualifying covered individual (as defined in subsection (g)(1))
for a coverage year (as defined in subsection (g)(2)) is equal
to the sum of the following:
``(A) For the portion of the individual's gross
covered prescription drug costs (as defined in
paragraph (3)) for the year that exceeds $1,250, but
does not exceed $1,350, an amount equal to 30 percent
of the allowable costs (as defined in paragraph (2))
attributable to such gross covered prescription drug
costs.
``(B) For the portion of the individual's gross
covered prescription drug costs for the year that
exceeds $1,350, but does not exceed $1,450, an amount
equal to 50 percent of the allowable costs attributable
to such gross covered prescription drug costs.
``(C) For the portion of the individual's gross
covered prescription drug costs for the year that
exceeds $1,450, but does not exceed $1,550, an amount
equal to 70 percent of the allowable costs attributable
to such gross covered prescription drug costs.
``(D) For the portion of the individual's gross
covered prescription drug costs for the year that
exceeds $1,550, but does not exceed $2,350, an amount
equal to 90 percent of the allowable costs attributable
to such gross covered prescription drug costs.
``(E) For the portion of the individual's gross
covered prescription drug costs for the year that
exceeds $7,050, an amount equal to 90 percent of the
allowable costs attributable to such gross covered
prescription drug costs.
``(2) Allowable costs.--For purposes of this section, the
term `allowable costs' means, with respect to gross covered
prescription drug costs under a plan described in subsection
(b) offered by a qualifying entity, the part of such costs that
are actually paid under the plan, but in no case more than the
part of such costs that would have been paid under the plan if
the prescription drug coverage under the plan were standard
coverage.
``(3) Gross covered prescription drug costs.--For purposes of
this section, the term `gross covered prescription drug costs'
means, with respect to an enrollee with a qualifying entity
under a plan described in subsection (b) during a coverage
year, the costs incurred under the plan for covered
prescription drugs dispensed during the year, including costs
relating to the deductible, whether paid by the enrollee or
under the plan, regardless of whether the coverage under the
plan exceeds standard coverage and regardless of when the
payment for such drugs is made.
``(4) Indexing dollar amounts.--
``(A) Amounts for 2003.--The dollar amounts applied
under paragraph (1) for 2003 shall be the dollar
amounts specified in such paragraph.
``(B) For 2004.--The dollar amounts applied under
paragraph (1) for 2004 shall be the dollar amounts
specified in such paragraph increased by the annual
percentage increase described in section 1860B(b)(5)
for 2004.
``(C) For subsequent years.--The dollar amounts
applied under paragraph (1) for a year after 2004 shall
be the amounts (under this paragraph) applied under
paragraph (1) for the preceding year increased by the
annual percentage increase described in section
1860B(b)(5) for the year involved.
``(D) Rounding.--Any amount, determined under the
preceding provisions of this paragraph for a year,
which is not a multiple of $5 shall be rounded to the
nearest multiple of $5.
``(d) Adjustment of Payments.--
``(1) In general.--The Medicare Benefits Administrator shall
estimate--
``(A) the total payments to be made (without regard
to this subsection) during a year under this section;
and
``(B) the total payments to be made by qualifying
entities for standard coverage under plans described in
subsection (b) during the year.
``(2) Adjustment of payments.--The Administrator shall
proportionally adjust the payments made under this section for
a coverage year in such manner so that the total of the
payments made for the year under this section is equal to 35
percent of the total payments described in paragraph (1)(B)
during the year.
``(e) Payment Methods.--
``(1) In general.--Payments under this section shall be based
on such a method as the Medicare Benefits 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 Medicare Prescription Drug Account.
``(f) Qualified Retiree Prescription Drug Plan Defined.--
``(1) In general.--For purposes of this section, the term
`qualified retiree prescription drug plan' means employment-
based retiree health coverage (as defined in paragraph (3)(A))
if, with respect to an individual enrolled (or eligible to be
enrolled) under this part who is covered under the plan, the
following requirements are met:
``(A) Assurance.--The sponsor of the plan shall
annually attest, and provide such assurances as the
Medicare Benefits Administrator may require, that the
coverage meets the requirements for qualified
prescription drug coverage.
``(B) Audits.--The sponsor (and the plan) shall
maintain, and afford the Medicare Benefits
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, the accuracy of
payments made, and such other matters as may be
appropriate.
``(C) Provision of certification of prescription drug
coverage.--The sponsor of the plan shall provide for
issuance of certifications of the type described in
section 1860A(c)(2)(D).
``(D) Other requirements.--The sponsor of the plan
shall comply with such other requirements as the
Medicare Benefits Administrator finds necessary to
administer the program under this section.
``(2) Limitation on benefit eligibility.--No payment shall be
provided under this section with respect to an individual who
is enrolled under a qualified retiree prescription drug plan
unless the individual is a medicare primary individual who--
``(A) is covered under the plan; and
``(B) is eligible to obtain qualified prescription
drug coverage under section 1860A but did not elect
such coverage under this part (either through a
prescription drug plan or through a Medicare+Choice
plan).
``(3) Definitions.--As used in this section:
``(A) Employment-based retiree health coverage.--The
term `employment-based retiree health coverage' means
health insurance or other coverage of health care costs
for medicare primary individuals (or for such
individuals and their spouses and dependents) based on
their status as former employees or labor union
members.
``(B) Employer.--The term `employer' has the meaning
given such term by section 3(5) of the Employee
Retirement Income Security Act of 1974 (except that
such term shall include only employers of two or more
employees).
``(C) Sponsor.--The term `sponsor' means a plan
sponsor, as defined in section 3(16)(B) of the Employee
Retirement Income Security Act of 1974.
``(D) Medicare primary individual.--The term
`medicare primary individual' means, with respect to a
plan, an individual who is covered under the plan and
with respect to whom the plan is not a primary plan (as
defined in section 1862(b)(2)(A)).
``(g) General Definitions.--For purposes of this section:
``(1) Qualifying covered individual.--The term `qualifying
covered individual' means an individual who--
``(A) is enrolled with a prescription drug plan under
this part;
``(B) is enrolled with a Medicare+Choice plan that
provides qualified prescription drug coverage under
part C; or
``(C) is covered as a medicare primary individual
under a qualified retiree prescription drug plan.
``(2) Coverage year.--The term `coverage year' means a
calendar year in which covered outpatient drugs are dispensed
if a claim for payment is made under the plan for such drugs,
regardless of when the claim is paid.
``SEC. 1860I. MEDICARE PRESCRIPTION DRUG ACCOUNT IN FEDERAL
SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND.
``(a) In General.--There is created within the Federal Supplementary
Medical Insurance Trust Fund established by section 1841 an account to
be known as the `Medicare Prescription Drug Account' (in this section
referred to as the `Account'). The Account shall consist of such gifts
and bequests as may be made as provided in section 201(i)(1), and such
amounts as may be deposited in, or appropriated to, such fund as
provided in this part. Funds provided under this part to the Account
shall be kept separate from all other funds within the Federal
Supplementary Medical Insurance Trust Fund.
``(b) Payments From Account.--
``(1) In general.--The Managing Trustee shall pay from time
to time from the Account such amounts as the Medicare Benefits
Administrator certifies are necessary to make--
``(A) payments under section 1860G (relating to low-
income subsidy payments);
``(B) payments under section 1860H (relating to
reinsurance subsidy payments); and
``(C) payments with respect to administrative
expenses under this part in accordance with section
201(g).
``(2) Transfers to medicaid account for increased
administrative costs.--The Managing Trustee shall transfer from
time to time from the Account to the Grants to States for
Medicaid account amounts the Secretary certifies are
attributable to increases in payment resulting from the
application of a higher Federal matching percentage under
section 1935(b).
``(3) Treatment in relation to part b premium.--Amounts
payable from the Account shall not be taken into account in
computing actuarial rates or premium amounts under section
1839.
``(c) Deposits Into Account.--
``(1) Medicaid transfer.--There is hereby transferred to the
Account, from amounts appropriated for Grants to States for
Medicaid, amounts equivalent to the aggregate amount of the
reductions in payments under section 1903(a)(1) attributable to
the application of section 1935(c).
``(2) Appropriations to cover government contributions.--
There are authorized to be appropriated from time to time, out
of any moneys in the Treasury not otherwise appropriated, to
the Account, an amount equivalent to the amount of payments
made from the Account under subsection (b), reduced by the
amount transferred to the Account under paragraph (1).
``SEC. 1860J. DEFINITIONS; TREATMENT OF REFERENCES TO PROVISIONS IN
PART C.
``(a) Definitions.--For purposes of this part:
``(1) Covered outpatient drugs.--The term `covered outpatient
drugs' is defined in section 1860B(f).
``(2) Initial coverage limit.--The term `initial coverage
limit' means the such limit as established under section
1860B(b)(3), or, in the case of coverage that is not standard
coverage, the comparable limit (if any) established under the
coverage.
``(3) Medicare prescription drug account.--The term `Medicare
Prescription Drug Account' means the Account in the Federal
Supplementary Medical Insurance Trust Fund created under
section 1860I(a).
``(4) PDP sponsor.--The term `PDP sponsor' means an entity
that is certified under this part as meeting the requirements
and standards of this part for such a sponsor.
``(5) Prescription drug plan.--The term `prescription drug
plan' means health benefits coverage that--
``(A) is offered under a policy, contract, or plan by
a PDP sponsor pursuant to, and in accordance with, a
contract between the Medicare Benefits Administrator
and the sponsor under section 1860D(b);
``(B) provides qualified prescription drug coverage;
and
``(C) meets the applicable requirements of the
section 1860C for a prescription drug plan.
``(6) Qualified prescription drug coverage.--The term
`qualified prescription drug coverage' is defined in section
1860B(a).
``(7) Standard coverage.--The term `standard coverage' is
defined in section 1860B(b).
``(b) Application of Medicare+Choice Provisions Under This Part.--For
purposes of applying provisions of part C under this part with respect
to a prescription drug plan and a PDP sponsor, unless otherwise
provided in this part such provisions shall be applied as if--
``(1) any reference to a Medicare+Choice plan included a
reference to a prescription drug plan;
``(2) any reference to a provider-sponsored organization
included a reference to a PDP sponsor;
``(3) any reference to a contract under section 1857 included
a reference to a contract under section 1860D(b); and
``(4) any reference to part C included a reference to this
part.''.
(b) Conforming Amendments to Federal Supplementary Medical Insurance
Trust Fund.--Section 1841 of the Social Security Act (42 U.S.C. 1395t)
is amended--
(1) in the last sentence of subsection (a)--
(A) by striking ``and'' before ``such amounts'', and
(B) by inserting before the period the following:
``and such amounts as may be deposited in, or
appropriated to, the Medicare Prescription Drug Account
established by section 1860I''; and
(2) in subsection (g), by inserting after ``by this part,''
the following: ``the payments provided for under part D (in
which case the payments shall come from the Medicare
Prescription Drug Account in the Trust Fund),''.
(c) Additional Conforming Changes.--
(1) Conforming references to previous part d.--Any reference
in law (in effect before the date of the enactment of this Act)
to part D of title XVIII of the Social Security Act is deemed a
reference to part E of such title (as in effect after such
date).
(2) Secretarial submission of legislative proposal.--Not
later than 6 months after the date of the enactment of this
Act, the Secretary of Health and Human Services shall submit to
the appropriate committees of Congress a legislative proposal
providing for such technical and conforming amendments in the
law as are required by the provisions of this subtitle.
SEC. 102. OFFERING OF QUALIFIED PRESCRIPTION DRUG COVERAGE UNDER THE
MEDICARE+CHOICE PROGRAM.
(a) In General.--Section 1851 of the Social Security Act (42 U.S.C.
1395w-21) is amended by adding at the end the following new subsection:
``(j) Availability of Prescription Drug Benefits.--
``(1) In general.--A Medicare+Choice organization may not
offer prescription drug coverage (other than that required
under parts A and B) to an enrollee under a Medicare+Choice
plan unless such drug coverage is at least qualified
prescription drug coverage and unless the requirements of this
subsection with respect to such coverage are met.
``(2) Compliance with additional beneficiary protections.--
With respect to the offering of qualified prescription drug
coverage by a Medicare+Choice organization under a
Medicare+Choice plan, the organization and plan shall meet the
requirements of section 1860C, including requirements relating
to information dissemination and grievance and appeals, in the
same manner as they apply to a PDP sponsor and a prescription
drug plan under part D. The Medicare Benefits Administrator
shall waive such requirements to the extent the Administrator
determines that such requirements duplicate requirements
otherwise applicable to the organization or plan under this
part.
``(3) Treatment of coverage.--Except as provided in this
subsection, qualified prescription drug coverage offered under
this subsection shall be treated under this part in the same
manner as supplemental health care benefits described in
section 1852(a)(3)(A).
``(4) Availability of premium and cost-sharing subsidies for
low-income enrollees and reinsurance subsidy payments for
organizations.--For provisions--
``(A) providing premium and cost-sharing subsidies to
low-income individuals receiving qualified prescription
drug coverage through a Medicare+Choice plan, see
section 1860G; and
``(B) providing a Medicare+Choice organization with
reinsurance subsidy payments for providing qualified
prescription drug coverage under this part, see section
1860H.
``(5) Specification of separate and standard premium.--
``(A) In general.--For purposes of applying section
1854 and section 1860G(b)(2)(B) with respect to
qualified prescription drug coverage offered under this
subsection under a plan, the Medicare+Choice
organization shall compute and publish the following:
``(i) Separate prescription drug premium.--A
premium for prescription drug benefits that
constitute qualified prescription drug coverage
that is separate from other coverage under the
plan.
``(ii) Portion of coverage attributable to
standard benefits.--The ratio of the actuarial
value of standard coverage to the actuarial
value of the qualified prescription drug
coverage offered under the plan.
``(iii) Portion of premium attributable to
standard benefits.--A standard premium equal to
the product of the premium described in clause
(i) and the ratio under clause (ii).
The premium under clause (i) shall be compute without
regard to any reduction in the premium permitted under
subparagraph (B).
``(B) Reduction of premiums allowed.--Nothing in this
subsection shall be construed as preventing a
Medicare+Choice organization from reducing the amount
of a premium charged for prescription drug coverage
because of the application of section 1854(f)(1)(A) to
other coverage.
``(C) Acceptance of reference premium as full premium
if no standard (or equivalent) coverage in an area.--
For requirement to accept reference premium as full
premium if there is no standard (or equivalent)
coverage in the area of a Medicare+Choice plan, see
section 1860F(d).
``(6) Transition in initial enrollment period.--
Notwithstanding any other provision of this part, the annual,
coordinated election period under subsection (e)(3)(B) for 2003
shall be the 6-month period beginning with November 2002.
``(7) Qualified prescription drug coverage; standard
coverage.--For purposes of this part, the terms `qualified
prescription drug coverage' and `standard coverage' have the
meanings given such terms in section 1860B.''.
(b) Conforming Amendments.--Section 1851 of such Act (42 U.S.C.
1395w-21) is amended--
(1) in subsection (a)(1)--
(A) by inserting ``(other than qualified prescription
drug benefits)'' after ``benefits'';
(B) by striking the period at the end of subparagraph
(B) and inserting a comma; and
(C) by adding after and below subparagraph (B) the
following:
``and may elect qualified prescription drug coverage in
accordance with section 1860A.''; and
(2) in subsection (g)(1), by inserting ``and section
1860A(c)(2)(B)'' after ``in this subsection''.
(c) Effective Date.--The amendments made by this section apply to
coverage provided on or after January 1, 2003.
SEC. 103. MEDICAID AMENDMENTS.
(a) Determinations of Eligibility for Low-Income Subsidies.--
(1) Requirement.--Section 1902 of the Social Security Act (42
U.S.C. 1396a) is amended--
(A) in subsection (a)--
(i) by striking ``and'' at the end of
paragraph (64);
(ii) by striking the period at the end of
paragraph (65) and inserting ``; and''; and
(iii) by inserting after paragraph (65) the
following new paragraph:
``(66) provide for making eligibility determinations under
section 1935(a).''.
(2) New section.--Title XIX of such Act is further amended--
(A) by redesignating section 1935 as section 1936;
and
(B) by inserting after section 1934 the following new
section:
``special provisions relating to medicare prescription drug benefit
``Sec. 1935. (a) Requirement for Making Eligibility Determinations
for Low-Income Subsidies.--As a condition of its State plan under this
title under section 1902(a)(66) and receipt of any Federal financial
assistance under section 1903(a), a State shall--
``(1) make determinations of eligibility for premium and
cost-sharing subsidies under (and in accordance with) section
1860G;
``(2) inform the Administrator of the Medicare Benefits
Administration of such determinations in cases in which such
eligibility is established; and
``(3) otherwise provide such Administrator with such
information as may be required to carry out part D of title
XVIII (including section 1860G).
``(b) Payments for Additional Administrative Costs.--
``(1) In general.--The amounts expended by a State in
carrying out subsection (a) are, subject to paragraph (2),
expenditures reimbursable under the appropriate paragraph of
section 1903(a); except that, notwithstanding any other
provision of such section, the applicable Federal matching
rates with respect to such expenditures under such section
shall be increased as follows:
``(A) For expenditures attributable to costs incurred
during 2003, the otherwise applicable Federal matching
rate shall be increased by 20 percent of the percentage
otherwise payable (but for this subsection) by the
State.
``(B) For expenditures attributable to costs incurred
during 2004, the otherwise applicable Federal matching
rate shall be increased by 40 percent of the percentage
otherwise payable (but for this subsection) by the
State.
``(C) For expenditures attributable to costs incurred
during 2005, the otherwise applicable Federal matching
rate shall be increased by 60 percent of the percentage
otherwise payable (but for this subsection) by the
State.
``(D) For expenditures attributable to costs incurred
during 2006, the otherwise applicable Federal matching
rate shall be increased by 80 percent of the percentage
otherwise payable (but for this subsection) by the
State.
``(E) For expenditures attributable to costs incurred
after 2006, the otherwise applicable Federal matching
rate shall be increased to 100 percent.
``(2) Coordination.--The State shall provide the Secretary
with such information as may be necessary to properly allocate
administrative expenditures described in paragraph (1) that may
otherwise be made for similar eligibility determinations.''.
(b) Phased-In Federal Assumption of Medicaid Responsibility for
Premium and Cost-Sharing Subsidies for Dually Eligible Individuals.--
(1) In general.--Section 1903(a)(1) of the Social Security
Act (42 U.S.C. 1396b(a)(1)) is amended by inserting before the
semicolon the following: ``, reduced by the amount computed
under section 1935(c)(1) for the State and the quarter''.
(2) Amount described.--Section 1935 of such Act, as inserted
by subsection (a)(2), is amended by adding at the end the
following new subsection:
``(c) Federal Assumption of Medicaid Prescription Drug Costs for
Dually-Eligible Beneficiaries.--
``(1) In general.--For purposes of section 1903(a)(1), for a
State that is one of the 50 States or the District of Columbia
for a calendar quarter in a year (beginning with 2003) the
amount computed under this subsection is equal to the product
of the following:
``(A) Medicare subsidies.--The total amount of
payments made in the quarter under section 1860G
(relating to premium and cost-sharing prescription drug
subsidies for low-income medicare beneficiaries) that
are attributable to individuals who are residents of
the State and are entitled to benefits with respect to
prescribed drugs under the State plan under this title
(including such a plan operating under a waiver under
section 1115).
``(B) State matching rate.--A proportion computed by
subtracting from 100 percent the Federal medical
assistance percentage (as defined in section 1905(b))
applicable to the State and the quarter.
``(C) Phase-out proportion.--The phase-out proportion
(as defined in paragraph (2)) for the quarter.
``(2) Phase-out proportion.--For purposes of paragraph
(1)(C), the `phase-out proportion' for a calendar quarter in--
``(A) 2003 is 80 percent;
``(B) 2004 is 60 percent;
``(C) 2005 is 40 percent;
``(D) 2006 is 20 percent; or
``(E) a year after 2006 is 0 percent.''.
(c) Medicaid Providing Wrap-Around Benefits.--Section 1935 of such
Act, as so inserted and amended, is further amended by adding at the
end the following new subsection:
``(d) Additional Provisions.--
``(1) Medicaid as secondary payor.--In the case of an
individual dually entitled to qualified prescription drug
coverage under a prescription drug plan under part D of title
XVIII (or under a Medicare+Choice plan under part C of such
title) and medical assistance for prescribed drugs under this
title, medical assistance shall continue to be provided under
this title for prescribed drugs to the extent payment is not
made under the prescription drug plan or the Medicare+Choice
plan selected by the individual.
``(2) Condition.--A State may require, as a condition for the
receipt of medical assistance under this title with respect to
prescription drug benefits for an individual eligible to obtain
qualified prescription drug coverage described in paragraph (1),
that the individual elect qualified prescription drug coverage
under section 1860A.''.
(d) Treatment of Territories.--
(1) In general.--Section 1935 of such Act, as so inserted and
amended, is further amended--
(A) in subsection (a) in the matter preceding
paragraph (1), by inserting ``subject to subsection
(e)'' after ``section 1903(a)'';
(B) in subsection (c)(1), by inserting ``subject to
subsection (e)'' after ``1903(a)(1)''; and
(C) by adding at the end the following new
subsection:
``(e) Treatment of Territories.--
``(1) In general.--In the case of a State, other than the 50
States and the District of Columbia--
``(A) the previous provisions of this section shall
not apply to residents of such State; and
``(B) if the State establishes a plan described in
paragraph (2) (for providing medical assistance with
respect to the provision of prescription drugs to
medicare beneficiaries), the amount otherwise
determined under section 1108(f) (as increased under
section 1108(g)) for the State shall be increased by
the amount specified in paragraph (3).
``(2) Plan.--The plan described in this paragraph is a plan
that--
``(A) provides medical assistance with respect to the
provision of covered outpatient drugs (as defined in
section 1860B(f)) to low-income medicare beneficiaries;
and
``(B) assures that additional amounts received by the
State that are attributable to the operation of this
subsection are used only for such assistance.
``(3) Increased amount.--
``(A) In general.--The amount specified in this
paragraph for a State for a year is equal to the
product of--
``(i) the aggregate amount specified in
subparagraph (B); and
``(ii) the amount specified in section
1108(g)(1) for that State, divided by the sum
of the amounts specified in such section for
all such States.
``(B) Aggregate amount.--The aggregate amount
specified in this subparagraph for--
``(i) 2003, is equal to $20,000,000; or
``(ii) a subsequent year, is equal to the
aggregate amount specified in this subparagraph
for the previous year increased by annual
percentage increase specified in section
1860(b)(5) for the year involved.
``(4) Report.--The Secretary shall submit to Congress a
report on the application of this subsection and may include in
the report such recommendations as the Secretary deems
appropriate.''.
(2) Conforming amendment.--Section 1108(f) of such Act is
amended by inserting ``and section 1935(e)(1)(B)'' after
``Subject to subsection (g)''.
SEC. 104. MEDIGAP TRANSITION PROVISIONS.
(a) In General.--Notwithstanding any other provision of law, no new
medicare supplemental policy that provides coverage of expenses for
prescription drugs may be issued under section 1882 of the Social
Security Act on or after January 1, 2003, to an individual unless it
replaces a medicare supplemental policy that was issued to that
individual and that provided some coverage of expenses for prescription
drugs.
(b) Issuance of Substitute Policies if Obtain Prescription Drug
Coverage Through Medicare.--
(1) In general.--The issuer of a medicare supplemental
policy--
(A) may not deny or condition the issuance or
effectiveness of a medicare supplemental policy that
has a benefit package classified as ``A'', ``B'',
``C'', ``D'', ``E'', ``F'', or ``G'' (under the
standards established under subsection (p)(2) of
section 1882 of the Social Security Act, 42 U.S.C.
1395ss) and that is offered and is available for
issuance to new enrollees by such issuer;
(B) may not discriminate in the pricing of such
policy, because of health status, claims experience,
receipt of health care, or medical condition; and
(C) may not impose an exclusion of benefits based on
a pre-existing condition under such policy,
in the case of an individual described in paragraph (2) who
seeks to enroll under the policy not later than 63 days after
the date of the termination of enrollment described in such
paragraph and who submits evidence of the date of termination
or disenrollment along with the application for such medicare
supplemental policy.
(2) Individual covered.--An individual described in this
paragraph is an individual who--
(A) enrolls in a prescription drug plan under part D
of title XVIII of the Social Security Act; and
(B) at the time of such enrollment was enrolled and
terminates enrollment in a medicare supplemental policy
which has a benefit package classified as ``H'', ``I'',
or ``J'' under the standards referred to in paragraph
(1)(A) or terminates enrollment in a policy to which
such standards do not apply but which provides benefits
for prescription drugs.
(3) Enforcement.--The provisions of paragraph (1) shall be
enforced as though they were included in section 1882(s) of the
Social Security Act (42 U.S.C. 1395ss(s)).
(4) Definitions.--For purposes of this subsection, the term
``medicare supplemental policy'' has the meaning given such
term in section 1882(g) of the Social Security Act (42 U.S.C.
1395ss(g)).
SEC. 105. DEMONSTRATION PROJECT FOR DISEASE MANAGEMENT FOR SEVERELY
CHRONICALLY ILL MEDICARE BENEFICIARIES.
(a) In General.--The Administrator of the Medicare Benefits
Administration (in this section referred to as the ``Administrator'')
shall conduct a demonstration project under this section (in this
section referred to as the ``project'') to demonstrate the impact on
costs and health outcomes of applying disease management to medicare
beneficiaries with diagnosed, advanced-stage congestive heart failure,
diabetes, or coronary heart disease.
(b) Voluntary Participation.--
(1) Eligibility.--Medicare beneficiaries are eligible to
participate in the project only if--
(A) they meet specific medical criteria demonstrating
the appropriate diagnosis and the advanced nature of
their disease;
(B) their physicians approve of participation in the
project; and
(C) they are not enrolled in a Medicare+Choice plan.
(2) Benefits.--A beneficiary who is enrolled in the project
shall be eligible--
(A) for disease management services related to their
chronic health condition; and
(B) if the beneficiary--
(i) is enrolled in a prescription drug plan
under part D of title XVIII of the Social
Security Act, for payment of any premiums for
such plan, any deductible or cost-sharing, and
any amounts not covered under the plan because
of the application of an initial coverage
limit; or
(ii) is not enrolled in such a plan, for
payment for all costs for prescription drugs
without regard to whether or not they relate to
the chronic health condition;
except that the project may provide for modest cost-
sharing with respect to prescription drug coverage.
(3) Treatment as qualifying coverage for purposes of
continuous coverage.--For purposes of applying section
1860A(c)(2)(C) of the Social Security Act, coverage under the
project shall be treated as coverage under a prescription drug
plan under part D of title XVIII of such Act.
(c) Contracts with Disease Management Organizations.--
(1) In general.--The Administrator shall carry out the
project through contracts with up to 3 disease management
organizations. The Administrator shall not enter into such a
contract with an organization unless the organization
demonstrates that it can produce improved health outcomes and
reduce aggregate medicare expenditures consistent with
paragraph (2).
(2) Contract provisions.--Under such contracts--
(A) such an organization shall be required to provide
for prescription drug coverage described in subsection
(b)(2)(B);
(B) such an organization shall be paid a fee
negotiated and established by the Administrator in a
manner so that (taking into account savings in
expenditures under parts A and B of the medicare
program) there will be a net reduction in expenditures
under the medicare program as a result of the project;
and
(C) such an organization shall guarantee, through an
appropriate arrangement with a reinsurance company or
otherwise, the net reduction in expenditures described
in subparagraph (B).
(3) Payments.--Payments to such organizations shall be made
in appropriate proportion from the Trust Funds established
under title XVIII of the Social Security Act.
(d) Duration.--The project shall last for not longer than 3 years.
(e) Report.--The Administrator shall submit to Congress an interim
report on the project not later than 2 years after the date it is first
implemented and a final report on the project not later than 6 months
after the date of its completion. Such reports shall include
information on the impact of the project on costs and health outcomes
and recommendations on the cost-effectiveness of extending or expanding
the project.
TITLE II--MODERNIZATION OF ADMINISTRATION OF MEDICARE
Subtitle A--Medicare Benefits Administration
SEC. 201. ESTABLISHMENT OF ADMINISTRATION.
(a) In General.--Title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) is amended by inserting after section 1806 the following
new section:
``medicare benefits administration
``Sec. 1807. (a) Establishment.--There is established within the
Department of Health and Human Services an agency to be known as the
Medicare Benefits Administration.
``(b) Administrator and Deputy Administrator.--
``(1) Administrator.--
``(A) In general.--The Medicare Benefits
Administration shall be headed by an Administrator (in
this section referred to as the `Administrator') who
shall be appointed by the President, by and with the
advice and consent of the Senate. The Administrator
shall be in direct line of authority to the Secretary.
``(B) Compensation.--The Administrator shall be paid
at the rate of basic pay payable for level III of the
Executive Schedule under section 5314 of title 5,
United States Code.
``(C) Term of office.--The Administrator shall be
appointed for a term of 5 years. In any case in which a
successor does not take office at the end of an
Administrator's term of office, that Administrator may
continue in office until the entry upon office of such
a successor. An Administrator appointed to a term of
office after the commencement of such term may serve
under such appointment only for the remainder of such
term.
``(D) General authority.--The Administrator shall be
responsible for the exercise of all powers and the
discharge of all duties of the Administration, and
shall have authority and control over all personnel and
activities thereof.
``(E) Rulemaking authority.--The Administrator may
prescribe such rules and regulations as the
Administrator determines necessary or appropriate to
carry out the functions of the Administration. The
regulations prescribed by the Administrator shall be
subject to the rulemaking procedures established under
section 553 of title 5, United States Code.
``(F) Authority to establish organizational units.--
The Administrator may establish, alter, consolidate, or
discontinue such organizational units or components
within the Administration as the Administrator
considers necessary or appropriate, except that this
subparagraph shall not apply with respect to any unit,
component, or provision provided for by this section.
``(G) Authority to delegate.--The Administrator may
assign duties, and delegate, or authorize successive
redelegations of, authority to act and to render
decisions, to such officers and employees of the
Administration as the Administrator may find necessary.
Within the limitations of such delegations,
redelegations, or assignments, all official acts and
decisions of such officers and employees shall have the
same force and effect as though performed or rendered
by the Administrator.
``(2) Deputy administrator.--
``(A) In general.--There shall be a Deputy
Administrator of the Medicare Benefits Administration
who shall be appointed by the President, by and with
the advice and consent of the Senate.
``(B) Compensation.--The Deputy Administrator shall
be paid at the rate of basic pay payable for level IV
of the Executive Schedule under section 5315 of title
5, United States Code.
``(C) Term of office.--The Deputy Administrator shall
be appointed for a term of 5 years. In any case in
which a successor does not take office at the end of a
Deputy Administrator's term of office, such Deputy
Administrator may continue in office until the entry
upon office of such a successor. A Deputy Administrator
appointed to a term of office after the commencement of
such term may serve under such appointment only for the
remainder of such term.
``(D) Duties.--The Deputy Administrator shall perform
such duties and exercise such powers as the
Administrator shall from time to time assign or
delegate. The Deputy Administrator shall be Acting
Administrator of the Administration during the absence
or disability of the Administrator and, unless the
President designates another officer of the Government
as Acting Administrator, in the event of a vacancy in
the office of the Administrator.
``(3) Secretarial coordination of program administration.--
The Secretary shall ensure appropriate coordination between the
Administrator and the Administrator of the Health Care
Financing Administration in carrying out the programs under
this title.
``(c) Duties; Administrative Provisions.--
``(1) Duties.--
``(A) General duties.--The Administrator shall carry
out parts C and D, including--
``(i) negotiating, entering into, and
enforcing, contracts with plans for the
offering of Medicare+Choice plans under part C,
including the offering of qualified
prescription drug coverage under such plans;
and
``(ii) negotiating, entering into, and
enforcing, contracts with PDP sponsors for the
offering of prescription drug plans under part
D.
``(B) Other duties.--The Administrator shall carry
out any duty provided for under part C or part D,
including demonstration projects carried out in part or
in whole under such parts, the programs of all-
inclusive care for the elderly (PACE program) under
section 1894, the social health maintenance
organization (SHMO) demonstration projects (referred to
in section 4104(c) of the Balanced Budget Act of 1997),
and through a Medicare+Choice project that demonstrates
the application of capitation payment rates for frail
elderly medicare beneficiaries through the use of a
interdisciplinary team and through the provision of
primary care services to such beneficiaries by means of
such a team at the nursing facility involved).
``(C) Noninterference.--In carrying out its duties
with respect to the provision of qualified prescription
drug coverage to beneficiaries under this title, the
Administrator may not--
``(i) require a particular formulary or
institute a price structure for the
reimbursement of covered outpatient drugs;
``(ii) interfere in any way with negotiations
between PDP sponsors and Medicare+Choice
organizations and drug manufacturers,
wholesalers, or other suppliers of covered
outpatient drugs; and
``(iii) otherwise interfere with the
competitive nature of providing such coverage
through such sponsors and organizations.
``(D) Annual reports.--Not later March 31 of each
year, the Administrator shall submit to Congress and
the President a report on the administration of parts C
and D during the previous fiscal year.
``(2) Staff.--
``(A) In general.--The Administrator, with the
approval of the Secretary, may employ, without regard
to chapter 31 of title 5, United States Code, such
officers and employees as are necessary to administer
the activities to be carried out through the Medicare
Benefits Administration.
``(B) Flexibility with respect to compensation.--
``(i) In general.--The staff of the Medicare
Benefits Administration shall, subject to
clause (ii), be paid without regard to the
provisions of chapter 51 and chapter 53 of such
title (relating to classification and schedule
pay rates).
``(ii) Maximum rate.--In no case may the rate
of compensation determined under clause (i)
exceed the rate of basic pay payable for level
IV of the Executive Schedule under section 5315
of title 5, United States Code.
``(C) Limitation on full-time equivalent staffing for
current hcfa functions being transferred.--The
Administrator may not employ under this paragraph a
number of full-time equivalent employees, to carry out
functions that were previously conducted by the Health
Care Financing Administration and that are conducted by
the Administrator by reason of this section, that
exceeds the number of such full-time equivalent
employees authorized to be employed by the Health Care
Financing Administration to conduct such functions as
of the date of the enactment of this Act.
``(3) Redelegation of certain functions of the health care
financing administration.--
``(A) In general.--The Secretary, the Administrator,
and the Administrator of the Health Care Financing
Administration shall establish an appropriate
transition of responsibility in order to redelegate the
administration of part C from the Secretary and the
Administrator of the Health Care Financing
Administration to the Administrator as is appropriate
to carry out the purposes of this section.
``(B) Transfer of data and information.--The
Secretary shall ensure that the Administrator of the
Health Care Financing Administration transfers to the
Administrator of the Medicare Benefits Administration
such information and data in the possession of the
Administrator of the Health Care Financing
Administration as the Administrator of the Medicare
Benefits Administration requires to carry out the
duties described in paragraph (1).
``(C) Construction.--Insofar as a responsibility of
the Secretary or the Administrator of the Health Care
Financing Administration is redelegated to the
Administrator under this section, any reference to the
Secretary or the Administrator of the Health Care
Financing Administration in this title or title XI with
respect to such responsibility is deemed to be a
reference to the Administrator.
``(d) Office of Beneficiary Assistance.--
``(1) Establishment.--The Secretary shall establish within
the Medicare Benefits Administration an Office of Beneficiary
Assistance to carry out functions relating to medicare
beneficiaries under this title, including making determinations
of eligibility of individuals for benefits under this title,
providing for enrollment of medicare beneficiaries under this
title, and the functions described in paragraph (2). The Office
shall be separate operating division within the Administration.
``(2) Dissemination of information on benefits and appeals
rights.--
``(A) Dissemination of benefits information.--The
Office of Beneficiary Assistance shall disseminate to
medicare beneficiaries, by mail, by posting on the
Internet site of the Medicare Benefits Administration
and through the toll-free telephone number provided for
under section 1804(b), information with respect to the
following:
``(i) Benefits, and limitations on payment
(including cost-sharing, stop-loss provisions,
and formulary restrictions) under parts C and
D.
``(ii) Benefits, and limitations on payment
under parts A and B, including information on
medicare supplemental policies under section
1882.
Such information shall be presented in a manner so that
medicare beneficiaries may compare benefits under parts
A, B, D, and medicare supplemental policies with
benefits under Medicare+Choice plans under part C.
``(B) Dissemination of appeals rights information.--
The Office of Beneficiary Assistance shall disseminate
to medicare beneficiaries in the manner provided under
subparagraph (A) a description of procedural rights
(including grievance and appeals procedures) of
beneficiaries under the original medicare fee-for-
service program under parts A and B, the
Medicare+Choice program under part C, and the Voluntary
Prescription Drug Benefit Program under part D.
``(3) Medicare ombudsman.--
``(A) In general.--Within the Office of Beneficiary
Assistance, there shall be a Medicare Ombudsman,
appointed by the Secretary from among individuals with
expertise and experience in the fields of health care
and advocacy, to carry out the duties described in
subparagraph (B).
``(B) Duties.--The Medicare Ombudsman shall--
``(i) receive complaints, grievances, and
requests for information submitted by a
medicare beneficiary, with respect to any
aspect of the medicare program;
``(ii) provide assistance with respect to
complaints, grievances, and requests referred
to in clause (i), including--
``(I) assistance in collecting
relevant information for such
beneficiaries, to seek an appeal of a
decision or determination made by a
fiscal intermediary, carrier,
Medicare+Choice organization, a PDP
sponsor under part D, or the Secretary;
and
``(II) assistance to such
beneficiaries with any problems arising
from disenrollment from a
Medicare+Choice plan under part C or a
prescription drug plan under part D;
and
``(iii) submit annual reports to Congress,
the Secretary, and the Medicare Policy Advisory
Board describing the activities of the Office,
and including such recommendations for
improvement in the administration of this title
as the Ombudsman determines appropriate.
``(C) Coordination with state ombudsman programs and
consumer organizations.--The Medicare Ombudsman shall,
to the extent appropriate, coordinate with State
medical Ombudsman programs, and with State- and
community-based consumer organizations, to--
``(i) provide information about the medicare
program; and
``(ii) conduct outreach to educate medicare
beneficiaries with respect to manners in which
problems under the medicare program may be
resolved or avoided.
``(e) Medicare Policy Advisory Board.--
``(1) Establishment.--There is established within the
Medicare Benefits Administration the Medicare Policy Advisory
Board (in this section referred to the `Board'). The Board
shall advise, consult with, and make recommendations to the
Administrator of the Medicare Benefits Administration with
respect to the administration of parts C and D, including the
review of payment policies under such parts.
``(2) Reports.--
``(A) In general.--With respect to matters of the
administration of parts C and D, the Board shall submit
to Congress and to the Administrator of the Medicare
Benefits Administration such reports as the Board
determines appropriate. Each such report may contain
such recommendations as the Board determines
appropriate for legislative or administrative changes
to improve the administration of such parts, including
the topics described in subparagraph (B). Each such
report shall be published in the Federal Register.
``(B) Topics described.--Reports required under
subparagraph (A) may include the following topics:
``(i) Fostering competition.--Recommendations
or proposals to increase competition under
parts C and D for services furnished to
medicare beneficiaries.
``(ii) Education and enrollment.--
Recommendations for the improvement to efforts
to provide medicare beneficiaries information
and education on the program under this title,
and specifically parts C and D, and the program
for enrollment under the title.
``(iii) Implementation of risk-adjustment.--
Evaluation of the implementation under section
1853(a)(3)(C) of the risk adjustment
methodology to payment rates under that section
to Medicare+Choice organizations offering
Medicare+Choice plans that accounts for
variations in per capita costs based on health
status and other demographic factors.
``(iv) Disease management programs.--
Recommendations on the incorporation of disease
management programs under parts C and D.
``(v) Rural access.--Recommendations to
improve competition and access to plans under
parts C and D in rural areas.
``(C) Maintaining independence of board.--The Board
shall directly submit to Congress reports required
under subparagraph (A). No officer or agency of the
United States may require the Board to submit to any
officer or agency of the United States for approval,
comments, or review, prior to the submission to
Congress of such reports.
``(3) Duty of administrator of medicare benefits
administration.--With respect to any report submitted by the
Board under paragraph (2)(A), not later than 90 days after the
report is submitted, the Administrator of the Medicare Benefits
Administration shall submit to Congress and the President
an analysis of recommendations made by the Board in such
report. Each such analysis shall be published in the Federal
Register.
``(4) Membership.--
``(A) Appointment.--Subject to the succeeding
provisions of this paragraph, the Board shall consist
of 7 members to be appointed as follows:
``(i) 3 members shall be appointed by the
President.
``(ii) 2 members shall be appointed by the
Speaker of the House of Representatives, with
the advice of the chairman and the ranking
minority member of the Committees on Ways and
Means and on Commerce of the House of
Representatives.
``(iii) 2 members shall be appointed by the
President pro tempore of the Senate with the
advice of the chairman and the ranking minority
member of the Senate Committee on Finance.
``(B) Qualifications.--The members shall be chosen on
the basis of their integrity, impartiality, and good
judgment, and shall be individuals who are, by reason
of their education and experience in health care
benefits management, exceptionally qualified to perform
the duties of members of the Board.
``(C) Prohibition on inclusion of federal
employees.--No officer or employee of the United States
may serve as a member of the Board.
``(5) Compensation.--Members of the Board shall receive, for
each day (including travel time) they are engaged in the
performance of the functions of the board, compensation at
rates not to exceed the daily equivalent to the annual rate in
effect for level IV of the Executive Schedule under section
5315 of title 5, United States Code.
``(6) Terms of office.--
``(A) In general.--The term of office of members of
the Board shall be 3 years.
``(B) Terms of initial appointees.--As designated by
the President at the time of appointment, of the
members first appointed--
``(i) 1 shall be appointed for a term of 1
year;
``(ii) 3 shall be appointed for terms of 2
years; and
``(iii) 3 shall be appointed for terms of 3
years.
``(C) Reappointments.--Any person appointed as a
member of the Board may not serve for more than 8
years.
``(D) Vacancy.--Any member appointed to fill a
vacancy occurring before the expiration of the term for
which the member's predecessor was appointed shall be
appointed only for the remainder of that term. A member
may serve after the expiration of that member's term
until a successor has taken office. A vacancy in the
Board shall be filled in the manner in which the
original appointment was made.
``(7) Chair.--The Chair of the Board shall be elected by the
members. The term of office of the Chair shall be 3 years.
``(8) Meetings.--The Board shall meet at the call of the
Chair, but in no event less than 3 times during each fiscal
year.
``(9) Director and staff.--
``(A) Appointment of director.--The Board shall have
a Director who shall be appointed by the Chair.
``(B) In general.--With the approval of the Board,
the Director may appoint, without regard to chapter 31
of title 5, United States Code, such additional
personnel as the Director considers appropriate.
``(C) Flexibility with respect to compensation.--
``(i) In general.--The Director and staff of
the Board shall, subject to clause (ii), be
paid without regard to the provisions of
chapter 51 and chapter 53 of such title
(relating to classification and schedule pay
rates).
``(ii) Maximum rate.--In no case may the rate
of compensation determined under clause (i)
exceed the rate of basic pay payable for level
IV of the Executive Schedule under section 5315
of title 5, United States Code.
``(D) Assistance from the administrator of the
medicare benefits administration.--The Administrator of
the Medicare Benefits Administration shall make
available to the Board such information and other
assistance as it may require to carry out its
functions.
``(10) Contract authority.--The Board may contract with and
compensate government and private agencies or persons to carry
out its duties under this subsection, without regard to section
3709 of the Revised Statutes (41 U.S.C. 5).
``(f) Funding.--There is authorized to be appropriated, in
appropriate part from the Federal Hospital Insurance Trust Fund and
from the Federal Supplementary Medical Insurance Trust Fund (including
the Medicare Prescription Drug Account), such sums as are necessary to
carry out this section.''.
(b) Effective Date.--
(1) In general.--The amendment made by subsection (a) shall
take effect on the date of the enactment of this Act.
(2) Timing of initial appointments.--The Administrator and
Deputy Administrator of the Medicare Benefits Administration
may not be appointed before March 1, 2001.
(3) Duties with respect to eligibility determinations and
enrollment.--The Administrator of the Medicare Benefits
Administration shall carry out enrollment under title XVIII of
the Social Security Act, make eligibility determinations under
such title, and carry out part C of such title for years
beginning or after January 1, 2003.
SEC. 202. MISCELLANEOUS ADMINISTRATIVE PROVISIONS.
(a) Administrator as Member of the Board of Trustees of the Medicare
Trust Funds.--Section 1817(b) and section 1841(b) of the Social
Security Act (42 U.S.C. 1395i(b), 1395t(b)) are each amended by
striking ``and the Secretary of Health and Human Services, all ex
officio,'' and inserting ``the Secretary of Health and Human Services,
and the Administrator of the Medicare Benefits Administration, all ex
officio,''.
(b) Increase in Grade to Executive Level III for the Administrator of
the Health Care Financing Administration.--
(1) In general.--Section 5314 of title 5, United States Code,
by adding at the end the following:
``Administrator of the Health Care Financing
Administration.''.
(2) Conforming amendment.--Section 5315 of such title is
amended by striking ``Administrator of the Health Care
Financing Administration.''.
(3) Effective date.--The amendments made by this subsection
take effect on March 1, 2001.
Subtitle B--Oversight of Financial Sustainability of the Medicare
Program
SEC. 211. ADDITIONAL REQUIREMENTS FOR ANNUAL FINANCIAL REPORT AND
OVERSIGHT ON MEDICARE PROGRAM.
(a) In General.--Section 1817 of the Social Security Act (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.--
``(1) In general.--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 (in this subsection referred to as the `Trust
Funds'). Such report shall included the following information:
``(A) 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 for payment
for benefits covered under this title, 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.
``(B) 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 subparagraph (A).
``(C) 10-year and 50-year projections.--An estimate
of total amounts referred to in subparagraph (A)
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.
``(D) Relation to gdp growth.--A comparison of the
rate of growth of the total amounts referred to in
subparagraph (A) to the rate of growth in the gross
domestic product for the same period.
``(2) Publication.--Each report submitted under paragraph (1)
shall be published by the Committee on Ways and Means as a
public document and shall be made available by such Committee
on the Internet.''.
(b) Effective Date.--The amendment made by subsection (a) shall apply
with respect to fiscal years beginning on or after the date of the
enactment of this Act.
(c) Congressional Hearings.--It is the sense of Congress that the
committees of jurisdiction shall hold hearings on the reports submitted
under section 1817(l) of the Social Security Act.
Subtitle C--Changes in Medicare Coverage and Appeals Process
SEC. 221. REVISIONS TO MEDICARE APPEALS PROCESS.
(a) Conduct of Reconsiderations of Determinations by Independent
Contractors.--Section 1869 of the Social Security Act (42 U.S.C.
1395ff) is amended to read as follows:
``determinations; appeals
``Sec. 1869. (a) Initial Determinations.--The Secretary shall
promulgate regulations and make initial determinations with respect to
benefits under part A or part B in accordance with those regulations
for the following:
``(1) The initial determination of whether an individual is
entitled to benefits under such parts.
``(2) The initial determination of the amount of benefits
available to the individual under such parts.
``(3) Any other initial determination with respect to a claim
for benefits under such parts, including an initial
determination by the Secretary that payment may not be made, or
may no longer be made, for an item or service under such parts,
an initial determination made by a utilization and quality
control peer review organization under section 1154(a)(2), and
an initial determination made by an entity pursuant to a
contract with the Secretary to administer provisions of this
title or title XI.
``(b) Appeal Rights.--
``(1) In general.--
``(A) Reconsideration of initial determination.--
Subject to subparagraph (D), any individual
dissatisfied with any initial determination under
subsection (a) shall be entitled to reconsideration of
the determination, and, subject to subparagraphs (D)
and (E), a hearing thereon by the Secretary to the same
extent as is provided in section 205(b) and to judicial
review of the Secretary's final decision after such
hearing as is provided in section 205(g).
``(B) Representation by provider or supplier.--
``(i) In general.--Sections 206(a), 1102, and
1871 shall not be construed as authorizing the
Secretary to prohibit an individual from being
represented under this section by a person that
furnishes or supplies the individual, directly
or indirectly, with services or items, solely
on the basis that the person furnishes or
supplies the individual with such a service or
item.
``(ii) Mandatory waiver of right to payment
from beneficiary.--Any person that furnishes
services or items to an individual may not
represent an individual under this section with
respect to the issue described in section
1879(a)(2) unless the person has waived any
rights for payment from the beneficiary with
respect to the services or items involved in
the appeal.
``(iii) Prohibition on payment for
representation.--If a person furnishes services
or items to an individual and represents the
individual under this section, the person may
not impose any financial liability on such
individual in connection with such
representation.
``(iv) Requirements for representatives of a
beneficiary.--The provisions of section 205(j)
and section 206 (regarding representation of
claimants) shall apply to representation of an
individual with respect to appeals under this
section in the same manner as they apply to
representation of an individual under those
sections.
``(C) Succession of rights in cases of assignment.--
The right of an individual to an appeal under this
section with respect to an item or service may be
assigned to the provider of services or supplier of the
item or service upon the written consent of such
individual using a standard form established by the
Secretary for such an assignment.
``(D) Time limits for appeals.--
``(i) Reconsiderations.--Reconsideration
under subparagraph (A) shall be available only
if the individual described subparagraph (A)
files notice with the Secretary to request
reconsideration by not later than 180 days
after the individual receives notice of the
initial determination under subsection (a) or
within such additional time as the Secretary
may allow.
``(ii) Hearings conducted by the secretary.--
The Secretary shall establish in regulations
time limits for the filing of a request for a
hearing by the Secretary in accordance with
provisions in sections 205 and 206.
``(E) Amounts in controversy.--
``(i) In general.--A hearing (by the
Secretary) shall not be available to an
individual under this section if the amount in
controversy is less than $100, and judicial
review shall not be available to the individual
if the amount in controversy is less than
$1,000.
``(ii) Aggregation of claims.--In determining
the amount in controversy, the Secretary, under
regulations, shall allow 2 or more appeals to
be aggregated if the appeals involve--
``(I) the delivery of similar or
related services to the same individual
by one or more providers of services or
suppliers, or
``(II) common issues of law and fact
arising from services furnished to 2 or
more individuals by one or more
providers of services or suppliers.
``(F) Expedited proceedings.--
``(i) Expedited determination.--In the case
of an individual who--
``(I) has received notice by a
provider of services that the provider
of services plans to terminate services
provided to an individual and a
physician certifies that failure to
continue the provision of such services
is likely to place the individual's
health at significant risk, or
``(II) has received notice by a
provider of services that the provider
of services plans to discharge the
individual from the provider of
services,
the individual may request, in writing or
orally, an expedited determination or an
expedited reconsideration of an initial
determination made under subsection (a), as the
case may be, and the Secretary shall provide
such expedited determination or expedited
reconsideration.
``(ii) Expedited hearing.--In a hearing by
the Secretary under this section, in which the
moving party alleges that no material issues of
fact are in dispute, the Secretary shall make
an expedited determination as to whether any
such facts are in dispute and, if not, shall
render a decision expeditiously.
``(G) Reopening and revision of determinations.--The
Secretary may reopen or revise any initial
determination or reconsidered determination described
in this subsection under guidelines established by the
Secretary in regulations.
``(2) Review of coverage determinations.--
``(A) National coverage determinations.--
``(i) In general.--Review of any national
coverage determination shall be subject to the
following limitations:
``(I) Such a determination shall not
be reviewed by any administrative law
judge.
``(II) Such a determination shall not
be held unlawful or set aside on the
ground that a requirement of section
553 of title 5, United States Code, or
section 1871(b) of this title, relating
to publication in the Federal Register
or opportunity for public comment, was
not satisfied.
``(III) Upon the filing of a
complaint by an aggrieved party, such a
determination shall be reviewed by the
Departmental Appeals Board of the
Department of Health and Human
Services. In conducting such a review,
the Departmental Appeals Board shall
review the record and shall permit
discovery and the taking of evidence to
evaluate the reasonableness of the
determination. In reviewing such a
determination, the Departmental
Appeals Board shall defer only to the
reasonable findings of fact, reasonable
interpretations of law, and reasonable
applications of fact to law by the
Secretary.
``(IV) A decision of the Departmental
Appeals Board constitutes a final
agency action and is subject to
judicial review.
``(ii) Definition of national coverage
determination.--For purposes of this section,
the term `national coverage determination'
means a determination by the Secretary
respecting whether or not a particular item or
service is covered nationally under this title,
including such a determination under
1862(a)(1).
``(B) Local coverage determination.--In the case of a local
coverage determination made by a fiscal intermediary or a
carrier under part A or part B respecting whether a particular
type or class of items or services is covered under such parts,
the following limitations apply:
``(i) Upon the filing of a complaint by an aggrieved
party, such a determination shall be reviewed by an
administrative law judge of the Social Security
Administration. The administrative law judge shall
review the record and shall permit discovery and the
taking of evidence to evaluate the reasonableness of
the determination. In reviewing such a determination,
the administrative law judge shall defer only to the
reasonable findings of fact, reasonable interpretations
of law, and reasonable applications of fact to law by
the Secretary.
``(ii) Such a determination may be reviewed by the
Departmental Appeals Board of the Department of Health
and Human Services.
``(iii) A decision of the Departmental Appeals Board
constitutes a final agency action and is subject to
judicial review.
``(C) No material issues of fact in dispute.--In the case of
review of a determination under subparagraph (A)(i)(III) or
(B)(i) where the moving party alleges that there are no
material issues of fact in dispute, and alleges that the only
issue is the constitutionality of a provision of this title, or
that a regulation, determination, or ruling by the Secretary is
invalid, the moving party may seek review by a court of
competent jurisdiction.
``(D) Pending national coverage determinations.--
``(i) In general.--In the event the Secretary has not
issued a national coverage or noncoverage determination
with respect to a particular type or class of items or
services, an affected party may submit to the Secretary
a request to make such a determination with respect to
such items or services. By not later than the end of
the 90-day period beginning on the date the Secretary
receives such a request, the Secretary shall take one
of the following actions:
``(I) Issue a national coverage
determination, with or without limitations.
``(II) Issue a national noncoverage
determination.
``(III) Issue a determination that no
national coverage or noncoverage determination
is appropriate as of the end of such 90-day
period with respect to national coverage of
such items or services.
``(IV) Issue a notice that states that the
Secretary has not completed a review of the
request for a national coverage determination
and that includes an identification of the
remaining steps in the Secretary's review
process and a deadline by which the Secretary
will complete the review and take an action
described in subclause (I), (II), or (III).
``(ii) In the case of an action described in clause
(i)(IV), if the Secretary fails to take an action
referred to in such clause by the deadline specified by
the Secretary under such clause, then the Secretary is
deemed to have taken an action described in clause
(i)(III) as of the deadline.
``(iii) When issuing a determination under clause
(i), the Secretary shall include an explanation of the
basis for the determination. An action taken under
clause (i) (other than subclause (IV)) is deemed to be
a national coverage determination for purposes of
review under subparagraph (A).
``(E) Annual report on national coverage determinations.--
``(i) In general.--Not later than December 1 of each
year, beginning in 2001, the Secretary shall submit to
Congress a report that sets forth a detailed
compilation of the actual time periods that were
necessary to complete and fully implement national
coverage determinations that were made in the previous
fiscal year for items, services, or medical devices not
previously covered as a benefit under this title,
including, with respect to each new item, service, or
medical device, a statement of the time taken by the
Secretary to make the necessary coverage, coding, and
payment determinations, including the time taken to
complete each significant step in the process of making
such determinations.
``(ii) Publication of reports on the internet.--The
Secretary shall publish each report submitted under
clause (i) on the medicare Internet site of the
Department of Health and Human Services.
``(3) Publication on the internet of decisions of hearings of
the secretary.--Each decision of a hearing by the Secretary
shall be made public, and the Secretary shall publish each
decision on the Medicare Internet site of the Department of
Health and Human Services. The Secretary shall remove from such
decision any information that would identify any individual,
provider of services, or supplier.
``(4) Limitation on review of certain regulations.--A
regulation or instruction which relates to a method for
determining the amount of payment under part B and which was
initially issued before January 1, 1981, shall not be subject
to judicial review.
``(5) Standing.--An action under this section seeking review
of a coverage determination (with respect to items and services
under this title) may be initiated only by one (or more) of the
following aggrieved persons, or classes of persons:
``(A) Individuals entitled to benefits under part A,
or enrolled under part B, or both, who are in need of
the items or services that are the subject of the
coverage determination.
``(B) Persons, or classes of persons, who make,
manufacture, offer, supply, make available, or provide
such items and services.
``(c) Conduct of Reconsiderations by Independent Contractors.--
``(1) In general.--The Secretary shall enter into contracts
with qualified independent contractors to conduct
reconsiderations of initial determinations made under
paragraphs (2) and (3) of subsection (a). Contracts shall be
for an initial term of three years and shall be renewable on a
triennial basis thereafter.
``(2) Qualified independent contractor.--For purposes of this
subsection, the term `qualified independent contractor' means
an entity or organization that is independent of any
organization under contract with the Secretary that makes
initial determinations under subsection (a), and that meets the
requirements established by the Secretary consistent with
paragraph (3).
``(3) Requirements.--Any qualified independent contractor
entering into a contract with the Secretary under this
subsection shall meet the following requirements:
``(A) In general.--The qualified independent
contractor shall perform such duties and functions and
assume such responsibilities as may be required under
regulations of the Secretary promulgated to carry out
the provisions of this subsection, and such additional
duties, functions, and responsibilities as provided
under the contract.
``(B) Determinations.--The qualified independent
contractor shall determine, on the basis of such
criteria, guidelines, and policies established by the
Secretary and published under subsection (d)(2)(D),
whether payment shall be made for items or services
under part A or part B and the amount of such payment.
Such determination shall constitute the conclusive
determination on those issues for purposes of payment
under such parts for fiscal intermediaries, carriers,
and other entities whose determinations are subject to
review by the contractor; except that payment may be
made if--
``(i) such payment is allowed by reason of
section 1879;
``(ii) in the case of inpatient hospital
services or extended care services, the
qualified independent contractor determines
that additional time is required in order to
arrange for postdischarge care, but payment may
be continued under this clause for not more
than 2 days, and only in the case in which the
provider of such services did not know and
could not reasonably have been expected to know
(as determined under section 1879) that payment
would not otherwise be made for such services
under part A or part B prior to notification by
the qualified independent contractor under this
subsection;
``(iii) such determination is changed as the
result of any hearing by the Secretary or
judicial review of the decision under this
section; or
``(iv) such payment is authorized under
section 1861(v)(1)(G).
``(C) Deadlines for decisions.--
``(i) Determinations.--The qualified
independent contractor shall conduct and
conclude a determination under subparagraph (B)
or an appeal of an initial determination, and
mail the notice of the decision by not later
than the end of the 45-day period beginning on
the date a request for reconsideration has been
timely filed.
``(ii) Consequences of failure to meet
deadline.--In the case of a failure by the
qualified independent contractor to mail the
notice of the decision by the end of the period
described in clause (i), the party requesting
the reconsideration or appeal may request a
hearing before an administrative law judge,
notwithstanding any requirements for a
reconsidered determination for purposes of the
party's right to such hearing.
``(iii) Expedited reconsiderations.--The
qualified independent contractor shall perform
an expedited reconsideration under subsection
(b)(1)(F) of a notice from a provider of
services or supplier that payment may not be
made for an item or service furnished by the
provider of services or supplier, of a decision
by a provider of services to terminate services
furnished to an individual, or in accordance
with the following:
``(I) Deadline for decision.--
Notwithstanding section 216(j), not
later than 1 day after the date the
qualified independent contractor has
received a request for such
reconsideration and has received such
medical or other records needed for
such reconsideration, the qualified
independent contractor shall provide
notice (by telephone and in writing) to
the individual and the provider of
services and attending physician of the
individual of the results of the
reconsideration. Such reconsideration
shall be conducted regardless of
whether the provider of services or
supplier will charge the individual for
continued services or whether the
individual will be liable for payment
for such continued services.
``(II) Consultation with
beneficiary.--In such reconsideration,
the qualified independent contractor
shall solicit the views of the
individual involved.
``(D) Limitation on individual reviewing
determinations.--
``(i) Physicians.--No physician under the
employ of a qualified independent contractor
may review--
``(I) determinations regarding health
care services furnished to a patient if
the physician was directly responsible
for furnishing such services; or
``(II) determinations regarding
health care services provided in or by
an institution, organization, or
agency, if the physician or any member
of the physician's family has, directly
or indirectly, a significant financial
interest in such institution,
organization, or agency.
``(ii) Physician's family described.--For
purposes of this paragraph, a physician's
family includes the physician's spouse (other
than a spouse who is legally separated from the
physician under a decree of divorce or separate
maintenance), children (including stepchildren
and legally adopted children), grandchildren,
parents, and grandparents.
``(E) Explanation of determinations.--Any
determination of a qualified independent contractor
shall be in writing, and shall include a detailed
explanation of the determination as well as a
discussion of the pertinent facts and applicable
regulations applied in making such determination.
``(F) Notice requirements.--Whenever a qualified
independent contractor makes a determination under this
subsection, the qualified independent contractor shall
promptly notify such individual and the entity
responsible for the payment of claims under part A or
part B of such determination.
``(G) Dissemination of information.--Each qualified
independent contractor shall, using the methodology
established by the Secretary under subsection (d)(4),
make available all determinations of such qualified
independent contractors to fiscal intermediaries (under
section 1816), carriers (under section 1842), peer
review organizations (under part B of title XI),
Medicare+Choice organizations offering Medicare+Choice
plans under part C, and other entities under contract
with the Secretary to make initial determinations under
part A or part B or title XI.
``(H) Ensuring consistency in determinations.--Each
qualified independent contractor shall monitor its
determinations to ensure the consistency of its
determinations with respect to requests for
reconsideration of similar or related matters.
``(I) Data collection.--
``(i) In general.--Consistent with the
requirements of clause (ii), a qualified
independent contractor shall collect such
information relevant to its functions, and keep
and maintain such records in such form and
manner as the Secretary may require to carry
out the purposes of this section and shall
permit access to and use of any such
information and records as the Secretary may
require for such purposes.
``(ii) Type of data collected.--Each
qualified independent contractor shall keep
accurate records of each decision made,
consistent with standards established by the
Secretary for such purpose. Such records shall
be maintained in an electronic database in a
manner that provides for identification of the
following:
``(I) Specific claims that give rise
to appeals.
``(II) Situations suggesting the need
for increased education for providers
of services, physicians, or suppliers.
``(III) Situations suggesting the
need for changes in national or local
coverage policy.
``(IV) Situations suggesting the need
for changes in local medical review
policies.
``(iii) Annual reporting.--Each qualified
independent contractor shall submit annually to
the Secretary (or otherwise as the Secretary
may request) records maintained under this
paragraph for the previous year.
``(J) Hearings by the secretary.--The qualified
independent contractor shall (i) prepare such
information as is required for an appeal of its
reconsidered determination to the Secretary for a
hearing, including as necessary, explanations of issues
involved in the determination and relevant policies,
and (ii) participate in such hearings as required by
the Secretary.
``(4) Number of qualified independent contractors.--The
Secretary shall enter into contracts with not fewer than 12
qualified independent contractors under this subsection.
``(5) Limitation on qualified independent contractor
liability.--No qualified independent contractor having a
contract with the Secretary under this subsection and no person
who is employed by, or who has a fiduciary relationship with,
any such qualified independent contractor or who furnishes
professional services to such qualified independent contractor,
shall be held by reason of the performance of any duty,
function, or activity required or authorized pursuant to this
subsection or to a valid contract entered into under this
subsection, to have violated any criminal law, or to be civilly
liable under any law of the United States or of any State (or
political subdivision thereof) provided due care was exercised
in the performance of such duty, function, or activity.
``(d) Administrative Provisions.--
``(1) Outreach.--The Secretary shall perform such outreach
activities as are necessary to inform individuals entitled to
benefits under this title and providers of services and
suppliers with respect to their rights of, and the process for,
appeals made under this section. The Secretary shall use the
toll-free telephone number maintained by the Secretary (1-800-
MEDICAR(E)) (1-800-633-4227) to provide information regarding
appeal rights and respond to inquiries regarding the status of
appeals.
``(2) Guidance for reconsiderations and hearings.--
``(A) Regulations.--Not later than 1 year after the
date of the enactment of this section, the Secretary
shall promulgate regulations governing the processes of
reconsiderations of determinations by the Secretary and
qualified independent contractors and of hearings by
the Secretary. Such regulations shall include such
specific criteria and provide such guidance as required
to ensure the adequate functioning of the
reconsiderations and hearings processes and to ensure
consistency in such processes.
``(B) Deadlines for administrative action.--
``(i) Hearing by administrative law judge.--
``(II) In general.--Except as
provided in subclause (II), an
administrative law judge shall conduct
and conclude a hearing on a decision of
a qualified independent contractor
under subsection (c) and render a
decision on such hearing by not later
than the end of the 90-day period
beginning on the date a request for
hearing has been timely filed.
``(II) Waiver of deadline by party
seeking hearing.--The 90-day period
under subclause (i) shall not apply in
the case of a motion or stipulation by
the party requesting the hearing to
waive such period.
``(ii) Departmental appeals board review.--
The Departmental Appeals Board of the
Department of Health and Human Services shall
conduct and conclude a review of the decision
on a hearing described in subparagraph (B) and
make a decision or remand the case to the
administrative law judge for reconsideration by
not later than the end of the 90-day period
beginning on the date a request for review has
been timely filed.
``(iii) Consequences of failure to meet
deadlines.--In the case of a failure by an
administrative law judge to render a decision
by the end of the period described in clause
(ii), the party requesting the hearing may
request a review by the Departmental Appeals
Board of the Department of Health and Human
Services, notwithstanding any requirements for
a hearing for purposes of the party's right to
such a review.
``(iv) DAB hearing procedure.--In the case of
a request described in clause (iii), the
Departmental Appeals Board shall review the
case de novo.
``(C) Policies.--The Secretary shall provide such
specific criteria and guidance, including all
applicable national and local coverage policies and
rationale for such policies, as is necessary to assist
the qualified independent contractors to make informed
decisions in considering appeals under this section.
The Secretary shall furnish to the qualified
independent contractors the criteria and guidance
described in this paragraph in a published format,
which may be an electronic format.
``(D) Publication of medicare coverage policies on
the internet.--The Secretary shall publish national and
local coverage policies under this title on an Internet
site maintained by the Secretary.
``(E) Effect of failure to publish policies.--
``(i) National and local coverage policies.--
Qualified independent contractors shall not be
bound by any national or local medicare
coverage policy established by the Secretary
that is not published on the Internet site
under subparagraph (D).
``(ii) Other policies.--With respect to
policies established by the Secretary other
than the policies described in clause (i),
qualified independent contractors shall not be
bound by such policies if the Secretary does
not furnish to the qualified independent
contractor the policies in a published format
consistent with subparagraph (C).
``(3) Continuing education requirement for qualified
independent contractors and administrative law judges.--
``(A) In general.--The Secretary shall provide to
each qualified independent contractor, and, in
consultation with the Commissioner of Social Security,
to administrative law judges that decide appeals of
reconsiderations of initial determinations or other
decisions or determinations under this section, such
continuing education with respect to policies of the
Secretary under this title or part B of title XI as is
necessary for such qualified independent contractors
and administrative law judges to make informed
decisions with respect to appeals.
``(B) Monitoring of decisions by qualified
independent contractors and administrative law
judges.--The Secretary shall monitor determinations
made by all qualified independent contractors and
administrative law judges under this section and shall
provide continuing education and training to such
qualified independent contractors and administrative
law judges to ensure consistency of determinations with
respect to appeals on similar or related matters. To
ensure such consistency, the Secretary shall provide
for administration and oversight of qualified
independent contractors and, in consultation with the
Commissioner of Social Security, administrative law
judges through a central office of the Department of
Health and Human Services. Such administration and
oversight may not be delegated to regional offices of
the Department.
``(4) Dissemination of determinations.--The Secretary shall
establish a methodology under which qualified independent
contractors shall carry out subsection (c)(3)(G).
``(5) Survey.--Not less frequently than every 5 years, the
Secretary shall conduct a survey of a valid sample of
individuals entitled to benefits under this title, providers of
services, and suppliers to determine the satisfaction of such
individuals or entities with the process for appeals of
determinations provided for under this section and education
and training provided by the Secretary with respect to that
process. The Secretary shall submit to Congress a report
describing the results of the survey, and shall include any
recommendations for administrative or legislative actions that
the Secretary determines appropriate.
``(6) Report to congress.--The Secretary shall submit to
Congress an annual report describing the number of appeals for
the previous year, identifying issues that require
administrative or legislative actions, and including any
recommendations of the Secretary with respect to such actions.
The Secretary shall include in such report an analysis of
determinations by qualified independent contractors with
respect to inconsistent decisions and an analysis of the causes
of any such inconsistencies.''.
(b) Applicability of Requirements and Limitations on Liability of
Qualified Independent Contractors to Medicare+Choice Independent
Appeals Contractors.--Section 1852(g)(4) of the Social Security Act (42
U.S.C. 1395w-22(e)(3)) is amended by adding at the end the following:
``The provisions of section 1869(c)(5) shall apply to independent
outside entities under contract with the Secretary under this
paragraph.''.
(c) Conforming Amendment to Review by the Provider Reimbursement
Review Board.--Section 1878(g) of the Social Security Act (42 U.S.C.
1395oo(g)) is amended by adding at the end the following new paragraph:
``(3) Findings described in paragraph (1) and determinations and
other decisions described in paragraph (2) may be reviewed or appealed
under section 1869.''.
SEC. 222. PROVISIONS WITH RESPECT TO LIMITATIONS ON LIABILITY OF
BENEFICIARIES.
(a) Expansion of Limitation of Liability Protection for Beneficiaries
With Respect to Medicare Claims Not Paid or Paid Incorrectly.--
(1) In general.--Section 1879 of the Social Security Act (42
U.S.C. 1395pp) is amended by adding at the end the following
new subsections:
``(i) Notwithstanding any other provision of this Act, an individual
who is entitled to benefits under this title and is furnished a service
or item is not liable for repayment to the Secretary of amounts with
respect to such benefits--
``(1) subject to paragraph (2), in the case of a claim for
such item or service that is incorrectly paid by the Secretary;
and
``(2) in the case of payments made to the individual by the
Secretary with respect to any claim under paragraph (1), the
individual shall be liable for repayment of such amount only up
to the amount of payment received by the individual from the
Secretary.
``(j)(1) An individual who is entitled to benefits under this title
and is furnished a service or item is not liable for payment of amounts
with respect to such benefits in the following cases:
``(A) In the case of a benefit for which an initial
determination has not been made by the Secretary under
subsection (a) whether payment may be made under this title for
such benefit.
``(B) In the case of a claim for such item or service that
is--
``(i) improperly submitted by the provider of
services or supplier; or
``(ii) rejected by an entity under contract with the
Secretary to review or pay claims for services and
items furnished under this title, including an entity
under contract with the Secretary under section 1857.
``(2) The limitation on liability under paragraph (1) shall not apply
if the individual signs a waiver provided by the Secretary under
subsection (l) of protections under this paragraph, except that any
such waiver shall not apply in the case of a denial of a claim for
noncompliance with applicable regulations or procedures under this
title or title XI.
``(k) An individual who is entitled to benefits under this title and
is furnished services by a provider of services is not liable for
payment of amounts with respect to such services prior to noon of the
first working day after the date the individual receives the notice of
determination to discharge and notice of appeal rights under paragraph
(1), unless the following conditions are met:
``(1) The provider of services shall furnish a notice of
discharge and appeal rights established by the Secretary under
subsection (l) to each individual entitled to benefits under
this title to whom such provider of services furnishes
services, upon admission of the individual to the provider of
services and upon notice of determination to discharge the
individual from the provider of services, of the individual's
limitations of liability under this section and rights of
appeal under section 1869.
``(2) If the individual, prior to discharge from the provider
of services, appeals the determination to discharge under
section 1869 not later than noon of the first working day after
the date the individual receives the notice of determination to
discharge and notice of appeal rights under paragraph (1), the
provider of services shall, by the close of business of such
first working day, provide to the Secretary (or qualified
independent contractor under section 1869, as determined by the
Secretary) the records required to review the determination.
``(l) The Secretary shall develop appropriate standard forms for
individuals entitled to benefits under this title to waive limitation
of liability protections under subsection (j) and to receive notice of
discharge and appeal rights under subsection (k). The forms developed
by the Secretary under this subsection shall clearly and in plain
language inform such individuals of their limitations on liability,
their rights under section 1869(a) to obtain an initial determination
by the Secretary of whether payment may be made under part A or part B
for such benefit, and their rights of appeal under section 1869(b), and
shall inform such individuals that they may obtain further information
or file an appeal of the determination by use of the toll-free
telephone number (1-800-MEDICAR(E)) (1-800-633-4227) maintained by the
Secretary. The forms developed by the Secretary under this subsection
shall be the only manner in which such individuals may waive such
protections under this title or title XI.
``(m) An individual who is entitled to benefits under this title and
is furnished an item or service is not liable for payment of cost
sharing amounts of more than $50 with respect to such benefits unless
the individual has been informed in advance of being furnished the item
or service of the estimated amount of the cost sharing for the item or
service using a standard form established by the Secretary.''.
(2) Conforming amendment.--Section 1870(a) of the Social
Security Act (42 U.S.C. 1395gg(a)) is amended by striking ``Any
payment under this title'' and inserting ``Except as provided
in section 1879(i), any payment under this title''.
(b) Inclusion of Beneficiary Liability Information in Explanation of
Medicare Benefits.--Section 1806(a) of the Social Security Act (42
U.S.C. 1395b-7(a)) is amended--
(1) in paragraph (1), by striking ``and'' at the end;
(2) by redesignating paragraph (2) as paragraph (3); and
(3) by inserting after paragraph (1) the following new
paragraph:
``(2) lists with respect to each item or service furnished
the amount of the individual's liability for payment;'';
(4) in paragraph (3), as so redesignated, by striking the
period at the end and inserting ``; and''; and
(5) by adding at the end the following new paragraph:
``(4) includes the toll-free telephone number (1-800-
MEDICAR(E)) (1-800-633-4227) for information and questions
concerning the statement, liability of the individual for
payment, and appeal rights.''.
SEC. 223. WAIVERS OF LIABILITY FOR COST SHARING AMOUNTS.
(a) In General.--Section 1128A(i)(6)(A) of the Social Security Act
(42 U.S.C. 1320a-7a(i)(6)(A)) is amended by striking clauses (i)
through (iii) and inserting the following:
``(i) the waiver is offered as a part of a
supplemental insurance policy or retiree health
plan;
``(ii) the waiver is not offered as part of
any advertisement or solicitation, other than
in conjunction with a policy or plan described
in clause (i);
``(iii) the person waives the coinsurance and
deductible amount after the beneficiary informs
the person that payment of the coinsurance or
deductible amount would pose a financial
hardship for the individual; or
``(iv) the person determines that the
coinsurance and deductible amount would not
justify the costs of collection.''.
(b) Conforming Amendment.--Section 1128B(b) of the Social Security
Act (42 U.S.C. 1320a-7b(b)) is amended by adding at the end the
following new paragraph:
``(4) In this section, the term `remuneration' includes the
meaning given such term in section 1128A(i)(6).''.
SEC. 224. ELIMINATION OF MOTIONS BY THE SECRETARY ON DECISIONS OF THE
PROVIDER REIMBURSEMENT REVIEW BOARD.
Section 1878(f)(1) of such Act (42 U.S.C. 1395oo(f)(1)) is amended--
(1) in the first sentence, by striking ``unless the
Secretary, on his own motion, and within 60 days after the
provider of services is notified of the Board's decision,
reverses, affirms, or modifies the Board's decision'';
(2) in the second sentence, by striking ``, or of any
reversal, affirmance, or modification by the Secretary,'' and
``or of any reversal, affirmance, or modification by the
Secretary''; and
(3) in the fifth sentence, by striking ``and not subject to
review by the Secretary''.
TITLE III--MEDICARE+CHOICE REFORMS; PRESERVATION OF MEDICARE PART B
DRUG BENEFIT
Subtitle A--Medicare+Choice Reforms
SEC. 301. INCREASE IN NATIONAL PER CAPITA MEDICARE+CHOICE GROWTH
PERCENTAGE IN 2001 AND 2002.
Section 1853(c)(6)(B) of the Social Security Act (42 U.S.C. 1395w-
23(c)(6)(B)) is amended--
(1) in clause (iv), by striking ``for 2001, 0.5 percentage
points'' and inserting ``for 2001, 0 percentage points''; and
(2) in clause (v), by striking ``for 2002, 0.3 percentage
points'' and inserting ``for 2002, 0 percentage points''.
SEC. 302. PERMANENTLY REMOVING APPLICATION OF BUDGET NEUTRALITY
BEGINNING IN 2002.
Section 1853(c) of the Social Security Act (42 U.S.C. 1395w-23(c)) is
amended--
(1) in paragraph (1)(A), in the matter following clause (ii),
by inserting ``(for years before 2002)'' after ``multiplied'';
and
(2) in paragraph (5), by inserting ``(before 2002)'' after
``for each year''.
SEC. 303. INCREASING MINIMUM PAYMENT AMOUNT.
(a) In General.--Section 1853(c)(1)(B)(ii) of the Social Security Act
(42 U.S.C. 1395w-23(c)(1)(B)(ii)) is amended--
(1) by striking ``(ii) For a succeeding year'' and inserting
``(ii)(I) Subject to subclause (II), for a succeeding year'';
and
(2) by adding at the end the following new subclause:
``(II) For 2002 for any of the 50 States and
the District of Columbia, $450.''.
(b) Effective Date.--The amendments made by subsection (a) apply to
years beginning with 2002.
SEC. 304. ALLOWING MOVEMENT TO 50:50 PERCENT BLEND IN 2002.
Section 1853(c)(2) of the Social Security Act (42 U.S.C. 1395w-
23(c)(2)) is amended--
(1) by striking the period at the end of subparagraph (F) and
inserting a semicolon; and
(2) by adding after and below subparagraph (F) the following:
``except that a Medicare+Choice organization may elect to apply
subparagraph (F) (rather than subparagraph (E)) for 2002.''.
SEC. 305. INCREASED UPDATE FOR PAYMENT AREAS WITH ONLY ONE OR NO
MEDICARE+CHOICE CONTRACTS.
(a) In General.--Section 1853(c)(1)(C)(ii) of the Social Security Act
(42 U.S.C. 1395w-23(c)(1)(C)(ii)) is amended--
(1) by striking ``(ii) For a subsequent year'' and inserting
``(ii)(I) Subject to subclause (II), for a subsequent year'';
and
(2) by adding at the end the following new subclause:
``(II) During 2002, 2003, 2004, and 2005, in
the case of a Medicare+Choice payment area in
which there is no more than 1 contract entered
into under this part as of July 1 before the
beginning of the year, 102.5 percent of the
annual Medicare+Choice capitation rate under
this paragraph for the area for the previous
year.''.
(b) Construction.--The amendments made by subsection (a) do not
affect the payment of a first time bonus under section 1853(i) of the
Social Security Act (42 U.S.C. 1395w-23(i)).
SEC. 306. PERMITTING HIGHER NEGOTIATED RATES IN CERTAIN MEDICARE+CHOICE
PAYMENT AREAS BELOW NATIONAL AVERAGE.
Section 1853(c)(1) of the Social Security Act (42 U.S.C. 1395w-
23(c)(1)) is amended--
(1) in the matter before subparagraph (A), by striking ``or
(C)'' and inserting ``(C), or (D)''; and
(2) by adding at the end the following new subparagraph:
``(D) Permitting higher rates through negotiation.--
``(i) In general.--For each year beginning
with 2004, in the case of a Medicare+Choice
payment area for which the Medicare+Choice
capitation rate under this paragraph would
otherwise be less than the United States per
capita cost (USPCC), as calculated by the
Secretary, a Medicare+Choice organization may
negotiate with the Medicare Benefits
Administrator an annual per capita rate that--
``(I) reflects an annual rate of
increase up to the rate of increase
specified in clause (ii);
``(II) takes into account audited
current data supplied by the
organization on its adjusted community
rate (as defined in section
1854(f)(3)); and
``(III) does not exceed the United
States per capita cost, as projected by
the Secretary for the year involved.
``(ii) Maximum rate described.--The rate of
increase specified in this clause for a year is
the rate of inflation in private health
insurance for the year involved, as projected
by the Medicare Benefits Administrator, and
includes such adjustments as may be necessary--
``(I) to reflect the demographic
characteristics in the population under
this title; and
``(II) to eliminate the costs of
prescription drugs.
``(iii) Adjustments for over or under
projections.--If subparagraph is applied to an
organization and payment area for a year, in
applying this subparagraph for a subsequent
year the provisions of paragraph (6)(C) shall
apply in the same manner as such provisions
apply under this paragraph.''.
SEC. 307. 10-YEAR PHASE IN OF RISK ADJUSTMENT BASED ON DATA FROM ALL
SETTINGS.
Section 1853(a)(3)(C)(ii) of the Social Security Act (42 U.S.C.
1395w-23(c)(1)(C)(ii)) is amended--
(1) by striking the period at the end of subclause (II) and
inserting a semicolon; and
(2) by adding after and below subclause (II) the following:
``and, beginning in 2004, insofar as such risk
adjustment is based on data from all settings,
the methodology shall be phased in equal
increments over a 10 year period, beginning
with 2004 or (if later) the first year in which
such data is used.''.
Subtitle B--Preservation of Medicare Coverage of Drugs and Biologicals
SEC. 311. PRESERVATION OF COVERAGE OF DRUGS AND BIOLOGICALS UNDER PART
B OF THE MEDICARE PROGRAM.
(a) In General.--Section 1861(s)(2) of the Social Security Act (42
U.S.C. 1395x(s)(2)) is amended, in each of subparagraphs (A) and (B),
by striking ``(including drugs and biologicals which cannot, as
determined in accordance with regulations, be self-administered)'' and
inserting ``(including injectable and infusable drugs and biologicals
which are not usually self-administered by the patient)''.
(b) Effective Date.--The amendment made by subsection (a) applies to
drugs and biologicals administered on or after October 1, 2000.
SEC. 312. GAO REPORT ON PART B PAYMENT FOR DRUGS AND BIOLOGICALS AND
RELATED SERVICES.
(a) In General.--The Comptroller General of the United States shall
conduct a study to quantify the extent to which reimbursement for drugs
and biologicals under the current medicare payment methodology
(provided under section 1842 (o) of the Social Security Act (42 U.S.C.
1395u(o)) overpays for the cost of such drugs and biologicals compared
to the average acquisition cost paid by physicians or other suppliers
of such drugs
(B) Elements.--The study shall also assess the consequences of
changing the current medicare payment methodology to a payment
methodology that is based on the average acquisition cost of the drugs.
The study shall, at a minimum, assess the effects of such a reduction
on--
(1) the delivery of health care services to Medicare
beneficiaries with cancer;
(2) total Medicare expenditures, including an estimate of the
number of patients who would, as a result of the payment
reduction, receive chemotherapy in a hospital rather than in a
physician's office;
(3) the delivery of dialysis services;
(4) the delivery of vaccines;
(5) the administration in physician offices of drugs other
than cancer therapy drugs; and
(6) the effect on the delivery of drug therapies by hospital
outpatient departments of changing the average wholesale price
as the basis for Medicare pass-through payments to such
departments, as included in the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999.
(c) Payment for Related Professional Services.--The study shall also
include a review of the extent to which other payment methodologies
under part B of the medicare program, if any, intended to reimburse
physician and other suppliers of drugs and biologicals described in
subsection (a) for costs incurred in handling, storing and
administering such drugs and biologicals are inadequate to cover such
costs and whether an additional payment would be required to cover
these costs under the average acquisition cost methodology.
(d) Consideration of Issues in Implementing an Average Acquisition
Cost Methodology.--The study shall assess possible means by which a
payment method based on average acquisition cost could be implemented,
including at least the following:
(1) Identification of possible bases for determining the
average acquisition cost of drugs, such as surveys of
wholesaler catalog prices, and determination of the advantages,
disadvantages, and costs (to the government and public) of each
possible approach.
(2) The impact on individual providers and practitioners if
average or median prices are used as the payment basis.
(3) Methods for updating and keeping current the prices used
as the payment basis.
(e) Coordination with BBRA Study.--The Comptroller General shall
conduct the study under this section in coordination with the study
provided for under section 213(a) of the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-350), as
enacted into law by section 1000(a)(6) of Public Law 106-113.
(f) Report.--Not later than 6 months after the date of the enactment
of this Act, the Comptroller General shall submit a report on the study
conducted under this section, as well as the study referred to in
subsection (e). Such report shall include recommendations regarding
such changes in the medicare reimbursement policies described in
subsections (a) and (c) as the Comptroller General deems appropriate,
as well as the recommendations described in section 213(b) of the
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999.
I. INTRODUCTION
A. Purpose and Summary
Although Medicare currently offers a wide range of health
care benefits, it is significantly different from other Federal
health care programs and private health insurance plans because
it does not generally offer coverage of outpatient prescription
drugs to its enrollees. While a patchwork of different coverage
sources has assisted most Medicare beneficiaries, a significant
number of beneficiaries are without adequate prescription drug
coverage. Additionally, while the nation's healthcare system
has become increasingly reliant on prescription drugs as
effective treatment regimens, the rate of prescription drug
spending has exploded and continually surpassed the rate of
inflation. The lack of coverage and increased prescription drug
spending has resulted in higher out-of-pocket drug spending for
beneficiaries and increased beneficiary financial exposure to
extraordinarily high drug costs.
H.R. 4680, the ``Medicare Rx 2000 Act,'' amends Title XVIII
of the Social Security Act by establishing a voluntary,
universally-offered prescription drug benefit for Medicare
beneficiaries under a new Part D program. The bill provides
prescription drug coverage through private Prescription Drug
plans (PDPs) and Medicare+Choice (M+C) plans and makes
provisions for a standard, or qualified alternative, benefit
which includes a beneficiary out-of-pocket spending limit. The
new Part D program, as well as the Medicare+Choice program
(Part C), would be administered by a new agency, the Medicare
Benefits Administration (MBA), within the U.S. Department of
Health and Human Services.
Additionally, provisions in H.R. 4680 make changes to the
way some Medicare benefits are administered, reform the
coverage and appeals process for Medicare beneficiaries and the
health care providers and suppliers that provide services to
them, and strengthen and stabilize the Medicare+Choice program.
The Committee strongly believes that the creation of a new
agency, given operational flexibility within the U.S.
Department of Health and Human Services, will ensure that
market competition and private-sector practices are used in the
administration of the Part C and Part D programs, since these
practices are vital to the overall long-term health of
Medicare+Choice and the new prescription drug benefit.
H.R. 4680 was written after receiving input from public
hearings before the Committee on Ways and Means and its
Subcommittee on Health. During these hearings, the Committee
and Subcommittee received expert testimony from many witnesses,
including Members of Congress, representatives of beneficiary
organizations, health care providers, and other experts in
Medicare and healthcare policy. Additionally, the bill was
crafted in deference to the House budget resolution (H. Con.
Res. 290) passed in March, which set aside $40 billion over the
next five years for legislation ``that reforms the Medicare
Program and provides coverage for prescription drugs * * *''
B. Background and Need for Legislation
Eighty percent of senior citizens use a prescription drug
everyday. On average, seniors currently spend in excess of $600
annually on pharmaceuticals, with future spending anticipated
to rise in the next ten years. In the absence of prescription
drug coverage under Medicare, more than two-thirds of Medicare
beneficiaries have come to rely on other sources to obtain
prescription drug benefits, including employer-sponsored
retiree health insurance, Medicaid and other State-sponsored
health programs, and managed care plans through the
Medicare+Choice program. In recent years, Medicare+Choice plans
are requiring more cost-sharing, making drug benefits less
generous. Also, as the rate of pharmaceutical costs has risen
faster than the inflation rate, there have been growing
concerns that current coverage sources are becoming inadequate
to protect beneficiaries from ever-rising out-of-pocket cost
exposure. Specifically, commentators have targeted increased
beneficiary cost-sharing and catastrophic costs as major
financial concerns for Medicare beneficiaries.
Since the enactment of the Medicare+Choice program in the
Balanced Budget Act of 1997 (Public Law 105-33), there have
been concerns about its viability. Most problematic has been
the number of plans withdrawing from service areas in the past
two years, leaving uncertainty in the way enrolled
beneficiaries receive their care. In addition to unfavorable
competitive markets, plans have tied their withdrawals to low
reimbursement rates and administrative burdens associated with
Medicare+Choice. In 1999, the Medicare, Medicaid, S-CHIP
Balanced Budget Refinement Act, as incorporated in Public Law
106-113, contained several provisions to strengthen the
Medicare+Choice program, including changes in the
implementation of the proposed risk adjuster, increases in
payments to plans entering an area without a Medicare+Choice
plan, and the easing of some administrative burdens.
C. Legislative History
Committee bill
H.R. 4680 was introduced on June 15, 2000 by Representative
Bill Thomas (R-CA) and was referred to the Committee on Ways
and Means and the Committee on Commerce. On June 21, 2000, the
Committee on Ways and Means ordered favorably reported the
bill, amended by an amendment in the nature of a substitute by
Representative Thomas, to the House of Representatives by a
roll call vote of 23 ayes and 14 nays.
The bill contains three main titles. Title I contains
provisions establishing the new Medicare prescription drug
benefit. Section 101 establishes the Medicare prescription drug
benefit and institutes rules and regulations for beneficiary
eligibility and requirements for participation in the program.
Section 102 consists of provisions ensuring a prescription drug
benefit under the Medicare+Choice program, and Sections 103 and
104 amend the Medicaid program and Medigap regulations,
respectively.
Title II contains provisions relating to the modernization
of the administration of Medicare through a new agency.
Subtitle A establishes the Medicare Benefits Administration to
oversee the implementation of the Medicare prescription drug
benefit and the Medicare+Choice program. Subtitle B requires
the Board of Trustees of the Medicare Trust Funds to report on
an additional, more relevant measure of solvency using the
total Federal resources required to finance Medicare benefits.
Subtitle C reforms the Medicare Part A and Part B coverage and
appeals process.
Title III contains provisions relating to the
Medicare+Choice program and drugs and biologicals covered under
Part B. Subtitle A consists of provisions pertaining to
Medicare+Choice payment reform and Subtitle B deals with the
preservation of certain drugs and biologicals covered under
Part B of the Medicare program.
Legislative hearings
The Committee on Ways and Means and its Subcommittee on
Health each have held hearings focusing on the addition and
implementation of a prescription drug benefit under the
Medicare program. On February 15, 2000, the Subcommittee
examined seniors' access to a prescription drug benefit. Among
topics discussed at the hearing were the effects of
prescription drug proposals on publicly and privately financed
health care and their long-term effects on the Medicare
program.
On May 11, 2000, the Subcommittee held a hearing on the
Clinton Administration's prescription drug proposal. The
hearing offered the Subcommittee an opportunity to discuss the
President's budgetary proposal for a prescription drug benefit.
The Subcommittee also examined the analysis provided by the
Congressional Budget Office to determine the long-term effects
of the Administration's proposal on the financial stability of
Medicare.
On June 13, 2000, the Committee held a hearing to discuss
legislative proposals to establish a prescription drug benefit
under the Medicare program. The primary proposal examined was a
House bipartisan plan advocated by Subcommittee Chairman Bill
Thomas. The hearing provided an opportunity to receive
informative perspectives on the different legislative proposals
from Members of Congress, the Administration, health plans, and
experts in the pharmaceutical industry.
II. EXPLANATION OF PROVISIONS
Section 1. Short Title; Table of Contents
The Act may be cited as the ``Medicare Rx 2000 Act''.
Title I--Medicare Prescription Drug Benefit
Section 101. Establishment of a Medicare Prescription Drug Benefit
Current law
Currently Medicare beneficiaries who are inpatients of
hospitals or skilled nursing facilities may receive drugs as
part of their treatment. Medicare payments made to the
facilities cover these costs. In addition, drugs used incident
to certain outpatient procedures, whether performed in hospital
outpatient departments or ambulatory surgical centers, may be
covered and are paid for through a similar bundled payment.
Medicare also makes payments to physicians for drugs or
biologicals which cannot be self-administered. In addition,
Medicare Part B provides some limited coverage for selected
self-administered drugs and immunizations in certain
circumstances (e.g., immunosuppressive drugs after an organ
transplant, pneumococcal pneumonia vaccine if ordered by a
physician).
Beyond these limited benefits, Medicare does not generally
cover outpatient prescription drugs.
Explanation of provision
The provision would establish a new, universally
accessible, voluntary prescription drug program for all
Medicare beneficiaries. This program would be created under a
new Medicare Part D, consisting of ten new sections (Sections
1860A-J).
Sec. 1860A Benefits; eligibility; enrollment; and coverage
period
Section 1860A establishes the new prescription drug benefit
and specifies eligibility requirements, enrollment procedures,
and allowable coverage restrictions.
Part D benefits would be administered by the Medicare
Benefits Administration (MBA), established under Title II of
this Act, and be provided through either Medicare+Choice (M+C)
plans or new Prescription Drug plans (PDP). All Medicare
beneficiaries who are enrolled in Part B would be eligible to
obtain qualified prescription drug coverage through Part D. A
special rule is includedallowing for a one-time enrollment
opportunity at the initiation of the program for those who are
currently eligible for Medicare Part A but not now enrolled in Medicare
Part B to elect Part D benefits. All beneficiaries electing Part D
coverage would be guaranteed a choice of at least two drug plan
options, at least one of which is a prescription drug plan.
Beneficiaries who elect to participate in Medicare Part D
would select and enroll in a plan available in their area
through a process similar to that now provided for Part B
enrollment. All eligible beneficiaries would be entitled to
enroll in a plan without any late enrollment penalty during a
six-month period at the initiation of the new prescription drug
program, and could change plans during annual and specified
special enrollment periods thereafter. Annual enrollment
periods would be conducted in conjunction with Medicare+Choice
enrollment. Special enrollment periods could be established by
the MBA Administrator and, at minimum, would be provided for
those who involuntarily lose alternative prescription drug
coverage, miss an enrollment deadline due to an error in the
processing of a request for enrollment, or met exceptional
conditions determined by the Administrator. As with Part B,
individuals who become eligible for Medicare in the future
would have seven months to decide whether or not to participate
in Part D. Current beneficiaries who elect Part D benefits upon
the program's initiation, and future beneficiaries who join the
program in their initial eligibility period, would be
guaranteed the protection of community rating and the non-
application of pre-existing condition limitations, so long as
they maintain continuous coverage while in the program. As in
Part B, those electing not to participate in Part D during
their initial eligibility period could (unless continuously
covered under alternative prescription drug coverage) be
assessed late enrollment penalties if they decided to join the
program at a later date.
The section specifies what forms of alternative
prescription drug coverage qualify for purposes of
administering the continuous coverage rules and includes
conforming amendments to allow for the administration of such
rules. It also specifies when plan elections and terminations
would take effect, and provides that the initial period of
coverage under the program would begin January 1, 2003.
Sec. 1860B Requirements for qualified prescription drug
coverage
Section 1860B establishes the benefit requirements that
plans participating in Part D would have to meet. First, a plan
would be required to make available to its enrollees the
benefit of all price discounts that it negotiates on behalf of
its enrollees, even when the plan is under no obligation to pay
benefits itself. Second, a plan would be required to provide,
at a minimum, coverage for covered outpatient drugs that was
either standard coverage (defined in law) or qualified
alternative coverage. For plans offering in 2003, standard
coverage would be defined as having: (1) A $250 deductible; (2)
required cost-sharing of on average 50% on the next $2,100 of
incurred costs (above the deductible); and (3) a limitation on
overall beneficiary out-of-pocket spending of $6,000. The
standard coverage deductible, initial coverage limit and
limitation on out-of-pocket spending would be indexed to the
average annual increase in per capita aggregate expenditures
for covered outpatient drugs for Medicare beneficiaries, and
rounded to the nearest appropriate multiple. In any given year,
qualified alternative coverage would be defined as coverage
that: (1) Is at least actuarially equivalent to the standard
coverage required for such year; (2) provides coverage the
unsubsidized value of which is at least equal to the
unsubsidized value of the standardized coverage; (3) is
designed to provide, using an actuarially representative
pattern of utilization, for the payment of the initial benefit
that is at least equal to the standard benefit; and (4) limits
overall out-of-pocket spending that was the same as that
required under standard coverage for such year.
Participating plans could offer coverage that is more
munificent than standard coverage, if approved by the MBA
Administrator. The Administrator would be required to review
and approve all plans before they were made available to
beneficiaries, and could terminate the contract of any plan
sponsor if the sponsor purposefully engaged in any activities
intended to result in favorable selection.
Covered outpatient drugs would be defined to include: (1) A
drug that may only be dispensed subject to a prescription and
which is described in subparagraph (A)(i) or (A)(ii) of Section
1927(k)(2) of the Social Security Act (relating to drugs for
which federal matching payments may be made under the Medicaid
program); (2) a biological product described in subparagraph
(B) of such section; (3) insulin described in subparagraph (C)
of such section; and (4) prescription smoking cessation agents
otherwise excluded from coverage under Medicaid. The definition
includes any use of a covered outpatient drug for a medically
accepted indication. Drugs for which benefits could be paid
under Part B would not be covered under Part D. If a plan met
the associated patient protection requirements included in
Section 1860C, it could elect to utilize a formulary to limit
benefits for certain covered outpatient drugs.
Sec. 1860C Beneficiary protections for qualified
prescription drug coverage
Section 1860C specifies beneficiary protections to protect
the interests of beneficiaries who might elect to enroll in
Medicare Part D. A participating plan would be required to
provide each enrolling beneficiary information about the plan's
benefit structure, its affiliated networks of pharmacy
providers, any applicable formulary requirements, and their
right to file grievances and/or seek benefit appeals. In
addition, as is the case in Medicare+Choice, beneficiaries
would have a right to obtain more detailed plan information,
including comparable quality information, at any time upon
request. Plans would be required to have a mechanism for
responding to beneficiary inquiries and make available
information regarding any changes in the plan's formulary.
Plans would be required to furnish enrollees with a detailed
explanation of benefits when prescription drug benefits were
provided under the program. Plans would also be required to
secure agreements with sufficient numbers of pharmacies to make
access to covered benefits convenient for enrolled
beneficiaries. In addition, plans would be required to
guarantee that enrolled beneficiaries were able to continue
benefitting from any price discounts the plan negotiates from
affiliated pharmacies or manufacturers for covered prescription
drugs, even when the plan was under no obligation to pay
benefits.
Plans that elect to establish drug formularies would be
required to establish a pharmaceuticaland therapeutic committee
(that includes representatives from both medicine and pharmacy) to
develop and maintain the formulary. Plans would be required to cover
drugs from each therapeutic class. Beneficiaries could appeal any
denial of a request for benefits based on the application of a
formulary whenever their attending physician indicates that the use of
a drug listed on the formulary is not sufficient to meet the patient's
medical needs.
In addition, plans participating in Part D would be
required to establish and maintain quality assurance,
utilization management, and medication therapy management
programs so that the health and safety of program enrollees
would be protected. Utilization management programs would be
required to include incentives to use generic drugs when
appropriate. Medication therapy management programs would have
to be developed in cooperation with licensed pharmacists and
physicians. Such programs would be used to reduce adverse drug
interactions and increase beneficiary adherence with
prescription medication regimens through refill reminders,
special packaging and other appropriate means. Prescription
drug plans would also ensure that enrolled beneficiaries were
informed, at the time of purchase, of any price differential
between their prescribed drug and the lowest cost generic drug
therapeutically and pharmaceutically equivalent and
bioequivalent.
Finally, all participating plans would be required to
maintain meaningful procedures for the hearing and resolving of
any enrollee grievances, protect the confidentiality and
accuracy of all enrollee records, and provide enrollee access
to both expedited coverage determinations and a procedure for
the reconsideration of any benefit denials, in the same way as
such rights are currently provided to enrollees of
Medicare+Choice plans. As is the case in Medicare Part C, the
Administrator would be required to contract with an independent
review organization to review and resolve in a timely manner
any plan reconsiderations that affirm a denial of coverage.
Sec. 1860D Requirements for prescription drug plan (PDP)
sponsors
Section 1860D specifies organizational requirements for
prescription drug plan sponsors who seek to participate in Part
D. In general, provisions in this section would require
participating plans to be licensed under state law as a risk-
bearing entity eligible to offer health insurance or health
benefits coverage in each state in which the plan operated.
Additionally, the provisions would require plans who contract
with the Administrator to provide covered drugs to
beneficiaries who are entitled to receive benefits under the
program to accept full financial risk for the provision of such
benefits to each such beneficiary whom they enroll.
The Administrator would be required to enter into contracts
binding plan sponsors to fulfill the requirements specified.
Such contracts could apply to one or more prescription drug
plans. By reference, the section would incorporate and impose
on prescription drug plans many of the contract requirements
now required of Medicare+Choice plans in Section 1857,
including requirements pertaining to allowable audits to guard
against fraud and abuse, minimum enrollments, contract periods,
intermediate sanctions and contract terminations. A special
rule is included allowing for the imposition of limited, pro
rata user fees on prescription drug plans. Such fees would be
used to help finance related beneficiary educational
activities, as is the case with Medicare+Choice.
In order to maximize choice and access, the Administrator
would be empowered to waive plan licensure requirements in
circumstances similar to those allowable under Part C for
provider-sponsored organizations. In such cases, plans would be
required to meet financial solvency and capital adequacy
standards established by the Administrator. The Administrator
would be given the authority to establish by regulation such
additional plan and plan sponsor standards as deemed
appropriate to implement Part D, and would be required to
publish such regulations by October 1, 2001.
As is the case under Part C, the standards that would be
established for plans and plan sponsors under Part D would
supercede any state law or regulation affecting such entities
to the extent that they were inconsistent with such standards.
Specifically, state laws relating to benefit requirements, laws
relating to the inclusion or treatment of affiliated providers,
laws related to coverage determinations, and the establishment
and regulation of premiums would be preempted. In addition,
States would be prohibited from imposing premium taxes, similar
taxes with respect to premiums or other funds paid to PDP
sponsors in exchange for the provision of benefits described in
Part D.
Sec. 1860E Process for beneficiaries to select qualified
prescription drug coverage
Section 1860E specifies the procedures by which eligible
beneficiaries would be able to select a prescription drug or
Medicare+Choice plan that provided qualified prescription drug
coverage under Part D. The Administrator, acting through the
Office of Beneficiary Assistance (established under Title II),
would be required to establish and maintain plan election
procedures consistent with those now provided for the election
of M+C plans under Part C. Such procedures would include the
conducting of open annual enrollment periods in which
beneficiaries already enrolled in a plan under Part D could
elect to change plans, the active dissemination of comparative
plan information (including price, quality and comparative
benefit information) in a manner consistent with and in
coordination with the dissemination of information regarding
M+C plans, and the coordination of elections through filing
with an M+C organization or a PDP sponsor in a manner
consistent with that provided for the election of benefits
under Part C.
The Administrator would be instructed to administer the
program in a manner such that all eligible individuals would be
assured of the availability of at least two qualifying plan
options in their area of residence. If necessary to ensure such
access, the Administrator is authorized to provide financial
incentives, including the partial underwriting of risk, for a
PDP sponsor to expand its service area under an existing
prescription drug plan to adjoining or additional areas, or to
establish such a plan (including offering such a plan on a
regional or nationwide basis). Limitations on this authority
would be included so as to maximize, to the extent possible,
the assumption of financial risk by PDP sponsors and M+C
organizations. The Administrator would be required to report to
Congress annually on the exercise ofthis authority.
Sec. 1860F Premiums
New Section 1860F requires each PDP sponsor to submit to
the MBA Administrator specified information in the same manner
as information is submitted by an M+C organization. The
information to be submitted is information on the qualified
drug coverage to be provided, the actuarial value of the
coverage, and the monthly premium to be charged for the
coverage. The PDP sponsor must include an actuarial
certification of the actuarial basis for the premium, the
portion of the premium attributable to benefits in excess of
the standard coverage, and the reduction in the premium
resulting from reinsurance subsidies. The MBA Administrator
would review the submitted information and approve or
disapprove the rates, values, and amounts submitted. The
Administrator would take into account the adjusted community
rate (ACR) for the covered benefits and would have the same
authority to negotiate the terms and conditions of the plans as
the Director of the Office of Personnel Management has with
respect to Federal Employees Health Benefits Program (FEHBP)
plans.
The premium for a prescription drug plan could not vary
among individuals enrolled in the plan in the same service
area, provided the individuals are not subject to late
enrollment penalties. The M+C provisions relating to the terms
and conditions for imposing premiums would apply to the new
Part D.
The PDP sponsor of any prescribed drug plan offered in the
area would be required to accept the reference premium as the
full premium for qualified prescription drug coverage if there
was no standard coverage available in an area. M+C plans would
be required to accept the reference premium under the same
conditions.
Sec. 1860G Premium and cost-sharing subsidies for low-
income individuals
New Section 1860G would provide subsidies for low-income
individuals. Individuals who met the resource requirements of
the Qualified Medicare Beneficiary (QMB) program, and who had
incomes under 135% of poverty, would be entitled to a full
premium subsidy for the standard plan (or actuarially
equivalent alternative) coverage. Such individuals would also
be entitled to cost-sharing subsidies, of an amount equal to
95% of the potential cost-sharing obligations a non-subsidized
beneficiary would face on spending up to the initial coverage
limit if enrolled in a standard plan. Individuals who obtained
coverage via these subsidies would still be charged nominal
copays for each prescription. Individuals who met the QMB
program resource test and had incomes between 135% and 150% of
poverty would be entitled to phased-out premium subsidies,
ranging from 100% for persons at 135% of poverty to 0% for
those at 150% of poverty. State Medicaid plans would determine
whether an individual is eligible for a subsidy and the amount
of the subsidy. The determination would be made by the MBA
Administrator if a state does not operate such a plan (or a
state waiver program under Section 1115 of the Social Security
Act).
The premium subsidy amount would be defined as the
reference premium for the qualified prescription drug coverage
that the entitled beneficiary selects, whether it is offered by
a prescription drug plan or an M+C plan in the area. The
reference premium means the premium imposed (without regard to
any subsidies or late enrollment penalties) for enrollment in a
plan providing standard coverage (or alternative coverage if
the actuarial value is equivalent). If a plan provides
alternative coverage with a higher actuarial value than that
for standard coverage, the reference premium is the same ratio
to the total premium as the actuarial value of standard
coverage is to the actuarial value of the alternative coverage.
The MBA Administrator would provide a process whereby the
Administrator would notify the PDP sponsor or M+C organization
that an individual is eligible for a subsidy and the amount of
the subsidy. The sponsor or organization would reduce the
premiums or cost-sharing otherwise imposed by the amount of the
subsidy. The Administrator would periodically and on a timely
basis reimburse the sponsor or organization for the amount of
the reductions.
Part D coverage would be primary to any drug benefits under
Medicaid.
Sec. 1860H Subsidies for all Medicare beneficiaries
through reinsurance for qualified prescription drug
coverage
In order to reduce premiums for all beneficiaries, mitigate
adverse selection, and encourage participation, the MBA
Administrator would provide for reinsurance payments for
qualifying entities. Such payments would be made for specified
costs incurred in providing prescription drug coverage for
individuals enrolled in a PDP plan under Part D, for
individuals enrolled in an M+C plan that provides qualified
drug coverage, and for persons enrolled in a qualified retiree
drug plan. The section would constitute budget authority in
advance of appropriations and represent the obligation of the
Administrator to provide payments of the amounts provided under
Section 1860H.
Entities qualified to receive subsidies would be a PDP
sponsor, an M+C organization offering qualified prescription
drug coverage, and the sponsor of a qualified retiree drug
plan.
In 2003, the reinsurance payment amount for a qualifying
covered individual would be equal to the sum of the following:
(a) for the portion of an individual's gross covered drug costs
that exceeds $1,250 but does not exceed $1,350, 30% of the
allowable costs for such coverage; (b) for the portion of an
individual's gross covered drug costs that exceeds $1,350 but
does not exceed $1,450, 50% of the allowable costs for such
coverage; (c) for the portion of an individual's gross covered
drug costs that exceeds $1,450 but does not exceed $1,550, 70%
of the allowable costs for such coverage; (d) for the portion
of an individual's gross covered drug costs that exceeds $1,550
but does not exceed $2,350, 90% of the allowable costs for such
coverage; and (e) for the portion of an individual's gross
covered drug costs that exceeds $7,050, 90% of the allowable
costs for such coverage. In subsequent years, these dollar
amounts are increased by the percentage increase in average per
capita aggregateexpenditures for covered drugs for
beneficiaries for the 12-month period ending the previous July. The
amounts so determined would be rounded to the nearest multiple of $5.
Allowable costs would be defined as the portion of gross
covered prescription drug costs that are actually paid by the
plan, but in no case be more than the part of such costs that
would have been paid by the plan if the drug coverage under the
plan were standard coverage. Gross covered drug costs would be
defined as costs incurred under the plan for covered
prescription drugs, including costs related to the deductible,
whether paid by the enrollee or the plan, regardless of whether
coverage under the plan exceeded standard coverage and
regardless of when the payment for drugs is made.
The MBA Administrator would be required to estimate the
total reinsurance payments that would be made throughout the
program during the year under the reinsurance schedule
described above, and the total benefit payments that would be
expected to be made by qualifying entities for standard
coverage during the year. The Administrator would
proportionately adjust payments such that total reinsurance
payments made during the year are equal to 35% of total
payments made by qualifying plans for standard coverage during
the year. The payment method would be determined by the MBA
Administrator, who could use an interim payment system based on
estimates. Payments would be made from the Medicare
Prescription Drug Account.
A ``qualified retiree prescription drug plan'' would be
defined as employment-based retiree health coverage that met
the following requirements: (1) the sponsor of the plan would
be required to annually attest to the MBA Administrator (and to
provide such assurances as required by the Administrator) that
the coverage meets the requirements for qualified coverage; (2)
the sponsor and the plan would have to maintain and provide
access to records needed to ensure the adequacy of coverage and
the accuracy of payments made; (3) payment could not be made
for an individual unless the individual is covered under the
plan and is entitled to obtain coverage through a PDP or M+C
plan but elected not to; and (4) payments could only be made
for Medicare primary individuals.
Sec. 1860I Medicare prescription drug account in Federal
Supplementary Medical Insurance Trust Fund
New Section 1860I would create a Medicare Prescription Drug
Account within the Part B Trust Fund. Funds provided under Part
D to the Account would be kept separate from all other funds
within Part B. The MBA Administrator would pay from the
account, from time to time, low-income subsidies, reinsurance
payments, and administrative costs. The Managing Trustee would
transfer, from time to time, to the Medicaid account amounts
attributable to allowable increases in administrative costs
associated with identifying and qualifying beneficiaries
eligible for low-income subsidies. Amounts deposited to the
Account would include Federal amounts which would otherwise be
payable by Medicaid, except for the fact that Medicaid becomes
the secondary payer of drug benefits for dual-eligibles.
Sec. 1860J Definitions; Treatment of references to
provisions in part C
New Section 1860J includes definitions of terms and
specifies how cross references to Part C are to be applied. It
further provides conforming changes to the Federal
Supplementary Medical Insurance Trust Fund. It also requires
the Secretary to submit a legislative proposal for technical
changes within six months of enactment.
Effective date
Date of enactment of the act.
Reason for change
The Committee recognizes that modern medicine is
increasingly reliant upon the use of outpatient prescription
drug therapies in the fight against disease. This is
particularly true in the Medicare population. It has been
estimated recently that the average Medicare beneficiary spends
more than $600 a year on prescription medications. For some
indications, drug therapies can cost tens of thousands of
dollars a year. However, currently the Medicare program
generally excludes coverage for these drugs. While most
beneficiaries have obtained alternative forms of insurance to
help them finance needed prescription medications, more than 10
million current beneficiaries lack affordable access to such
protection. This provision adds a new Medicare prescription
drug benefit to the Medicare program in recognition of this
need. By including both an initial standard benefit covering
costs of up to $2,350 a year in 2003 and an out-of-pocket
spending limit of $6,000, the provision would provide all
beneficiaries access to coverage for both routine and
catastrophic drug expenses. The low-income and reinsurance
subsidies ensure that the benefit will be affordable for those
in need. In addition, by providing the benefit through a
voluntary, competitive, private-sector delivery model, the
Committee notes that beneficiaries will be provided the
benefits of greater price discounts and the ability to either
maintain their current coverage, if they have it, or in the
alternative, to choose a plan that best meets their needs.
The Committee recommends that all medication therapy
management programs include services routinely provided or
coordinated by pharmacists, including services related to case
management, disease management, drug therapy management,
patient training and education, face-to-face counseling,
medication refill reminders, drug therapy problem
identification and resolution, the provision of special
packaging, or other services that enhance the use of
prescription medications.
Section 102. Offering of Qualified Prescription Drug Coverage Under the
Medicare+Choice Program
Current law
Under current law Medicare+Choice plans may elect to offer
prescription drug coverage under Part C. The extent of these
benefits vary and are not subject to any explicit
standardization requirements. However, as with all
Medicare+Choice benefit specifics, the financing and design of
such benefits must meet the approval of the Secretary under the
adjusted community rate (ACR) approval process. Generally,
plans offering drugs must either finance such benefits from
differences between the applicable county payment rate and
their costs in providing Medicare's basic benefits, or by
assessing beneficiaries who enroll in the plan supplemental
premiums.
Explanation of provision
A Medicare+Choice plan could not offer drug coverage (other
than that already required under Medicare) unless the coverage
was qualified prescription drug coverage. The organization
would be required to meet beneficiary protections outlined in
the new Section 1860C, including requirements relating to
information dissemination and grievance and appeals. The
Administrator could waive such requirements to the extent the
Administrator determined they were duplicative of requirements
otherwise applicable to the plan or organization.
Medicare+Choice organizations would be required to compute
and publish: (a) a premium for drug benefits that is separate
from other coverage; (b) the ratio of the actuarial value of
standard coverage to the actuarial value of prescription drug
coverage offered under the plan; and (c) a standard premium.
Medicare+Choice organizations would be permitted to reduce the
amount of premiums charged for qualified coverage through the
application of overages identified through the ACR process
provided for in Part C. For purposes of low-income subsidy
payments, the organization would be required to accept the
reference premium as the full premium if there is no standard
or equivalent coverage in the area (as provided under Section
1860F(d)).
Effective date
Changes apply to Medicare+Choice plan coverage that is
provided on or after January 1, 2003.
Reason for change
This provision makes the conforming changes needed to
integrate the new drug benefit into the Medicare+Choice
program. It ensures that Medicare+Choice plans can continue
offering enrollees prescription drug benefits; however, it
requires that they meet the requisite standards specified in
the new Part D if they do. Standardization of the minimum
benefit requirements ensures that the new drug program will not
be harmed by the potential for adverse selection that could
result if Medicare+Choice plans were allowed to offer
prescription drug benefits that did not meet the minimum
requirements included in Part D. The Committee expects that
through these changes, and the additional resources provided
under Section 101 and Title III of this Act, the
Medicare+Choice program will be greatly strengthened and that
Medicare+Choice plans will become instrumental in expanding
beneficiary access to multiple prescription drug coverage
options.
Section 103. Medicaid Amendments
Current law
State Medicaid programs have the option to include
prescription drugs in their Medicaid benefits package. All
states and the five territories (American Samoa, Guam, Northern
Mariana Islands, Puerto Rico and Virgin Islands) currently do
so. In general, a Medicare beneficiary who is fully entitled to
Medicaid benefits is eligible to receive prescription drug
coverage under his or her state's Medicaid program.
Medicaid also provides a very limited benefit to certain
elderly and disabled Medicare beneficiaries. They include
``qualified Medicare beneficiaries'' (QMBs), ``specified low-
income Medicare beneficiaries'' (SLMBs), and other ``qualified
individuals.'' QMBs are aged and disabled persons who are
receiving Medicare, whose income is below 100 percent of the
Federal poverty level, and whose resources do not exceed twice
the allowable amount under SSI. They receive Medicaid coverage
for the cost of Medicare Part B premiums (and if applicable,
Part A premiums) and Medicare coinsurance and deductible
amounts. (Those QMBs who are otherwise eligible for full
Medicaid receive QMB benefits in addition to Medicaid
benefits.) SLMBs are like QMBs except that their income is
between 100% and 120% of the Federal poverty level and they
receive coverage for only Medicare Part B premiums.
Qualified individuals (QI1s) with income between 120% and
135% of the Federal poverty level and qualified individuals
(QI2s) with income between 135% and 175% of the Federal poverty
level are unique in that neither group is entitled to their
benefit. States are allotted amounts to cover QI1s and QI2s on
a first-come, first-serve basis, and states do not contribute
to the cost of their benefits. In addition, QI1s and QI2s
cannot otherwise be eligible for Medicaid. QI1s are eligible
for Medicaid payment of their Medicare Part B premium. QI2s are
eligible for Medicaid payment of the small portion of the
Medicare Part B premium attributable to the transfer of certain
home health visits (estimated to be just over $1 per month in
2000) from Part A. Coverage of these special groups of Medicare
beneficiaries is optional in the five territories. Currently,
none of these territories have elected such coverage. However,
territories may pay Medicare premiums (i.e., buy-in) for some
dual-enrolled persons.
All Medicaid costs are financed by the states and federal
government through a system of ``matching payments.'' Most of
the costs of administering the Medicaid program are shared
evenly by the states and the federal government, with each
paying 50%. State shares of Medicaid benefits are determined by
a formula in Medicaid statute that is based on average per
capita income in each statecompared to the national average.
The federal share (the ``federal matching percentage'' or FMAP) is
equal to 100% minus each calculated state share. States with higher
average incomes receive lower federal matching shares. The FMAP for
benefits is subject to a floor of 50% and a ceiling of 83%.
In the 50 States and the District of Columbia, Medicaid is
an individual entitlement. There are no upper limits on the
Federal payments for Medicaid as long as states contribute
their share of matching funds. In contrast, Medicaid in the
territories is subject to Federal spending caps. Every year,
those caps are increased by the percentage change in the
medical care component of the Consumer Price Index for all
urban consumers (as published by the Bureau of Labor
Statistics). The Federal matching rate is statutorily set at 50
percent for the territories.
Explanation of provision
Section 103 adds a new Section 1935 to the Social Security
Act entitled ``Special Provisions Relating to Medicare
Prescription Drug Benefit.'' The provision requires States, as
a condition of receiving Federal assistance, to make
eligibility determinations for premium and cost-sharing
assistance for Part D, inform the MBA Administrator of cases
where eligibility has been established, and otherwise provide
information to the MBA Administrator as may be required to
carry out Part D.
The provision provides for a phased-in Federal assumption
of the costs associated with providing dual-eligible Medicaid
beneficiaries qualified drug coverage under Medicare Part D.
These costs would be assumed by the Federal government over a
period of five years, in increments of 20% each year, and be
assumed through appropriate revisions in the Medicaid matching
payments for each State.
The provision includes clarification that in the case of
individuals dually entitled to prescription drug coverage under
Part D and drug coverage under Medicaid, that those
individuals' coverage under Medicare would be primary. The
provision allows States to require, as a condition for receipt
of Medicaid drug benefits, that a dually-entitled individual
elect qualified prescription drug coverage under Medicare.
Residents of Territories are not eligible for regular low-
income subsidies. However, Territories would be able to get
additional Medicaid funds, beginning at $20 million a year and
escalating by the annual percentage increase in prescription
drug costs for Medicare beneficiaries. In order to obtain these
funds, Territories would be required to formulate a plan on how
they would dedicate the funds to assist low-income Medicare
beneficiaries in obtaining covered outpatient prescription
drugs.
Effective date
Date of enactment of the act.
Reason for change
The Medicaid amendments included in Section 103 are
necessary to implement and provide for the ongoing
administration of the new Medicare drug program specified in
Section 101. The administrative payments authorized in this
provision are necessary to ensure that low-income beneficiaries
who are eligible for the new subsidies provided for in Section
101 are appropriately identified and enrolled in the program.
The provisions in subsection (b) provide for a federal
assumption of the costs associated with making the new Medicare
drug benefit primary for individuals who are dually entitled to
Medicare and Medicaid. The Committee notes that the assumption
of these costs will reduce projected state Medicaid obligations
by billions of dollars over the next several years, freeing up
resources that could be used to expand or improve existing
state medical assistance or other pharmacy assistance programs.
Section 104. Medigap Transition Provisions
Current law
Under current law private insurance companies may sell one
of ten standardized supplemental Medicare insurance (a.k.a
``Medigap'') products, three of which contain limited coverage
for prescription drugs. In addition, insurers can renew
policies that provide some coverage for prescription drugs if
those policies were initially sold before the Medigap program
was standardized.
Explanation of provision
Beneficiaries who have current Medigap prescription drug
insurance could maintain such coverage. However, no new (not
including renewals of existing policies) Medigap prescription
drug policies could be sold to an individual after January 1,
2003. Individuals who currently have a Medigap policy with
prescription drug coverage and who elect to terminate such
coverage and enroll in Part D would be able to enroll in a
Medigap policy without prescription drug coverage without
penalty within 63 days of the termination of prior coverage.
Effective date
Date of enactment of the act.
Reason for change
The provisions in Section 104 provide conforming changes
necessary to integrate the new prescription drug program with
the Medigap insurance market. The provisions ensure that
individuals who currently maintain prescription drug coverage
through a Medigap policy may continue such coverage; however,
they also ensure that the stability of the drug program will
not be threatened by theissuance of additional policies which
do not meet the minimum benefit requirements specified in Part D. After
consultation with the Congressional Budget Office and independent
actuaries, the Committee concluded that these provisions were necessary
to protect against undue adverse selection in the new Medicare drug
program.
Section 105. Demonstration Project for Disease Management for Severely
Chronically Ill Medicare Beneficiaries
Current law
Medicare does not currently provide direct reimbursement
for disease management services under the fee-for service
program. The Secretary does have standing authority to initiate
demonstration projects. However, currently there is no
operative disease management program of that kind in place.
Explanation of provision
The MBA Administrator would conduct a three-year
demonstration project applying disease management to Medicare
beneficiaries diagnosed with advanced-stage congestive heart
failure, diabetes, or coronary disease. A beneficiary would be
eligible for the demonstration project if: (1) the beneficiary
met the appropriate diagnosis; (2) the beneficiary's physician
approved of the participation; and (3) the beneficiary was not
a Medicare+Choice enrollee. Enrolled beneficiaries would be
eligible for disease management services, as well as decreased
premiums, deductible, cost-sharing, and out-of-pocket costs if
they were also enrolled in a prescription drug plan, or payment
for all costs of prescription drugs if they were not enrolled
in a prescription drug plan.
The MBA Administrator would contract with up to 3 disease
management organizations to conduct the demonstration, and
provide the disease management services and prescription drug
benefits. The organizations would be paid in a manner so that
there would be a net reduction in expenditures under the
Medicare program as a result of the demonstration project.
The MBA Administrator would be required to submit an
interim report not later than 2 years after the demonstration
project was first implemented and a final report not later than
6 months after the project's completion. The reports would
focus on the costs, health outcomes, and recommendations
associated to the project and its possible extension or
expansion.
Effective date
Date of enactment.
Reason for change
The provision is included to examine whether active use of
disease management services may improve the overall health of
Medicare beneficiaries with advanced illnesses, while
effectively reducing overall program costs.
The Committee recommends that all disease management
demonstration projects include pharmacist participation in case
management, drug therapy management, patient training and
education, drug therapy problem identification and resolution,
the provision of special packaging, or other services that
enhance the use of prescription medications.
Title II--Modernization of Administration of Medicare
Subtitle A--Medicare Benefits Administration
Section 201(a). Establishment of Administration
Current law
At present, the Health Care Financing Administration (HCFA)
located within the Department of Health and Human Services
(DHHS) administers the Medicare program along with several
other programs.
Explanation of provision
The provision would establish a new agency, the Medicare
Benefits Administration (MBA), within the Department of Health
and Human Services.
Effective date
Date of enactment of the act.
Reason for change
This provision creates a new agency, the Medicare Benefits
Administration (MBA), to strengthen and modernize the Medicare
program. The Committee notes that the range and complexity of
activities involved in managing Medicare are considerable and
continue to grow. The Health Care Financing Administration
(HCFA), which currently administers Medicare, also oversees
more than 50 Medicaid programs, the State Children's Health
Insurance Programs and has many other duties.
Historically, adding a new mission to a government agency,
such as the Medicare+Choice program in 1997 and now the new
prescription drug benefit provided in this bill, may mean that
the new functions do not get the management attention they
deserve and need in order to flourish. The Committee believes
these two aspects of the Medicare program are sufficiently
different from operating the fee-for-service portion of
Medicare to warrant the creation of a new agency to manage
them, particularly in light of the movement toward negotiated
pricing. The Committee believes that a new agency will enable
these two programs to develop and mature to their maximum
potential, and provide an opportunity to create a culture
attuned to fostering innovation, flexibility, and competitive
pricing in health care delivery. A new agency will relieve some
of the considerable pressures on HCFA and enable it to focus on
the increasingly complex tasks associated with administering
the fee-for-service portion of the Medicare program.
The MBA provides an appropriate structure for administering
portions of the Medicare program, including a new prescription
drug benefit, through a partnership with the private sector,
and ensuring health plan choices for beneficiaries in the
Medicare+Choice. Additionally, the new agency, through its
Office of Beneficiary Assistance, will streamline and simplify
beneficiaries' access to consumer information about their
benefits, rights, and health care plan options and, through the
Ombudsman program, will provide assistance to seniors in
resolving problems with Medicare. The Committee notes that as
the Medicare program has become increasingly complex, it is
critical to provide seamless, easy access to information about
the program provided in a consumer-oriented manner that
reflects the best communication practices of the private
sector. The Committee intends that the MBA organize and manage
the Office of Beneficiary Assistance and the Ombudsman program
with these goals in mind.
This provision calls for a structure that is flexible, yet
accountable to the President and Congress, but to some degree,
is independent of Executive Branch involvement in carrying out
the duties of the MBA. For example, the new Medicare Policy
Advisory Board, a separate entity created to advise the MBA on
policy, will include both Presidential and Congressional
appointees, and will make recommendations directly to the
Congress without review or comment by any Federal office or
official. The Committee will look to the Board to provide
objective assessments of the administration of the MBA, the
operation of the new Medicare programs as well as the
functioning of Medicare as a whole.
The fixed five-year terms of the Administrator and Deputy
Administrator provide some necessary stability to the
management of this agency as well as a measure of independence
from the President. Flexibility with respect to hiring and
compensation, within limits, is provided to attract personnel
who will bring private sector, best business practices
experience to the new agency. However, for example, the
Committee expects that the MBA Administrator would hire
personnel at reasonable compensation levels, even though he/she
has considerable freedom to set salary structure. The Committee
notes that the President can remove the MBA Administrator at
any time if the individual's behavior is egregious in any
respect. The Committee hopes that in allowing the MBA
Administrator this flexibility in terms of staffing, the
organizational culture will be oriented toward the
identification, expeditious hiring and retention of highly
qualified personnel to enable the quality management and
operation of a competition-based program.
The new agency is established within the Department of
Health and Human Services to provide accountability to the
executive and legislative branches and to the public. The
Secretary is directed to ensure appropriate coordination
between the two agencies, the MBA and the HCFA, in carrying out
the Medicare program, including the transfer and/or sharing of
data and information. The Committee anticipates that
coordinated, focused management activities will be necessary to
ensure that effective administration of Medicare as a whole.
With that need in mind, we encourage the Secretary to develop
the necessary mechanisms to foster interagency cooperation not
only at the MBA's inception but also on an ongoing basis.
However, the Committee is concerned about the duplication of
functions and increases in overall personnel in creating a
second government agency to administer Medicare. With respect
to this concern, the provision limits staffing in the MBA, only
for those functions being transferred to it from HCFA, to the
number of full-time equivalent HCFA employees currently
performing those duties.
The Committee does not wish to minimize the number of tasks
involved in establishing a new agency. It is expected that the
Secretary would begin to craft an implementation plan upon
enactment, including the oversight of transition tasks,
consideration of potential candidates for the Administrator and
Deputy Administrator positions, and the development of
interagency memoranda of understanding. The Committee
encourages the Secretary to share the implementation plan with
the Committee as soon as feasible so that appropriate oversight
can be exercised.
Section 201(b). Administrator and Deputy Administrator
Current law
Currently, HCFA is headed by an Administrator, appointed by
the President with the advice and consent of the Senate. The
Administrator is at Executive Level IV and is appointed to an
indefinite term of office. At present, HCFA has a Deputy
Administrator who is in the Senior Executive Service and is
appointed by the Secretary of Health and Human Services.
The heads of departments and agencies generally have
authority over the various programs carried out by various
units under them, and are responsible for the appropriate
coordination of those programs.
Explanation of provision
The Medicare Benefits Administration (MBA) would be headed
by an Administrator who would report directly to the Secretary.
The Administrator would be appointed by the President to a
fixed five-year term of office, subject to the advice and
consent of the Senate, at Executive Level III. When the term
expires, the Administrator could continue in office until a
successor was appointed. Anyone appointed to complete an
unexpired term could be appointed only for the remainder of the
term.
The Administrator would be responsible for the exercise of
all powers and the discharge of all duties of the MBA, could
establish and reorganize units with the administration, could
prescribe rules and regulations under the Administrative
Procedures Act, and could delegate authority to his or her
subordinates.
There would be a Deputy Administrator appointed by the
President at Executive Level IV to a fixed five-year term of
office, subject to the advice and consent of the Senate. When
the term expires, the Deputy Administrator could continue in
office until a successor was appointed. Anyone appointed to
complete an unexpired term could be appointed only for the
remainder of the term. The Deputy Administrator is to perform
the duties and exercise the powers delegated to him or her by
the Administrator.
The Secretary of HHS would ensure appropriate coordination
between the Administrator of the MBA and the Administrator of
HCFA in carrying out the Medicare program.
Effective date
Date of enactment of the act, except that the Administrator
and the Deputy Administrator cannot be appointed before March
1, 2001.
Reason for change
See Section 201(a).
Section 201(c). Duties; Administrative Provisions
Current law
Currently, the HCFA Administrator is responsible for the
effective administration and oversight of the Medicare program
(both Parts A and B or traditional fee-for-service, as well as
Part C or the Medicare managed care), the Federal portion of
the Medicaid program, the Children's Health Insurance Program,
and related quality assurance programs including oversight of
clinical laboratories, oversight of Medicare supplemental
insurance, certification and survey activities for nursing
homes, and oversight of certain aspects of private health
insurance markets.
Many units within executive departments are required to
submit annual reports regarding their activities to Congress
and the President.
At present, HCFA staff, with the approval of the Secretary,
is appointed and paid in accordance with Title V Civil Service
provisions.
When a new entity is established, information and data that
is needed by the new entity, but that is in the possession of
an existing entity, normally is transferred to the new entity.
Explanation of provision
The Administrator would carry out Parts C and D of Title
XVIII of the Social Security Act (hereby referred to as ``Title
XVIII''), including negotiating, entering into, and enforcing
contracts with plans under Medicare+Choice and contracts with
PDP sponsors offering prescription drug plans under Part D. The
Administrator also would carry out other duties under Parts C
and D, including demonstration projects and the Programs of
All-Inclusive Care for the Elderly (PACE), Social Health
Maintenance Organizations (SHMOs), and EverCare. Additionally,
in administering the prescription drug benefit, the
Administrator would not: (1) Require a particular formulary or
price structure for drug reimbursement; (2) interfere with
negotiations between Medicare+Choice plans and PDP sponsors and
drug manufacturers, wholesalers, or other suppliers; or (3)
interfere with the competitive nature of providing drug
coverage through PDP sponsors and Medicare+Choice plans.
The MBA Administrator would be required, not later than
March 31 of each year, to submit a report covering the
administration of Parts C and D during the previous fiscal year
to Congress and the President.
The MBA Administrator, with the approval of the Secretary,
would be authorized to employ staff in a flexible manner
without regard to the Title V Civil Service provisions
governing appointment (5 U.S.C. 31) and pay (5 U.S.C. 51 and
53), except that the rate of compensation may not exceed the
rate of basic pay for Executive Level IV ($122,400).
The Secretary is to establish an appropriate transition of
responsibility to redelegate the administration of Part C from
the HCFA Administrator to the Administrator of the MBA. The
Secretary also would ensure that information and data in the
possession of the HCFA Administrator that is needed by the MBA
Administrator to carry out his or her duties will be
transferred to the latter.
Effective date
Date of enactment of the act. However, the Administrator
cannot be appointed until March 1, 2001. The MBA
Administrator's duties in carrying out Parts C and D would
begin in 2003.
Reason for change
See Section 201(a).
Section 201(d). Office of Beneficiary Assistance
Current law
At present, the Center for Beneficiary Services in HCFA
serves as the central location for interactions with
beneficiaries, including beneficiary-centered information,
education and service initiatives.
Explanation of provision
The Secretary of HHS would establish the Office of
Beneficiary Assistance (OBA) within the MBA to carry out
functions relating to beneficiaries' access to the entire
Medicare program. Some of these functions would include
responsibility for eligibility and enrollment, and for
dissemination of information on benefits and appeals rights for
Medicare Parts A, B ,C, and D. In addition, the OBA would
disseminate information on benefits and limitations on payment,
including cost-sharing, stop-loss and formulary restrictions
under Parts C and D. The OBA would make available other
information so that beneficiaries could compare benefits
throughout the entire program, including comparisons of M+C
benefits under Part C with Medicare supplemental policies. The
OBA also would disseminate information on beneficiaries'
grievance and appeals procedural rights for the entire Medicare
program. Dissemination of benefits information would occur
through the mail, Internet, and toll-free telephone number.
Effective date
Date of enactment. The Administrator of the MBA would carry
out enrollment and make eligibility determinations beginning on
or after January 1, 2003.
Reason for change
See Section 201(a).
Section 201(d)(3). Medicare Ombudsman
Current law
At present, there is a National Ombudsman in the Elder
Rights Protection Office in the Administration on Aging in the
Department of Health and Human Services. (The office,
originally named Office of Long-Term Care Ombudsman Programs,
was established under 42 U.S.C. 3011(d)). The Director of the
office is appointed by the Assistant Secretary of the
Administration on Aging from among individuals who have
expertise and background in the fields of long-term care
advocacy and management. The National Ombudsman and the
Director serve as advocates on behalf of older individuals who
reside in long-term care facilities regarding all Federal
policies affecting such individuals. Among other activities,
they advocate, monitor, and coordinate Federal and State
activities of Long-term Care Ombudsmen. The Director makes
recommendations to the Secretary and Assistant Secretary
regarding long-term care programs, and submits to the Speaker
of the House of Representatives and President pro tempore of
the Senate an annual report on the effectiveness of services
provided under the State Long-Term Care Ombudsman programs.
Explanation of provision
A Medicare Ombudsman (MO) would be established within the
Office of Beneficiary Assistance (OBA). The MO would be
appointed by the Secretary from among individuals with
expertise and experience in the fields of health care and
advocacy, to assist Medicare beneficiaries regarding their
complaints, grievances, and requests for information with
respect to any aspect of the Medicare program.
The duties of the MO would include assisting Medicare
beneficiaries: (1) In collecting relevant information to seek
an appeal of a decision or determination made by a Fiscal
Intermediary, Medicare Carrier, Medicare+Choice organization, a
PDP sponsor under Part D, or the Secretary; and (2) with any
problems arising from disenrollment from an M+C plan under Part
C of Title XVIII or a prescription drug plan under Part D of
Title XVIII. The MO would also be required to submit annual
reports to Congress, the Secretary, and the Medicare Policy
Advisory Board describing the activities of the Office,
including recommendations for improvement in the administration
of this title.
The MO also would help guide and coordinate the efforts of
State medical ombudsman programs and State-based and community-
based consumer organizations to provide information about the
Medicare program and educate Medicare beneficiaries regarding
how problems under the Medicare program may be resolved or
avoided.
Effective date
Date of enactment of the act.
Reason for change
See Section 201(a).
Section 201(e). Medicare Policy Advisory Board
Current law
Established in statute, the Social Security Advisory Board
advises the Commissioner of Social Security on numerous Social
Security issues, including policies related to old-age,
survivors, and disability insurance. The Board submits reports
to Congress and the President regarding the various issues
affecting Social Security. While there are numerous advisory
boards operating throughout the Federal government, the Social
Security Advisory Board closely approximates the structure and
function of the proposed Medicare Policy Advisory Board.
Explanation of provision
The Medicare Policy Advisory Board (MPAB) would be
established within the Medicare Benefits Administration (MBA).
The Board would advise, consult with, and make recommendations
to the Administrator of the MBA regarding the administration of
Parts C and D of Title XVIII, including the review of payment
policies.
The Board is to submit to Congress and the MBA
Administrator, and publish in the Federal Register, such
reports as it determines appropriate, including legislative or
administrative recommendations to improve Parts C and D. The
reports may include recommendations on such topics as fostering
competition under Parts C and D, improving education and
enrollment processes for Medicare beneficiaries, implementation
of risk-adjustment methodology under Medicare+Choice, the
inclusion of disease management programs, and improving
competition and access to Part C and Part D plans in rural
areas. The reports would be submitted directly to Congress, and
no officer or agency of the United States may require that they
be submitted to any officer or agency for approval, comments,
or review, before being submitted to Congress.
The MBA Administrator, within 90 days after a report by
MPAB is submitted, is to submit to Congress and the President
an analysis of any recommendations in the report, and is to
publish the analysis in the Federal Register.
Effective date
Date of enactment of the act.
Reason for change
See Section 201(a).
Section 201(e). (4) Membership, (5) Compensation, (6) Terms of Office,
(7) Chair, (8) Meetings, (9) Director and Staff
Current law
The Social Security Advisory Board consists of seven
members, no more than four of whom may be from the same
political party. Three members are appointed by the President,
with the advice and consent of the Senate; two by the President
pro tempore of the Senate, with the advice of the chair and
ranking minority member of the Committee on Finance; and two by
the Speaker of the House, with the advice of the chair and
ranking minority member of the Committee on Ways and Means.
Members are entitled to travel and per diem expenses while
serving on Board business. Members serve six-year staggered
terms; they must leave office when their terms expire. A member
appointed to an unexpired term serves only for the remainder of
the term. The Chair is designated by the President for a four-
year term; the Board meets at the call of the Chair, but not
less than four times a year.
The Board appoints a staff director without regard to Civil
Service provisions, who is paid at a rate equivalent to the
rate for the Senior Executive Service ($106,200 to $122,400).
The Board also appoints additional personnel and may compensate
such personnel without regard to Title V regarding the
competitive service.
Explanation of provisions
The Medicare Policy Advisory Board is to consist of seven
members, of which three are to be appointed by the President;
two by the Speaker of the House, with the advice of the
chairmen and ranking minority members of the Committee on Ways
and Means and the Committee on Commerce; and two by the
President pro tempore of the Senate, with the advice of the
chairman and ranking minority member of the Committee on
Finance. The members are to be chosen based on their integrity,
impartiality, and good judgment, and are to be exceptionally
qualified by reason of their education and experience in health
care benefits management.
While engaged on Board business, members are to be
compensated at rates not to exceed the daily equivalent to the
annual rate in effect for Executive Level IV.
Terms of office are to be for three years, and, as
designated by the President at the time of appointment, one is
to be appointed for one year; three for two years, and three
for three years. No member may serve for more than eight years.
A member appointed to fill an unexpired term may be appointed
only to complete the term. A member whose term expires may
continue to serve until a successor is appointed.
The Chair of the Board would be elected by the members to a
three-year term. The Board is to meet at the call of the Chair,
but not less than three times during the fiscal year.
The Board would have a director who would be appointed by
the Chair. With the Board's approval, the director appoints and
fixes the pay of the staff. Both the director and staff are to
be appointed and paid without regard to Civil Service
provisions governing appointment (5 U.S.C. 31) and pay (5
U.S.C. 51 and 53), except that the rate of pay may not exceed
the rate of basic pay for Executive Level IV ($122,400).
The MBA Administrator is to make available to the Board
such information and other assistance as it may require to
carry out its functions. The MPAB may contract with and
compensate government and private agencies to carry out its
duties.
Effective date
Date of enactment of the act.
Reason for change
See Section 201(a).
Section 201(f). Funding
Current law
HCFA currently is authorized to be appropriated in part
from the Federal Hospital Insurance Trust Fund and from the
Federal Supplementary Medical Insurance Trust Fund such sums as
are necessary to carry out its Medicare programs. Funds are
appropriated under the normal appropriations process.
Explanation of provision
The provision would authorize funds for the MBA and the
MPAB, like HCFA, to be appropriated in part from the Federal
Hospital Insurance Trust Fund and from the Federal
Supplementary Medical Insurance Trust Fund in such sums as are
necessary to carry out this section of the act. The funds would
be appropriated under the normal appropriations process.
Effective date
Date of enactment of the act.
Reason for change
See Section 201(a).
Section 202. Miscellaneous Administrative Provisions
Current law
At present, the HCFA Administrator is the Secretary of the
Board of Trustees of the Medicare Trust Funds, while the
Secretary of the Treasury is the managing trustee and an ex
officio member. Other ex officio members of the Board include
the Commissioner of Social Security, the Secretary of Labor,
and the Secretary of Health and Human Services.
The Administrator of HCFA is at Executive Level IV
position.
Explanation of provision
The provision would make the MBA Administrator an ex
officio member of the Board. The provision also would raise the
HCFA Administrator to Executive Level III.
Effective date
The provision would become effective on March 1, 2001.
Reason for change
This provision recognizes that the Administrator of the
Health Care Financing Administration and the Administrator of
the new Medicare Benefits Administration should have equal
professional status in the Department of Health and Human
Services. A review of the other Cabinet level departments'
executive structures demonstrates that the Administrators of
large, complex governmental programs, such as Medicare, warrant
recognition commensurate with their management
responsibilities.
Subtitle B--Oversight of Financial Sustainability of the Medicare
Program
Section 211. Additional Requirements for Annual Financial Report and
Oversight on Medicare Program
Current law
The Board of Trustees of the Medicare Trust Funds are
required to submit reports to Congress concerning the operation
and status of each Trust Fund during the preceding fiscal year
and the next two fiscal years no later than the first day of
April of each year. The reports also include an actuarial
opinion by the Chief Actuarial Officer of the Health Care
Financing Administration certifying that the techniques and
methods are generally accepted and reasonable.
Explanation of provision
The Board of Trustees would be required to submit an
additional report to Congress on the operation and status of
the Hospital Insurance (Part A) Trust Fund and Federal
Supplemental Medical Insurance (Part B) Trust Fund that would
include information on the obligations from the general
revenues of the Treasury for Medicare benefits (in total, in
relation to all other general revenue amounts, and as a percent
of gross domestic product); a historical overview of that
spending; and 10-year and 50-year projections. The report would
be published by the Committee on Ways and Means and published
on the Internet.
Effective date
This provision would be effective the fiscal years
following the date of enactment.
Reason for change
This provision requires the Medicare Board of Trustees to
adopt a test of financial solvency for the Medicare program in
addition to the tests that currently exists. The Committee
believes that this test, which measures overall spending from
the general revenues of the Treasury for Medicare benefits,
provides a more relevant and realistic picture of the financial
viability of the Medicare program. The current concept of
Medicare's solvency is based on the fiscal outlook for the
Federal Hospital Insurance (HI) Trust Fund (Part A), which is
funded by a payroll tax paid by employers and employees, and
the Federal Supplementary Medical Insurance Trust Fund (Part
B), which is funded by premiums paid by beneficiaries and
general revenue. The Committee notes that the current
measurement of solvency is open to manipulation by moving funds
between the two accounts, as was done in 1997 when spending for
home health services was transferred gradually from the HI
Trust Fund to Part B, thus artificially improving the financial
outlook of the HI Trust Fund. The Committee notes that rosy
projections of HI Trust Fund spending belie the true state of
Medicare's solvency, encouraging the delay of important reform
and financing decisions for years and making them dramatic and
painful when they must be implemented. The Committee believes
that the critical question for Medicare's financial health is
not how much revenue from payroll taxes is needed to fund a
portion of Medicare, but rather how much total tax revenue is
needed to fund the entire program. The Committee includes this
provision to focus the public debate about Medicare's financial
viability in a more realistic and meaningful way.
Subtitle C--Changes in Medicare Coverage and Appeals Process
Section 221. Revisions to Medicare Appeals Process
Current law
Medicare beneficiaries and, in certain circumstances,
providers and suppliers of health care services may appeal
adverse determinations regarding claims for benefits under Part
A and Part B. Section 1869 of the Social Security Act allows
these parties who have been denied coverage of an item or
service the right to appeal that decision through a series of
administrative appeals and then into federal district court if
the amounts of disputed claims in question meet certain
thresholds at each step of the appeals process.
The procedures differ for Medicare Part A and Medicare Part
B services. Generally, each part has its own initial appeals
process which the beneficiary must exhaust before moving on to
a hearing before an administrative law judge (ALJ), then to
review by the Health and Human Services Department Appeals
Board (DAB) and then possibly to federal court. Under Part A,
an ALJ hearing is available for disputed amounts greater than
$100 and judicial review is available for disputed amounts
greater than $1,000. Under Part B, an ALJ hearing is available
for disputed amounts greater than $500 and judicial review is
available for amounts greater than $1,000. Generally, claims
involving the delivery of similar or related services to the
same individual or involving common issues of law and fact
arising from services furnished to two or more individuals can
be aggregated to reach the jurisdictional amount.
Generally, current law provides that a beneficiary may be
represented in an appeal by a person who supplied the service
or item. However, the supplier or provider must first waive
their rights to payment from the beneficiary for the services
or items that are being appealed. The person may not impose any
financial liability on the beneficiary in connection with such
representation.
Current law includes provisions for an expedited appeal
process where a party may request court review in place of an
ALJ hearing or DAB review when all parties to the reconsidered
decision (including the Secretary) concur that the only issue
precluding a favorable determination is a statutory provision
which the individual requesting review alleges to be
unconstitutional or a regulation, national coverage decision
under Section 1862(a)(1) of the Social Security Act, or a HCFA
ruling is alleged to be invalid. HCFA policy currently provides
that an expedited review would not apply to a challenge to a
manual instruction, local medical policy, or a policy
statement; only agency determinations, such as regulations,
HCFA rulings, and national coverage determinations, that are
binding on the ALJ can be appealed in such a fashion.
Significant statutory limitations have been imposed on the
review of national coverage determinations (called national
coverage decisions by HCFA). Specifically, an ALJ may not
review a national coverage determination, except to decide
whether the determination has been applied correctly to the
claim at issue. A court would not set aside or invalidate a
national coverage determination because public rulemaking
provisions contained in the Administrative Procedure Act (5
U.S.C. 553) or Section 1871(b) of the Social Security Act have
not been followed. Further, any case in which a court
determines that the record is incomplete or otherwise lacks
adequate information to support the validity of a national
coverage determination is remanded back to the Secretary for
additional proceedings tosupplement the record. The court may
not determine that an item or service is covered in the particular case
except upon review of the supplemented record. Finally, the statute
limits judiciary review of certain Part B payment methodologies.
Explanation of provision
These provisions would revise Section 1869, change certain
statutory requirements and codify, clarify and, in some
instances, redefine certain actions currently established
through regulation. In general, the provisions would combine
the Part A and Part B beneficiary appeal processes; would
permit providers and suppliers adversely affected by claims
processing and coverage decisions to appeal; would give
qualified independent review contractors the responsibility for
reconsiderations of initial determinations; would provide for
expedited reconsideration of certain initial determinations
that could cause the termination of ongoing care; would
establish a review process, including judicial review, for both
national and local coverage determinations; would extend the
limitations on liability provided to qualified independent
contractors to Medicare +Choice independent appeals
contractors; and would make all decisions made by the Provider
Reimbursement Review Board subject to appeal under 1869.
Initial determinations would be defined to include
determinations regarding: (1) whether a beneficiary is entitled
to Medicare benefits; (2) the amount of Medicare benefits
available to a beneficiary; (3) a claim for benefits under
Parts A or B, including an initial determination by the
Secretary that payment may not be made, or may no longer be
made, for an item or service under such Parts; (4) the
appropriateness of a discharge of a beneficiary from a
provider, made by a utilization and quality control peer review
organization; and (5) other initial determinations with respect
to benefits made by contractors administering Medicare or Title
XI (peer review).
At the request of an affected beneficiary, the Secretary
would be required to provide for a reconsideration of initial
determinations, including a hearing thereon. The Secretary
would enter into contracts with qualified independent
contractors to conduct reconsiderations of initial
determinations. Under this subsection, the Secretary would
enter into contracts with not fewer than 12 qualified
independent contractors. The qualified independent contractor
would be an entity that is independent of any organization
under contract with the Secretary that makes initial
determinations and that meets requirements established by the
Secretary. Contracts would be for an initial term of three
years and renewable every three years thereafter. The Secretary
would provide specific criteria and guidance, including all
applicable national and local coverage policies necessary to
assist the contractors to make informed decisions. These
policies would be published on the Internet. Contractors would
only be bound by local or national coverage policies that were
published on the Internet. Contractors would not be bound by
any other policies (not local or national coverage policies) if
not provided in a published format.
The qualified independent contractor would determine
whether payment would be made for items or services under Part
A or Part B and the amount of such payment. The qualified
independent contractor would conduct and conclude a
determination or reconsideration and then would mail the notice
of the decision by not later than the end of the 45-day period
from the date that a reconsideration request had been filed. If
the deadline for mailing the decision is missed, the appealing
party would be able to request an ALJ hearing. The Secretary
would be able to reopen or revise any initial or reconsidered
determination under guidelines that would be established in
regulation.
Beneficiaries would be able to request, in writing or
orally, an expedited determination or expedited reconsideration
of an initial determination. The qualified independent
contractor would provide notice (by telephone and in writing)
of the reconsideration results to the Medicare beneficiary,
provider of services, and attending physician no later than 1
day after the medical or other records needed for
reconsideration are received. The contractor would solicit the
views of the individual involved and conduct the
reconsideration regardless of whether the beneficiary would be
charged for continuing services or be liable for payment.
Each qualified independent contractor would monitor its own
determinations to ensure consistency by collecting and
maintaining an electronic database that identifies: (1)
specific claims that give rise to appeals; (2) situations where
further provider education may be necessary; and (3) situations
where changes in national coverage, local coverage or local
medical review policies may be necessary. The database would be
used for the contractors own purposes. Additionally, the
contractor would submit its database annually to the Secretary
for the Secretary's own purposes.
After a determination has been made, contractors would
promptly notify the individual and the Medicare claims payer.
Contractor determinations would be in writing and include a
detailed explanation of the determination. The Secretary would
establish a methodology under which qualified independent
contractors would make available all determinations to fiscal
intermediaries, carriers, peer review organizations,
Medicare+Choice organizations and other entities under contract
to make initial determinations under Medicare or peer review
statutes. Qualified independent contractors and their employees
would not be held liable under any federal or state criminal or
civil law if due care was exercised in the performance of its
duties, functions or activities.
The Secretary would also establish in regulation the time
limits for requesting a hearing. Hearings would be available
for disputed amounts greater than $100. Judicial review would
be available for disputed amounts greater than $1,000.
Aggregation of claims to meet these thresholds, with certain
restrictions, would be permitted. An ALJ would conduct a
hearing on a contractor's determination and issue a decision no
later than 90 days after the hearing request date. However, the
party requesting the hearing can request the 90 day period be
waived. The DAB would conduct a review on an ALJ's decision and
issue a decision or remand no later than 90 days after the
review request date. In the event that an ALJ does not issue a
hearing decision by the appropriate time period, the party
requesting the hearing would be able to request the DAB to
review the case de novo. All hearing decisions would be made
public and published on the website of Health and Human
Services absent information that would identify the
beneficiary, provider or supplier.
National coverage determinations would be determinations by
the Secretary regarding whether a particular item or service is
covered under this title. Like current law, national coverage
determinations would not be reviewed by an ALJ and would not be
held to be unlawful because of rulemaking violations. These
determinations would be reviewed by the Department Appeals
Board (DAB) of the Department of Health and Human Services, who
would be able to review the record, as well as permit discovery
and the taking of evidence. The DAB would defer only to
reasonable findings of fact, interpretations of law and
reasonable applications of fact to law by the Secretary. A
decision by the DAB would constitute a final agency action and
would be subject to judicial review. Local coverage
determinations would be determinations made by a fiscal
intermediary or a carrier under Part A or Part B regarding
whether a particular type or class of items or services is
covered under such Parts. Local coverage determinations made by
Medicare claims processing contractors would be subject to
review by an ALJ of the Social Security Administration, who
would be able to review the record, as well as permit discovery
and the taking of evidence to evaluate the reasonableness of
the determination. The ALJ would defer only to reasonable
findings of fact, interpretations of law, and reasonable
applications of fact to law by the Secretary. An ALJ decision
would constitute a final agency action and would be subject to
review by the DAB, constituting a final agency action which is
subject to judicial review. When there are no material issues
of facts in dispute and the issues concern either the
constitutionality of the provision or the validity of a
regulation, ruling or determination, the aggrieved party would
be able to seek review in a court of competent jurisdiction.
When the Secretary has not issued a national coverage or
noncoverage determination, with respect to a particular type or
class of item or service, an affected party would be able to
submit a request to make such a determination. The Secretary
would have 90 days to either: (1) issue a national coverage
determination, with or without limitations; (2) issue a
national noncoverage determination; (3) issue a determination
that no determination is appropriate; or (4) issue a notice
that the Secretary has not completed a review of the national
coverage determination and identify the remaining steps in the
Secretary's review process and a deadline by which the
Secretary would complete the review. All of these actions would
be accompanied by an explanation of the basis for the
determination. Failure to complete a review pursuant to the
above (4) would be deemed to be an action under (3). Any action
under (1), (2) or (3) is deemed to be national coverage
determinations and subject to review. Also, all decisions of
hearings by the Secretary would be made public and published on
the Internet.
The Secretary would submit a report to Congress annually,
and subsequently publish the report on the Internet, on the
actual time periods necessary to fully implement national
coverage determinations made in the previous fiscal year.
Aggrieved persons with standing to initiate action under
this section would include: (1) individuals entitled to Part A
or enrolled in Part B or both who are in need of the items or
services involved in the coverage determination and (2) persons
or classes of persons who make, manufacture, offer, supply,
make available, or provide such items and services. Included
are many of the existing provisions and protections with
respect to people providing items and services representing
beneficiaries.
The Secretary would perform outreach activities to inform
beneficiaries, providers, and suppliers of their appeal rights
and procedures, including the use of the toll-free telephone
number to respond to inquiries about the status of appeals. No
later than one year after enactment of these provisions, the
Secretary would promulgate regulations governing
reconsideration and hearing procedures which would include such
specific criteria and guidance to ensure adequately functional
and consistent reconsiderations and hearings. The Secretary
would provide each qualified independent contractor and ALJ (in
consultation with the Social Security Administration)
continuing education regarding Medicare or PRO policies so that
informed appeal decisions would be made.
The Secretary would monitor determinations made by all
qualified independent contractors and ALJs to ensure
consistency of their determinations by providing for the
continuing education, administration and oversight of qualified
independent contractors and ALJs through a central office in
HHS.
The Secretary would submit a report to Congress not less
frequently than every five years on beneficiary, provider, and
supplier satisfaction with the appeals process of
determinations, as well as the respective education and
training involved in the process. The report would include any
legislative and administrative recommendations the Secretary
determines appropriate.
In addition, the Secretary would submit an annual report to
Congress on the number of appeals for the previous year,
identifying issues that require administrative or legislative
action, and any recommendations of the Secretary on these
actions. The report would also include an analysis and causes
of inconsistent decisions of determinations by qualified
independent contractors.
Effective date
The Secretary would promulgate regulations governing
reconsideration and hearing procedures no later than one year
after enactment of these provisions.
Reason for change
The Committee held several hearings in the last two years
dealing with both private-sector patient protections and the
Medicare coverage and appeals procedures. These hearings
revealed that when compared to enrollees in private sector
health plans, Medicare beneficiaries have far fewer legal
protections when denied coverage for a requested benefit. Not
only do Medicare beneficiaries have to wait much longer periods
of time to have claims disputes resolved (e.g. Part B claims
take on average over 400 days to resolve), often times they
lack detailed information about Medicare's coverage policies,
and due to administrative delay and obfuscation, can be
effectively precluded from challenging disputed policies in
court.
The provisions in this section are intended to correct
these deficiencies, and ensure that all beneficiaries maintain
a legitimate right to challenge in a timely manner, before an
independent decisionmaker, any adverse coverage or claims
decisions that may impact their ability to obtain quality
health care. In addition, by combining the Part A and Part B
appeals processes, the Committee intends, along with the
changes in subtitle A, to streamline and improve the
administration of Medicare appeals.
Section 222. Provisions with Respect to Limitations of the Liability of
Beneficiaries
Current law
Under certain circumstances, Medicare will pay for services
that are not normally covered. In general, Medicare will pay
for these services if neither the beneficiary, nor the
provider, practitioner, or supplier knew, or could have
reasonably been expected to know, that the services were
excluded from coverage. A beneficiary will be liable if given
advance notice, in writing, the service may not be covered. The
written notice, called a notice of noncoverage for Part A
services and an advance beneficiary notice (ABN) for Part B
services, must have been given to the beneficiary (or someone
acting on the beneficiary's behalf) by a provider,
practitioner, or supplier furnishing the service and then
signed by the beneficiary or by the beneficiary's
representative.
Explanation of provision
These provisions would amend Section 1879 of the Social
Security Act to clarify situations and establish procedures
where beneficiaries who are furnished items or services that
are subsequently found not to be covered under Medicare will
and will not be liable for repayment.
Specifically, a Medicare beneficiary furnished a service or
item would not be liable for repayment if a claim for an item
or service is incorrectly paid by the Secretary except when
Medicare payments are made to the beneficiary and then only up
to the amount of the payment.
A Medicare beneficiary furnished a service or item would
not be liable for payment if: (1) the initial determination on
payment of a benefit had not been made by the Secretary to
establish whether Medicare payment can be made; or (2) the
claim for an item or service is improperly submitted by a
provider or supplier or is rejected by an entity under contract
to review or pay Medicare claims or by an M+C organization.
These limitations of beneficiary liability would not apply if
the beneficiary signs a waiver form, developed by the
Secretary, that clearly informs beneficiaries of their
limitations on liability, their rights to obtain an initial
determination of Medicare payment of the benefit, and their
rights to appeals The waiver form would also include the toll-
free number maintained by the Secretary to obtain any further
information
These waiver forms are the only manner in which
beneficiaries may waive their liability. This waiver is not
applicable in cases where a claim is denied for noncompliance
with Medicare or peer review regulations.
A Medicare beneficiary who is furnished services by a
provider would not be liable for payment prior to noon of the
first working day after the date the beneficiary receives
notice of determination of discharge and a notice of appeal
rights unless: (1) the provider furnishes the notice of
discharge and appeal rights to each Medicare beneficiary served
upon admission and furnishes a notice of the beneficiary's
limitation of liability and appeal rights upon notice of
determination of discharge; and (2) the beneficiary, prior to
discharge, appeals the determination to discharge no later than
noon of the first working day and the provider by close of that
business day provides the records necessary to review the
determination.
A Medicare beneficiary would not be liable for payment of
cost-sharing amounts of more than $50 for a furnished item or
service unless the beneficiary has been informed in advance of
the estimated cost-sharing amount of the item or service using
a standard form established by the Secretary.
Information regarding the beneficiary's payment liability
for furnished benefits and the toll-free number to access
information on beneficiary liability and appeal rights would be
required to be included on the explanation of Medicare
benefits.
Effective date
Date of enactment of the act.
Reason for change
This provision clarifies the circumstances in which
Medicare beneficiaries may and may not be held liable for the
costs of care not reimbursable under the Medicare program. The
use of a standardized waiver form is intended to better protect
the interests of Medicare beneficiaries, and help educate them
about their rights under the improved appeals process.
Section 223. Waivers of Liability for Cost Sharing Amounts
Current law
Providers, suppliers and practitioners who routinely waive
beneficiary coinsurance and deductible amounts may be held
liable under the Medicare and Medicaid anti-kickback statute. A
routine waiver of beneficiary cost-sharing amounts may result
in false claims as well as excessive utilization of items and
services paid for by Medicare. Providers, suppliers and
practitioners mayforgive the copayment in consideration of a
particular patient's financial hardship; this exception is not to be
used routinely, but should be used occasionally to address the
financial needs of a given patient.
Explanation of provision
This provision would revise the circumstances in which the
beneficiary's cost-sharing amounts can be waived if: (1) the
waiver is offered as part of a supplemental insurance policy or
retiree health plan; (2) the waiver is not part of any
advertisement or solicitation; (3) the person waives the
coinsurance and deductible after the beneficiary informs the
person that payment would pose a financial hardship; (4) the
person determines that the coinsurance and deductible would not
justify the costs of collection.
Effective date
Date of enactment of the act.
Reason for change
This provision clarifies and rationalizes the circumstances
in which providers of health services may lawfully elect to
forgo the collection or imposition of Medicare's scheduled
cost-sharing requirements. The changes included in this
provision will ensure that providers have greater discretion to
waive cost-sharing requirements if they would pose a financial
hardship to patients, and allow for the more efficient
operation of provider collection practices.
Section 224. Elimination of Motions by the Secretary on Decisions of
the Provider Reimbursement Review Board
Current law
Providers who submit required cost reports and are
dissatisfied with the resolution of issues that affect their
Medicare reimbursement may apply for hearing in front of the
Provider Reimbursement Review Board (PRRB). The amount in
controversy must be at least $10,000. At the hearing, providers
have the right to be represented by counsel, introduce
evidence, and examine witnesses. The PRRB has the power to
affirm, modify or reverse a final determination of a fiscal
intermediary with respect to a cost report. A PRRB decision
would be final unless the Secretary, within 60 days after the
date the provider is informed of this decision, acts to
reverse, affirm, or modify the decision.
Explanation of provision
The provision would eliminate the Secretary's authority to
reverse, affirm or modify PRRB decisions within 60 days after
the provider is notified of the decision.
Effective date
Date of enactment of the act.
Reason for change
This provision streamlines the appeals process for
providers seeking reimbursement under Part A of the Medicare
program. The change is consistent with the concepts of binding
external review and specified timeframes for appeals that are
also incorporated in the beneficiary appeals provisions in
Section 221 and comparable requirement imposed on private
sector health plans by other law.
Title III--Medicare+Choice Reforms; Preservation of Medicare Part B
Drug Benefit
Subtitle A--Medicare+Choice Reforms
Section 301. Increase in National Per Capita Medicare+Choice Growth
Percentage in 2001 and 2002
Current law
For each beneficiary enrolled, the Medicare+Choice (M+C)
plan receives the M+C payment rate applicable to the payment
area (typically a county) in which the enrollee resides,
adjusted for risk. This rate is based on a formula which gives
the county the highest of three different rates: (1) a floor,
or minimum payment rate; (2) a minimum update rate; and (3) a
blended rate. After each county's payment rate is determined,
the total projected spending for Medicare+Choice is compared to
a budget-neutral amount. If the projected spending is greater
than the budget-neutral amount, payment rates are reduced until
budget neutrality is met. This is accomplished by lowering
payments in counties with blended rates. However, no county
will receive less than the floor rate or the minimum update
rate, whichever is larger.
The floor payment rate was set at $401.61 per month for
aged beneficiaries in 2000. Each year the floor is increased by
an annual update factor, equal to adjusted growth in Medicare
fee-for-service expenditures per capita, minus 0.5 percentage
points in 2000 and 2001, and minus 0.3 percentage points in
2002.
The minimum update rate was set at the county rate in 1997,
increased by 2%. This rate increases 2% each year.
The blended rate represents an average of local and
national rates. The local rate is an area-specific capitation
rate, which is adjusted to remove the share of payments that
represent payments for graduate medical education (GME), with a
phase-out over 5 years. Beginning in 1998, local rates for
blending purposes had 20% of GME spending removed. The
reduction in GME payments is increased by 20% annually, until
all GME funds are removed from 2002 forward. The local rate is
the 1997 county rate, updated annually by the national per
capita M+C growth percentage. The national rate is the average
of local area-specific payment rates, weighted by the number of
Medicare beneficiaries in each county. For blending purposes,
the national rate is input-price adjusted to reflect
differences in the costs of providing medical care across
counties. The blended rate is computed as follows: 90% local/
10% national in 1998; 82% local/18% national in 1999; 74%
local/26% national in 2000; 66% local/34% national in 2001; 58%
local/42% national in 2002; 50% local/50% national from
2003onward.
Explanation of provision
The provision would remove the decrease in the annual
update factor, equal to adjusted growth in Medicare fee-for-
service expenditures per capita. The decrease would be changed
from minus 0.5 percentage points to minus 0.0 percentage points
in 2001, and from minus 0.3 percentage points to minus 0.0
percentage point in 2002.
Effective date
The provision would be effective beginning in January 2001.
Reason for change
This provision will remove the reductions from the national
per capita growth rate in 2001 and 2002, which are scheduled to
be minus 0.5 percentage point and 0.3 percentage point
respectively. The Committee notes that the reductions are
inappropriate at this time, given the current state of the
Medicare+Choice program.
Section 302. Permanently Removing Application of Budget Neutrality
Beginning in 2002
Current law
After each county's payment rate is determined under the
formula, the total projected spending for Medicare+Choice is
compared to a budget-neutral amount. If the projected spending
is greater than the budget-neutral amount, payment rates are
reduced until budget neutrality is met. This is accomplished by
lowering payments in counties with blended rates. However, no
county receives less than the floor rate or the minimum update
rate, whichever is larger.
Explanation of provision
The provision would remove budget neutrality beginning in
2002.
Effective date
The provision would become effective beginning with payment
rates for 2002.
Reason for change
This provision permanently removes the application of
budget neutrality in the calculation of the Medicare+Choice
starting in 2002. The Committee agrees that ``funding the
blended rates'' will increase the rates for many payment areas.
Section 303. Increasing Minimum Payment Amount
Current law
For each beneficiary enrolled, the M+C plan receives the
M+C payment rate applicable to the payment area (typically a
county) in which the enrollee resides, adjusted for risk. This
rate is based on a formula which gives the county the highest
of three different rates: (1) a floor, or minimum payment rate;
(2) a minimum update rate; and (3) a blended rate.
Explanation of provision
The floor, or minimum payment rate, would be raised in 2002
to $450 for aged beneficiaries, with proportional increases for
disabled beneficiaries and those with end-stage renal disease.
After 2002, the minimum payment rate would be allowed to
increase at the rate of Medicare fee-for-service per capita
growth.
Effective date
The provision would be effective in 2002.
Reason for change
This provision increases the minimum payment amount to $450
in 2002, and provides for an update at the rate of fee-for-
service per capita growth thereafter. The Committee recognizes
that changes in payment policy need to occur to attract
Medicare+Choice plans to rural areas. Raising the minimum
payment amount is one change that can accomplish this
objective.
Section 304. Allowing Movement to 50:50 Percent Blend in 2002
Current law
The blended rate represents an average of local and
national rates. The local rate is an area-specific capitation
rate, which is adjusted to remove the share of payments that
represent payments for graduate medical education (GME), with a
phase-out over 5 years, ending in 2002. The national rate is
the average of local area-specific payment rates, weighted by
the number of Medicare beneficiaries ineach county. For
blending purposes, the national rate is input-price adjusted to reflect
differences in the costs of providing medical care across counties. The
blended rate is computed as follows: 90% local/10% national in 1998;
82% local/18% national in 1999; 74% local/26% national in 2000; 66%
local/34% national in 2001; 58% local/42% national in 2002; and 50%
local/50% national from 2003 onward.
Explanation of provision
The provision would allow plans to choose to be paid a
blend of 50 percent local costs and 50 percent national costs
in 2002 instead of the 58 percent local/42 percent national
blend scheduled to be in effect in that year. For 2003, the
blend would be 50 percent local/50 percent national.
Effective date
The provision would be effective in 2002.
Reason for change
This provision would allow health plans to move more
quickly to a blended rate of 50 percent local area costs and 50
percent national costs in 2002, instead of in 2003 as currently
scheduled. Current law provides for a blend of 58 percent local
costs and 42 percent national costs in 2002. The Committee
believes that health plans, particularly those serving local
areas with relatively low costs, should have the opportunity to
benefit one year sooner from a rate based on a higher
percentage of national costs.
Section 305. Increased Update for Payment Areas with Only One or No
Medicare+Choice Contracts
Current law
For each beneficiary enrolled, the M+C plan receives the
M+C payment rate applicable to the payment area (typically a
county) in which the enrollee resides, adjusted for risk. This
rate is based on a formula which gives the county the highest
of three different rates: (1) a floor, or minimum payment rate;
(2) a minimum update rate; and (3) a blended rate. The minimum
update rate was set at the county rate in 1997 increased by 2%.
This rate increases 2% each year.
The Balanced Budget Refinement Act of 1999 (BBRA)
encouraged new M+C plans to enter counties that would otherwise
not have a private plan participating. The first plan to enter
a previously unserved county receives a 5% added payment during
its first year and a 3% added payment during its second year,
applied during the 2-year period beginning January 1, 2000.
Explanation of provision
The provision would allow plans to apply for a higher
update to their rates if there are one or no contracts in the
county. Instead of the 2% minimum update, plans would receive a
2.5% update in 2002 through 2005.
Effective date
This provision would become effective beginning in 2002.
Reason for change
This provision allows Medicare+Choice plans to receive a
2.5 percent update in payment areas where there is only one or
no contract, compared to the 2 percent minimum update they
normally would receive. The Committee believes strongly in
offering many choices to seniors and views this change as one
way to encourage health plans to participate in the program.
Section 306. Permitting Higher Negotiated Rates in Certain Payment
Areas Below National Average
Current law
Plans are paid an administered monthly price, called the
Medicare+Choice payment rate, for each enrollee. It is
calculated according to a formula established in statute and
updated by law.
Explanation of provision
The provision would introduce an element of negotiated
pricing into the rates paid to plans by allowing them to
negotiate their annual update with the Medicare Benefits
Administration (MBA), the new agency that administers the M+C
program. Only those plans with rates below the national
average, the USPCC (United States Per Capita Cost), would be
allowed to negotiate their updates.
Plans would negotiate with the MBA by presenting data on
costs, benefits and utilization to the agency. A plan would be
required to submit its current audited adjusted community rates
(ACRs) to the new agency. Starting in 2004, plans could
negotiate updates up to a ceiling of the growth rate of the
private insurance market, net of the increases in prescription
drug costs and adjusted for the characteristics of the Medicare
population, as calculated by the Medicare Benefits
Administration. However, no plan would be permitted to
negotiate a rate that exceeds the USPCC.
Effective date
The provision would become effective in 2004.
Reason for change
This provision permits health plans to negotiate inflation
updates to their rates with the Medicare Benefits
Administration beginning in 2004. Health plans will present
current, audited data to the Administrator to prove that their
costs warrant an increase higher than the mandated update. The
Committee believes that this is a first step toward introducing
negotiated pricing and increasing competition in the Medicare
program.
Section 307. Ten-Year Phase-In of Risk Adjustment Based on Data from
All Settings
Current law
M+C payments to plans are currently adjusted using a blend
of demographically-based and health status-based adjusters.
Prior to 2000, payments were adjusted solely based on
demographic characteristics of plan enrollees. These
demographic factors included age, gender, coverage by Medicaid,
institutionalized status, and working status.
As required under the Balanced Budget Act of 1997, the
Secretary began using a health status-based risk adjustment
system in 2000. The Secretary chose the principal inpatient
diagnostic cost groups (PIP-DCG) method, which supplements
demographic factors with health status factors. This
prospective model uses diagnoses in a base year to adjust
payment for a future payment year. Payment is determined by
each Medicare+Choice enrollee's risk factor, which is based on
inpatient data using the PIP-DCG adjusters. These adjusters
predict incremental costs, above the average for the
demographic group, which are expected to be incurred in the
year after hospitalization.
The BBRA required a phase-in of the new risk adjustment
methodology such that M+C payments would reflect a blend of
payments under the older demographic adjustment procedure and
the new PIP-DCG procedure. The BBRA held the risk adjuster at
90% demographic/10% PIP-DCG blend for 2000 and 2001. In 2002,
not more than 20% of the risk adjuster may be based on the
health status method.
The BBRA requires the Medicare Payment Advisory Commission
(MedPAC) to conduct a study that evaluates the risk adjustment
method and report findings by December 2000. The Secretary is
required to study and report on how to reduce the costs and
burdens of M+C plans' reporting of encounter data, due January
1, 2001. The Secretary has proposed moving to comprehensive
risk adjustment, which would take into account a wider range of
measures for health status, not just hospitalization, by 2004.
Explanation of provision
The provision would phase in a new risk adjustment method
based on data from all settings gradually over ten years, in
one-tenth increments, starting in 2004.
Effective date
The transition would begin in 2004.
Reason for change
This provision provides for a gradual phase-in of risk
adjustment over a ten-year period, once the methodology is
based on data from all settings. The Committee recognizes that
risk-adjusted payments will likely have dramatic effects on
some health plans, and notes that sweeping payment policy
changes in the Medicare program, such as the hospital inpatient
prospective payment system for capital-related costs, have been
implemented with very long transition periods so that entities
can adjust gradually.
Subtitle B--Preservation of Medicare Coverage of Drugs and Biologicals
Section 311. Preservation of Coverage of Drugs and Biologicals Under
Part B of the Medicare Program
Current law
Section 1862(s) of the Social Security Act defines covered
``medical and other health services'' for purposes of coverage
under Medicare Part B. The definition includes:
(2)(A) services and supplies (including drugs and
biologicals which cannot, as determined in accordance
with regulations, be self-administered) furnished as
incident to a physician's professional service, of
kinds which are commonly furnished in physicians'
offices and are commonly either rendered without charge
or included in the physicians' bills * * *
The phrase ``cannot be self-administered'' is defined in
the Medicare Carrier's Manual as follows:
Whether a drug or biological is of a type which
cannot be self-administered is based on the usual
method of administration of the form of that drug or
biological as furnished bythe physician. Thus, where a
physician gives a patient pills or other oral medication, these are
excluded from coverage since the form of the drug given to the patient
is usually self-administered. Similarly, if a physician gives a patient
an injection which is usually self-injected (e.g., insulin or
calcitonin), this drug is excluded from coverage, unless administered
to the patient in an emergency situation (e.g., diabetic coma). Where,
however, a physician injects a drug which is not usually self-injected,
this drug is not subject to the self-administrable drug exclusion
(regardless of whether the drug may also be available in oral form)
since it is not self-administrable in the form in which it was
furnished to the patient.
Individual Medicare carriers have reportedly applied
different policies when considering whether a drug or
biological can or cannot be self-administered. Some carriers
have based the determination on the typical means of
administration while others have assessed the individual
patient's ability to administer the drug.
On August 13, 1997, HCFA issued a memorandum to Medicare
carriers which was intended to clarify program policy. The
memorandum stated that the inability to self-administer is to
be based on the typical means of administration of the drug,
not on the individual patient's ability to administer the drug.
The memorandum stated that: ``The individual patient's mental
or physical ability to administer any drug is not a
consideration for this purpose.'' The memorandum went on to
note that certain drugs that are generally self-administered
may not be self-administered under certain limited
circumstances such as when the patient first learns how to
administer the drug. Coverage in these limited situations is at
the discretion of the Medicare carrier; i.e. the carrier
determines in these instances whether it is medically necessary
for the physician or staff to administer the drug. The carrier
could not consider the patient's condition such as a mental or
physical disability.
As a result of this memorandum, certain patients (for
example, patients with multiple sclerosis) no longer had
Medicare coverage for certain drugs. However, implementation of
this policy directive was halted for FY2000 by a provision in
the Consolidated Appropriations Act. The provision prohibits
the use of any funds to carry out the August 13, 1997
transmittal or to promulgate any regulation or other
transmittal or policy directive that has the effect of imposing
(or clarifying the imposition of) a restriction on the coverage
of injectable drugs beyond those applied on the day before
issuance of the transmittal. HCFA issued a Program Memorandum
in April 2000 which suspended application of the August 13,
1997 memorandum. It noted that each carrier or intermediary
must establish its own policies individually and could not
establish model policies as a group.
Explanation of provision
Section 311 would replace the current phrase in Section
1862(a)(2) relating to self-administered drugs and biologicals.
The new language would permit coverage of ``injectable and
infusable drugs and biologicals which are not usually
administered by the patient.''
Effective date
This provision applies to drugs and biologicals
administered on or after October 1, 2000.
Reason for change
This provision ensures that Medicare beneficiaries will
continue to be able to obtain the full range of medications
covered by Part B prior to HCFA's issuance of its revised
carrier memorandum of August 17, 1998.
Section 312. GAO Report on Part B Payment for Drugs and Biologicals and
Related Services
Current law
Under current law, Medicare Part B pays for some
medications in certain circumstances. Currently, those who
supply these drugs are reimbursed the average wholesale price
of the drug minus 5%, as specified under Section 1842(o).
Explanation of provision
The provision would require the General Accounting Office
to conduct a study on the extent to which Medicare payment
methodology overpays for the cost of drugs and biologicals
currently covered under Medicare Part B compared to the average
acquisition cost paid by other suppliers. The study would also
address: (1) the consequences of changing current methodology
to one based on average acquisition of costs on the delivery of
oncology, chemotherapy, dialysis, and vaccine services, on the
administration of drugs in physician offices, and on the effect
of drug therapy delivery in the hospital outpatient setting;
(2) other Part B payment methodologies intended to reimburse
physician and supplier costs in handling, storing, and
administering these drugs and biologicals; and (3) issues on
the implementation of an average acquisition cost methodology.
Effective date
The report would be submitted 6 months after the date of
enactment.
Reason for change
In the past, the General Accounting Office (GAO) and the
Office of Inspector General in the Department of Health and
Human Services have criticized the current methodology for the
Part B drug and biological reimbursement and reported that
Medicare has overpaid for drugs and biologicals covered under
Part B. The Committee finds these reports troubling and is
intent on devising improvements in this area so as to prevent
the overpayment of covered drugs and biologicals in the future.
The intent of this section is to gather more information on the
average actual acquisition costs incurred by those who
routinely supply covered drugs and biologicals to Medicare
beneficiaries, and to examine the related quality and access to
care issues that may arise, especially with respect to oncology
care, if the current payment methodology for Part B drugs and
biologicals were changed. The report would be done along with a
pending GAO report, authorized under Public Law 106-113, to
study the adequacy of practice expense payments for providers
of drug and biological services.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statements are made
concerning the votes of the Committee on Ways and Means in its
consideration of the bill, H.R. 4680.
motion to report the bill
The bill, H.R. 4680, as amended, was ordered favorably
reported by a rollcall vote of 23 yeas to 14 nays (with a
quorum being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Archer..................... X ........ ......... Mr. Rangel....... ........ ........ .........
Mr. Crane...................... X ........ ......... Mr. Stark........ ........ X .........
Mr. Thomas..................... X ........ ......... Mr. Matsui....... ........ X .........
Mr. Shaw....................... X ........ ......... Mr. Coyne........ ........ X .........
Mrs. Johnson................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Houghton................... X ........ ......... Mr. Cardin....... ........ X .........
Mr. Herger..................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. McCrery.................... X ........ ......... Mr. Kleczka...... ........ X .........
Mr. Camp....................... X ........ ......... Mr. Lewis (GA)... ........ X .........
Mr. Ramstad.................... X ........ ......... Mr. Neal......... ........ ........ .........
Mr. Nussle..................... X ........ ......... Mr. McNulty...... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Jefferson.... ........ X .........
Ms. Dunn....................... X ........ ......... Mr. Tanner....... ........ X .........
Mr. Collins.................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. Portman.................... X ........ ......... Mrs. Thurman..... ........ X .........
Mr. English.................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Watkins.................... X ........ .........
Mr. Hayworth................... X ........ .........
Mr. Weller..................... X ........ .........
Mr. Hulshof.................... X ........ .........
Mr. McInnis.................... X ........ .........
Mr. Lewis (KY)................. X ........ .........
Mr. Foley...................... X ........ .........
----------------------------------------------------------------------------------------------------------------
votes on amendments
Rollcall votes were conducted on the following amendments
to the Thomas amendment in the nature of a substitute.
An amendment by Mr. Cardin, to allow the Health Care
Financing Administration to be a Prescription Drug plan (PDP)
sponsor for a nationwide prescription drug plan, was defeated
by a rollcall vote of 12 yeas to 22 nays. The vote was as
follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Archer..................... ........ X ......... Mr. Rangel....... ........ ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Thomas..................... ........ X ......... Mr. Matsui....... X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Coyne........ X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Lewis (GA)... ........ ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. Jefferson.... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. English.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Watkins.................... ........ X .........
Mr. Hayworth................... ........ X .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mrs. Thurman and Mr. Doggett, to give legal
authority and require Medicare prescription drug plans to
obtain prescription drugs for their enrollees and make them
available at the lower of two federally-negotiated prices, was
defeated by a rollcall vote of 13 yeas to 21 nays. The vote was
as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Archer..................... ........ X ......... Mr. Rangel....... ........ ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Thomas..................... ........ X ......... Mr. Matsui....... ........ ........ .........
Mr. Shaw....................... ........ X ......... Mr. Coyne........ ........ ........ .........
Mrs. Johnson................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... ........ ........ ......... Mr. Jefferson.... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. English.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Watkins.................... ........ X .........
Mr. Hayworth................... ........ X .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. McDermott and Mr. Lewis of Georgia, to
require the Administrator of the Medicare Benefits
Administration to determine whether an individual is eligible
for the low-income subsidy, was defeated by a rollcall vote of
14 yeas to 23 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Archer..................... ........ X ......... Mr. Rangel....... ........ ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Thomas..................... ........ X ......... Mr. Matsui....... X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Coyne........ X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Neal......... ........ ........ .........
Mr. Nussle..................... ........ X ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. Jefferson.... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. English.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Watkins.................... ........ X .........
Mr. Hayworth................... ........ X .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Tanner, to modify how PDP sponsors
permit pharmacy participation in their plan, was defeated by a
rollcall vote of 15 yeas to 22 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Archer..................... ........ X ......... Mr. Rangel....... ........ ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Thomas..................... ........ X ......... Mr. Matsui....... X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Coyne........ X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Neal......... ........ ........ .........
Mr. Nussle..................... ........ X ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. Jefferson.... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Collins.................... X ........ ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. English.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Watkins.................... ........ X .........
Mr. Hayworth................... ........ X .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
----------------------------------------------------------------------------------------------------------------
A substitute amendment by Mr. Stark was defeated by a
rollcall vote of 14 yeas to 23 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Archer..................... ........ X ......... Mr. Rangel....... ........ ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Thomas..................... ........ X ......... Mr. Matsui....... X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Coyne........ X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Neal......... ........ ........ .........
Mr. Nussle..................... ........ X ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. Jefferson.... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. English.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Watkins.................... ........ X .........
Mr. Hayworth................... ........ X .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made:
The Committee agrees with the estimate prepared by the
Congressional Budget Office (CBO) which is included below. The
Committee notes that the CBO has provided a revised estimate
which takes into account modifications that will be made to the
bill by an en bloc amendment to be offered by the Chairman of
the Committee to be incorporated upon adoption of the rule
providing for floor consideration. The Committee notes that a
technical change to the disease management demonstration
project contained in Section 105 was made to limit the cost of
the provision and keep the bill within the amount provided for
in the budget resolution.
B. Statement Regarding New Budget Authority and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
Committee bill would result in increased federal direct
spending over the five-year period and a negligible indirect
effect on revenues over the five-year period.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives requiring a cost estimate
prepared by the Congressional Budget Office (CBO), the
following report prepared by CBO is provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 27, 2000.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the attached table of the estimated effects on
spending and revenues of H.R. 4680, the Medicare Rx 2000 Act,
as ordered reported by the committee on Ways and Means on June
21, 2000.
CBO estimates H.R. 4680, as ordered reported, would
increase direct spending by $0.4 billion in 2001, by $40.7
billion over the 2001-2005 period, and by $159.9 billion over
the 2001-2010 period. The increase in budget authority for
direct spending would be equal to the increase in outlays.
We also estimate that the bill would reduce revenues from
income and payroll taxes by $0.2 billion during the 2001-2010
period. Social Security payroll taxes, which are off-budget,
account for $0.1 billion of that amount. Subject to
Appropriation of the necessary amounts, CBO estimates the bill
would increase discretionary spending by $0.2 billion in 2001
and by $6.6 billion over the 2001-2010 period.
The bill contains a number of preemptions of state law that
would be intergovernmental mandates as defined in the Unfunded
Mandates Reform Act (UMBRA). CBO cannot estimate the costs of a
preemption of state taxing authority because of uncertainties
about market changes. The other preemptions in the bill would
impose no costs on state, local, or tribal governments.
The bill contains a private-sector mandate on medigap
insurers that would bar them from providing coverage of
prescription drug expenses for certain individuals, but CBO
estimates that its cost would not exceed the threshold
specified in UMRA ($109 million in 2000, adjusted annually for
inflation).
I hope this information is helpful to you. The CBO staff
contact is Tom Bradley.
Sincerely,
Barry B. Anderson,
(For Dan L. Crippen, Director).
Attachments.
ESTIMATED BUDGETARY EFFECT OF THE MEDICARE Rx 2000 ACT--AS ORDERED REPORTED ON JUNE 21, 2000
----------------------------------------------------------------------------------------------------------------
By fiscal year, in billions of dollars--
-------------------------------------------------------------------------------
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Medicare outlays:
Payments to qualifying drug 0 0 6.2 7.7 8.6 9.5 10.5 11.5 12.7 14.1
plans......................
Disease management project.. 0 0 0.1 0.3 0.6 0.1 -0.1 0 0 0
Coverage and appeals........ 0.1 0.1 0.1 0.2 0.2 0.3 0.4 0.5 0.6 0.7
Medicare+Choice payments.... 0.2 1.2 0.2 0.9 1.1 1.1 1.5 1.8 2.2 2.6
SMI coverage of drugs and 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2
biologicals................
Low-income subsidy for 0 0 5.0 7.9 9.6 10.9 12.1 13.4 14.9 16.5
premium and cost-sharing
assistance.................
SMI transfer to Medicaid for 0 0 (\1\) 0.1 0.1 0.2 0.2 0.3 0.3 0.3
subsidy administration.....
-------------------------------------------------------------------------------
Subtotal.................. 0.4 1.5 11.9 17.1 20.3 22.2 24.7 27.6 30.8 34.3
Medicaid outlays:
Change to current-law drug 0 0 -2.6 -3.7 -4.1 -4.6 -5.1 -5.7 -6.3 -7.0
spending...................
Part A/B benefits and other 0 0 0.3 0.7 1.2 1.4 1.5 1.6 1.7 1.9
Medicaid costs.............
Reductions in payments to 0 0 -0.6 -1.3 -1.2 -0.8 -0.3 0 0 0
states.....................
Administration (net of SMI 0 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
transfer)..................
-------------------------------------------------------------------------------
Subtotal.................. 0 0.1 -2.7 -4.1 -3.9 -3.8 -3.7 -3.9 -4.4 -4.9
Effect of higher drug prices on
outlays by federal programs:
Medicaid.................... 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) 0.1 0.1
FEHB (for annuitants, on- 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
budget)....................
-------------------------------------------------------------------------------
Subtotal, on-budget....... 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) 0.1 0.1 0.1
===============================================================================
Total, on-budget outlays.. 0.4 1.7 9.2 13.0 16.4 18.5 21.0 23.8 26.4 29.4
Off-budget outlays (FEHB for 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
postal workers and annuitants).
CHANGES IN REVENUES
Income and Medicare payroll 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
taxes (on-budget)..............
Social Security payroll taxes 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
(off-budget)...................
-------------------------------------------------------------------------------
Total..................... 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) -0.1
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Administration of drug benefit 0.2 0.4 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.7
and related activities.........
Administration of coverage/ (\1\) 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2
appeals provision..............
Effect of higher drug prices on 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
outlays for FEHB (for active
workers) and other federal
programs.......................
-------------------------------------------------------------------------------
Total..................... 0.2 0.4 0.6 0.6 0.7 0.7 0.7 0.8 0.9 0.9
----------------------------------------------------------------------------------------------------------------
\1\ Costs or savings of less than $50 million.
Notes:--SMI = Supplementary Medical Insurance (Part B of Medicare); FEHB = Federal Employees Health Benefits.
Source: Congressional Budget office.
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 27, 2000.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the attached table of the estimated effects on
spending and revenues of H.R. 4680, the Medicare Rx 2000 Act,
as ordered reported by the Committee on Ways and Means on June
21, 2000, and modified by a Manager's Amendment provided on
June 26, 2000.
The Manager's Amendment permits the Medicare Benefits
Administrator to add coverage of drugs otherwise excluded, and
it caps participation in the Disease Management Project at
30,000. The amendment also contains several technical
corrections.
CBO estimates H.R. 4680, as amended, would increase direct
spending by $0.4 billion in 2001, by $40.0 billion over the
2001-2005 period, and by $159 billion over the 2001-2010
period. The increase in budget authority for direct spending
would be equal to the increase in outlays.
We also estimate that the bill would reduce revenues from
income and payroll taxes by $0.2 billion during the 2001-2010
period. Social Security payroll taxes, which are off-budget,
account for $0.1 billion of that amount. Subject to
appropriation of the necessary amounts, CBO estimates the bill
would increase discretionary spending by $0.2 billion in 2001
and by $6.6 billion over the 2001-2010 period.
CBO is preparing a detailed cost estimate of the bill,
which we expect to deliver later today.
I hope this information is helpful to you. The CBO staff
contact is Tom Bradley.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
ESTIMATED BUDGETARY EFFECT OF THE MEDICARE Rx 2000 ACT
----------------------------------------------------------------------------------------------------------------
By fiscal year, in billions of dollars--
-------------------------------------------------------------------------------
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Medicare outlays:
Payments to qualifying drug 0 0 6.2 7.7 8.6 9.5 10.5 11.5 12.7 14.1
plans......................
Disease management project.. 0 0 0.1 0.1 0.1 (\1\) (\1\) 0 0 0
Coverage and appeals........ 0.1 0.1 0.1 0.2 0.2 0.3 0.4 0.5 0.6 0.7
Medicare+Choice payments.... 0.2 1.2 0.2 0.9 1.1 1.1 1.5 1.8 2.2 2.6
SMI coverage of drugs and 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2
biologicals................
Low-income subsidy for 0 0 5.0 7.9 9.6 10.9 12.1 13.4 14.9 16.5
premium and cost-sharing
assistance.................
SMI transfer to Medicaid for 0 0 a 0.1 0.1 0.2 0.2 0.3 0.3 0.3
subsidy administration.....
-------------------------------------------------------------------------------
Subtotal.................. 0.4 1.5 11.9 16.9 19.9 22.1 24.7 27.6 30.8 34.3
Medicaid outlays:
Change to current-law drug 0 0 -2.6 -3.7 -4.1 -4.6 -5.1 -5.7 -6.3 -7.0
spending...................
Part A/B benefits and other 0 0 0.3 0.7 1.2 1.4 1.5 1.6 1.7 1.9
Medicaid costs.............
Reductions in payments to 0 0 -0.6 -1.3 -1.2 -0.8 -0.3 0 0 0
states.....................
Administration (net of SMI 0 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
transfer)..................
-------------------------------------------------------------------------------
Subtotal.................. 0 0.1 -2.7 -4.1 -3.9 -3.8 -3.7 -3.9 -4.4 -4.9
Effect of higher drug prices on
outlays by federal programs:
Medicaid.................... 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) 0.1 0.1
FEHB (for annuitants, on- 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
budget)....................
-------------------------------------------------------------------------------
Subtotal, on-budget....... 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) 0.1 0.1 0.1
===============================================================================
Total, on-budget outlays.. 0.4 1.7 9.2 12.8 16.0 18.4 21.1 23.8 26.4 29.4
Off-budget outlays (FEHB for 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
postal workers and annuitants).
CHANGES IN REVENUES
Income and Medicare payroll 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
taxes (on-budget)..............
Social Security payroll taxes 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
(off-budget)...................
-------------------------------------------------------------------------------
Total..................... 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) -0.1
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Administration of drug benefit 0.2 0.4 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.7
and related activities.........
Administration of coverage/ (\1\) 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2
appeals provision..............
Effect of higher drug prices on 0 0 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\)
outlays for FEHB (for active
workers) & other federal
programs.......................
-------------------------------------------------------------------------------
Total..................... 0.2 0.4 0.6 0.6 0.7 0.7 0.7 0.8 0.9 0.9
----------------------------------------------------------------------------------------------------------------
\1\ Costs or savings of less than $50 million.
Notes.--SMI=Supplementary Medical Insurance (Part B of Medicare); FEHB=Federal Employees Health Benefits.
Source: Congressional Budget Office.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
need for this legislation was confirmed by the oversight
hearings of the Committee and its Subcommittee on Health. The
hearings were as follows:
The Subcommittee on Health held a hearing on February 15,
2000 examining the implications of different proposals aimed at
helping seniors gain more affordable access to prescription
drugs. Testimony at the hearing was presented by the General
Accounting Office and health care experts and advocates.
On May 11, 2000, the Subcommittee held a hearing to examine
the Clinton Administration's prescription drug proposal and its
effect on beneficiary care. Testimony at the hearing was
provided by the Health Care Financing Administration, the
Congressional Budget Office, and the General Accounting Office.
Finally, on June 13, 2000, the Committee held a hearing on
legislation to cover prescription drugs under Medicare and the
related effects on the financial outlook of the Medicare
program. Testimony at the hearing was received from Members of
Congress and other parties pertinent to the development of
legislation.
B. Summary of Findings and Recommendations of the Government Reform
Committee
In compliance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
oversight findings or recommendations have been submitted to
the Committee on Government Reform regarding the subject of the
bill.
C. Constitutional Authority Statement
In compliance with clause 3(d)(1) of rule XIII of the Rules
of the House of Representatives, relating to Constitutional
Authority, the Committee states that the Committee's action in
reporting the bill is derived from Article I of the
Constitution, Section 8 (``The Congress shall have power to lay
and collect taxes, duties, imposts and excises, to pay the
debts and to provide for * * * the general welfare of the
United States * * *'').
VI. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SOCIAL SECURITY ACT
* * * * * * *
TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE
SIMPLIFICATION
* * * * * * *
SEC. 1108. ADDITIONAL GRANTS TO PUERTO RICO, THE VIRGIN ISLANDS, GUAM,
AND AMERICAN SAMOA; LIMITATION ON TOTAL PAYMENTS.
(a) * * *
* * * * * * *
(f) Subject to subsection (g) and section 1935(e)(1)(B), the
total amount certified by the Secretary under title XIX with
respect to a fiscal year for payment to--
(1) * * *
* * * * * * *
civil monetary penalties
Sec. 1128A. (a) * * *
* * * * * * *
(i) For the purposes of this section:
(1) The term ``State agency'' means the agency
established or designated to administer or supervise
the administration of the State plan under title XIX of
this Act or designated to administer the State's
program under title V or title XX of this Act.
(6) The term ``remuneration'' includes the waiver of
coinsurance and deductible amounts (or any part
thereof), and transfers of items or services for free
or for other than fair market value. The term
``remuneration'' does not include--
(A) the waiver of coinsurance and deductible
amounts by a person, if--
[(i) the waiver is not offered as
part of any advertisement or
solicitation;
[(ii) the person does not routinely
waive coinsurance or deductible
amounts; and
[(iii) the person--
[(I) waives the coinsurance
and deductible amounts after
determining in good faith that
the individual is in financial
need; or
[(II) fails to collect
coinsurance or deductible
amounts after making reasonable
collection efforts;]
(i) the waiver is offered as a part
of a supplemental insurance policy or
retiree health plan;
(ii) the waiver is not offered as
part of any advertisement or
solicitation, other than in conjunction
with a policy or plan described in
clause (i);
(iii) the person waives the
coinsurance and deductible amount after
the beneficiary informs the person that
payment of the coinsurance or
deductible amount would pose a
financial hardship for the individual;
or
(iv) the person determines that the
coinsurance and deductible amount would
not justify the costs of collection.
* * * * * * *
criminal penalties for acts involving federal health care programs
Sec. 1128B. (a) * * *
(b)(1) Whoever knowingly and willfully solicits or receives
any remuneration (including any kickback, bribe, or rebate)
directly or indirectly, overtly or covertly, in cash or in
kind--
(A) * * *
* * * * * * *
(4) In this section, the term ``remuneration''
includes the meaning given such term in section
1128A(i)(6).
* * * * * * *
TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED
* * * * * * *
explanation of medicare benefits
Sec. 1806. (a) In General.--The Secretary shall furnish to
each individual for whom payment has been made under this title
(or would be made without regard to any deductible) a statement
which--
(1) lists the item or service for which payment has
been made and the amount of such payment for each item
or service; [and]
(2) lists with respect to each item or service
furnished the amount of the individual's liability for
payment;
[(2)] (3) includes a notice of the individual's right
to request an itemized statement (as provided in
subsection (b))[.]; and
(4) includes the toll-free telephone number (1-800-
MEDICAR(E)) (1-800-633-4227) for information and
questions concerning the statement, liability of the
individual for payment, and appeal rights.
* * * * * * *
medicare benefits administration
Sec. 1807. (a) Establishment.--There is established within
the Department of Health and Human Services an agency to be
known as the Medicare Benefits Administration.
(b) Administrator and Deputy Administrator.--
(1) Administrator.--
(A) In general.--The Medicare Benefits
Administration shall be headed by an
Administrator (in this section referred to as
the ``Administrator'') who shall be appointed
by the President, by and with the advice and
consent of the Senate. The Administrator shall
be in direct line of authority to the
Secretary.
(B) Compensation.--The Administrator shall be
paid at the rate of basic pay payable for level
III of the Executive Schedule under section
5314 of title 5, United States Code.
(C) Term of office.--The Administrator shall
be appointed for a term of 5 years. In any case
in which a successor does not take office at
the end of an Administrator's term of office,
that Administrator may continue in office until
the entry upon office of such a successor. An
Administrator appointed to a term of office
after the commencement of such term may serve
under such appointment only for the remainder
of such term.
(D) General authority.--The Administrator
shall be responsible for the exercise of all
powers and the discharge of all duties of the
Administration, and shall have authority and
control over all personnel and activities
thereof.
(E) Rulemaking authority.--The Administrator
may prescribe such rules and regulations as the
Administrator determines necessary or
appropriate to carry out the functions of the
Administration. The regulations prescribed by
the Administrator shall be subject to the
rulemaking procedures established under section
553 of title 5, United States Code.
(F) Authority to establish organizational
units.--The Administrator may establish, alter,
consolidate, or discontinue such organizational
units or components within the Administration
as the Administrator considers necessary or
appropriate, except that this subparagraph
shall not apply with respect to any unit,
component, or provision provided for by this
section.
(G) Authority to delegate.--The Administrator
may assign duties, and delegate, or authorize
successive redelegations of, authority to act
and to render decisions, to such officers and
employees of the Administration as the
Administrator may find necessary. Within the
limitations of such delegations, redelegations,
or assignments, all official acts and decisions
of such officers and employees shall have the
same force and effect as though performed or
rendered by the Administrator.
(2) Deputy administrator.--
(A) In general.--There shall be a Deputy
Administrator of the Medicare Benefits
Administration who shall be appointed by the
President, by and with the advice and consent
of the Senate.
(B) Compensation.--The Deputy Administrator
shall be paid at the rate of basic pay payable
for level IV of the Executive Schedule under
section 5315 of title 5, United States Code.
(C) Term of office.--The Deputy Administrator
shall be appointed for a term of 5 years. In
any case in which a successor does not take
office at the end of a Deputy Administrator's
term of office, such Deputy Administrator may
continue in office until the entry upon office
of such a successor. A Deputy Administrator
appointed to a term of office after the
commencement of such term may serve under such
appointment only for the remainder of such
term.
(D) Duties.--The Deputy Administrator shall
perform such duties and exercise such powers as
the Administrator shall from time to time
assign or delegate. The Deputy Administrator
shall be Acting Administrator of the
Administration during the absence or disability
of the Administrator and, unless the President
designates another officer of the Government as
Acting Administrator, in the event of a vacancy
in the office of the Administrator.
(3) Secretarial coordination of program
administration.--The Secretary shall ensure appropriate
coordination between the Administrator and the
Administrator of the Health Care Financing
Administration in carrying out the programs under this
title.
(c) Duties; Administrative Provisions.--
(1) Duties.--
(A) General duties.--The Administrator shall
carry out parts C and D, including--
(i) negotiating, entering into, and
enforcing, contracts with plans for the
offering of Medicare+Choice plans under
part C, including the offering of
qualified prescription drug coverage
under such plans; and
(ii) negotiating, entering into, and
enforcing, contracts with PDP sponsors
for the offering of prescription drug
plans under part D.
(B) Other duties.--The Administrator shall
carry out any duty provided for under part C or
part D, including demonstration projects
carried out in part or in whole under such
parts, the programs of all-inclusive care for
the elderly (PACE program) under section 1894,
the social health maintenance organization
(SHMO) demonstration projects (referred to in
section 4104(c) of the Balanced Budget Act of
1997), and through a Medicare+Choice project
that demonstrates the application of capitation
payment rates for frail elderly medicare
beneficiaries through the use of a
interdisciplinary team and through the
provision of primary care services to such
beneficiaries by means of such a team at the
nursing facility involved).
(C) Noninterference.--In carrying out its
duties with respect to the provision of
qualified prescription drug coverage to
beneficiaries under this title, the Administrator
may not--
(i) require a particular formulary or
institute a price structure for the
reimbursement of covered outpatient
drugs;
(ii) interfere in any way with
negotiations between PDP sponsors and
Medicare+Choice organizations and drug
manufacturers, wholesalers, or other
suppliers of covered outpatient drugs;
and
(iii) otherwise interfere with the
competitive nature of providing such
coverage through such sponsors and
organizations.
(D) Annual reports.--Not later March 31 of
each year, the Administrator shall submit to
Congress and the President a report on the
administration of parts C and D during the
previous fiscal year.
(2) Staff.--
(A) In general.--The Administrator, with the
approval of the Secretary, may employ, without
regard to chapter 31 of title 5, United States
Code, such officers and employees as are
necessary to administer the activities to be
carried out through the Medicare Benefits
Administration.
(B) Flexibility with respect to
compensation.--
(i) In general.--The staff of the
Medicare Benefits Administration shall,
subject to clause (ii), be paid without
regard to the provisions of chapter 51
and chapter 53 of such title (relating
to classification and schedule pay
rates).
(ii) Maximum rate.--In no case may
the rate of compensation determined
under clause (i) exceed the rate of
basic pay payable for level IV of the
Executive Schedule under section 5315
of title 5, United States Code.
(C) Limitation on full-time equivalent
staffing for current hcfa functions being
transferred.--The Administrator may not employ
under this paragraph a number of full-time
equivalent employees, to carry out functions
that were previously conducted by the Health
Care Financing Administration and that are
conducted by the Administrator by reason of
this section, that exceeds the number of such
full-time equivalent employees authorized to be
employed by the Health Care Financing
Administration to conduct such functions as of
the date of the enactment of this Act.
(3) Redelegation of certain functions of the health
care financing administration.--
(A) In general.--The Secretary, the
Administrator, and the Administrator of the
Health Care Financing Administration shall
establish an appropriate transition of
responsibility in order to redelegate the
administration of part C from the Secretary and
the Administrator of the Health Care Financing
Administration to the Administrator as is
appropriate to carry out the purposes of this
section.
(B) Transfer of data and information.--The
Secretary shall ensure that the Administrator
of the Health Care Financing Administration
transfers to the Administrator of the Medicare
Benefits Administration such information and
data in the possession of the Administrator of
the Health Care Financing Administration as the
Administrator of the Medicare Benefits
Administration requires to carry out the duties
described in paragraph (1).
(C) Construction.--Insofar as a
responsibility of the Secretary or the
Administrator of the Health Care Financing
Administration is redelegated to the
Administrator under this section, any reference
to the Secretary or the Administrator of the
Health Care Financing Administration in this
title or title XI with respect to such
responsibility is deemed to be a reference to
the Administrator.
(d) Office of Beneficiary Assistance.--
(1) Establishment.--The Secretary shall establish
within the Medicare Benefits Administration an Office
of Beneficiary Assistance to carry out functions
relating to medicare beneficiaries under this title,
including making determinations of eligibility of
individuals for benefits under this title, providing
for enrollment of medicare beneficiaries under this
title, and the functions described in paragraph (2).
The Office shall be separate operating division within
the Administration.
(2) Dissemination of information on benefits and
appeals rights.--
(A) Dissemination of benefits information.--
The Office of Beneficiary Assistance shall
disseminate to medicare beneficiaries, by mail,
by posting on the Internet site of the Medicare
Benefits Administration and through the toll-
free telephone number provided for under
section 1804(b), information with respect to
the following:
(i) Benefits, and limitations on
payment (including cost-sharing, stop-
loss provisions, and formulary
restrictions) under parts C and D.
(ii) Benefits, and limitations on
payment under parts A and B, including
information on medicare supplemental
policies under section 1882.
Such information shall be presented in a manner
so that medicare beneficiaries may compare
benefits under parts A, B, D, and medicare
supplemental policies with benefits under
Medicare+Choice plans under part C.
(B) Dissemination of appeals rights
information.--The Office of Beneficiary
Assistance shall disseminate to medicare
beneficiaries in the manner provided under
subparagraph (A) a description of procedural
rights (including grievance and appeals
procedures) of beneficiaries under the original
medicare fee-for-service program under parts A
and B, the Medicare+Choice program under part
C, and the Voluntary Prescription Drug Benefit
Program under part D.
(3) Medicare ombudsman.--
(A) In general.--Within the Office of
Beneficiary Assistance, there shall be a
Medicare Ombudsman, appointed by the Secretary
from among individuals with expertise and experience
in the fields of health care and advocacy, to carry
out the duties described in subparagraph (B).
(B) Duties.--The Medicare Ombudsman shall--
(i) receive complaints, grievances,
and requests for information submitted
by a medicare beneficiary, with respect
to any aspect of the medicare program;
(ii) provide assistance with respect
to complaints, grievances, and requests
referred to in clause (i), including--
(I) assistance in collecting
relevant information for such
beneficiaries, to seek an
appeal of a decision or
determination made by a fiscal
intermediary, carrier,
Medicare+Choice organization, a
PDP sponsor under part D, or
the Secretary; and
(II) assistance to such
beneficiaries with any problems
arising from disenrollment from
a Medicare+Choice plan under
part C or a prescription drug
plan under part D; and
(iii) submit annual reports to
Congress, the Secretary, and the
Medicare Policy Advisory Board
describing the activities of the
Office, and including such
recommendations for improvement in the
administration of this title as the
Ombudsman determines appropriate.
(C) Coordination with state ombudsman
programs and consumer organizations.--The
Medicare Ombudsman shall, to the extent
appropriate, coordinate with State medical
Ombudsman programs, and with State- and
community-based consumer organizations, to--
(i) provide information about the
medicare program; and
(ii) conduct outreach to educate
medicare beneficiaries with respect to
manners in which problems under the
medicare program may be resolved or
avoided.
(e) Medicare Policy Advisory Board.--
(1) Establishment.--There is established within the
Medicare Benefits Administration the Medicare Policy
Advisory Board (in this section referred to the
``Board''). The Board shall advise, consult with, and
make recommendations to the Administrator of the
Medicare Benefits Administration with respect to the
administration of parts C and D, including the review
of payment policies under such parts.
(2) Reports.--
(A) In general.--With respect to matters of
the administration of parts C and D, the Board
shall submit to Congress and to the
Administrator of the Medicare Benefits
Administration such reports as the Board
determines appropriate. Each such report may
contain such recommendations as the Board
determines appropriate for legislative or
administrative changes to improve the
administration of such parts, including the
topics described in subparagraph (B). Each such
report shall be published in the Federal
Register.
(B) Topics described.--Reports required under
subparagraph (A) may include the following
topics:
(i) Fostering competition.--
Recommendations or proposals to
increase competition under parts C and
D for services furnished to medicare
beneficiaries.
(ii) Education and enrollment.--
Recommendations for the improvement to
efforts to provide medicare
beneficiaries information and education
on the program under this title, and
specifically parts C and D, and the
program for enrollment under the title.
(iii) Implementation of risk-
adjustment.--Evaluation of the
implementation under section
1853(a)(3)(C) of the risk adjustment
methodology to payment rates under that
section to Medicare+Choice
organizations offering Medicare+Choice
plans that accounts for variations in
per capita costs based on health status
and other demographic factors.
(iv) Disease management programs.--
Recommendations on the incorporation of
disease management programs under parts
C and D.
(v) Rural access.--Recommendations to
improve competition and access to plans
under parts C and D in rural areas.
(C) Maintaining independence of board.--The
Board shall directly submit to Congress reports
required under subparagraph (A). No officer or
agency of the United States may require the
Board to submit to any officer or agency of the
United States for approval, comments, or
review, prior to the submission to Congress of
such reports.
(3) Duty of administrator of medicare benefits
administration.--With respect to any report submitted
by the Board under paragraph (2)(A), not later than 90
days after the report is submitted, the Administrator
of the Medicare Benefits Administration shall submit to
Congress and the President an analysis of
recommendations made by the Board in such report. Each
such analysis shall be published in the Federal
Register.
(4) Membership.--
(A) Appointment.--Subject to the succeeding
provisions of this paragraph, the Board shall
consist of 7 members to be appointed as
follows:
(i) 3 members shall be appointed by
the President.
(ii) 2 members shall be appointed by
the Speaker of the House of
Representatives, with the advice of the
chairman and the ranking minority
member of the Committees on Ways and
Means and on Commerce of the House of
Representatives.
(iii) 2 members shall be appointed by
the President pro tempore of the Senate
with the advice of the chairman and the
ranking minority member of the Senate
Committee on Finance.
(B) Qualifications.--The members shall be
chosen on the basis of their integrity,
impartiality, and good judgment, and shall be
individuals who are, by reason of their education
and experience in health care benefits management,
exceptionally qualified to perform the duties of
members of the Board.
(C) Prohibition on inclusion of federal
employees.--No officer or employee of the
United States may serve as a member of the
Board.
(5) Compensation.--Members of the Board shall
receive, for each day (including travel time) they are
engaged in the performance of the functions of the
board, compensation at rates not to exceed the daily
equivalent to the annual rate in effect for level IV of
the Executive Schedule under section 5315 of title 5,
United States Code.
(6) Terms of office.--
(A) In general.--The term of office of
members of the Board shall be 3 years.
(B) Terms of initial appointees.--As
designated by the President at the time of
appointment, of the members first appointed--
(i) 1 shall be appointed for a term
of 1 year;
(ii) 3 shall be appointed for terms
of 2 years; and
(iii) 3 shall be appointed for terms
of 3 years.
(C) Reappointments.--Any person appointed as
a member of the Board may not serve for more
than 8 years.
(D) Vacancy.--Any member appointed to fill a
vacancy occurring before the expiration of the
term for which the member's predecessor was
appointed shall be appointed only for the
remainder of that term. A member may serve
after the expiration of that member's term
until a successor has taken office. A vacancy
in the Board shall be filled in the manner in
which the original appointment was made.
(7) Chair.--The Chair of the Board shall be elected
by the members. The term of office of the Chair shall
be 3 years.
(8) Meetings.--The Board shall meet at the call of
the Chair, but in no event less than 3 times during
each fiscal year.
(9) Director and staff.--
(A) Appointment of director.--The Board shall
have a Director who shall be appointed by the
Chair.
(B) In general.--With the approval of the
Board, the Director may appoint, without regard
to chapter 31 of title 5, United States Code,
such additional personnel as the Director
considers appropriate.
(C) Flexibility with respect to
compensation.--
(i) In general.--The Director and
staff of the Board shall, subject to
clause (ii), be paid without regard to
the provisions of chapter 51 and
chapter 53 of such title (relating to
classification and schedule pay rates).
(ii) Maximum rate.--In no case may
the rate of compensation determined
under clause (i) exceed the rate of
basic pay payable for level IV of the
Executive Schedule under section 5315
of title 5, United States Code.
(D) Assistance from the administrator of the
medicare benefits administration.--The
Administrator of the Medicare Benefits
Administration shall make available to the
Board such information and other assistance as
it may require to carry out its functions.
(10) Contract authority.--The Board may contract with
and compensate government and private agencies or
persons to carry out its duties under this subsection,
without regard to section 3709 of the Revised Statutes
(41 U.S.C. 5).
(f) Funding.--There is authorized to be appropriated, in
appropriate part from the Federal Hospital Insurance Trust Fund
and from the Federal Supplementary Medical Insurance Trust Fund
(including the Medicare Prescription Drug Account), such sums
as are necessary to carry out this section.
* * * * * * *
Part A--Hospital Insurance Benefits for the Aged and Disabled
* * * * * * *
FEDERAL HOSPITAL INSURANCE TRUST FUND
Sec. 1817. (a) * * *
(b) With respect to the Trust Fund, there is hereby created a
body to be known as the Board of Trustees of the Trust Fund
(hereinafter in this section referred to as the ``Board of
Trustees'') composed of the Commissioner of Social Security,
the Secretary of the Treasury, the Secretary of Labor, [and the
Secretary of Health and Human Services, all ex officio,] the
Secretary of Health and Human Services, and the Administrator
of the Medicare Benefits Administration, all ex officio, and of
two members of the public (both of whom may not be from the
same political party), who shall be nominated by the President
for a term of four years and subject to confirmation by the
Senate. A member of the Board of Trustees serving as a member
of the public and nominated and confirmed to fill a vacancy
occurring during a term shall be nominated and confirmed only
for the remainder of such term. An individual nominated and
confirmed as a member of the public may serve in such position
after the expiration of such member's term until the earlier of
the time at which the member's successor takes office or the
time at which a report of the Board is first issued under
paragraph (2) after the expiration of the member's term. The
Secretary of the Treasury shall be the Managing Trustee of the
Board of Trustees (hereinafter in this section referred to as
the ``Managing Trustee''). The Administrator of the Health Care
Financing Administration shall serve as the Secretary of the
Board of Trustees. The Board of Trustees shall meet not less
frequently than once each calendar year. It shall be the duty
of the Board of Trustees to--
(1) * * *
* * * * * * *
(l) Combined Report on Operation and Status of the Trust Fund
and the Federal Supplementary Medical Insurance Trust Fund.--
(1) In general.--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 (in this subsection
referred to as the ``Trust Funds''). Such report shall
included the following information:
(A) 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 for payment for benefits covered
under this title, 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.
(B) 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 subparagraph (A).
(C) 10-year and 50-year projections.--An
estimate of total amounts referred to in
subparagraph (A) 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.
(D) Relation to gdp growth.--A comparison of
the rate of growth of the total amounts
referred to in subparagraph (A) to the rate of
growth in the gross domestic product for the
same period.
(2) Publication.--Each report submitted under
paragraph (1) shall be published by the Committee on
Ways and Means as a public document and shall be made
available by such Committee on the Internet.
* * * * * * *
Part B--Supplementary Medical Insurance Benefits for the Aged and
Disabled
* * * * * * *
FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND
Sec. 1841. (a) There is hereby created on the books of the
Treasury of the United States a trust fund to be known as the
``Federal Supplementary Medical Insurance Trust Fund''
(hereinafter in this section referred to as the ``Trust
Fund''). The Trust Fund shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1), [and]
such amounts as may be deposited in, or appropriated to, such
fund as provided in this part and such amounts as may be
deposited in, or appropriated to, the Medicare Prescription
Drug Account established by section 1860I.
(b) With respect to the Trust Fund, there is hereby created a
body to be known as the Board of Trustees of the Trust Fund
(hereinafter in this section referred to as the ``Board of
Trustees'') composed of the Commissioner of Social Security,
Secretary of the Treasury, the Secretary of Labor, [and the
Secretary of Health and Human Services, all ex officio,] the
Secretary of Health and Human Services, and the Administrator
of the Medicare Benefits Administration, all ex officio, and of
two members of the public (both of whom may not be from the
same political party), who shall be nominated by the President
for a term of four years and subject to confirmation by the
Senate. A member of the Board of Trustees serving as a member
of the public and nominated and confirmed to fill a vacancy
occurring during a term shall be nominated and confirmed only
for the remainder of such term. An individual nominated and
confirmed as a member of the public may serve in such position
after the expiration of such member's term until the earlier of
the time at which the member's successor takes office or the
time at which a report of the Board is first issued under
paragraph (2) after the expiration of the member's term. The
Secretary of the Treasury shall be the Managing Trustee of the
Board of Trustees (hereinafter in this section referred to as
the ``Managing Trustee''). The Administrator of the Health Care
Financing Administration shall serve as the Secretary of the
Board of Trustees. The Board of Trustees shall meet not less
frequently than once each calendar year. It shall be the duty
of the Board of Trustees to--
(1) * * *
* * * * * * *
(g) The Managing Trustee shall pay from time to time from the
Trust Fund such amounts as the Secretary of Health and Human
Services certifies are necessary to make the payments provided
for by this part, the payments provided for under part D (in
which case the payments shall come from the Medicare
Prescription Drug Account in the Trust Fund), and the payments
with respect to administrative expenses in accordance with
section 201(g)(1).
* * * * * * *
Part C--Medicare+Choice Program
eligibility, election, and enrollment
Sec. 1851. (a) Choice of Medicare Benefits Through
Medicare+Choice Plans.--
(1) In general.--Subject to the provisions of this
section, each Medicare+Choice eligible individual (as
defined in paragraph (3)) is entitled to elect to
receive benefits (other than qualified prescription
drug benefits) under this title--
(A) through the original medicare fee-for-
service program under parts A and B, or
(B) through enrollment in a Medicare+Choice
plan under this part[.],
and may elect qualified prescription drug coverage in
accordance with section 1860A.
* * * * * * *
(g) Guaranteed Issue and Renewal.--
(1) In general.--Except as provided in this
subsection and section 1860A(c)(2)(B), a
Medicare+Choice organizationshall provide that at any
time during which elections are accepted under this section with
respect to a Medicare+Choice plan offered by the organization, the
organization will accept without restrictions individuals who are
eligible to make such election.
* * * * * * *
(j) Availability of Prescription Drug Benefits.--
(1) In general.--A Medicare+Choice organization may
not offer prescription drug coverage (other than that
required under parts A and B) to an enrollee under a
Medicare+Choice plan unless such drug coverage is at
least qualified prescription drug coverage and unless
the requirements of this subsection with respect to
such coverage are met.
(2) Compliance with additional beneficiary
protections.--With respect to the offering of qualified
prescription drug coverage by a Medicare+Choice
organization under a Medicare+Choice plan, the
organization and plan shall meet the requirements of
section 1860C, including requirements relating to
information dissemination and grievance and appeals, in
the same manner as they apply to a PDP sponsor and a
prescription drug plan under part D. The Medicare
Benefits Administrator shall waive such requirements to
the extent the Administrator determines that such
requirements duplicate requirements otherwise
applicable to the organization or plan under this part.
(3) Treatment of coverage.--Except as provided in
this subsection, qualified prescription drug coverage
offered under this subsection shall be treated under
this part in the same manner as supplemental health
care benefits described in section 1852(a)(3)(A).
(4) Availability of premium and cost-sharing
subsidies for low-income enrollees and reinsurance
subsidy payments for organizations.--For provisions--
(A) providing premium and cost-sharing
subsidies to low-income individuals receiving
qualified prescription drug coverage through a
Medicare+Choice plan, see section 1860G; and
(B) providing a Medicare+Choice organization
with reinsurance subsidy payments for providing
qualified prescription drug coverage under this
part, see section 1860H.
(5) Specification of separate and standard premium.--
(A) In general.--For purposes of applying
section 1854 and section 1860G(b)(2)(B) with
respect to qualified prescription drug coverage
offered under this subsection under a plan, the
Medicare+Choice organization shall compute and
publish the following:
(i) Separate prescription drug
premium.--A premium for prescription
drug benefits that constitute qualified
prescription drug coverage that is
separate from other coverage under the
plan.
(ii) Portion of coverage attributable
to standard benefits.--The ratio of the
actuarial value of standard coverage to
the actuarial value of the qualified
prescription drug coverage offered
under the plan.
(iii) Portion of premium attributable
to standard benefits.--A standard
premium equal to the product of the
premium described in clause (i) and the
ratio under clause (ii).
The premium under clause (i) shall be compute
without regard to any reduction in the premium
permitted under subparagraph (B).
(B) Reduction of premiums allowed.--Nothing
in this subsection shall be construed as
preventing a Medicare+Choice organization from
reducing the amount of a premium charged for
prescription drug coverage because of the
application of section 1854(f)(1)(A) to other
coverage.
(C) Acceptance of reference premium as full
premium if no standard (or equivalent) coverage
in an area.--For requirement to accept
reference premium as full premium if there is
no standard (or equivalent) coverage in the
area of a Medicare+Choice plan, see section
1860F(d).
(6) Transition in initial enrollment period.--
Notwithstanding any other provision of this part, the
annual, coordinated election period under subsection
(e)(3)(B) for 2003 shall be the 6-month period
beginning with November 2002.
(7) Qualified prescription drug coverage; standard
coverage.--For purposes of this part, the terms
``qualified prescription drug coverage'' and ``standard
coverage'' have the meanings given such terms in
section 1860B.
* * * * * * *
benefits and beneficiary protections
Sec. 1852. (a) * * *
* * * * * * *
(g) Coverage Determinations, Reconsiderations, and Appeals.--
(1) * * *
* * * * * * *
(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.
* * * * * * *
payments to medicare+choice organizations
Sec. 1853. (a) Payments to Organizations.--
(1) * * *
* * * * * * *
(3) Establishment of risk adjustment factors.--
(A) * * *
* * * * * * *
(C) Initial implementation.--
(i) * * *
(ii) Phase-in.--Such risk adjustment
methodology shall be implemented in a
phased-in manner so that the
methodology insofar as it makes
adjustments to capitation rates for
health status applies to--
(I) * * *
(II) not more than 20 percent
of such capitation rate in
2002[.];
and, beginning in 2004, insofar as such
risk adjustment is based on data from
all settings, the methodology shall be
phased in equal increments over a 10
year period, beginning with 2004 or (if
later) the first year in which such
data is used.
* * * * * * *
(c) Calculation of Annual Medicare+Choice Capitation Rates.--
(1) In general.--For purposes of this part, subject
to paragraphs (6)(C) and (7), each annual
Medicare+Choice capitation rate, for a Medicare+Choice
payment area 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)] (C), or (D):
(A) Blended capitation rate.--The sum of--
(i) * * *
(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 (for years before 2002) by the
budget neutrality adjustment factor determined
under paragraph (5).
(B) Minimum amount.--12 multiplied by the
following amount:
(i) * * *
[(ii) For a succeeding year] (ii)(I)
Subject to subclause (II), for a
succeeding year, the minimum amount
specified in this clause (or clause
(i)) for the preceding year increased
by the national per capita
Medicare+Choice growth percentage,
described in paragraph (6)(A) for that
succeeding year.
(II) For 2002 for any of the 50
States and the District of Columbia,
$450.
(C) Minimum percentage increase.--
(i) * * *
[(ii) For a subsequent year] (ii)(I)
Subject to subclause (II), for a
subsequent year, 102 percent of the
annual Medicare+Choice capitation rate
under this paragraph for the area for
the previous year.
(II) During 2002, 2003, 2004, and
2005, in the case of a Medicare+Choice
payment area in which there is no more
than 1 contract entered into under this
part as of July 1 before the beginning
of the year, 102.5 percent of the
annual Medicare+Choice capitation rate
under this paragraph for the area for
the previous year.
(D) Permitting higher rates through
negotiation.--
(i) In general.--For each year
beginning with 2004, in the case of a
Medicare+Choice payment area for which
the Medicare+Choice capitation rate
under this paragraph would otherwise be
less than the United States per capita
cost (USPCC), as calculated by the
Secretary, a Medicare+Choice
organization may negotiate with the
Medicare Benefits Administrator an
annual per capita rate that--
(I) reflects an annual rate
of increase up to the rate of
increase specified in clause
(ii);
(II) takes into account
audited current data supplied
by the organization on its
adjusted community rate (as
defined in section 1854(f)(3));
and
(III) does not exceed the
United States per capita cost,
as projected by the Secretary
for the year involved.
(ii) Maximum rate described.--The
rate of increase specified in this
clause for a year is the rate of
inflation in private health insurance
for the year involved, as projected by
the Medicare Benefits Administrator,
and includes such adjustments as may be
necessary--
(I) to reflect the
demographic characteristics in
the population under this
title; and
(II) to eliminate the costs
of prescription drugs.
(iii) Adjustments for over or under
projections.--If subparagraph is
applied to an organization and payment
area for a year, in applying this
subparagraph for a subsequent year the
provisions of paragraph (6)(C) shall
apply in the same manner as such
provisions apply under this paragraph.
(2) Area-specific and national percentages.--For
purposes of paragraph (1)(A)--
(A) * * *
* * * * * * *
(F) for a year after 2002, the ``area-
specific percentage'' is 50 percent and the
``national percentage'' is 50 percent[.];
except that a Medicare+Choice organization may elect to
apply subparagraph (F) (rather than subparagraph (E))
for 2002.
* * * * * * *
(5) Payment adjustment budget neutrality factor.--For
purposes of paragraph (1)(A), for each year (before
2002), the Secretary shall determine a budget
neutrality adjustment factor so that the aggregate of
the payments under this part (other than those
attributable to subsection (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) * * *
(B) Adjustment.--The number of percentage
points specified in this subparagraph is--
(i) * * *
* * * * * * *
(iv) [for 2001, 0.5 percentage
points] for 2001, 0 percentage points,
(v) [for 2002, 0.3 percentage points]
for 2002, 0 percentage points, and
* * * * * * *
Part D--Voluntary Prescription Drug Benefit Program
SEC. 1860A. BENEFITS; ELIGIBILITY; ENROLLMENT; AND COVERAGE PERIOD.
(a) Provision of Qualified Prescription Drug Coverage Through
Enrollment in Plans.--Subject to the succeeding provisions of
this part, each individual who is enrolled under part B is
entitled to obtain qualified prescription drug coverage
(described in section 1860B(a)) as follows:
(1) Medicare+choice plan.--If the individual is
eligible to enroll in a Medicare+Choice plan that
provides qualified prescription drug coverage under
section 1851(j), the individual may enroll in the plan
and obtain coverage through such plan.
(2) Prescription drug plan.--If the individual is not
enrolled in a Medicare+Choice plan that provides
qualified prescription drug coverage, the individual
may enroll under this part in a prescription drug plan
(as defined in section 1860C(a)).
Such individuals shall have a choice of such plans under
section 1860E(d).
(b) General Election Procedures.--
(1) In general.--An individual may elect to enroll in
a prescription drug plan under this part, or elect the
option of qualified prescription drug coverage under a
Medicare+Choice plan under part C, and change such
election only in such manner and form as may be
prescribed by regulations of the Administrator of the
Medicare Benefits Administration (appointed under
section 1807(b)) (in this part referred to as the
``Medicare Benefits Administrator'') and only during an
election period prescribed in or under this subsection.
(2) Election periods.--
(A) In general.--Except as provided in this
paragraph, the election periods under this
subsection shall be the same as the coverage
election periods under the Medicare+Choice
program under section 1851(e), including--
(i) annual coordinated election
periods; and
(ii) special election periods.
In applying the last sentence of section
1851(e)(4) (relating to discontinuance of a
Medicare+Choice election during the first year
of eligibility) under this subparagraph, in the
case of an election described in such section
in which the individual had elected or is
provided qualified prescription drug coverage
at the time of such first enrollment, the
individual shall be permitted to enroll in a
prescription drug plan under this part at the
time of the election of coverage under the
original fee-for-service plan.
(B) Initial election periods.--
(i) Individuals currently covered.--
In the case of an individual who is
enrolled under part B as of November 1,
2002, there shall be an initial
election period of 6 months beginning
on that date.
(ii) Individual covered in future.--
In the case of an individual who is
first enrolled under part B after
November 1, 2002, there shall be an
initial election period which is the
same as the initial enrollment period
under section 1837(d).
(C) Additional special election periods.--The
Medicare Benefits Administrator shall establish
special election periods--
(i) in cases of individuals who have
and involuntarily lose prescription
drug coverage described in subsection
(c)(2)(C);
(ii) in cases described in section
1837(h) (relating to errors in
enrollment), in the same manner as such
section applies to part B; and
(iii) in the case of an individual
who meets such exceptional conditions
(including conditions recognized under
section 1851(d)(4)(D)) as the
Administrator may provide.
(D) One-time enrollment permitted for current
part a only beneficiaries.--In the case of an
individual who as of November 1, 2002--
(i) is entitled to benefits under
part A; and
(ii) is not (and has not previously
been) enrolled under part B;
the individual shall be eligible to enroll in a
prescription drug plan under this part but only
during the period described in subparagraph
(B)(i). If the individual enrolls in such a
plan, the individual may change such enrollment
under this part, but the individual may not
enroll in a Medicare+Choice plan under part C
unless the individual enrolls under part B.
Nothing in this subparagraph shall be construed
as providing for coverage under a prescription
drug plan of benefits that are excluded because
of the application of section 1860B(f)(2)(B).
(c) Guaranteed Issue; Community Rating; and
Nondiscrimination.--
(1) Guaranteed issue.--
(A) In general.--An eligible individual who
is eligible to elect qualified prescription
drug coverage under a prescription drug plan or
Medicare+Choice plan at a time during which
elections are accepted under this part with respect
to the plan shall not be denied enrollment based on
any health status-related factor (described in section
2702(a)(1) of the Public Health Service Act) or
any other factor.
(B) Medicare+choice limitations permitted.--
The provisions of paragraphs (2) and (3) (other
than subparagraph (C)(i), relating to default
enrollment) of section 1851(g) (relating to
priority and limitation on termination of
election) shall apply to PDP sponsors under
this subsection.
(2) Community-rated premium.--
(A) In general.--In the case of an individual
who maintains (as determined under subparagraph
(C)) continuous prescription drug coverage
since first qualifying to elect prescription
drug coverage under this part, a PDP sponsor or
Medicare+Choice organization offering a
prescription drug plan or Medicare+Choice plan
that provides qualified prescription drug
coverage and in which the individual is
enrolled may not deny, limit, or condition the
coverage or provision of covered prescription
drug benefits or increase the premium under the
plan based on any health status-related factor
described in section 2702(a)(1) of the Public
Health Service Act or any other factor.
(B) Late enrollment penalty.--In the case of
an individual who does not maintain such
continuous prescription drug coverage, a PDP
sponsor or Medicare+Choice organization may
(notwithstanding any provision in this title)
increase the premium otherwise applicable or
impose a pre-existing condition exclusion with
respect to qualified prescription drug coverage
in a manner that reflects additional actuarial
risk involved. Such a risk shall be established
through an appropriate actuarial opinion of the
type described in subparagraphs (A) through (C)
of section 2103(c)(4).
(C) Continuous prescription drug coverage.--
An individual is considered for purposes of
this part to be maintaining continuous
prescription drug coverage on and after a date
if the individual establishes that there is no
period of 63 days or longer on and after such
date (beginning not earlier than January 1,
2003) during all of which the individual did
not have any of the following prescription drug
coverage:
(i) Coverage under prescription drug
plan or medicare+choice plan.--
Qualified prescription drug coverage
under a prescription drug plan or under
a Medicare+Choice plan.
(ii) Medicaid prescription drug
coverage.--Prescription drug coverage
under a medicaid plan under title XIX,
including through the Program of All-
inclusive Care for the Elderly (PACE)
under section 1934, through a social
health maintenance organization
(referred to in section 4104(c) of the
Balanced Budget Act of 1997), or
through a Medicare+Choice project that
demonstrates the application of
capitation payment rates for frail
elderly medicare beneficiaries through
the use of a interdisciplinary team and
through the provision of primary care
services to such beneficiaries by means
of such a team at the nursing facility
involved.
(iii) Prescription drug coverage
under group health plan.--Any
outpatient prescription drug coverage
under a group health plan, including a
health benefits plan under the Federal
Employees Health Benefit Plan under
chapter 89 of title 5, United States
Code, and a qualified retiree
prescription drug plan as defined in
section 1860H(f)(1).
(iv) Prescription drug coverage under
certain medigap policies.--Coverage
under a medicare supplemental policy
under section 1882 that provides
benefits for prescription drugs
(whether or not such coverage conforms
to the standards for packages of
benefits under section 1882(p)(1)), but
only if the policy was in effect on
January 1, 2003, and only until the
date such coverage is terminated.
(v) State pharmaceutical assistance
program.--Coverage of prescription
drugs under a State pharmaceutical
assistance program.
(vi) Veterans' coverage of
prescription drugs.--Coverage of
prescription drugs for veterans under
chapter 17 of title 38, United States
Code.
(D) Certification.--For purposes of carrying
out this paragraph, the certifications of the
type described in sections 2701(e) of the
Public Health Service Act and in section
9801(e) of the Internal Revenue Code shall also
include a statement for the period of coverage
of whether the individual involved had
prescription drug coverage described in
subparagraph (C).
(E) Construction.--Nothing in this section
shall be construed as preventing the
disenrollment of an individual from a
prescription drug plan or a Medicare+Choice
plan based on the termination of an election
described in section 1851(g)(3), including for
non-payment of premiums or for other reasons
specified in subsection (d)(3), which takes
into account a grace period described in
section 1851(g)(3)(B)(i).
(3) Nondiscrimination.--A PDP sponsor offering a
prescription drug plan shall not establish a service
area in a manner that would discriminate based on
health or economic status of potential enrollees.
(d) Effective Date of Elections.--
(1) In general.--Except as provided in this section,
the Medicare Benefits Administrator shall provide that
elections under subsection (b) take effect at the same
time as the Secretary provides that similar elections
under section 1851(e) take effect under section
1851(f).
(2) No election effective before 2003.--In no case
shall any election take effect before January 1, 2003.
(3) Termination.--The Medicare Benefits Administrator
shall provide for the termination of an election in the
case of--
(A) termination of coverage under part B
(other than the case of an individual described
in subsection (b)(2)(D) (relating to part A
only individuals)); and
(B) termination of elections described in
section 1851(g)(3) (including failure to pay
required premiums).
SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRESCRIPTION DRUG COVERAGE.
(a) Requirements.--
(1) In general.--For purposes of this part and part
C, the term ``qualified prescription drug coverage''
means either of the following:
(A) Standard coverage with access to
negotiated prices.--Standard coverage (as
defined in subsection (b)) and access to
negotiated prices under subsection (d).
(B) Actuarially equivalent coverage with
access to negotiated prices.--Coverage of
covered outpatient drugs which meets the
alternative coverage requirements of subsection
(c) and access to negotiated prices under
subsection (d).
(2) Permitting additional outpatient prescription
drug coverage.--
(A) In general.--Subject to subparagraph (B),
nothing in this part shall be construed as
preventing qualified prescription drug coverage
from including coverage of covered outpatient
drugs that exceeds the coverage required under
paragraph (1), but any such additional coverage
shall be limited to coverage of covered
outpatient drugs.
(B) Disapproval authority.--The Medicare
Benefits Administrator shall review the
offering of qualified prescription drug
coverage under this part or part C. If the
Administrator finds that, in the case of a
qualified prescription drug coverage under a
prescription drug plan or a Medicare+Choice
plan, that the organization or sponsor offering
the coverage is purposefully engaged in
activities intended to result in favorable
selection of those eligible medicare
beneficiaries obtaining coverage through the
plan, the Administrator may terminate the
contract with the sponsor or organization under
this part or part C.
(3) Application of secondary payor provisions.--The
provisions of section 1852(a)(4) shall apply under this
part in the same manner as they apply under part C.
(b) Standard Coverage.--For purposes of this part, the
``standard coverage'' is coverage of covered outpatient drugs
(as defined in subsection (f)) that meets the following
requirements:
(1) Deductible.--The coverage has an annual
deductible--
(A) for 2003, that is equal to $250; or
(B) 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.
Any amount determined under subparagraph (B) that is
not a multiple of $5 shall be rounded to the nearest
multiple of $5.
(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 (e)) with an
average expected payment of 50 percent of such costs.
(3) Initial coverage limit.--Subject to paragraph
(4), the coverage has an initial coverage limit on the
maximum costs that may be recognized for payment
purposes (above the annual deductible)--
(A) for 2003, that is equal to $2,100; or
(B) 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.
Any amount determined under subparagraph (B) that is
not a multiple of $25 shall be rounded to the nearest
multiple of $25.
(4) Limitation on out-of-pocket expenditures by
beneficiary.--
(A) In general.--Notwithstanding paragraph
(3), the coverage provides benefits without any
cost-sharing after the individual has incurred
costs (as described in subparagraph (C)) for
covered outpatient drugs in a year equal to the
annual out-of-pocket limit specified in
subparagraph (B).
(B) Annual out-of-pocket limit.--For purposes
of this part, the ``annual out-of-pocket
limit'' specified in this subparagraph--
(i) for 2003, is equal to $6,000; 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.
Any amount determined under clause (ii) that is
not a multiple of $100 shall be rounded to the
nearest multiple of $100.
(C) Application.--In applying subparagraph
(A)--
(i) incurred costs shall only include
costs incurred 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); and
(ii) such costs shall be treated as
incurred without regard to whether the
individual or another person, including
a State program or other third-party
coverage, has paid for such costs.
(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 outpatient drugs in the United States for
medicare beneficiaries, as determined by the Medicare
Benefits Administrator for the 12-month period ending
in July of the previous year.
(c) Alternative Coverage Requirements.--A prescription drug
plan or Medicare+Choice plan may provide a different
prescription drug benefit design from the standard coverage
described in subsection (b) so long as the following
requirements are met:
(1) Assuring at least actuarially equivalent
coverage.--
(A) Assuring equivalent value of total
coverage.--The actuarial value of the total
coverage (as determined under subsection (e))
is at least equal to the actuarial value (as so
determined) of standard coverage.
(B) Assuring equivalent unsubsidized value of
coverage.--The unsubsidized value of the
coverage is at least equal to the unsubsidized
value of standard coverage. For purposes of
this subparagraph, the unsubsidized value of
coverage is the amount by which the actuarial
value of the coverage (as determined under
subsection (e)) exceeds the actuarial value of
the reinsurance subsidy payments under section
1860H with respect to such coverage.
(C) Assuring standard payment for costs at
initial coverage limit.--The coverage is
designed, based upon an actuarially
representative pattern of utilization (as
determined under subsection (e)), to provide
for the payment, with respect to costs incurred
that are equal to the sum of the deductible
under subsection (b)(1) and the initial
coverage limit under subsection (b)(3), of an
amount equal to at least such initial coverage
limit multiplied by the percentage specified in
subsection (b)(2).
(2) Limitation on out-of-pocket expenditures by
beneficiaries.--The coverage provides the limitation on
out-of-pocket expenditures by beneficiaries described
in subsection (b)(4).
(d) Access to Negotiated Prices.--Under qualified
prescription drug coverage offered by a PDP sponsor or a
Medicare+Choice organization, the sponsor or organization shall
provide beneficiaries with access to negotiated prices
(including applicable discounts) used for payment for covered
outpatient drugs, regardless of the fact that no benefits may
be payable under the coverage with respect to such drugs
because of the application of cost-sharing or an initial
coverage limit (described in subsection (b)(3)). Insofar as a
State elects to provide medical assistance under title XIX for
a drug based on the prices negotiated by a prescription drug
plan under this part, the requirements of section 1927 shall
not apply to such drugs.
(e) Actuarial Valuation; Determination of Annual Percentage
Increases.--
(1) Processes.--For purposes of this section, the
Medicare Benefits Administrator shall establish
processes and methods--
(A) for determining the actuarial valuation
of prescription drug coverage, including--
(i) an actuarial valuation of
standard coverage and of the
reinsurance subsidy payments under
section 1860H;
(ii) the use of generally accepted
actuarial principles and methodologies;
and
(iii) applying the same methodology
for determinations of alternative
coverage under subsection (c) as is
used with respect to determinations of
standard coverage under subsection (b);
and
(B) for determining annual percentage
increases described in subsection (b)(5).
(2) Use of outside actuaries.--Under the processes
under paragraph (1)(A), PDP sponsors and
Medicare+Choice organizations may use actuarial
opinions certified by independent, qualified actuaries
to establish actuarial values.
(f) Covered Outpatient Drugs Defined.--
(1) In general.--Except as provided in this
subsection, for purposes of this part, the term
``covered outpatient drug'' means--
(A) a drug that may be dispensed only upon a
prescription and that is described in
subparagraph (A)(i) or (A)(ii) of section
1927(k)(2); or
(B) a biological product or insulin described
in subparagraph (B) or (C) of such section;
and such term includes any use of a covered outpatient
drug for a medically accepted indication (as defined in
section 1927(k)(6)).
(2) Exclusions.--
(A) In general.--Such term does not include
drugs or classes of drugs, or their medical
uses, which may be excluded from coverage or
otherwise restricted under section 1927(d)(2),
other than subparagraph (E) thereof (relating
to smoking cessation agents).
(B) Avoidance of duplicate coverage.--A drug
prescribed for an individual that would
otherwise be a covered outpatient drug under
this part shall not be so considered if payment
for such drug is available under part A or B
(but shall be so considered if such payment is
not available because benefits under part A or
B have been exhausted), without regard to
whether the individual is entitled to benefits
under part A or enrolled under part B.
(3) Application of formulary restrictions.--A drug
prescribed for an individual that would otherwise be a
covered outpatient drug under this part shall not be so
considered under a plan if the plan excludes the drug
under a formulary that meets the requirements of
section 1860C(f)(2) (including providing an appeal
process).
(4) Application of general exclusion provisions.--A
prescription drug plan or Medicare+Choice plan may
exclude from qualified prescription drug coverage any
covered outpatient drug--
(A) for which payment would not be made if
section 1862(a) applied to part D; or
(B) which are not prescribed in accordance
with the plan or this part.
Such exclusions are determinations subject to
reconsideration and appeal pursuant to section
1860C(f).
(5) Study on inclusion of drugs treating morbid
obesity.--The Medicare Policy Advisory Board shall
provide for a study on removing the exclusion under
paragraph (2)(A) for coverage of agents used for weight
loss in the case of morbidly obese individuals. The
Board shall report to Congress on the results of the
study not later than March 1, 2002.
SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALIFIED PRESCRIPTION DRUG
COVERAGE.
(a) Guaranteed Issue Community-Related Premiums and
Nondiscrimination.--For provisions requiring guaranteed issue,
community-rated premiums, and nondiscrimination, see sections
1860A(c)(1), 1860A(c)(2), and 1860F(b).
(b) Dissemination of Information.--
(1) General information.--A PDP sponsor shall
disclose, in a clear, accurate, and standardized form
to each enrollee with a prescription drug plan offered
by the sponsor under this part at the time of
enrollment and at least annually thereafter, the
information described in section 1852(c)(1) relating to
such plan. Such information includes the following:
(A) Access to covered outpatient drugs,
including access through pharmacy networks.
(B) How any formulary used by the sponsor
functions.
(C) Co-payments and deductible requirements.
(D) Grievance and appeals procedures.
(2) Disclosure upon request of general coverage,
utilization, and grievance information.--Upon request
of an individual eligible to enroll under a
prescription drug plan, the PDP sponsor shall provide
the information described in section 1852(c)(2) (other
than subparagraph (D)) to such individual.
(3) Response to beneficiary questions.--Each PDP
sponsor offering a prescription drug plan shall have a
mechanism for providing specific information to
enrollees upon request. The sponsor shall make
available, through an Internet website and in writing
upon request, information on specific changes in its
formulary.
(4) Claims information.--Each PDP sponsor offering a
prescription drug plan must furnish to enrolled
individuals in a form easily understandable to such
individuals an explanation of benefits (in accordance
with section 1806(a) or in a comparable manner) and a
notice of the benefits in relation to initial coverage
limit and annual out-of-pocket limit for the current
year, whenever prescription drug benefits are provided
under this part (except that such notice need not be
provided more often than monthly).
(c) Access to Covered Benefits.--
(1) Assuring pharmacy access.--The PDP sponsor of the
prescription drug plan shall secure the participation
of sufficient numbers of pharmacies (which may include
mail order pharmacies) to ensure convenient access
(including adequate emergency access) for enrolled
beneficiaries, in accordance with standards established
under section 1860D(e) that ensure such convenient
access. Nothing in this paragraph shall be construed as
requiring the participation of (or permitting the
exclusion of) all pharmacies in any area under a plan.
(2) Access to negotiated prices for prescription
drugs.--The PDP sponsor of a prescription drug plan
shall issue such a card that may be used by an enrolled
beneficiary to assure access to negotiated prices under
section 1860B(d) for the purchase of prescription drugs
for which coverage is not otherwise provided under the
prescription drug plan.
(3) Requirements on development and application of
formularies.--Insofar as a PDP sponsor of a
prescription drug plan uses a formulary, the following
requirements must be met:
(A) Formulary committee.--The sponsor must
establish a pharmaceutical and therapeutic
committee that develops the formulary. Such
committee shall include at least one physician
and at least one pharmacist.
(B) Inclusion of drugs in all therapeutic
categories.--The formulary must include drugs
within all therapeutic categories and classes
of covered outpatient drugs (although not
necessarily for all drugs within such
categories and classes).
(C) Appeals and exceptions to application.--
The PDP sponsor must have, as part of the
appeals process under subsection (f)(2), a
process for appeals for denials of coverage
based on such application of the formulary.
(d) Cost and Utilization Management; Quality Assurance;
Medication Therapy Management Program.--
(1) In general.--The PDP sponsor shall have in
place--
(A) an effective cost and drug utilization
management program, including appropriate
incentives to use generic drugs, when
appropriate;
(B) quality assurance measures and systems to
reduce medical errors and adverse drug
interactions, including a medication therapy
management program described in paragraph (2);
and
(C) a program to control fraud, abuse, and
waste.
(2) Medication therapy management program.--
(A) In general.--A medication therapy
management program described in this paragraph
is a program of drug therapy management and
medication administration that is designed to
assure that covered outpatient drugs under the
prescription drug plan are appropriately used
to achieve therapeutic goals and reduce the
risk of adverse events, including adverse drug
interactions.
(B) Elements.--Such program may include--
(i) enhanced beneficiary
understanding of such appropriate use
through beneficiary education,
counseling, and other appropriate
means; and
(ii) increased beneficiary adherence
with prescription medication regimens
through medication refill reminders,
special packaging, and other
appropriate means.
(C) Development of program in cooperation
with licensed pharmacists.--The program shall
be developed in cooperation with licensed
pharmacists and physicians.
(D) Considerations in pharmacy fees.--The PDP
sponsor of a prescription drug program shall
take into account, in establishing fees for
pharmacists and others providing services under
the medication therapy management program, the
resources and time used in implementing the program.
(3) Treatment of accreditation.--Section 1852(e)(4)
(relating to treatment of accreditation) shall apply to
prescription drug plans under this part with respect to
the following requirements, in the same manner as they
apply to Medicare+Choice plans under part C with
respect to the requirements described in a clause of
section 1852(e)(4)(B):
(A) Paragraph (1) (including quality
assurance), including medication therapy
management program under paragraph (2).
(B) Subsection (c)(1) (relating to access to
covered benefits).
(C) Subsection (g) (relating to
confidentiality and accuracy of enrollee
records).
(4) Public disclosure of pharmaceutical prices for
generic equivalent drugs.--Each PDP sponsor shall
provide that each pharmacy or other dispenser that
arranges for the dispensing of a covered outpatient
drug shall inform the beneficiary at the time of
purchase of the drug of any differential between the
price of the prescribed drug to the enrollee and the
price of the lowest cost generic drug that is
therapeutically and pharmaceutically equivalent and
bioequivalent.
(e) Grievance Mechanism.--Each PDP sponsor shall provide
meaningful procedures for hearing and resolving grievances
between the organization (including any entity or individual
through which the sponsor provides covered benefits) and
enrollees with prescription drug plans of the sponsor under
this part in accordance with section 1852(f).
(f) Coverage Determinations, Reconsiderations, and Appeals.--
(1) In general.--A PDP sponsor shall meet the
requirements of section 1852(g) with respect to covered
benefits under the prescription drug plan it offers
under this part in the same manner as such requirements
apply to a Medicare+Choice organization with respect to
benefits it offers under a Medicare+Choice plan under
part C.
(2) Appeals of formulary determinations.--Under the
appeals process under paragraph (1) an individual who
is enrolled in a prescription drug plan offered by a
PDP sponsor may appeal to obtain coverage for a covered
outpatient drug that is not on the formulary of the
sponsor (established under subsection (c)) if the
prescribing physician determines that the
therapeutically similar drug that is on the formulary
is not as effective for the enrollee or has significant
adverse effects for the enrollee.
(g) Confidentiality and Accuracy of Enrollee Records.--A PDP
sponsor shall meet the requirements of section 1852(h) with
respect to enrollees under this part in the same manner as such
requirements apply to a Medicare+Choice organization with
respect to enrollees under part C.
SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG PLAN (PDP) SPONSORS;
CONTRACTS; ESTABLISHMENT OF STANDARDS.
(a) General Requirements.--Each PDP sponsor of a prescription
drug plan shall meet the following requirements:
(1) Licensure.--Subject to subsection (c), the
sponsor is organized and licensed under State law as a
risk-bearing entity eligible to offer health insurance
or health benefits coverage in each State in which it
offers a prescription drug plan.
(2) Assumption of full financial risk.--
(A) In general.--Subject to subparagraph (B)
and section 1860E(d)(2), the entity assumes
full financial risk on a prospective basis for
qualified prescription drug coverage that it
offers under a prescription drug plan and that
is not covered under reinsurance under section
1860H.
(B) Reinsurance permitted.--The entity may
obtain insurance or make other arrangements for
the cost of coverage provided to any enrolled
member under this part.
(3) Solvency for unlicensed sponsors.--In the case of
a sponsor that is not described in paragraph (1), the
sponsor shall meet solvency standards established by
the Medicare Benefits Administrator under subsection
(d).
(b) Contract Requirements.--
(1) In general.--The Medicare Benefits Administrator
shall not permit the election under section 1860A of a
prescription drug plan offered by a PDP sponsor under
this part, and the sponsor shall not be eligible for
payments under section 1860G or 1860H, unless the
Administrator has entered into a contract under this
subsection with the sponsor with respect to the
offering of such plan. Such a contract with a sponsor
may cover more than 1 prescription drug plan. Such
contract shall provide that the sponsor agrees to
comply with the applicable requirements and standards
of this part and the terms and conditions of payment as
provided for in this part.
(2) Negotiation regarding terms and conditions.--The
Medicare Benefits Administrator shall have the same
authority to negotiate the terms and conditions of
prescription drug plans under this part as the Director
of the Office of Personnel Management has with respect
to health benefits plans under chapter 89 of title 5,
United States Code. In negotiating the terms and
conditions regarding premiums for which information is
submitted under section 1860F(a)(2), the Administrator
shall take into account the reinsurance subsidy
payments under section 1860H and the adjusted community
rate (as defined in section 1854(f)(3)) for the
benefits covered.
(3) Incorporation of certain medicare+choice contract
requirements.--The following provisions of section 1857
shall apply, subject to subsection (c)(5), to contracts
under this section in the same manner as they apply to
contracts under section 1857(a):
(A) Minimum enrollment.--Paragraphs (1) and
(3) of section 1857(b).
(B) Contract period and effectiveness.--
Paragraphs (1) through (3) and (5) of section
1857(c).
(C) Protections against fraud and beneficiary
protections.--Section 1857(d).
(D) Additional contract terms.--Section
1857(e); except that in applying section
1857(e)(2) under this part--
(i) such section shall be applied
separately to costs relating to this
part (from costs under part C);
(ii) in no case shall the amount of
the fee established under this
subparagraph for a plan exceed 20
percent of the maximum amount of the
fee that may be established under
subparagraph (B) of such section; and
(iii) no fees shall be applied under
this subparagraph with respect to
Medicare+Choice plans.
(E) Intermediate sanctions.--Section 1857(g).
(F) Procedures for termination.--Section
1857(h).
(4) Rules of application for intermediate
sanctions.--In applying paragraph (3)(E)--
(A) the reference in section 1857(g)(1)(B) to
section 1854 is deemed a reference to this
part; and
(B) the reference in section 1857(g)(1)(F) to
section 1852(k)(2)(A)(ii) shall not be applied.
(c) Waiver of Certain Requirements to Expand Choice.--
(1) In general.--In the case of an entity that seeks
to offer a prescription drug plan in a State, the
Medicare Benefits 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)
has been met.
(2) Grounds for approval.--The grounds for approval
under this paragraph are the grounds for approval
described in subparagraph (B), (C), and (D) of section
1855(a)(2), and also include the application by a State
of any grounds other than those required under Federal
law.
(3) Application of waiver procedures.--With respect
to an application for a waiver (or a waiver granted)
under this subsection, the provisions of subparagraphs
(E), (F), and (G) of section 1855(a)(2) shall apply.
(4) Licensure does not substitute for or constitute
certification.--The fact that an entity is licensed in
accordance with subsection (a)(1) does not deem the
entity to meet other requirements imposed under this
part for a PDP sponsor.
(5) References to certain provisions.--For purposes
of this subsection, in applying provisions of section
1855(a)(2) under this subsection to prescription drug
plans and PDP sponsors--
(A) any reference to a waiver application
under section 1855 shall be treated as a
reference to a waiver application under
paragraph (1); and
(B) any reference to solvency standards shall
be treated as a reference to solvency standards
established under subsection (d).
(d) Solvency Standards for Non-Licensed Sponsors.--
(1) Establishment.--The Medicare Benefits
Administrator shall establish, by not later than
October 1, 2001, financial solvency and capital
adequacy standards that an entity that does not meet
the requirements of subsection (a)(1) must meet to
qualify as a PDP sponsor under this part.
(2) Compliance with standards.--Each PDP sponsor that
is not licensed by a State under subsection (a)(1) and
for which a waiver application has been approved under
subsection (c) shall meet solvency and capital adequacy
standards established under paragraph (1). The Medicare
Benefits Administrator shall establish certification
procedures for such PDP sponsors with respect to such
solvency standards in the manner described in section
1855(c)(2).
(e) Other Standards.--The Medicare Benefits Administrator
shall establish by regulation other standards (not described in
subsection (d)) for PDP sponsors and plans consistent with, and
to carry out, this part. The Administrator shall publish such
regulations by October 1, 2001. In order to carry out this
requirement in a timely manner, the Administrator may
promulgate regulations that take effect on an interim basis,
after notice and pending opportunity for public comment.
(f) Relation to State Laws.--
(1) In general.--The standards established under this
section shall supersede any State law or regulation
(including standards described in paragraph (2)) with
respect to prescription drug plans which are offered by
PDP sponsors under this part to the extent such law or
regulation is inconsistent with such standards.
(2) Standards specifically superseded.--State
standards relating to the following are superseded
under this subsection:
(A) Benefit requirements.
(B) Requirements relating to inclusion or
treatment of providers.
(C) Coverage determinations (including
related appeals and grievance processes).
(D) Establishment and regulation of premiums.
(3) Prohibition of state imposition of premium
taxes.--No State may impose a premium tax or similar
tax with respect to premiums paid to PDP sponsors for
prescription drug plans under this part, or with
respect to any payments made to such a sponsor by the
Medicare Benefits Administrator under this part.
SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT QUALIFIED PRESCRIPTION
DRUG COVERAGE.
(a) In General.--The Medicare Benefits Administrator, through
the Office of Beneficiary Assistance, shall establish, based
upon and consistent with the procedures used under part C
(including section 1851), a process for the selection of the
prescription drug plan or Medicare+Choice plan which offer
qualified prescription drug coverage through which eligible
individuals elect qualified prescription drug coverage under
this part.
(b) Elements.--Such process shall include the following:
(1) Annual, coordinated election periods, in which
such individuals can change the qualifying plans
through which they obtain coverage, in accordance with
section 1860A(b)(2).
(2) Active dissemination of information to promote an
informed selection among qualifying plans based upon
price, quality, and other features, in the manner
described in (and in coordination with) section
1851(d), including the provision of annual comparative
information, maintenance of a toll-free hotline, and
the use of non-federal entities.
(3) Coordination of elections through filing with a
Medicare+Choice organization or a PDP sponsor, in the
manner described in (and in coordination with) section
1851(c)(2).
(c) Medicare+Choice Enrollee In Plan Offering Prescription
Drug Coverage May Only Obtain Benefits Through the Plan.--An
individual who is enrolled under a Medicare+Choice plan that
offers qualified prescription drug coverage may only elect to
receive qualified prescription drug coverage under this part
through such plan.
(d) Assuring Access to a Choice of Qualified Prescription
Drug Coverage.--
(1) Choice of at least 2 plans in each area.--
(A) In general.--The Medicare Benefits
Administrator shall assure that each individual
who is enrolled under part B and who is
residing in an area has available, consistent
with subparagraph (B), a choice of enrollment
in at least 2 qualifying plans (as defined in
paragraph (5)) in the area in which the
individual resides, at least one of which is a
prescription drug plan.
(B) Requirement for different plan
sponsors.--The requirement in subparagraph (A)
is not satisfied with respect to an area if
only one PDP sponsor or Medicare+Choice
organization offers all the qualifying plans in
the area.
(2) Guaranteeing access to coverage.--In order to
assure access under paragraph (1) and consistent with
paragraph (3), the Medicare Benefits Administrator may
provide financial incentives (including partial
underwriting of risk) for a PDP sponsor to expand the
service area under an existing prescription drug plan
to adjoining or additional areas or to establish such a
plan (including offering such a plan on a regional or
nationwide basis), but only so long as (and to the
extent) necessary to assure the access guaranteed under
paragraph (1).
(3) Limitation on authority.--In exercising authority
under this subsection, the Medicare Benefits
Administrator--
(A) shall not provide for the full
underwriting of financial risk for any PDP
sponsor;
(B) shall not provide for any underwriting of
financial risk for a public PDP sponsor with
respect to the offering of a nationwide
prescription drug plan; and
(C) shall seek to maximize the assumption of
financial risk by PDP sponsors or
Medicare+Choice organizations.
(4) Reports.--The Medicare Benefits Administrator
shall, in each annual report to Congress under section
1807(f), include information on the exercise of
authority under this subsection. The Administrator also
shall include such recommendations as may be
appropriate to minimize the exercise of such authority,
including minimizing the assumption of financial risk.
(5) Qualifying plan defined.--For purposes of this
subsection, the term ``qualifying plan'' means a
prescription drug plan or a Medicare+Choice plan that
includes qualified prescription drug coverage.
SEC. 1860F. PREMIUMS.
(a) Submission of Premiums and Related Information.--
(1) In general.--Each PDP sponsor shall submit to the
Medicare Benefits Administrator information of the type
described in paragraph (2) in the same manner as
information is submitted by a Medicare+Choice
organization under section 1854(a)(1).
(2) Type of information.--The information described
in this paragraph is the following:
(A) Information on the qualified prescription
drug coverage to be provided.
(B) Information on the actuarial value of the
coverage.
(C) Information on the monthly premium to be
charged for the coverage, including an
actuarial certification of--
(i) the actuarial basis for such
premium;
(ii) the portion of such premium
attributable to benefits in excess of
standard coverage; and
(iii) the reduction in such premium
resulting from the reinsurance subsidy
payments provided under section 1860H.
(D) Such other information as the Medicare
Benefits Administrator may require to carry out
this part.
(3) Review.--The Medicare Benefits Administrator
shall review the information filed under paragraph (2)
for the purpose of conducting negotiations under
section 1860D(b)(2).
(b) Uniform Premium.--The premium for a prescription drug
plan charged under this section may not vary among individuals
enrolled in the plan in the same service area, except as is
permitted under section 1860A(c)(2)(B) (relating to late
enrollment penalties).
(c) Terms and Conditions for Imposing Premiums.--The
provisions of section 1854(d) shall apply under this part in
the same manner as they apply under part C, and, for this
purpose, the reference in such section to section
1851(g)(3)(B)(i) is deemed a reference to section
1860A(d)(3)(B) (relating to failure to pay premiums required
under this part).
(d) Acceptance of Reference Premium as Full Premium if No
Standard (or Equivalent) Coverage in an Area.--
(1) In general.--If there is no standard prescription
drug coverage (as defined in paragraph (2)) offered in
an area, in the case of an individual who is eligible
for a premium subsidy under section 1860G and resides
in the area, the PDP sponsor of any prescription drug
plan offered in the area (and any Medicare+Choice
organization that offers qualified prescription drug
coverage in the area) shall accept the reference
premium under section 1860G(b)(2) as payment in full
for the premium charge for qualified prescription drug
coverage.
(2) Standard prescription drug coverage defined.--For
purposes of this subsection, the term ``standard
prescription drug coverage'' means qualified
prescription drug coverage that is standard coverage or
that has an actuarial value equivalent to the actuarial
value for standard coverage.
SEC. 1860G. PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME
INDIVIDUALS.
(a) In General.--
(1) Full premium subsidy and reduction of cost-
sharing for individuals with income below 135 percent
of federal poverty level.--In the case of a subsidy
eligible individual (as defined in paragraph (3)) who
is determined to have income that does not exceed 135
percent of the Federal poverty level, the individual is
entitled under this section--
(A) to a premium subsidy equal to 100 percent
of the amount described in subsection (b)(1);
and
(B) subject to subsection (c), to the
substitution for the beneficiary cost-sharing
described in paragraphs (1) and (2) of section
1860B(b) (up to the initial coverage limit
specified in paragraph (3) of such section) of
amounts that are nominal.
(2) Sliding scale premium subsidy for individuals
with income above 135, but below 150 percent, of
federal poverty level.--In the case of a subsidy
eligible individual who is determined to have income
that exceeds 135 percent, but does not exceed 150
percent, of the Federal poverty level, the individual
is entitled under this section to a premium subsidy
determined on a linear sliding scale ranging from 100
percent of the amount described in subsection (b)(1)
for individuals with incomes at 135 percent of such
level to 0 percent of such amount for individuals with
incomes at 150 percent of such level.
(3) Determination of eligibility.--
(A) Subsidy eligible individual defined.--For
purposes of this section, subject to
subparagraph (D), the term ``subsidy eligible
individual'' means an individual who--
(i) is eligible to elect, and has
elected, to obtain qualified
prescription drug coverage under this
part;
(ii) has income below 150 percent of
the Federal poverty line; and
(iii) meets the resources requirement
described in section 1905(p)(1)(C).
(B) Determinations.--The determination of
whether an individual residing in a State is a
subsidy eligible individual and the amount of
such individual's income shall be determined
under the State medicaid plan for the State
under section 1935(a). In the case of a State
that does not operate such a medicaid plan
(either under title XIX or under a statewide
waiver granted under section 1115), such
determination shall be made under arrangements
made by the Medicare Benefits Administrator.
(C) Income determinations.--For purposes of
applying this section--
(i) income shall be determined in the
manner described in section
1905(p)(1)(B); and
(ii) the term ``Federal poverty
line'' means the official poverty line
(as defined by the Office of Management
and Budget, and revised annually in
accordance with section 673(2) of the
Omnibus Budget Reconciliation Act of
1981) applicable to a family of the
size involved.
(D) Treatment of territorial residents.--In
the case of an individual who is not a resident
of the 50 States or the District of Columbia,
the individual is not eligible to be a subsidy
eligible individual but may be eligible for
financial assistance with prescription drug
expenses under section 1935(e).
(b) Premium Subsidy Amount.--
(1) In general.--The premium subsidy amount described
in this subsection for an individual residing in an
area is the reference premium (as defined in paragraph
(2)) for qualified prescription drug coverage offered
by the prescription drug plan or the Medicare+Choice
plan in which the individual is enrolled.
(2) Reference premium defined.--For purposes of this
subsection, the term ``reference premium'' means, with
respect to qualified prescription drug coverage offered
under--
(A) a prescription drug plan that--
(i) provides standard coverage (or
alternative prescription drug coverage
the actuarial value is equivalent to
that of standard coverage), the premium
imposed for enrollment under the plan
under this part (determined without
regard to any subsidy under this
section or any late enrollment penalty
under section 1860A(c)(2)(B)); or
(ii) provides alternative
prescription drug coverage the
actuarial value of which is greater
than that of standard coverage, the
premium described in clause (i)
multiplied by the ratio of (I) the
actuarial value of standard coverage,
to (II) the actuarial value of the
alternative coverage; or
(B) a Medicare+Choice plan, the standard
premium computed under section
1851(j)(4)(A)(iii), determined without regard
to any reduction effected under section
1851(j)(4)(B).
(c) Rules in Applying Cost-Sharing Subsidies.--
(1) In general.--In applying subsection (a)(1)(B)--
(A) the maximum amount of subsidy that may be
provided with respect to an enrollee for a year
may not exceed 95 percent of the maximum cost-
sharing described in such subsection that may
be incurred for standard coverage;
(B) the Medicare Benefits Administrator shall
determine what is ``nominal'' taking into
account the rules applied under section
1916(a)(3); and
(C) nothing in this part shall be construed
as preventing a plan or provider from waiving
or reducing the amount of cost-sharing
otherwise applicable.
(2) Limitation on charges.--In the case of an
individual receiving cost-sharing subsidies under
subsection (a)(1)(B), the PDP sponsor may not charge
more than a nominal amount in cases in which the cost-sharing
subsidy is provided under such subsection.
(d) Administration of Subsidy Program.--The Medicare Benefits
Administrator shall provide a process whereby, in the case of
an individual who is determined to be a subsidy eligible
individual and who is enrolled in prescription drug plan or is
enrolled in a Medicare+Choice plan under which qualified
prescription drug coverage is provided--
(1) the Administrator provides for a notification of
the PDP sponsor or Medicare+Choice organization
involved that the individual is eligible for a subsidy
and the amount of the subsidy under subsection (a);
(2) the sponsor or organization involved reduces the
premiums or cost-sharing otherwise imposed by the
amount of the applicable subsidy and submits to the
Administrator information on the amount of such
reduction; and
(3) the Administrator periodically and on a timely
basis reimburses the sponsor or organization for the
amount of such reductions.
The reimbursement under paragraph (3) with respect to cost-
sharing subsidies may be computed on a capitated basis, taking
into account the actuarial value of the subsidies and with
appropriate adjustments to reflect differences in the risks
actually involved.
(e) Relation to Medicaid Program.--
(1) In general.--For provisions providing for
eligibility determinations, and additional financing,
under the medicaid program, see section 1935.
(2) Medicaid providing wrap around benefits.--The
coverage provided under this part is primary payor to
benefits for prescribed drugs provided under the
medicaid program under title XIX.
SEC. 1860H. SUBSIDIES FOR ALL MEDICARE BENEFICIARIES THROUGH
REINSURANCE FOR QUALIFIED PRESCRIPTION DRUG
COVERAGE.
(a) Reinsurance Subsidy Payment.--In order to reduce premium
levels applicable to qualified prescription drug coverage for
all medicare beneficiaries, to reduce adverse selection among
prescription drug plans and Medicare+Choice plans that provide
qualified prescription drug coverage, and to promote the
participation of PDP sponsors under this part, the Medicare
Benefits Administrator shall provide in accordance with this
section for payment to a qualifying entity (as defined in
subsection (b)) of the reinsurance payment amount (as defined
in subsection (c)) for excess costs incurred in providing
qualified prescription drug coverage--
(1) for individuals enrolled with a prescription drug
plan under this part;
(2) for individuals enrolled with a Medicare+Choice
plan that provides qualified prescription drug coverage
under part C; and
(3) for medicare primary individuals (described in
subsection (f)(3)(D)) who are enrolled in a qualified
retiree prescription drug plan.
This section constitutes budget authority in advance of
appropriations Acts and represents the obligation of the
Administrator to provide for the payment of amounts provided
under this section.
(b) Qualifying Entity Defined.--For purposes of this section,
the term ``qualifying entity'' means any of the following that
has entered into an agreement with the Administrator to provide
the Administrator with such information as may be required to
carry out this section:
(1) A PDP sponsor offering a prescription drug plan
under this part.
(2) A Medicare+Choice organization that provides
qualified prescription drug coverage under a
Medicare+Choice plan under part C.
(3) The sponsor of a qualified retiree prescription
drug plan (as defined in subsection (f)).
(c) Reinsurance Payment Amount.--
(1) In general.--Subject to subsection (d)(2) and
paragraph (4), the reinsurance payment amount under
this subsection for a qualifying covered individual (as
defined in subsection (g)(1)) for a coverage year (as
defined in subsection (g)(2)) is equal to the sum of
the following:
(A) For the portion of the individual's gross
covered prescription drug costs (as defined in
paragraph (3)) for the year that exceeds
$1,250, but does not exceed $1,350, an amount
equal to 30 percent of the allowable costs (as
defined in paragraph (2)) attributable to such
gross covered prescription drug costs.
(B) For the portion of the individual's gross
covered prescription drug costs for the year
that exceeds $1,350, but does not exceed
$1,450, an amount equal to 50 percent of the
allowable costs attributable to such gross
covered prescription drug costs.
(C) For the portion of the individual's gross
covered prescription drug costs for the year
that exceeds $1,450, but does not exceed
$1,550, an amount equal to 70 percent of the
allowable costs attributable to such gross
covered prescription drug costs.
(D) For the portion of the individual's gross
covered prescription drug costs for the year
that exceeds $1,550, but does not exceed
$2,350, an amount equal to 90 percent of the
allowable costs attributable to such gross
covered prescription drug costs.
(E) For the portion of the individual's gross
covered prescription drug costs for the year
that exceeds $7,050, an amount equal to 90
percent of the allowable costs attributable to
such gross covered prescription drug costs.
(2) Allowable costs.--For purposes of this section,
the term ``allowable costs'' means, with respect to
gross covered prescription drug costs under a plan
described in subsection (b) offered by a qualifying
entity, the part of such costs that are actually paid
under the plan, but in no case more than the part of
such costs that would have been paid under the plan if
the prescription drug coverage under the plan were
standard coverage.
(3) Gross covered prescription drug costs.--For
purposes of this section, the term ``gross covered
prescription drug costs'' means, with respect to an
enrollee with a qualifying entity under a plan
described in subsection (b) during a coverage year, the
costs incurred under the plan for covered prescription
drugs dispensed during the year, including costs
relating to the deductible, whether paid by the
enrollee or under the plan, regardless of whether the
coverage under the plan exceeds standard coverage and
regardless of when the payment for such drugs is made.
(4) Indexing dollar amounts.--
(A) Amounts for 2003.--The dollar amounts
applied under paragraph (1) for 2003 shall be
the dollar amounts specified in such paragraph.
(B) For 2004.--The dollar amounts applied
under paragraph (1) for 2004 shall be the
dollar amounts specified in such paragraph
increased by the annual percentage increase
described in section 1860B(b)(5) for 2004.
(C) For subsequent years.--The dollar amounts
applied under paragraph (1) for a year after
2004 shall be the amounts (under this
paragraph) applied under paragraph (1) for the
preceding year increased by the annual
percentage increase described in section
1860B(b)(5) for the year involved.
(D) Rounding.--Any amount, determined under
the preceding provisions of this paragraph for
a year, which is not a multiple of $5 shall be
rounded to the nearest multiple of $5.
(d) Adjustment of Payments.--
(1) In general.--The Medicare Benefits Administrator
shall estimate--
(A) the total payments to be made (without
regard to this subsection) during a year under
this section; and
(B) the total payments to be made by
qualifying entities for standard coverage under
plans described in subsection (b) during the
year.
(2) Adjustment of payments.--The Administrator shall
proportionally adjust the payments made under this
section for a coverage year in such manner so that the
total of the payments made for the year under this
section is equal to 35 percent of the total payments
described in paragraph (1)(B) during the year.
(e) Payment Methods.--
(1) In general.--Payments under this section shall be
based on such a method as the Medicare Benefits
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 Medicare Prescription Drug
Account.
(f) Qualified Retiree Prescription Drug Plan Defined.--
(1) In general.--For purposes of this section, the
term ``qualified retiree prescription drug plan'' means
employment-based retiree health coverage (as defined in
paragraph (3)(A)) if, with respect to an individual
enrolled (or eligible to be enrolled) under this part
who is covered under the plan, the following
requirements are met:
(A) Assurance.--The sponsor of the plan shall
annually attest, and provide such assurances as
the Medicare Benefits Administrator may
require, that the coverage meets the
requirements for qualified prescription drug
coverage.
(B) Audits.--The sponsor (and the plan) shall
maintain, and afford the Medicare Benefits
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, the accuracy of payments made, and
such other matters as may be appropriate.
(C) Provision of certification of
prescription drug coverage.--The sponsor of the
plan shall provide for issuance of
certifications of the type described in section
1860A(c)(2)(D).
(D) Other requirements.--The sponsor of the
plan shall comply with such other requirements
as the Medicare Benefits Administrator finds
necessary to administer the program under this
section.
(2) Limitation on benefit eligibility.--No payment
shall be provided under this section with respect to an
individual who is enrolled under a qualified retiree
prescription drug plan unless the individual is a
medicare primary individual who--
(A) is covered under the plan; and
(B) is eligible to obtain qualified
prescription drug coverage under section 1860A
but did not elect such coverage under this part
(either through a prescription drug plan or
through a Medicare+Choice plan).
(3) Definitions.--As used in this section:
(A) Employment-based retiree health
coverage.--The term ``employment-based retiree
health coverage'' means health insurance or
other coverage of health care costs for
medicare primary individuals (or for such
individuals and their spouses and dependents)
based on their status as former employees or
labor union members.
(B) Employer.--The term ``employer'' has the
meaning given such term by section 3(5) of the
Employee Retirement Income Security Act of 1974
(except that such term shall include only
employers of two or more employees).
(C) Sponsor.--The term ``sponsor'' means a
plan sponsor, as defined in section 3(16)(B) of
the Employee Retirement Income Security Act of
1974.
(D) Medicare primary individual.--The term
``medicare primary individual'' means, with
respect to a plan, an individual who is covered
under the plan and with respect to whom the
plan is not a primary plan (as defined in
section 1862(b)(2)(A)).
(g) General Definitions.--For purposes of this section:
(1) Qualifying covered individual.--The term
``qualifying covered individual'' means an individual
who--
(A) is enrolled with a prescription drug plan
under this part;
(B) is enrolled with a Medicare+Choice plan
that provides qualified prescription drug
coverage under part C; or
(C) is covered as a medicare primary
individual under a qualified retiree
prescription drug plan.
(2) Coverage year.--The term ``coverage year'' means
a calendar year in which covered outpatient drugs are
dispensed if a claim for payment is made under the plan
for such drugs, regardless of when the claim is paid.
SEC. 1860I. MEDICARE PRESCRIPTION DRUG ACCOUNT IN FEDERAL SUPPLEMENTARY
MEDICAL INSURANCE TRUST FUND.
(a) In General.--There is created within the Federal
Supplementary Medical Insurance Trust Fund established by
section 1841 an account to be known as the ``Medicare
Prescription Drug Account'' (in this section referred to as the
``Account''). The Account shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1), and
such amounts as may be deposited in, or appropriated to, such
fund as provided in this part. Funds provided under this part
to the Account shall be kept separate from all other funds
within the Federal Supplementary Medical Insurance Trust Fund.
(b) Payments From Account.--
(1) In general.--The Managing Trustee shall pay from
time to time from the Account such amounts as the
Medicare Benefits Administrator certifies are necessary
to make--
(A) payments under section 1860G (relating to
low-income subsidy payments);
(B) payments under section 1860H (relating to
reinsurance subsidy payments); and
(C) payments with respect to administrative
expenses under this part in accordance with
section 201(g).
(2) Transfers to medicaid account for increased
administrative costs.--The Managing Trustee shall
transfer from time to time from the Account to the
Grants to States for Medicaid account amounts the
Secretary certifies are attributable to increases in
payment resulting from the application of a higher
Federal matching percentage under section 1935(b).
(3) Treatment in relation to part b premium.--Amounts
payable from the Account shall not be taken into
account in computing actuarial rates or premium amounts
under section 1839.
(c) Deposits Into Account.--
(1) Medicaid transfer.--There is hereby transferred
to the Account, from amounts appropriated for Grants to
States for Medicaid, amounts equivalent to the
aggregate amount of the reductions in payments under
section 1903(a)(1) attributable to the application of
section 1935(c).
(2) Appropriations to cover government
contributions.--There are authorized to be appropriated
from time to time, out of any moneys in the Treasury
not otherwise appropriated, to the Account, an amount
equivalent to the amount of payments made from the
Account under subsection (b), reduced by the amount
transferred to the Account under paragraph (1).
SEC. 1860J. DEFINITIONS; TREATMENT OF REFERENCES TO PROVISIONS IN PART
C.
(a) Definitions.--For purposes of this part:
(1) Covered outpatient drugs.--The term ``covered
outpatient drugs'' is defined in section 1860B(f).
(2) Initial coverage limit.--The term ``initial
coverage limit'' means the such limit as established
under section 1860B(b)(3), or, in the case of coverage
that is not standard coverage, the comparable limit (if
any) established under the coverage.
(3) Medicare prescription drug account.--The term
``Medicare Prescription Drug Account'' means the
Account in the Federal Supplementary Medical Insurance
Trust Fund created under section 1860I(a).
(4) PDP sponsor.--The term ``PDP sponsor'' means an
entity that is certified under this part as meeting the
requirements and standards of this part for such a
sponsor.
(5) Prescription drug plan.--The term ``prescription
drug plan'' means health benefits coverage that--
(A) is offered under a policy, contract, or
plan by a PDP sponsor pursuant to, and in
accordance with, a contract between the
Medicare Benefits Administrator and the sponsor
under section 1860D(b);
(B) provides qualified prescription drug
coverage; and
(C) meets the applicable requirements of the
section 1860C for a prescription drug plan.
(6) Qualified prescription drug coverage.--The term
``qualified prescription drug coverage'' is defined in
section 1860B(a).
(7) Standard coverage.--The term ``standard
coverage'' is defined in section 1860B(b).
(b) Application of Medicare+Choice Provisions Under This
Part.--For purposes of applying provisions of part C under this
part with respect to a prescription drug plan and a PDP
sponsor, unless otherwise provided in this part such provisions
shall be applied as if--
(1) any reference to a Medicare+Choice plan included
a reference to a prescription drug plan;
(2) any reference to a provider-sponsored
organization included a reference to a PDP sponsor;
(3) any reference to a contract under section 1857
included a reference to a contract under section
1860D(b); and
(4) any reference to part C included a reference to
this part.
Part [D] E--Miscellaneous Provisions
definitions of services, institutions, etc.
Sec. 1861. For purposes of this title--
Spell of Illness
(a) * * *
* * * * * * *
(s) The term ``medical and other health services'' means any
of the following items or services:
(1) * * *
(2)(A) services and supplies [(including drugs and
biologicals which cannot, as determined in accordance
with regulations, be self-administered)] (including
injectable and infusable drugs and biologicals which
are not usually self-administered by the patient)
furnished as an incident to a physician's professional
service, of kinds which are commonly furnished in
physicians' offices and are commonly either rendered
without charge or included in the physicians' bills;
(B) hospital services [(including drugs and
biologicals which cannot, as determined in accordance
with regulations, be self-administered)] (including
injectable and infusable drugs and biologicals which
are not usually self-administered by the patient)
incident to physicians' services rendered to
outpatients and partial hospitalization services
incident to such services;
* * * * * * *
[determinations; appeals
[Sec. 1869. (a) The determination of whether an individual is
entitled to benefits under part A or part B, and the
determination of the amount of benefits under part A or part B,
and any other determination with respect to a claim for
benefits under part A or a claim for benefits with respect to
home health services under part B shall be made by the
Secretary in accordance with regulations prescribed by him.
[(b)(1) Any individual dissatisfied with any determination
under subsection (a) as to--
[(A) whether he meets the conditions of section 226
of this Act or section 103 of the Social Security
Amendments of 1965, or
[(B) whether he is eligible to enroll and has
enrolled pursuant to the provisions of part B of this
title or section 1818,
[(C) the amount of benefits under part A or part B
(including a determination where such amount is
determined to be zero), or
[(D) any other denial (other than under part B of
title XI) of a claim for benefits under part A or a
claim for benefits with respect to home health services
under part B,
shall be entitled to a hearing thereon by the Secretary to the
same extent as is provided in section 205(b) and to judicial
review of the Secretary's final decision after such hearing as
is provided in section 205(g), except that, in so applying such
sections 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. Sections 206(a), 1102, and 1871 shall not be
construed as authorizing the Secretary to prohibit an
individual from being represented under this subsection by a
person that furnishes or supplies the individual, directly or
indirectly, with services or items solely on the basis that the
person furnishes or supplies the individual with such a service
or item. Any person that furnishes services or items to an
individual may not represent an individual under this
subsection with respect to the issue described in section
1879(a)(2) unless the person has waived any rights for payment
from the beneficiary with respect to the services or items
involved in the appeal. If a person furnishes services or items
to an individual and represents the individual under this
subsection, the person may not impose any financial liability
on such individual in connection with such representation.
[(2) Notwithstanding paragraph (1)(C) and (1)(D), in the case
of a claim arising--
[(A) under part A, a hearing shall not be available
to an individual under paragraph (1)(C) and (1)(D) if
the amount in controversy is less than $100 and
judicial review shall not be available to the
individual under that paragraph if the amount in
controversy is less than $1,000; or--
[(B) under part B, a hearing shall not be available
to an individual under paragraph (1)(C) and (1)(D) if
the amount in controversy is less than $500 (or $100 in
the case of home health services) and judicial review
shall not be available to the individual under that
paragraph if the aggregate amount in controversy is
less than $1,000.
In determining the amount in controversy, the Secretary, under
regulations, shall allow two or more claims to be aggregated if
the claims involve the delivery of similar or related services
to the same individual or involve common issues of law and fact
arising from services furnished to two or more individuals.
[(3) Review of any national coverage determination under
section 1862(a)(1) respecting whether or not a particular type
or class of items or services is covered under this title shall
be subject to the following limitations:
[(A) Such a determination shall not be reviewed by
any administrative law judge.
[(B) Such a determination shall not be held unlawful
or set aside on the ground that a requirement of
section 553 of title 5, United States Code, or section
1871(b), relating to publication in the Federal
Register or opportunity for public comment, was not
satisfied.
[(C) In any case in which a court determines that the
record is incomplete or otherwise lacks adequate
information to support the validity of the
determination, it shall remand the matter to the
Secretary for additional proceedings to supplement the
record and the court may not determine that an item or
service is covered except upon review of the
supplemented record.
[(4) A regulation or instruction which relates to a method
for determining the amount of payment under part B and which
was initially issued before January 1, 1981, shall not be
subject to judicial review.
[(5) In an administrative hearing pursuant to paragraph (1),
where the moving party alleges that there are no material
issuesof fact in dispute, the administrative law judge shall
make an expedited determination as to whether any such facts are in
dispute and, if not, shall determine the case expeditiously.]
determinations; appeals
Sec. 1869. (a) Initial Determinations.--The Secretary shall
promulgate regulations and make initial determinations with
respect to benefits under part A or part B in accordance with
those regulations for the following:
(1) The initial determination of whether an
individual is entitled to benefits under such parts.
(2) The initial determination of the amount of
benefits available to the individual under such parts.
(3) Any other initial determination with respect to a
claim for benefits under such parts, including an
initial determination by the Secretary that payment may
not be made, or may no longer be made, for an item or
service under such parts, an initial determination made
by a utilization and quality control peer review
organization under section 1154(a)(2), and an initial
determination made by an entity pursuant to a contract
with the Secretary to administer provisions of this
title or title XI.
(b) Appeal Rights.--
(1) In general.--
(A) Reconsideration of initial
determination.--Subject to subparagraph (D),
any individual dissatisfied with any initial
determination under subsection (a) shall be
entitled to reconsideration of the
determination, and, subject to subparagraphs
(D) and (E), a hearing thereon by the Secretary
to the same extent as is provided in section
205(b) and to judicial review of the
Secretary's final decision after such hearing
as is provided in section 205(g).
(B) Representation by provider or supplier.--
(i) In general.--Sections 206(a),
1102, and 1871 shall not be construed
as authorizing the Secretary to
prohibit an individual from being
represented under this section by a
person that furnishes or supplies the
individual, directly or indirectly,
with services or items, solely on the
basis that the person furnishes or
supplies the individual with such a
service or item.
(ii) Mandatory waiver of right to
payment from beneficiary.--Any person
that furnishes services or items to an
individual may not represent an
individual under this section with
respect to the issue described in
section 1879(a)(2) unless the person
has waived any rights for payment from
the beneficiary with respect to the
services or items involved in the
appeal.
(iii) Prohibition on payment for
representation.--If a person furnishes
services or items to an individual and
represents the individual under this
section, the person may not impose any
financial liability on such individual
in connection with such representation.
(iv) Requirements for representatives
of a beneficiary.--The provisions of
section 205(j) and section 206
(regarding representation of claimants)
shall apply to representation of an
individual with respect to appeals
under this section in the same manner
as they apply to representation of an
individual under those sections.
(C) Succession of rights in cases of
assignment.--The right of an individual to an
appeal under this section with respect to an
item or service may be assigned to the provider
of services or supplier of the item or service
upon the written consent of such individual
using a standard form established by the
Secretary for such an assignment.
(D) Time limits for appeals.--
(i) Reconsiderations.--
Reconsideration under subparagraph (A)
shall be available only if the
individual described subparagraph (A)
files notice with the Secretary to
request reconsideration by not later
than 180 days after the individual
receives notice of the initial
determination under subsection (a) or
within such additional time as the
Secretary may allow.
(ii) Hearings conducted by the
secretary.--The Secretary shall
establish in regulations time limits
for the filing of a request for a
hearing by the Secretary in accordance
with provisions in sections 205 and
206.
(E) Amounts in controversy.--
(i) In general.--A hearing (by the
Secretary) shall not be available to an
individual under this section if the
amount in controversy is less than
$100, and judicial review shall not be
available to the individual if the
amount in controversy is less than
$1,000.
(ii) Aggregation of claims.--In
determining the amount in controversy,
the Secretary, under regulations, shall
allow 2 or more appeals to be
aggregated if the appeals involve--
(I) the delivery of similar
or related services to the same
individual by one or more
providers of services or
suppliers, or
(II) common issues of law and
fact arising from services
furnished to 2 or more
individuals by one or more
providers of services or
suppliers.
(F) Expedited proceedings.--
(i) Expedited determination.--In the
case of an individual who--
(I) has received notice by a
provider of services that the
provider of services plans to
terminate services provided to
an individual and a physician
certifies that failure to
continue the provision of such
services is likely to place the
individual's health at
significant risk, or
(II) has received notice by a
provider of services that the
provider of services plans to
discharge the individual from
the provider of services,
the individual may request, in writing
or orally, an expedited determination
or an expedited reconsideration of an
initial determination made under
subsection (a), as the case may be, and
the Secretary shall provide such
expedited determination or expedited
reconsideration.
(ii) Expedited hearing.--In a hearing
by the Secretary under this section, in
which the moving party alleges that no
material issues of fact are in dispute,
the Secretary shall make an expedited
determination as to whether any such
facts are in dispute and, if not, shall
render a decision expeditiously.
(G) Reopening and revision of
determinations.--The Secretary may reopen or
revise any initial determination or
reconsidered determination described in this
subsection under guidelines established by the
Secretary in regulations.
(2) Review of coverage determinations.--
(A) National coverage determinations.--
(i) In general.--Review of any
national coverage determination shall
be subject to the following
limitations:
(I) Such a determination
shall not be reviewed by any
administrative law judge.
(II) Such a determination
shall not be held unlawful or
set aside on the ground that a
requirement of section 553 of
title 5, United States Code, or
section 1871(b) of this title,
relating to publication in the
Federal Register or opportunity
for public comment, was not
satisfied.
(III) Upon the filing of a
complaint by an aggrieved
party, such a determination
shall be reviewed by the
Departmental Appeals Board of
the Department of Health and
Human Services. In conducting
such a review, the Departmental
Appeals Board shall review the
record and shall permit
discovery and the taking of
evidence to evaluate the
reasonableness of the
determination. In reviewing
such a determination, the
Departmental Appeals Board
shall defer only to the
reasonable findings of fact,
reasonable interpretations of
law, and reasonable
applications of fact to law by
the Secretary.
(IV) A decision of the
Departmental Appeals Board
constitutes a final agency
action and is subject to
judicial review.
(ii) Definition of national coverage
determination.--For purposes of this
section, the term ``national coverage
determination'' means a determination
by the Secretary respecting whether or
not a particular item or service is
covered nationally under this title,
including such a determination under
1862(a)(1).
(B) Local coverage determination.--In the case of a
local coverage determination made by a fiscal
intermediary or a carrier under part A or part B
respecting whether a particular type or class of items
or services is covered under such parts, the following
limitations apply:
(i) Upon the filing of a complaint by an
aggrieved party, such a determination shall be
reviewed by an administrative law judge of the
Social Security Administration. The
administrative law judge shall review the
record and shall permit discovery and the
taking of evidence to evaluate the
reasonableness of the determination. In
reviewing such a determination, the
administrative law judge shall defer only to
the reasonable findings of fact, reasonable
interpretations of law, and reasonable
applications of fact to law by the Secretary.
(ii) Such a determination may be reviewed by
the Departmental Appeals Board of the
Department of Health and Human Services.
(iii) A decision of the Departmental Appeals
Board constitutes a final agency action and is
subject to judicial review.
(C) No material issues of fact in dispute.--In the
case of review of a determination under subparagraph
(A)(i)(III) or (B)(i) where the moving party alleges
that there are no material issues of fact in dispute,
and alleges that the only issue is the
constitutionality of a provision of this title, or that
a regulation, determination, or ruling by the Secretary
is invalid, the moving party may seek review by a court
of competent jurisdiction.
(D) Pending national coverage determinations.--
(i) In general.--In the event the Secretary
has not issued a national coverage or
noncoverage determination with respect to a
particular type or class of items or services,
an affected party may submit to the Secretary a
request to make such a determination with
respect to such items or services. By not later
than the end of the 90-day period beginning on
the date the Secretary receives such a request,
the Secretary shall take one of the following
actions:
(I) Issue a national coverage
determination, with or without
limitations.
(II) Issue a national noncoverage
determination.
(III) Issue a determination that no
national coverage or noncoverage
determination is appropriate as of the
end of such 90-day period with respect
to national coverage of such items or
services.
(IV) Issue a notice that states that
the Secretary has not completed a
review of the request for a national
coverage determination and that
includes an identification of the
remaining steps in the Secretary's
review process and a deadline by which
the Secretary will complete the review
and take an action described in
subclause (I), (II), or (III).
(ii) In the case of an action described in
clause (i)(IV), if the Secretary fails to take
an action referred to in such clause by the
deadline specified by the Secretary under such
clause, then the Secretary is deemed to have taken
an action described in clause (i)(III) as of the
deadline.
(iii) When issuing a determination under
clause (i), the Secretary shall include an
explanation of the basis for the determination.
An action taken under clause (i) (other than
subclause (IV)) is deemed to be a national
coverage determination for purposes of review
under subparagraph (A).
(E) Annual report on national coverage
determinations.--
(i) In general.--Not later than December 1 of
each year, beginning in 2001, the Secretary
shall submit to Congress a report that sets
forth a detailed compilation of the actual time
periods that were necessary to complete and
fully implement national coverage
determinations that were made in the previous
fiscal year for items, services, or medical
devices not previously covered as a benefit
under this title, including, with respect to
each new item, service, or medical device, a
statement of the time taken by the Secretary to
make the necessary coverage, coding, and
payment determinations, including the time
taken to complete each significant step in the
process of making such determinations.
(ii) Publication of reports on the
internet.--The Secretary shall publish each
report submitted under clause (i) on the
medicare Internet site of the Department of
Health and Human Services.
(3) Publication on the internet of decisions of
hearings of the secretary.--Each decision of a hearing
by the Secretary shall be made public, and the
Secretary shall publish each decision on the Medicare
Internet site of the Department of Health and Human
Services. The Secretary shall remove from such decision
any information that would identify any individual,
provider of services, or supplier.
(4) Limitation on review of certain regulations.--A
regulation or instruction which relates to a method for
determining the amount of payment under part B and
which was initially issued before January 1, 1981,
shall not be subject to judicial review.
(5) Standing.--An action under this section seeking
review of a coverage determination (with respect to
items and services under this title) may be initiated
only by one (or more) of the following aggrieved
persons, or classes of persons:
(A) Individuals entitled to benefits under
part A, or enrolled under part B, or both, who
are in need of the items or services that are
the subject of the coverage determination.
(B) Persons, or classes of persons, who make,
manufacture, offer, supply, make available, or
provide such items and services.
(c) Conduct of Reconsiderations by Independent Contractors.--
(1) In general.--The Secretary shall enter into
contracts with qualified independent contractors to
conduct reconsiderations of initial determinations made
under paragraphs (2) and (3) of subsection (a).
Contracts shall be for an initial term of three years
and shall be renewable on a triennial basis thereafter.
(2) Qualified independent contractor.--For purposes
of this subsection, the term ``qualified independent
contractor'' means an entity or organization that is
independent of any organization under contract with the
Secretary that makes initial determinations under
subsection (a), and that meets the requirements
established by the Secretary consistent with paragraph
(3).
(3) Requirements.--Any qualified independent
contractor entering into a contract with the Secretary
under this subsection shall meet the following
requirements:
(A) In general.--The qualified independent
contractor shall perform such duties and
functions and assume such responsibilities as
may be required under regulations of the
Secretary promulgated to carry out the
provisions of this subsection, and such
additional duties, functions, and
responsibilities as provided under the
contract.
(B) Determinations.--The qualified
independent contractor shall determine, on the
basis of such criteria, guidelines, and
policies established by the Secretary and
published under subsection (d)(2)(D), whether
payment shall be made for items or services
under part A or part B and the amount of such
payment. Such determination shall constitute
the conclusive determination on those issues
for purposes of payment under such parts for
fiscal intermediaries, carriers, and other
entities whose determinations are subject to
review by the contractor; except that payment
may be made if--
(i) such payment is allowed by reason
of section 1879;
(ii) in the case of inpatient
hospital services or extended care
services, the qualified independent
contractor determines that additional
time is required in order to arrange
for postdischarge care, but payment may
be continued under this clause for not
more than 2 days, and only in the case
in which the provider of such services
did not know and could not reasonably
have been expected to know (as
determined under section 1879) that
payment would not otherwise be made for
such services under part A or part B
prior to notification by the qualified
independent contractor under this
subsection;
(iii) such determination is changed
as the result of any hearing by the
Secretary or judicial review of the
decision under this section; or
(iv) such payment is authorized under
section 1861(v)(1)(G).
(C) Deadlines for decisions.--
(i) Determinations.--The qualified
independent contractor shall conduct
and conclude a determination under
subparagraph (B) or an appeal of an
initial determination, and mail the
notice of the decision by not later than
the end of the 45-day period beginning on
the date a request for reconsideration has
been timely filed.
(ii) Consequences of failure to meet
deadline.--In the case of a failure by
the qualified independent contractor to
mail the notice of the decision by the
end of the period described in clause
(i), the party requesting the
reconsideration or appeal may request a
hearing before an administrative law
judge, notwithstanding any requirements
for a reconsidered determination for
purposes of the party's right to such
hearing.
(iii) Expedited reconsiderations.--
The qualified independent contractor
shall perform an expedited
reconsideration under subsection
(b)(1)(F) of a notice from a provider
of services or supplier that payment
may not be made for an item or service
furnished by the provider of services
or supplier, of a decision by a
provider of services to terminate
services furnished to an individual, or
in accordance with the following:
(I) Deadline for decision.--
Notwithstanding section 216(j),
not later than 1 day after the
date the qualified independent
contractor has received a
request for such
reconsideration and has
received such medical or other
records needed for such
reconsideration, the qualified
independent contractor shall
provide notice (by telephone
and in writing) to the
individual and the provider of
services and attending
physician of the individual of
the results of the
reconsideration. Such
reconsideration shall be
conducted regardless of whether
the provider of services or
supplier will charge the
individual for continued
services or whether the
individual will be liable for
payment for such continued
services.
(II) Consultation with
beneficiary.--In such
reconsideration, the qualified
independent contractor shall
solicit the views of the
individual involved.
(D) Limitation on individual reviewing
determinations.--
(i) Physicians.--No physician under
the employ of a qualified independent
contractor may review--
(I) determinations regarding
health care services furnished
to a patient if the physician
was directly responsible for
furnishing such services; or
(II) determinations regarding
health care services provided
in or by an institution,
organization, or agency, if the
physician or any member of the
physician's family has,
directly or indirectly, a
significant financial interest
in such institution,
organization, or agency.
(ii) Physician's family described.--
For purposes of this paragraph, a
physician's family includes the
physician's spouse (other than a spouse
who is legally separated from the
physician under a decree of divorce or
separate maintenance), children
(including stepchildren and legally
adopted children), grandchildren,
parents, and grandparents.
(E) Explanation of determinations.--Any
determination of a qualified independent
contractor shall be in writing, and shall
include a detailed explanation of the
determination as well as a discussion of the
pertinent facts and applicable regulations
applied in making such determination.
(F) Notice requirements.--Whenever a
qualified independent contractor makes a
determination under this subsection, the
qualified independent contractor shall promptly
notify such individual and the entity
responsible for the payment of claims under
part A or part B of such determination.
(G) Dissemination of information.--Each
qualified independent contractor shall, using
the methodology established by the Secretary
under subsection (d)(4), make available all
determinations of such qualified independent
contractors to fiscal intermediaries (under
section 1816), carriers (under section 1842),
peer review organizations (under part B of
title XI), Medicare+Choice organizations
offering Medicare+Choice plans under part C,
and other entities under contract with the
Secretary to make initial determinations under
part A or part B or title XI.
(H) Ensuring consistency in determinations.--
Each qualified independent contractor shall
monitor its determinations to ensure the
consistency of its determinations with respect
to requests for reconsideration of similar or
related matters.
(I) Data collection.--
(i) In general.--Consistent with the
requirements of clause (ii), a
qualified independent contractor shall
collect such information relevant to
its functions, and keep and maintain
such records in such form and manner as
the Secretary may require to carry out
the purposes of this section and shall
permit access to and use of any such
information and records as the
Secretary may require for such
purposes.
(ii) Type of data collected.--Each
qualified independent contractor shall
keep accurate records of each decision
made, consistent with standards
established by the Secretary for such
purpose. Such records shall be
maintained in an electronic database in
a manner that provides for
identification of the following:
(I) Specific claims that give
rise to appeals.
(II) Situations suggesting
the need for increased
education for providers of
services, physicians, or
suppliers.
(III) Situations suggesting
the need for changes in
national or local coverage
policy.
(IV) Situations suggesting
the need for changes in local
medical review policies.
(iii) Annual reporting.--Each
qualified independent contractor shall
submit annually to the Secretary (or
otherwise as the Secretary may request)
records maintained under this paragraph
for the previous year.
(J) Hearings by the secretary.--The qualified
independent contractor shall (i) prepare such
information as is required for an appeal of its
reconsidered determination to the Secretary for
a hearing, including as necessary, explanations
of issues involved in the determination and
relevant policies, and (ii) participate in such
hearings as required by the Secretary.
(4) Number of qualified independent contractors.--The
Secretary shall enter into contracts with not fewer
than 12 qualified independent contractors under this
subsection.
(5) Limitation on qualified independent contractor
liability.--No qualified independent contractor having
a contract with the Secretary under this subsection and
no person who is employed by, or who has a fiduciary
relationship with, any such qualified independent
contractor or who furnishes professional services to
such qualified independent contractor, shall be held by
reason of the performance of any duty, function, or
activity required or authorized pursuant to this
subsection or to a valid contract entered into under
this subsection, to have violated any criminal law, or
to be civilly liable under any law of the United States
or of any State (or political subdivision thereof)
provided due care was exercised in the performance of
such duty, function, or activity.
(d) Administrative Provisions.--
(1) Outreach.--The Secretary shall perform such
outreach activities as are necessary to inform
individuals entitled to benefits under this title and
providers of services and suppliers with respect to
their rights of, and the process for, appeals made
under this section. The Secretary shall use the toll-
free telephone number maintained by the Secretary (1-
800-MEDICAR(E)) (1-800-633-4227) to provide information
regarding appeal rights and respond to inquiries
regarding the status of appeals.
(2) Guidance for reconsiderations and hearings.--
(A) Regulations.--Not later than 1 year after
the date of the enactment of this section, the
Secretary shall promulgate regulations
governing the processes of reconsiderations of
determinations by the Secretary and qualified
independent contractors and of hearings by the
Secretary. Such regulations shall include such
specific criteria and provide such guidance as
required to ensure the adequate functioning of
the reconsiderations and hearings processes and
to ensure consistency in such processes.
(B) Deadlines for administrative action.--
(i) Hearing by administrative law
judge.--
(II) In general.--Except as
provided in subclause (II), an
administrative law judge shall
conduct and conclude a hearing
on a decision of a qualified
independent contractor under
subsection (c) and render a
decision on such hearing by not
later than the end of the 90-
day period beginning on the
date a request for hearing has
been timely filed.
(II) Waiver of deadline by
party seeking hearing.--The 90-
day period under subclause (i)
shall not apply in the case of
a motion or stipulation by the
party requesting the hearing to
waive such period.
(ii) Departmental appeals board
review.--The Departmental Appeals Board
of the Department of Health and Human
Services shall conduct and conclude a
review of the decision on a hearing
described in subparagraph (B) and make
a decision or remand the case to the
administrative law judge for
reconsideration by not later than the
end of the 90-day period beginning on
the date a request for review has been
timely filed.
(iii) Consequences of failure to meet
deadlines.--In the case of a failure by
an administrative law judge to render a
decision by the end of the period
described in clause (ii), the party
requesting the hearing may request a
review by the Departmental Appeals
Board of the Department of Health and
Human Services, notwithstanding any
requirements for a hearing for purposes
of the party's right to such a review.
(iv) DAB hearing procedure.--In the
case of a request described in clause
(iii), the Departmental Appeals Board
shall review the case de novo.
(C) Policies.--The Secretary shall provide
such specific criteria and guidance, including
all applicable national and local coverage
policies and rationale for such policies, as is
necessary to assist the qualified independent
contractors to make informed decisions in
considering appeals under this section. The
Secretary shall furnish to the qualified
independent contractors the criteria and
guidance described in this paragraph in a
published format, which may be an electronic
format.
(D) Publication of medicare coverage policies
on the internet.--The Secretary shall publish
national and local coverage policies under this
title on an Internet site maintained by the
Secretary.
(E) Effect of failure to publish policies.--
(i) National and local coverage
policies.--Qualified independent
contractors shall not be bound by any
national or local medicare coverage
policy established by the Secretary
that is not published on the Internet
site under subparagraph (D).
(ii) Other policies.--With respect to
policies established by the Secretary
other than the policies described in
clause (i), qualified independent
contractors shall not be bound by such
policies if the Secretary does not
furnish to the qualified independent
contractor the policies in a published
format consistent with subparagraph (C).
(3) Continuing education requirement for qualified
independent contractors and administrative law
judges.--
(A) In general.--The Secretary shall provide
to each qualified independent contractor, and,
in consultation with the Commissioner of Social
Security, to administrative law judges that
decide appeals of reconsiderations of initial
determinations or other decisions or
determinations under this section, such
continuing education with respect to policies
of the Secretary under this title or part B of
title XI as is necessary for such qualified
independent contractors and administrative law
judges to make informed decisions with respect
to appeals.
(B) Monitoring of decisions by qualified
independent contractors and administrative law
judges.--The Secretary shall monitor
determinations made by all qualified
independent contractors and administrative law
judges under this section and shall provide
continuing education and training to such
qualified independent contractors and
administrative law judges to ensure consistency
of determinations with respect to appeals on
similar or related matters. To ensure such
consistency, the Secretary shall provide for
administration and oversight of qualified
independent contractors and, in consultation
with the Commissioner of Social Security,
administrative law judges through a central
office of the Department of Health and Human
Services. Such administration and oversight may
not be delegated to regional offices of the
Department.
(4) Dissemination of determinations.--The Secretary
shall establish a methodology under which qualified
independent contractors shall carry out subsection
(c)(3)(G).
(5) Survey.--Not less frequently than every 5 years,
the Secretary shall conduct a survey of a valid sample
of individuals entitled to benefits under this title,
providers of services, and suppliers to determine the
satisfaction of such individuals or entities with the
process for appeals of determinations provided for
under this section and education and training provided
by the Secretary with respect to that process. The
Secretary shall submit to Congress a report describing
the results of the survey, and shall include any
recommendations for administrative or legislative
actions that the Secretary determines appropriate.
(6) Report to congress.--The Secretary shall submit
to Congress an annual report describing the number of
appeals for the previous year, identifying issues that
require administrative or legislative actions, and
including any recommendations of the Secretary with
respect to such actions. The Secretary shall include in
such report an analysis of determinations by qualified
independent contractors with respect to inconsistent
decisions and an analysis of the causes of any such
inconsistencies.
overpayment on behalf of individuals and settlement of claims for
benefits on behalf of deceased individuals
Sec. 1870. (a) [Any payment under this title] Except as
provided in section 1879(i), any payment under this title to
any provider of services or other person with respect to any
items or services furnished any individual shall be regarded as
a payment to such individual.
* * * * * * *
provider reimbursement review board
Sec. 1878. (a) * * *
* * * * * * *
(f)(1) A decision of the Board shall be final [unless the
Secretary, on his own motion, and within 60 days after the
provider of services is notified of the Board's decision,
reverses, affirms, or modifies the Board's decision]. Providers
shall have the right to obtain judicial review of any final
decision of the Board[, or of any reversal, affirmance, or
modification by the Secretary,] or of any reversal, affirmance,
or modification by the Secretary by a civil action commenced
within 60 days of the date on which notice of any final
decision by the Board or of any reversal, affirmance, or
modification by the Secretary is received. Providers shall also
have the right to obtain judicial review of any action of the
fiscal intermediary which involves a question of law or
regulations relevant to the matters in controversy whenever the
Board determines (on its own motion or at the request of a
provider of services as described in the following sentence)
that it is without authority to decide the question, by a civil
action commenced within sixty days of the date on which
notification of such determination is received. If a provider
of services may obtain a hearing under subsection (a) and has
filed a request for such a hearing, such provider may file a
request for a determination by the Board of its authority to
decide the question of law or regulations relevant to the
matters in controversy (accompanied by such documents and
materials as the Board shall require for purposes of rendering
such determination). The Board shall render such determination
in writing within thirty days after the Board receives the
request and such accompanying documents and materials, and the
determination shall be considered a final decision [and not
subject to review by the Secretary]. If the Board fails to
render such determination within such period, the provider may
bring a civil action (within sixty days of the end of such
period) with respect to the matter in controversy contained in
such request for a hearing. Such action shall be brought in the
district court of the United States for the judicial district
in which the provider is located (or, in an action brought
jointly by several providers, the judicial district in which
the greatest number of such providers are located) or in the
District Court for the District of Columbia and shall be tried
pursuant to the applicable provisions under chapter 7 of title
5, United States Code, notwithstanding any other provisions in
section 205. Any appeal to the Board or action for judicial
review by providers which are under common ownership or control
or which have obtained a hearing under subsection(b) must be
brought by such providers as a group with respect to any matter
involving an issue common to such providers.
* * * * * * *
(g)(1) * * *
* * * * * * *
(3) Findings described in paragraph (1) and determinations
and other decisions described in paragraph (2) may be reviewed
or appealed under section 1869.
* * * * * * *
limitation on liability of beneficiary where medicare claims are
disallowed
Sec. 1879. (a) * * *
* * * * * * *
(i) Notwithstanding any other provision of this Act, an
individual who is entitled to benefits under this title and is
furnished a service or item is not liable for repayment to the
Secretary of amounts with respect to such benefits--
(1) subject to paragraph (2), in the case of a claim
for such item or service that is incorrectly paid by
the Secretary; and
(2) in the case of payments made to the individual by
the Secretary with respect to any claim under paragraph
(1), the individual shall be liable for repayment of
such amount only up to the amount of payment received
by the individual from the Secretary.
(j)(1) An individual who is entitled to benefits under this
title and is furnished a service or item is not liable for
payment of amounts with respect to such benefits in the
following cases:
(A) In the case of a benefit for which an initial
determination has not been made by the Secretary under
subsection (a) whether payment may be made under this
title for such benefit.
(B) In the case of a claim for such item or service
that is--
(i) improperly submitted by the provider of
services or supplier; or
(ii) rejected by an entity under contract
with the Secretary to review or pay claims for
services and items furnished under this title,
including an entity under contract with the
Secretary under section 1857.
(2) The limitation on liability under paragraph (1) shall not
apply if the individual signs a waiver provided by the
Secretary under subsection (l) of protections under this
paragraph, except that any such waiver shall not apply in the
case of a denial of a claim for noncompliance with applicable
regulations or procedures under this title or title XI.
(k) An individual who is entitled to benefits under this
title and is furnished services by a provider of services is
not liable for payment of amounts with respect to such services
prior to noon of the first working day after the date the
individual receives the notice of determination to discharge
and notice of appeal rights under paragraph (1), unless the
following conditions are met:
(1) The provider of services shall furnish a notice
of discharge and appeal rights established by the
Secretary under subsection (l) to each individual
entitled to benefits under this title to whom such
provider of services furnishes services, upon admission
of the individual to the provider of services and upon
notice of determination to discharge the individual
from the provider of services, of the individual's
limitations of liability under this section and rights
of appeal under section 1869.
(2) If the individual, prior to discharge from the
provider of services, appeals the determination to
discharge under section 1869 not later than noon of the
first working day after the date the individual
receives the notice of determination to discharge and
notice of appeal rights under paragraph (1), the
provider of services shall, by the close of business of
such first working day, provide to the Secretary (or
qualified independent contractor under section 1869, as
determined by the Secretary) the records required to
review the determination.
(l) The Secretary shall develop appropriate standard forms
for individuals entitled to benefits under this title to waive
limitation of liability protections under subsection (j) and to
receive notice of discharge and appeal rights under subsection
(k). The forms developed by the Secretary under this subsection
shall clearly and in plain language inform such individuals of
their limitations on liability, their rights under section
1869(a) to obtain an initial determination by the Secretary of
whether payment may be made under part A or part B for such
benefit, and their rights of appeal under section 1869(b), and
shall inform such individuals that they may obtain further
information or file an appeal of the determination by use of
the toll-free telephone number (1-800-MEDICAR(E)) (1-800-633-
4227) maintained by the Secretary. The forms developed by the
Secretary under this subsection shall be the only manner in
which such individuals may waive such protections under this
title or title XI.
(m) An individual who is entitled to benefits under this
title and is furnished an item or service is not liable for
payment of cost sharing amounts of more than $50 with respect
to such benefits unless the individual has been informed in
advance of being furnished the item or service of the estimated
amount of the cost sharing for the item or service using a
standard form established by the Secretary.
* * * * * * *
TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS
* * * * * * *
STATE PLANS FOR MEDICAL ASSISTANCE
Sec. 1902. (a) A State plan for medical assistance must--
(1) * * *
* * * * * * *
(64) provide, not later than 1 year after the date of
the enactment of this paragraph, a mechanism to receive
reports from beneficiaries and others and compile data
concerning alleged instances of waste, fraud, and abuse
relating to the operation of this title; [and]
(65) provide that the State shall issue provider
numbers for all suppliers of medical assistance
consisting of durable medical equipment, as defined in
section 1861(n), and the State shall not issue or renew
such a supplier number for any such supplier unless--
(A) * * *
* * * * * * *
(B) a surety bond in a form specified by the
Secretary under section 1834(a)(16)(B) and in
an amount that is not less than $50,000 or such
comparable surety bond as the Secretary may
permit under the second sentence of such
section[.]; and
(66) provide for making eligibility determinations
under section 1935(a).
* * * * * * *
PAYMENT TO STATES
Sec. 1903. (a) From the sums appropriated therefor, the
Secretary (except as otherwise provided in this section) shall
pay to each State which has a plan approved under this title,
for each quarter, beginning with the quarter commencing January
1, 1966--
(1) an amount equal to the Federal medical assistance
percentage (as defined in section 1905(b), subject to
subsections (g) and (j) of this section and subsection
1923(f)) of the total amount expended during such
quarter as medical assistance under the State plan,
reduced by the amount computed under section 1935(c)(1)
for the State and the quarter; plus
* * * * * * *
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) subject to subsection (e), a State shall--
(1) make determinations of eligibility for premium
and cost-sharing subsidies under (and in accordance
with) section 1860G;
(2) inform the Administrator of the Medicare Benefits
Administration of such determinations in cases in which
such eligibility is established; and
(3) otherwise provide such Administrator with such
information as may be required to carry out part D of
title XVIII (including section 1860G).
(b) Payments for Additional Administrative Costs.--
(1) In general.--The amounts expended by a State in
carrying out subsection (a) are, subject to paragraph
(2), expenditures reimbursable under the appropriate
paragraph of section 1903(a); except that,
notwithstanding any other provision of such section,
the applicable Federal matching rates with respect to
such expenditures under such section shall be increased
as follows:
(A) For expenditures attributable to costs
incurred during 2003, the otherwise applicable
Federal matching rate shall be increased by 20
percent of the percentage otherwise payable
(but for this subsection) by the State.
(B) For expenditures attributable to costs
incurred during 2004, the otherwise applicable
Federal matching rate shall be increased by 40
percent of the percentage otherwise payable
(but for this subsection) by the State.
(C) For expenditures attributable to costs
incurred during 2005, the otherwise applicable
Federal matching rate shall be increased by 60
percent of the percentage otherwise payable
(but for this subsection) by the State.
(D) For expenditures attributable to costs
incurred during 2006, the otherwise applicable
Federal matching rate shall be increased by 80
percent of the percentage otherwise payable
(but for this subsection) by the State.
(E) For expenditures attributable to costs
incurred after 2006, the otherwise applicable
Federal matching rate shall be increased to 100
percent.
(2) Coordination.--The State shall provide the
Secretary with such information as may be necessary to
properly allocate administrative expenditures described
in paragraph (1) that may otherwise be made for similar
eligibility determinations.
(c) Federal Assumption of Medicaid Prescription Drug Costs
for Dually-Eligible Beneficiaries.--
(1) In general.--For purposes of section 1903(a)(1)
subject to subsection (e), for a State that is one of
the 50 States or the District of Columbia for a
calendar quarter in a year (beginning with 2003) the
amount computed under this subsection is equal to the
product of the following:
(A) Medicare subsidies.--The total amount of
payments made in the quarter under section
1860G (relating to premium and cost-sharing
prescription drug subsidies for low-income
medicare beneficiaries) that are attributable
to individuals who are residents of the State
and are entitled to benefits with respect to
prescribed drugs under the State plan under
this title (including such a plan operating
under a waiver under section 1115).
(B) State matching rate.--A proportion
computed by subtracting from 100 percent the
Federal medical assistance percentage (as
defined in section 1905(b)) applicable to the
State and the quarter.
(C) Phase-out proportion.--The phase-out
proportion (as defined in paragraph (2)) for
the quarter.
(2) Phase-out proportion.--For purposes of paragraph
(1)(C), the ``phase-out proportion'' for a calendar
quarter in--
(A) 2003 is 80 percent;
(B) 2004 is 60 percent;
(C) 2005 is 40 percent;
(D) 2006 is 20 percent; or
(E) a year after 2006 is 0 percent.
(d) Additional Provisions.--
(1) Medicaid as secondary payor.--In the case of an
individual dually entitled to qualified prescription
drug coverage under a prescription drug plan under part
D of title XVIII (or under a Medicare+Choice plan under
part C of such title) and medical assistance for
prescribed drugs under this title, medical assistance
shall continue to be provided under this title for
prescribed drugs to the extent payment is not made
under the prescription drug plan or the Medicare+Choice
plan selected by the individual.
(2) Condition.--A State may require, as a condition
for the receipt of medical assistance under this title
with respect to prescription drug benefits for an
individual eligible to obtain qualified prescription
drug coverage described in paragraph (1), that the
individual elect qualified prescription drug coverage
under section 1860A.
(e) Treatment of Territories.--
(1) In general.--In the case of a State, other than
the 50 States and the District of Columbia--
(A) the previous provisions of this section
shall not apply to residents of such State; and
(B) if the State establishes a plan described
in paragraph (2) (for providing medical
assistance with respect to the provision of
prescription drugs to medicare beneficiaries),
the amount otherwise determined under section
1108(f) (as increased under section 1108(g))
for the State shall be increased by the amount
specified in paragraph (3).
(2) Plan.--The plan described in this paragraph is a
plan that--
(A) provides medical assistance with respect
to the provision of covered outpatient drugs
(as defined in section 1860B(f)) to low-income
medicare beneficiaries; and
(B) assures that additional amounts received
by the State that are attributable to the
operation of this subsection are used only for
such assistance.
(3) Increased amount.--
(A) In general.--The amount specified in this
paragraph for a State for a year is equal to
the product of--
(i) the aggregate amount specified in
subparagraph (B); and
(ii) the amount specified in section
1108(g)(1) for that State, divided by
the sum of the amounts specified in
such section for all such States.
(B) Aggregate amount.--The aggregate amount
specified in this subparagraph for--
(i) 2003, is equal to $20,000,000; or
(ii) a subsequent year, is equal to
the aggregate amount specified in this
subparagraph for the previous year
increased by annual percentage increase
specified in section 1860(b)(5) for the
year involved.
(4) Report.--The Secretary shall submit to Congress a
report on the application of this subsection and may
include in the report such recommendations as the
Secretary deems appropriate.
references to laws directly affecting medicaid program
Sec. [1935.] 1936. (a) Authority or Requirements to Cover
Additional Individuals.--For provisions of law which make
additional individuals eligible for medical assistance under
this title, see the following:
(1) * * *
* * * * * * *
----------
TITLE 5, UNITED STATES CODE
* * * * * * *
CHAPTER 53--PAY RATES AND SYSTEMS
* * * * * * *
SUBCHAPTER II--EXECUTIVE SCHEDULE PAY RATES
* * * * * * *
Sec. 5314. Positions at level III
Level III of the Executive Schedule applies to the following
positions, for which the annual rate of basic pay shall be the
rate determined with respect to such level under chapter 11 of
title 2, as adjusted by section 5318 of this title:
Solicitor General of the United States.
* * * * * * *
Administrator of the Health Care Financing
Administration.
Sec. 5315. Positions at level IV
Level IV of the Executive Schedule applies to the following
positions, for which the annual rate of basic pay shall be the
rate determined with respect to such level under chapter 11 of
title 2, as adjusted by section 5318 of this title:
Deputy Administrator of General Services.
* * * * * * *
[Administrator of the Health Care Financing
Administration.]
* * * * * * *
VII. DISSENTING VIEWS
The bill ordered reported from this Committee solely by its
Republican Members is a failure. It is a political placebo--the
creature of a desperate poll-driven desire to appear to
accomplish something. All it does is help the drug makers and
the Medicare Health Maintenance Organizations.
By rejecting the Democratic substitute, the Committee
missed a golden opportunity to provide a real, defined,
dependable prescription medicine benefit in Medicare.
The Republican bill is not a true Medicare entitlement. In
fact, there is no ``there'' there in the Republican plan:
there is no certainty of the benefit;
there is no certainty of the premium, other than it
being too high.
there is no certainty that the medicine your doctor
orders will be delivered to you.
There is certainty that our nation's elderly and disabled
who sign up for this Rube Goldberg scheme (see diagram No. 1)
will be hassled by the private insurance companies who will
seek to sell them the equivalent of drug medigap programs and
then, to save money, hound doctors and pharmacies not to
deliver. There is certainty that many rural and community
pharmacies will be driven to the wall of bankruptcy.
In the Republican pseudo-plan, there will be no stability
from year to year. Premiums and formularies will oscillate. Rx
drug plans will enter and leave the program annually, just as
they do under Medicare+Choice.
Millions of seniors and disabled won't participate and will
continue to go without coverage. The frailest elderly and those
with Alzheimer's and other dementia will be particularly
vulnerable, as they face these bad choices.
defeat the republican bill and pass the democratic plan
The Republican bill should be defeated in favor of the
Democratic substitute.
Passing the Democratic substitute would enact the
President's proposal, as described in his radio address of June
24th.\1\ We propose a defined benefit
---------------------------------------------------------------------------
\1\ The only notable difference between the Democratic substitute
offered in Committee and the President's radio address is he proposes
starting in 2002 rather than as originally proposed, 2003.
---------------------------------------------------------------------------
with no deductible;
with Medicare paying half of the first $2000 in Rx
expenses in 2003 and 2004, with the benefit rising to
$5000 in 2009;
with beneficiaries' premium starting at $25 per month
in 2003 and with increases limited to the growth in
medication spending;
with a catastrophic out-of-pocket protection of
$4000, the cost of which is not included in the premium
(thus effectively lowering the beneficiaries total
share of the cost of the program to below 50%); and
with administration through Medicare contractors (who
would obtain discounts off of current Rx prices) in a
way that would ensure everyone would get the medicines
prescribed by their doctors, and those medicines would
be available from convenient neighborhood pharmacies at
lower prices.
includes a package of $3.6 billion in relief for
rural Medicare HMOs, a major improvement in the
Medicare appeals process, and the President's proposal
for $21 billion in adjustments to the Balanced Budget
Act of 1997, helping rural and urban hospitals, managed
care plans, nursing homes, home health agencies, and
others.
all a matter of budget priorities: democrats want to do more for the
retired and disabled. republicans want to do more for the wealthy
We admit that the cost of our Medicare program expansion to
seniors and the disabled is more than twice the cost of the
Republican gift to drug companies and HMOs. We are proud to be
doing more for the most vulnerable in our society. The $40
billion over five years allowed for a drug benefit by the
Republicans' FY 2001 Congressional Budget Resolution is a
prescription for failure. No one can enact a decent Rx benefit
for so little.
Our substitute is a clear statement to the world: the
Republican budget priorities are a total failure: they want to
give tens of billions in tax relief to the richest people in
our society, rather than help the disabled and retired in their
hour of sickness.
background
Prescription drugs are an integral part of modern medical
treatment. Access to these pharmaceuticals should be a Medicare
benefit, treated no differently than Medicare treats doctor
visits or surgical procedures. The task of the Committee was to
pass a bill that satisfied the needs of the \2/3\ of the
nation's seniors who have no prescription drug coverage or only
inadequate and unreliable insurance.
Rather than pursue real dialogue and negotiations to define
the best path to providing a good Medicare drug benefit to
improve the health of retirees and the disabled, the Republican
majority has chosen instead to push for a complex plan that
puts HMO's and drug industry interests before those of
beneficiaries.
While Medicare remains the cornerstone of financial
security for the elderly by virtue of its success in
eliminating major illness as a cause of financial ruin, it does
not cover the cost of outpatient prescription drugs. The 87% of
beneficiaries taking such medications face a bewildering and
potentially expensive series of alternatives. They must
join a Medicare-HMO that may offer drug benefits
temporarily;
if lucky, rely on retiree health plan drug benefits
from their former employer or union;
purchase, on their own, supplemental coverage through
Medigap;
rely on Medicaid if they qualify; or
pay the highest retail drug prices in the world
(since they do not get the discounts offered to
insurers and other large purchasers).
The situation facing seniors and the disabled has reached
crisis proportions: the price of medications has soared, and
HMOs and employers are daily scaling-back or canceling coverage
and Medigap policies are becoming prohibitively expensive.
Under the Thomas Republican plan, Medicare will not provide
guaranteed access to a reasonably priced drug plan, without
regard to where beneficiaries live, independent of private
health insurance company business decisions (which can reduce
or eliminate benefits).
The question is how to provide a defined, guaranteed Rx
benefit and ensure it is available in rural America.
The question is not whether to provide a Medicare drug
benefit, but how to do it. How does the Thomas Republican plan
fail beneficiaries, while benefiting drug companies and
promoting HMO's?
By relying on Medicare managed care programs (HMOs) or a
new private insurance product the Republicans fail or offer
stability and predictability. The following diagram (No. 1)
shows why:
One just has to look at the daily news to see reports of
Health Maintenance Organizations abandoning seniors in region
after region and cutting back or canceling the voluntary Rx
benefits they have been offering in the past. Hundreds of
thousands of seniors will lose their Medicare+Choice (M+C)
plans as plans exit the program effective January 2001. The
Thomas Republican plan takes money intended to purchase
pharmaceuticals for seniors and spends billions on payment
reforms for M+C plans (raising the floor, increasing payment
updates) without the requirement that each of those managed
care plans provide any decent, affordable, defined Rx benefit
to beneficiaries.
Rather than spending money to prop up private plans,
Congress should add the requirement of a good drug benefit to
the basic Medicare package, so that it is available to
everyone:
to those in HMOs,
to those in fee-for-service Medicare,
to those in rural America, and
to those in our cities.
A Rx requirement in all of Medicare would allow M+C plans
to compete on the basis of their ability to manage care, rather
than on how deftly they can market themselves by using the
excess from payments intended to cover basic Medicare benefits
to offer prescription drug coverage. An explicit drug benefit
``eliminates the extreme regional variation in Medicare+Choice
drug coverage, in which only 23 percent of rural beneficiaries
with access to Medicare+Choice have access to prescription drug
coverage, compared to 86 percent of urban beneficiaries.'' \2\
---------------------------------------------------------------------------
\2\ Statement of Nancy-Ann DeParle, Administrator, Health Care
Financing Administration before the House Ways and Means Committee
during a public hearing on Medicare Prescription Drug Coverage. June
13, 2000.
Will a stand-alone private health insurance market
prescription drug plan be offered on an equitable basis to all
beneficiaries?
The Thomas Republican plan appears to rely heavily
onparticipation by private insurers. Testimony by Mr. Charles Kahn,\3\
the president of the Health Insurance Association of America, has made
it clear that such stand-alone, drug-only policies would not work in
practice: ``Designing a theoretical drug coverage model through
legislative language does not guarantee that private insurers will
develop that product in the market.'' He points out that there are
significant economic barriers, including:
---------------------------------------------------------------------------
\3\ Testimony of Charles N. Kahn III, President-Health Insurance
Association of America, during a public hearing on ``Medicare
Prescription Drug Coverage'' before the U.S. House Committee on Ways
and Means. June 13, 2000.
the costs of development, marketing and administration.
Premiums for the policy would have to reflect these
costs. Adding to these administrative expenses is the
inherent difficulty of developing a sustainable premium
structure for a benefit that is so widely used and for
---------------------------------------------------------------------------
which the costs are rising so dramatically.
Adverse selection will further drive up premiums. HIAA
projects that \1/3\ of seniors will have drug costs under $250
in the year 2000, with their average cost estimated at $68.
These seniors are unlikely to purchase any type of private drug
coverage, given that the additional premium for such a policy
would be about 10 times higher than their average annual drug
costs.
Medicare Administrator Nancy Ann DeParle observed
subsidizing private insurers instead of establishing a
reliable Medicare benefit means that out patient
prescription drugs would not be part of the Medicare
benefits package like doctor or hospital care.
Beneficiary premiums would pay for expensive, private
Medigap plans whose administrative costs are on average
more than 10 times higher than Medicare's, according to
the National Association of Insurance Commissioners
statistics, rather than an affordable Medicare option.
Furthermore, Medigap plans have little experience
negotiating with drug manufacturers and relying on
numerous plans does not pool the purchasing power of
seniors; both elements are needed to keep the benefit
affordable.\4\
---------------------------------------------------------------------------
\4\ Statement before the House Ways and Means Committee during
public hearing on Medicare Prescription Drug Coverage. June 13, 2000.
The Administrator pointed out that developing a new private
insurance product market would be difficult in sparsely
populated rural areas, where risk pools are smaller and costs
often higher.
Even if coverage is offered, insurers would be likely to
come in and out of the market, move to profitable areas and
significantly modify benefit design from year to year based on
the prior year's experience. This could result in the same
pull-outs and uncertainty seen in the M+C plans.
It is quite possible that with enough subsidies from the
taxpayer that private insurers will participate in this
Republican scheme. But the questions remain:
--at what extra price to taxpayers in wasted
overhead?
--at what extra cost to beneficiaries?
--at what level of stability and certainty?
Is the drug coverage available and affordable to all
beneficiaries?
Under the Thomas Republican bill, the monthly premiums for
these new private insurance (medigap-like) Prescription Drug
Plans remain unspecified, subject to negotiation by a new
Medicare Benefits Administration. They can and will vary
significantly by region of the country. CBO (at the time of
writing) estimated the Republican plan would enroll about 2.4
million fewer seniors than the Democratic plan.
We suspect that many of those left out will be lower-income
individuals, because the Republican plan lets States enroll
people for low-income premium and co-payment assistance only
through State welfare offices, rather than sign them up with
less hassle through Social Security offices. Without assistance
in paying premiums and copays, millions will be unable to
afford the Republican plan.
The Republican plan does not provide direct premium
subsidies to those with incomes above 150 percent of
poverty.\5\ In testimony before the Ways and Means Committee on
June 13, 2000, the representative of the Older Women's League
emphasized that access to prescription drugs is not simply a
problem for the poor. While older Americans comprise only 13
percent of the U.S. population, they account for \1/3\ of
prescription drug spending. After premium payments, drugs
account for the single largest component of out-of-pocket
spending for non-institutionalized Medicare beneficiaries age
65 and older. Thus many seniors with moderate incomes also are
finding the higher cost of drugs to be out of reach. Middle
income seniors are finding their retirement security undermined
by the high cost of pharmaceuticals. A simply Medicaid
enhancement does not solve the full scope of the problem.
---------------------------------------------------------------------------
\5\ In contrast, the Democratic substitute would provide a premium
subsidy for all participating beneficiaries of greater than 50%.
---------------------------------------------------------------------------
The following table shows how inadequate the Republican
drug benefit is:
The Thomas Republican bill would subsidize insurers for
part of the cost of the most expensive enrollees, claiming that
this will result in the ``trickle down'' effect of lower
premiums for all; this ``trickle down benefit'' is not mandated
and is far, far from assured. Table 3 explains how the
Republican plan is a gift to the companies, rather than the
beneficiaries:
Will the Republican bill guarantee a meaningful benefit?
The Thomas bill specifies a dollar amount--an actuarial
equivalent \6\--and not a true defined benefit. Private
insurers could define deductibles, co-pays and benefit limits.
They could change significantly the benefit package year by
year. Only the catastrophic coverage is clearly delineated.
This is an invitation to beneficiary confusion and benefit
packages designed by for-profit companies for ``cherry
picking'' of low-cost, healthy enrollees. For example, insurers
could offer no deductible, low co-pays and a low benefit cap
that would leave an even larger gap before the catastrohic
stop-loss became effective. This represents a retreat from the
Medigap reforms of the early 1990's that stndardized benefits,
thus ensuring that plans compete on price and quality and not
on consumer confusion.
---------------------------------------------------------------------------
\6\ Members of Congress may get a lot of questions, when they try
to explain ``actuarial equivalent'' at a Town Meeting. Unfortunately,
it is just not possible to explain the Republican plan simply!
---------------------------------------------------------------------------
The plan also seems to require a formal appeals process
before a beneficiary could get off-formulary drugs or to file
any grievance. Such a mechanism could limit access by the
``hassling'' of doctros and beneficiaries. Furthermore, this
plan's multi-insurer approach reduces the pooled purcahsing
power of seniors, encouraging insuers to control costs through
restrictive formularies and limited pharmacy choice.
Bye-bye corner drugstore?
Finally, the Republican bill offers no guarantee that a
beneficiary will be able to obtain needed pharmaceuticals from
his or her local pharmacy, only that access be ``convenient.''
Will the approach proposed by the Republican plan offer any
remedies for rising drug prices?
We believe the Congressional Budget Office may say (we do
not have their letter of analysis at the time of writing) that
the Republican bill would achieve deeper drug price savings
than the Democratic plan, but that those savings are largely
offset by marketing costs and the cost of second-guessing and
hassling doctors to switch medicines. Indeed, those savings may
not be passed through to beneficiaries.
Policies that rely primarily on restrictive formularies,
fewer retail outlets, and excluding access to needed
medications in an attempt to control costs are unacceptable to
seniors and the disabled.
Remember the laughter and cheers in theaters all across
America when the heroine in ``As Good As It Gets'' expresses
her true feelings about HMOs? Wait 'til seniors experience the
hassle of the Republican Rx private insurers!
They won't be laughing.
They will be begging every Member of Congress for help.
republican plan creates new bureaucracies and adds inefficiency and
expense
Ironically, the Thomas Republican bill creates yet another
governmental entity. Within the Department of Health and Human
Services, there would be established a new Medicare Benefits
Administration (MBA), exempt from normal Civil Service pay
scales (but with a limit of $122,400 per employee), the
conflict of interest rules that govern the civil service, and
co-existing with HCFA.
principles we support
The Republican scheme is described accurately by Ranking
Health Subcommittee member Pete Stark as, ``basically a hoax, a
prescription for failure.'' It fails to offer the option of
affordable prescription drug insurance to all Medicare
beneficiaries.
Democratic amendments offered in the attempt to remedy the
failures in the Thomas plan were rejected.
Defeated by a series of votes along party lines were
--a proposal by Rep. Cardin to institute a
government-guaranteed safety-net Rx plan to supplement
the private market plans. Mr. Cardin pointed out,
``there is no guarantee of any particular benefit that
our constituents will get if the Republican bill is
enacted. The Republicans say this would be an
entitlement program, but there is no specific benefit
to which seniors are entitled.''
--an amendment by Reps. Thurman and Doggett to
guarantee to seniors the same drug discounts that drug
manufacturers give their best or most favored
customers. This version of Rep. Tom Allen's price
discount bill was defeated by the Republican majority.
--Rep. McDermott's effort to eliminate the need for
low-income beneficiaries to go to State Medicaid
(welfare) offices in order to apply for and receive the
premium and co-insurance assistance to which they are
``entitled.'' The Republicans likely opposed this
provision because they knew that if we permitted
enrollment through Social Security offices, more low
income seniors and disabled would participate and costs
would go up.
--Rep. Tanner's amendment to ensure that any local
pharmacy that wants to participate in the program can
do so. This amendment was proposed in order to
guarantee access to benefits for all beneficiaries,
especially those in rural areas. The amendment drew one
Republican vote, but was defeated by all the rest of
the Republicans.
Seniors need and deserve stability, equity, continuity and
predictability in their health care plans. They do not get this
from for-profit managed care as presently structured. They will
not get this from private insurance policies with premiums, co-
pays, benefits or even coverage open to change on an annual
basis.
The Rx plan we enact should be simple. Our plan is simple:
the following chart says it all:
Under the Democrats plan, beneficiaries can volunteer to
receive, as part of Medicare, universal, defined-benefit
prescription medicine coverage. With negotiated price discounts
and private sector administration (like Medicare is
administered today) the plan will be affordable to
beneficiaries and to taxpayers.
As stated by Ways and Means Committee Ranking Member
Rangel, ``The Republicans have no confidence in providing
assistance directly to our aged. Rather, they want to subsidize
the private sector, the HMOs and the insurance companies.''
The Democratic substitute amendment would help those who
need it.
help for medicare providers and the special needs of rural america
Our substitute also demonstrates a commitment to supporting
the President on the need for corrections to the Balanced
Budget Act of 1997. We propose adjustments along the lines
suggested by the President.
We propose to return to the people who serve Medicare
beneficiaries the same amount he has proposed: $21 billion over
five years. This package includes major adjustments to rural
and urban hospitals, teaching hospitals, hospitals that serve a
higher proportion of low-income patients, skilled nursing
facilities, home health agencies, end-stage renal disease
facilities, and others.
We include in this package Rep. Tanner's special rural
hospital amendment to provide a full inflation update and to
pay more for rural hospital outpatient services.
At the request of Reps. McDermott, Thurman, and Cardin, we
include a $3.6 billion package of assistance to stabilize and
encourage the growth of Medicare HMOs and managed care in rural
and lower-paid counties.
Like the President, we leave slightly more than half the
$21 billion unspecified--but with the commitment that we will
work with all our colleagues in the coming weeks to determine
the areas of remaining unaddressed critical need. We will work
to enact a final Balanced Budget Refinement Act II this summer.
conclusion
Members of Congress should defeat the Republican Rx hoax
and vote for a real, defined benefit in Medicare. They should
enact the Democatic substitute.
Pete Stark.
Jim McDermott.
Xavier Becerra.
William J. Coyne.
Michael R. McNulty.
Robert T. Matsui.
John S. Tanner.
Karen L. Thurman.
William J. Jefferson.
C.B. Rangel.
Sander Levin.
Jerry Kleczka.
Richard E. Neal.
John Lewis.
Ben Cardin.