Prescription Drug and Medicare Improvement Act of 2003

        [Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1 Engrossed in Senate (ES)]

108th CONGRESS
1st Session
S. 1

_______________________________________________________________________

AN ACT

To amend title XVIII of the Social Security Act to provide for a
voluntary prescription drug benefit under the medicare program and to
strengthen and improve the medicare program, and for other purposes.

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

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

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

Sec. 1. Short title; amendments to Social Security Act; references to
BIPA and Secretary; table of contents.
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

Subtitle A--Medicare Voluntary Prescription Drug Delivery Program

Sec. 101. Medicare voluntary prescription drug delivery program.
``Part D--Voluntary Prescription Drug Delivery Program

``Sec. 1860D. Definitions; treatment of references to
provisions in MedicareAdvantage program.
``Subpart 1--Establishment of Voluntary Prescription Drug Delivery
Program

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

``Sec. 1860D-10. Establishment of service areas.
``Sec. 1860D-11. Publication of risk adjusters.
``Sec. 1860D-12. Submission of bids for proposed Medicare
Prescription Drug plans.
``Sec. 1860D-13. Approval of proposed Medicare Prescription
Drug plans.
``Sec. 1860D-14. Computation of monthly standard prescription
drug coverage premiums.
``Sec. 1860D-15. Computation of monthly national average
premium.
``Sec. 1860D-16. Payments to eligible entities.
``Sec. 1860D-17. Computation of monthly beneficiary obligation.
``Sec. 1860D-18. Collection of monthly beneficiary obligation.
``Sec. 1860D-19. Premium and cost-sharing subsidies for low-
income individuals.
``Sec. 1860D-20. Reinsurance payments for expenses incurred in
providing prescription drug coverage above
the annual out-of-pocket threshold.
``Sec. 1860D-21. Direct subsidy for sponsor of a qualified
retiree prescription drug plan for plan
enrollees eligible for, but not enrolled
in, this part.
``Sec. 1860D-22. Direct subsidies for qualified State offering
a State pharmaceutical assistance program
for program enrollees eligible for, but not
enrolled in, this part.
``Subpart 3--Miscellaneous Provisions

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

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

Sec. 111. Medicare prescription drug discount card and transitional
assistance for low-income beneficiaries.
Subtitle C--Standards for Electronic Prescribing

Sec. 121. Standards for electronic prescribing.
Subtitle D--Other Provisions

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

Subtitle A--MedicareAdvantage Competition

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

Sec. 211. Establishment of MedicareAdvantage preferred provider program
option.
Subtitle C--Other Managed Care Reforms

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

Sec. 231. Establishment of alternative payment system for preferred
provider organizations in highly
competitive regions.
Sec. 232. Fee-for-service modernization projects.
Subtitle E--National Bipartisan Commission on Medicare Reform

Sec. 241. MedicareAdvantage goal; establishment of Commission.
Sec. 242. National bipartisan commission on medicare reform.
Sec. 243. Congressional consideration of reform proposals.
Sec. 244. Authorization of appropriations.
TITLE III--CENTER FOR MEDICARE CHOICES

Sec. 301. Establishment of the Center for Medicare Choices.
Sec. 302. Miscellaneous administrative provisions.
TITLE IV--MEDICARE FEE-FOR-SERVICE IMPROVEMENTS

Subtitle A--Provisions Relating to Part A

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

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

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

Subtitle A--Regulatory Reform

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

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

Sec. 521. Increased flexibility in medicare administration.
Subtitle D--Education and Outreach Improvements

Sec. 531. Provider education and technical assistance.
Sec. 532. Access to and prompt responses from medicare contractors.
Sec. 533. Reliance on guidance.
Sec. 534. Medicare provider ombudsman.
Sec. 535. Beneficiary outreach demonstration programs.
Subtitle E--Review, Recovery, and Enforcement Reform

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

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

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

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

Sec. 801. Importation of prescription drugs.
TITLE IX--DRUG COMPETITION ACT OF 2003

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

TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

Subtitle A--Medicare Voluntary Prescription Drug Delivery Program

SEC. 101. MEDICARE VOLUNTARY PRESCRIPTION DRUG DELIVERY PROGRAM.

(a) Establishment.--Title XVIII (42 U.S.C. 1395 et seq.) is amended
by redesignating part D as part E and by inserting after part C the
following new part:

``Part D--Voluntary Prescription Drug Delivery Program

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

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

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

``establishment of voluntary prescription drug delivery program

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

``enrollment under program

``Sec. 1860D-2. (a) Establishment of Enrollment Process.--
``(1) Process similar to part b enrollment.--The
Administrator shall establish a process through which an
eligible beneficiary (including an eligible beneficiary
enrolled in a MedicareAdvantage plan offered by a
MedicareAdvantage organization) may make an election to enroll
under this part. Such process shall be similar to the process
for enrollment in part B under section 1837, including the
deeming provisions of such section.
``(2) Condition of enrollment.--An eligible beneficiary
must be enrolled under this part in order to be eligible to
receive access to qualified prescription drug coverage.
``(b) Special Enrollment Procedures.--
``(1) Late enrollment penalty.--
``(A) Increase in monthly beneficiary obligation.--
Subject to the succeeding provisions of this paragraph,
in the case of an eligible beneficiary whose coverage
period under this part began pursuant to an enrollment
after the beneficiary's initial enrollment period under
part B (determined pursuant to section 1837(d)) and not
pursuant to the open enrollment period described in
paragraph (2), the Administrator shall establish
procedures for increasing the amount of the monthly
beneficiary obligation under section 1860D-17
applicable to such beneficiary by an amount that the
Administrator determines is actuarially sound for each
full 12-month period (in the same continuous period of
eligibility) in which the eligible beneficiary could
have been enrolled under this part but was not so
enrolled.
``(B) Periods taken into account.--For purposes of
calculating any 12-month period under subparagraph (A),
there shall be taken into account--
``(i) the months which elapsed between the
close of the eligible beneficiary's initial
enrollment period and the close of the
enrollment period in which the beneficiary
enrolled; and
``(ii) in the case of an eligible
beneficiary who reenrolls under this part, the
months which elapsed between the date of
termination of a previous coverage period and
the close of the enrollment period in which the
beneficiary reenrolled.
``(C) Periods not taken into account.--
``(i) In general.--For purposes of
calculating any 12-month period under
subparagraph (A), subject to clause (ii), there
shall not be taken into account months for
which the eligible beneficiary can demonstrate
that the beneficiary had creditable
prescription drug coverage (as defined in
subparagraph (F)).
``(ii) Beneficiary must involuntarily lose
coverage.--Clause (i) shall only apply with
respect to coverage--
``(I) in the case of coverage
described in clause (ii) of
subparagraph (F), if the plan
terminates, ceases to provide, or
reduces the value of the prescription
drug coverage under such plan to below
the actuarial value of standard
prescription drug coverage (as
determined under section 1860D-6(f));
``(II) in the case of coverage
described in clause (i), (iii), or (iv)
of subparagraph (F), if the beneficiary
is involuntarily disenrolled or becomes
ineligible for such coverage; or
``(III) in the case of a
beneficiary with coverage described in
clause (v) of subparagraph (F), if the
issuer of the policy terminates
coverage under the policy.
``(D) Periods treated separately.--Any increase in
an eligible beneficiary's monthly beneficiary
obligation under subparagraph (A) with respect to a
particular continuous period of eligibility shall not
be applicable with respect to any other continuous
period of eligibility which the beneficiary may have.
``(E) Continuous period of eligibility.--
``(i) In general.--Subject to clause (ii),
for purposes of this paragraph, an eligible
beneficiary's `continuous period of
eligibility' is the period that begins with the
first day on which the beneficiary is eligible
to enroll under section 1836 and ends with the
beneficiary's death.
``(ii) Separate period.--Any period during
all of which an eligible beneficiary satisfied
paragraph (1) of section 1836 and which
terminated in or before the month preceding the
month in which the beneficiary attained age 65
shall be a separate `continuous period of
eligibility' with respect to the beneficiary
(and each such period which terminates shall be
deemed not to have existed for purposes of
subsequently applying this paragraph).
``(F) Creditable prescription drug coverage
defined.--Subject to subparagraph (G), for purposes of
this part, the term `creditable prescription drug
coverage' means any of the following:
``(i) Drug-only coverage under Medicaid.--
Coverage of covered outpatient drugs (as
defined in section 1927) under title XIX or a
waiver under 1115 that is provided to an
individual who is not a dual eligible
individual (as defined in section 1860D-
19(a)(4)(E)).
``(ii) Prescription drug coverage under a
group health plan.--Any outpatient prescription
drug coverage under a group health plan,
including a health benefits plan under chapter
89 of title 5, United States Code (commonly
known as the Federal employees health benefits
program), and a qualified retiree prescription
drug plan (as defined in section 1860D-
20(e)(4)).
``(iii) State pharmaceutical assistance
program.--Coverage of prescription drugs under
a State pharmaceutical assistance program.
``(iv) Veterans' coverage of prescription
drugs.--Coverage of prescription drugs for
veterans, and survivors and dependents of
veterans, under chapter 17 of title 38, United
States Code.
``(v) Prescription drug coverage under
medigap policies.--Coverage under a medicare
supplemental policy under section 1882 that
provides benefits for prescription drugs
(whether or not such coverage conforms to the
standards for packages of benefits under
section 1882(p)(1)).
``(G) Requirement for creditable coverage.--
Coverage described in clauses (i) through (v) of
subparagraph (F) shall not be considered to be
creditable coverage under this part unless the coverage
provides coverage of the cost of prescription drugs the
actuarial value of which (as defined by the
Administrator) to the beneficiary equals or exceeds the
actuarial value of standard prescription drug coverage
(as determined under section 1860D-6(f)).
``(H) Disclosure.--
``(i) In general.--Each entity that offers
coverage of the type described in clause (ii)
(iii), (iv), or (v) of subparagraph (F) shall
provide for disclosure, consistent with
standards established by the Administrator, of
whether the coverage provides coverage of the
cost of prescription drugs the actuarial value
of which (as defined by the Administrator) to
the beneficiary equals or exceeds the actuarial
value of standard prescription drug coverage
(as determined under section 1860D-6(f)).
``(ii) Waiver of limitations.--An
individual may apply to the Administrator to
waive the application of subparagraph (G) if
the individual establishes that the individual
was not adequately informed that the coverage
the beneficiary was enrolled in did not provide
the level of benefits required in order for the
coverage to be considered creditable coverage
under subparagraph (F).
``(2) Initial election periods.--
``(A) Open enrollment period for current
beneficiaries in which late enrollment procedures do
not apply.--In the case of an individual who is an
eligible beneficiary as of November 1, 2005, there
shall be an open enrollment period of 6 months
beginning on that date under which such beneficiary may
enroll under this part without the application of the
late enrollment procedures established under paragraph
(1)(A).
``(B) Individual covered in future.--In the case of
an individual who becomes an eligible beneficiary after
such date, there shall be an initial election period
which is the same as the initial enrollment period
under section 1837(d).
``(3) Special enrollment period for beneficiaries who
involuntarily lose creditable prescription drug coverage.--
``(A) Establishment.--The Administrator shall
establish a special open enrollment period (as
described in subparagraph (B)) for an eligible
beneficiary that loses creditable prescription drug
coverage.
``(B) Special open enrollment period.--The special
open enrollment period described in this subparagraph
is the 63-day period that begins on--
``(i) in the case of a beneficiary with
coverage described in clause (ii) of paragraph
(1)(F), the later of the date on which the plan
terminates, ceases to provide, or substantially
reduces (as defined by the Administrator) the
value of the prescription drug coverage under
such plan or the date the beneficiary is
provided with notice of such termination or
reduction;
``(ii) in the case of a beneficiary with
coverage described in clause (i), (iii), or
(iv) of paragraph (1)(F), the later of the date
on which the beneficiary is involuntarily
disenrolled or becomes ineligible for such
coverage or the date the beneficiary is
provided with notice of such loss of
eligibility; or
``(iii) in the case of a beneficiary with
coverage described in clause (v) of paragraph
(1)(F), the latter of the date on which the
issuer of the policy terminates coverage under
the policy or the date the beneficiary is
provided with notice of such termination.
``(c) Period of Coverage.--
``(1) In general.--Except as provided in paragraph (2) and
subject to paragraph (3), an eligible beneficiary's coverage
under the program under this part shall be effective for the
period provided in section 1838, as if that section applied to
the program under this part.
``(2) Open and special enrollment.--
``(A) Open enrollment.--An eligible beneficiary who
enrolls under the program under this part pursuant to
subsection (b)(2) shall be entitled to the benefits
under this part beginning on January 1, 2006.
``(B) Special enrollment.--Subject to paragraph
(3), an eligible beneficiary who enrolls under the
program under this part pursuant to subsection (b)(3)
shall be entitled to the benefits under this part
beginning on the first day of the month following the
month in which such enrollment occurs.
``(3) Limitation.--Coverage under this part shall not begin
prior to January 1, 2006.
``(d) Termination.--
``(1) In general.--The causes of termination specified in
section 1838 shall apply to this part in the same manner as
such causes apply to part B.
``(2) Coverage terminated by termination of coverage under
part a or b.--
``(A) In general.--In addition to the causes of
termination specified in paragraph (1), the
Administrator shall terminate an individual's coverage
under this part if the individual is no longer enrolled
in both parts A and B.
``(B) Effective date.--The termination described in
subparagraph (A) shall be effective on the effective
date of termination of coverage under part A or (if
earlier) under part B.
``(3) Procedures regarding termination of a beneficiary
under a plan.--The Administrator shall establish procedures for
determining the status of an eligible beneficiary's enrollment
under this part if the beneficiary's enrollment in a Medicare
Prescription Drug plan offered by an eligible entity under this
part is terminated by the entity for cause (pursuant to
procedures established by the Administrator under section
1860D-3(a)(1)).

``election of a medicare prescription drug plan

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

``providing information to beneficiaries

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

``beneficiary protections

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

``prescription drug benefits

``Sec. 1860D-6. (a) Requirements.--
``(1) In general.--For purposes of this part and part C,
the term `qualified prescription drug coverage' means either of
the following:
``(A) Standard prescription drug coverage with
access to negotiated prices.--Standard prescription
drug coverage (as defined in subsection (c)) and access
to negotiated prices under subsection (e).
``(B) Actuarially equivalent prescription drug
coverage with access to negotiated prices.--Coverage of
covered drugs which meets the alternative coverage
requirements of subsection (d) and access to negotiated
prices under subsection (e), but only if it is approved
by the Administrator as provided under subsection (d).
``(2) Permitting additional prescription drug coverage.--
``(A) In general.--Subject to subparagraph (B) and
section 1860D-13(c)(2), nothing in this part shall be
construed as preventing qualified prescription drug
coverage from including coverage of covered drugs that
exceeds the coverage required under paragraph (1).
``(B) Requirement.--An eligible entity may not
offer a Medicare Prescription Drug plan that provides
additional benefits pursuant to subparagraph (A) in an
area unless the eligible entity offering such plan also
offers a Medicare Prescription Drug plan in the area
that only provides the coverage of prescription drugs
that is required under paragraph (1).
``(3) Cost control mechanisms.--In providing qualified
prescription drug coverage, the entity offering the Medicare
Prescription Drug plan or the MedicareAdvantage plan may use a
variety of cost control mechanisms, including the use of
formularies, tiered copayments, selective contracting with
providers of prescription drugs, and mail order pharmacies.
``(b) Application of Secondary Payor Provisions.--The provisions of
section 1852(a)(4) shall apply under this part in the same manner as
they apply under part C.
``(c) Standard Prescription Drug Coverage.--For purposes of this
part and part C, the term `standard prescription drug coverage' means
coverage of covered drugs that meets the following requirements:
``(1) Deductible.--
``(A) In general.--The coverage has an annual
deductible--
``(i) for 2006, that is equal to $275; or
``(ii) for a subsequent year, that is equal
to the amount specified under this paragraph
for the previous year increased by the
percentage specified in paragraph (5) for the
year involved.
``(B) Rounding.--Any amount determined under
subparagraph (A)(ii) that is not a multiple of $1 shall
be rounded to the nearest multiple of $1.
``(2) Limits on cost-sharing.--The coverage has cost-
sharing (for costs above the annual deductible specified in
paragraph (1) and up to the initial coverage limit under
paragraph (3)) that is equal to 50 percent or that is
actuarially consistent (using processes established under
subsection (f)) with an average expected payment of 50 percent
of such costs.
``(3) Initial coverage limit.--
``(A) In general.--Subject to paragraph (4), the
coverage has an initial coverage limit on the maximum
costs that may be recognized for payment purposes
(including the annual deductible)--
``(i) for 2006, that is equal to $4,500; or
``(ii) for a subsequent year, that is equal
to the amount specified in this paragraph for
the previous year, increased by the annual
percentage increase described in paragraph (5)
for the year involved.
``(B) Rounding.--Any amount determined under
subparagraph (A)(ii) that is not a multiple of $1 shall
be rounded to the nearest multiple of $1.
``(4) Limitation on out-of-pocket expenditures by
beneficiary.--
``(A) In general.--The coverage provides benefits
with cost-sharing that is equal to 10 percent after the
individual has incurred costs (as described in
subparagraph (C)) for covered drugs in a year equal to
the annual out-of-pocket limit specified in
subparagraph (B).
``(B) Annual out-of-pocket limit.--
``(i) In general.--For purposes of this
part, the `annual out-of-pocket limit'
specified in this subparagraph--
``(I) for 2006, is equal to $3,700;
or
``(II) for a subsequent year, is
equal to the amount specified in this
subparagraph for the previous year,
increased by the annual percentage
increase described in paragraph (5) for
the year involved.
``(ii) Rounding.--Any amount determined
under clause (i)(II) that is not a multiple of
$1 shall be rounded to the nearest multiple of
$1.
``(C) Application.--In applying subparagraph (A)--
``(i) incurred costs shall only include
costs incurred, with respect to covered drugs,
for the annual deductible (described in
paragraph (1)), cost-sharing (described in
paragraph (2)), and amounts for which benefits
are not provided because of the application of
the initial coverage limit described in
paragraph (3) (including costs incurred for
covered drugs described in section
1860D(a)(2)(C)); and
``(ii) such costs shall be treated as
incurred only if they are paid by the
individual (or by another individual, such as a
family member, on behalf of the individual),
under section 1860D-19 (but only with respect
to the percentage of such costs that the
individual is responsible for under that
section), under title XIX, or under a State
pharmaceutical assistance program and the
individual (or other individual) is not
reimbursed through insurance or otherwise, a
group health plan, or other third-party payment
arrangement for such costs.
``(D) Information regarding third-party
reimbursement.--In order to ensure compliance with the
requirements of subparagraph (C)(ii), the Administrator
is authorized to establish procedures, in coordination
with the Secretary of Treasury and the Secretary of
Labor, for determining whether costs for individuals
are being reimbursed through insurance or otherwise, a
group health plan, or other third-party payment
arrangement, and for alerting the entities in which
such individuals are enrolled about such reimbursement
arrangements. An entity with a contract under this part
may also periodically ask individuals enrolled in a
plan offered by the entity whether the individuals have
or expect to receive such third-party reimbursement. A
material misrepresentation of the information described
in the preceding sentence by an individual (as defined
in standards set by the Administrator and determined
through a process established by the Administrator)
shall constitute grounds for termination of enrollment
under section 1860D-2(d).
``(5) Annual percentage increase.--For purposes of this
part, the annual percentage increase specified in this
paragraph for a year is equal to the annual percentage increase
in average per capita aggregate expenditures for covered drugs
in the United States for beneficiaries under this title, as
determined by the Administrator for the 12-month period ending
in July of the previous year.
``(d) Alternative Coverage Requirements.--A Medicare Prescription
Drug plan or MedicareAdvantage plan may provide a different
prescription drug benefit design from the standard prescription drug
coverage described in subsection (c) so long as the Administrator
determines (based on an actuarial analysis by the Administrator) that
the following requirements are met and the plan applies for, and
receives, the approval of the Administrator for such benefit design:
``(1) Assuring at least actuarially equivalent prescription
drug coverage.--
``(A) Assuring equivalent value of total
coverage.--The actuarial value of the total coverage
(as determined under subsection (f)) is at least equal
to the actuarial value (as so determined) of standard
prescription drug coverage.
``(B) Assuring equivalent unsubsidized value of
coverage.--The unsubsidized value of the coverage is at
least equal to the unsubsidized value of standard
prescription drug coverage. For purposes of this
subparagraph, the unsubsidized value of coverage is the
amount by which the actuarial value of the coverage (as
determined under subsection (f)) exceeds the actuarial
value of the amounts associated with the application of
section 1860D-17(c) and reinsurance payments under
section 1860D-20 with respect to such coverage.
``(C) Assuring standard payment for costs at
initial coverage limit.--The coverage is designed,
based upon an actuarially representative pattern of
utilization (as determined under subsection (f)), to
provide for the payment, with respect to costs incurred
that are equal to the initial coverage limit under
subsection (c)(3), of an amount equal to at least the
product of--
``(i) such initial coverage limit minus the
deductible under subsection (c)(1); and
``(ii) the percentage specified in
subsection (c)(2).
Benefits other than qualified prescription drug coverage shall
not be taken into account for purposes of this paragraph.
``(2) Deductible and limitation on out-of-pocket
expenditures by beneficiaries may not vary.--The coverage may
not vary the deductible under subsection (c)(1) for the year or
the limitation on out-of-pocket expenditures by beneficiaries
described in subsection (c)(4) for the year.
``(e) Access to Negotiated Prices.--
``(1) Access.--
``(A) In general.--Under qualified prescription
drug coverage offered by an eligible entity or a
MedicareAdvantage organization, the entity or
organization shall provide beneficiaries with access to
negotiated prices used for payment for covered drugs,
regardless of the fact that no benefits may be payable
under the coverage with respect to such drugs because
of the application of the deductible, any cost-sharing,
or an initial coverage limit (described in subsection
(c)(3)). For purposes of this part, the term
`negotiated prices' includes all discounts, direct or
indirect subsidies, rebates, or other price concessions
or direct or indirect remunerations.
``(B) Medicaid related provisions.--Insofar as a
State elects to provide medical assistance under title
XIX for a drug based on the prices negotiated under a
Medicare Prescription Drug plan under this part--
``(i) the medical assistance for such a
drug shall be disregarded for purposes of a
rebate agreement entered into under section
1927 which would otherwise apply to the
provision of medical assistance for the drug
under title XIX; and
``(ii) the prices negotiated under a
Medicare Prescription Drug plan with respect to
covered drugs, under a MedicareAdvantage plan
with respect to such drugs, or under a
qualified retiree prescription drug plan (as
defined in section 1860D-20(e)(4)) with respect
to such drugs, on behalf of eligible
beneficiaries, shall (notwithstanding any other
provision of law) not be taken into account for
the purposes of establishing the best price
under section 1927(c)(1)(C).
``(2) Cards or other technology.--
``(A) In general.--In providing the access under
paragraph (1), the eligible entity or MedicareAdvantage
organization shall issue a card or use other technology
pursuant to section 1860D-5(b)(1).
``(B) National standards.--
``(i) Development.--The Administrator shall
provide for the development of national
standards relating to a standardized format for
the card or other technology required under
subparagraph (A). Such standards shall be
compatible with parts C and D of title XI and
may be based on standards developed by an
appropriate standard setting organization.
``(ii) Consultation.--In developing the
standards under clause (i), the Administrator
shall consult with the National Council for
Prescription Drug Programs and other standard-
setting organizations determined appropriate by
the Administrator.
``(iii) Implementation.--The Administrator
shall implement the standards developed under
clause (i) by January 1, 2008.
``(3) Disclosure.--The eligible entity offering a Medicare
Prescription Drug plan and the MedicareAdvantage organization
offering a MedicareAdvantage plan shall disclose to the
Administrator (in a manner specified by the Administrator) the
extent to which discounts, direct or indirect subsidies,
rebates, or other price concessions or direct or indirect
remunerations made available to the entity or organization by a
manufacturer are passed through to enrollees through pharmacies
and other dispensers or otherwise. The provisions of section
1927(b)(3)(D) shall apply to information disclosed to the
Administrator under this paragraph in the same manner as such
provisions apply to information disclosed under such section.
``(4) Audits and reports.--To protect against fraud and
abuse and to ensure proper disclosures and accounting under
this part, in addition to any protections against fraud and
abuse provided under section 1860D-7(f)(1), the Administrator
may periodically audit the financial statements and records of
an eligible entity offering a Medicare Prescription Drug plan
and a MedicareAdvantage organization offering a
MedicareAdvantage plan with the auditor of the Administrator's
choice.
``(f) Actuarial Valuation; Determination of Annual Percentage
Increases.--
``(1) Processes.--For purposes of this section, the
Administrator shall establish processes and methods--
``(A) for determining the actuarial valuation of
prescription drug coverage, including--
``(i) an actuarial valuation of standard
prescription drug coverage and of the
reinsurance payments under section 1860D-20;
``(ii) the use of generally accepted
actuarial principles and methodologies; and
``(iii) applying the same methodology for
determinations of alternative coverage under
subsection (d) as is used with respect to
determinations of standard prescription drug
coverage under subsection (c); and
``(B) for determining annual percentage increases
described in subsection (c)(5).
Such processes shall take into account any effect that
providing actuarially equivalent prescription drug coverage
rather than standard prescription drug coverage has on drug
utilization.
``(2) Use of outside actuaries.--Under the processes under
paragraph (1)(A), eligible entities and MedicareAdvantage
organizations may use actuarial opinions certified by
independent, qualified actuaries to establish actuarial values,
but the Administrator shall determine whether such actuarial
values meet the requirements under subsection (c)(1).

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

``Sec. 1860D-7. (a) General Requirements.--An eligible entity
offering a Medicare Prescription Drug plan shall meet the following
requirements:
``(1) Licensure.--Subject to subsection (c), the entity is
organized and licensed under State law as a risk-bearing entity
eligible to offer health insurance or health benefits coverage
in each State in which it offers a Medicare Prescription Drug
plan.
``(2) Assumption of financial risk.--
``(A) In general.--Subject to subparagraph (B) and
subsections (d)(2) and (e) of section 1860D-13, to the
extent that the entity is at risk pursuant to such
section 1860D-16, the entity assumes financial risk on
a prospective basis for the benefits that it offers
under a Medicare Prescription Drug plan and that is not
covered under section 1860D-20.
``(B) Reinsurance permitted.--To the extent that
the entity is at risk pursuant to section 1860D-16, the
entity may obtain insurance or make other arrangements
for the cost of coverage provided to any enrolled
member under this part.
``(3) Solvency for unlicensed entities.--In the case of an
eligible entity that is not described in paragraph (1) and for
which a waiver has been approved under subsection (c), such
entity shall meet solvency standards established by the
Administrator under subsection (d).
``(b) Contract Requirements.--The Administrator shall not permit an
eligible beneficiary to elect a Medicare Prescription Drug plan offered
by an eligible entity under this part, and the entity shall not be
eligible for payments under section 1860D-16 or 1860D-20, unless the
Administrator has entered into a contract under this subsection with
the entity with respect to the offering of such plan. Such a contract
with an entity may cover more than 1 Medicare Prescription Drug plan.
Such contract shall provide that the entity agrees to comply with the
applicable requirements and standards of this part and the terms and
conditions of payment as provided for in this part.
``(c) Waiver of Certain Requirements in Order To Ensure Beneficiary
Choice.--
``(1) In general.--In the case of an eligible entity that
seeks to offer a Medicare Prescription Drug plan in a State,
the Administrator shall waive the requirement of subsection
(a)(1) that the entity be licensed in that State if the
Administrator determines, based on the application and other
evidence presented to the Administrator, that any of the
grounds for approval of the application described in paragraph
(2) have been met.
``(2) Grounds for approval.--The grounds for approval under
this paragraph are the grounds for approval described in
subparagraphs (B), (C), and (D) of section 1855(a)(2), and also
include the application by a State of any grounds other than
those required under Federal law.
``(3) Application of waiver procedures.--With respect to an
application for a waiver (or a waiver granted) under this
subsection, the provisions of subparagraphs (E), (F), and (G)
of section 1855(a)(2) shall apply.
``(4) References to certain provisions.--For purposes of
this subsection, in applying the provisions of section
1855(a)(2) under this subsection to Medicare Prescription Drug
plans and eligible entities--
``(A) any reference to a waiver application under
section 1855 shall be treated as a reference to a
waiver application under paragraph (1); and
``(B) any reference to solvency standards were
treated as a reference to solvency standards
established under subsection (d).
``(d) Solvency Standards for Non-Licensed Entities.--
``(1) Establishment and publication.--The Administrator, in
consultation with the National Association of Insurance
Commissioners, shall establish and publish, by not later than
January 1, 2005, financial solvency and capital adequacy
standards for entities described in paragraph (2).
``(2) Compliance with standards.--An eligible entity that
is not licensed by a State under subsection (a)(1) and for
which a waiver application has been approved under subsection
(c) shall meet solvency and capital adequacy standards
established under paragraph (1). The Administrator shall
establish certification procedures for such eligible entities
with respect to such solvency standards in the manner described
in section 1855(c)(2).
``(e) Licensure Does Not Substitute for or Constitute
Certification.--The fact that an entity is licensed in accordance with
subsection (a)(1) or has a waiver application approved under subsection
(c) does not deem the eligible entity to meet other requirements
imposed under this part for an eligible entity.
``(f) Incorporation of Certain MedicareAdvantage Contract
Requirements.--The following provisions of section 1857 shall apply,
subject to subsection (c)(4), to contracts under this section in the
same manner as they apply to contracts under section 1857(a):
``(1) Protections against fraud and beneficiary
protections.--Section 1857(d).
``(2) Intermediate sanctions.--Section 1857(g), except that
in applying such section--
``(A) the reference in section 1857(g)(1)(B) to
section 1854 is deemed a reference to this part; and
``(B) the reference in section 1857(g)(1)(F) to
section 1852(k)(2)(A)(ii) shall not be applied.
``(3) Procedures for termination.--Section 1857(h).
``(g) Other Standards.--The Administrator shall establish by
regulation other standards (not described in subsection (d)) for
eligible entities and Medicare Prescription Drug plans consistent with,
and to carry out, this part. The Administrator shall publish such
regulations by January 1, 2005.
``(h) Periodic Review and Revision of Standards.--
``(1) In general.--Subject to paragraph (2), the
Administrator shall periodically review the standards
established under this section and, based on such review, may
revise such standards if the Administrator determines such
revision to be appropriate.
``(2) Prohibition of midyear implementation of significant
new regulatory requirements.--The Administrator may not
implement, other than at the beginning of a calendar year,
regulations under this section that impose new, significant
regulatory requirements on an eligible entity or a Medicare
Prescription Drug plan.
``(h) Relation to State Laws.--
``(1) In general.--The standards established under this
part shall supersede any State law or regulation (including
standards described in paragraph (2)) with respect to Medicare
Prescription Drug plans which are offered by eligible entities
under this part--
``(A) to the extent such law or regulation is
inconsistent with such standards; and
``(B) in the same manner as such laws and
regulations are superseded under section 1856(b)(3).
``(2) Standards specifically superseded.--State standards
relating to the following are superseded under this section:
``(A) Benefit requirements, including requirements
relating to cost-sharing and the structure of
formularies.
``(B) Premiums.
``(C) Requirements relating to inclusion or
treatment of providers.
``(D) Coverage determinations (including related
appeals and grievance processes).
``(E) Requirements relating to marketing materials
and summaries and schedules of benefits regarding a
Medicare Prescription Drug plan.
``(3) Prohibition of state imposition of premium taxes.--No
State may impose a premium tax or similar tax with respect to--
``(A) monthly beneficiary obligations paid to the
Administrator for Medicare Prescription Drug plans
under this part; or
``(B) any payments made by the Administrator under
this part to an eligible entity offering such a plan.

``Subpart 2--Prescription Drug Delivery System

``establishment of service areas

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

``publication of risk adjusters

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

``submission of bids for proposed medicare prescription drug plans

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

``approval of proposed medicare prescription drug plans

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

``computation of monthly standard prescription drug coverage premiums

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

``computation of monthly national average premium

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

``payments to eligible entities

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

``computation of monthly beneficiary obligation

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

``collection of monthly beneficiary obligation

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

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

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

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

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

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

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

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

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

``Subpart 3--Miscellaneous Provisions

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

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

``other related provisions

``Sec. 1860D-26. (a) Restriction on Enrollment in a Medicare
Prescription Drug Plan Offered by a Sponsor of Employment-Based Retiree
Health Coverage.--
``(1) In general.--In the case of a Medicare Prescription
Drug plan offered by an eligible entity that is a sponsor (as
defined in paragraph (5) of section 1860D-20(e)) of employment-
based retiree health coverage (as defined in paragraph (4)(B)
of such section), notwithstanding any other provision of this
part and in accordance with regulations of the Administrator,
the entity offering the plan may restrict the enrollment of
eligible beneficiaries enrolled under this part to eligible
beneficiaries who are enrolled in such coverage.
``(2) Limitation.--The sponsor of the employment-based
retiree health coverage described in paragraph (1) may not
offer enrollment in the Medicare Prescription Drug plan
described in such paragraph based on the health status of
eligible beneficiaries enrolled for such coverage.
``(b) Coordination With State Pharmaceutical Assistance Programs.--
``(1) In general.--An eligible entity offering a Medicare
Prescription Drug plan, or a MedicareAdvantage organization
offering a MedicareAdvantage plan (other than an MSA plan or a
private fee-for-service plan that does not provide qualified
prescription drug coverage), may enter into an agreement with a
State pharmaceutical assistance program described in paragraph
(2) to coordinate the coverage provided under the plan with the
assistance provided under the State pharmaceutical assistance
program.
``(2) State pharmaceutical assistance program described.--
For purposes of paragraph (1), a State pharmaceutical
assistance program described in this paragraph is a program
that has been established pursuant to a waiver under section
1115 or otherwise.
``(c) Regulations To Carry Out This Part.--
``(1) Authority for interim final regulations.--The
Secretary may promulgate initial regulations implementing this
part in interim final form without prior opportunity for public
comment.
``(2) Final regulations.--A final regulation reflecting
public comments must be published within 1 year of the interim
final regulation promulgated under paragraph (1).''.
``(d) Waiver Authority.--The Secretary shall have authority similar
to the waiver authority under section 1857(i) to facilitate the
offering of Medicare Prescription Drug plans by employer or other group
health plans as part of employment-based retiree health coverage (as
defined in section 1860D-20(d)(4)(B)), including the authority to
establish separate premium amounts for enrollees in a Medicare
Prescription Drug plan by reason of such coverage.''.
(b) Conforming Amendments to Federal Supplementary Medical
Insurance Trust Fund.--Section 1841 (42 U.S.C. 1395t) is amended--
(1) in the last sentence of subsection (a)--
(A) by striking ``and'' before ``such amounts'';
and
(B) by inserting before the period the following:
``, and such amounts as may be deposited in, or
appropriated to, the Prescription Drug Account
established by section 1860D-25'';
(2) in subsection (g), by inserting after ``by this part,''
the following: ``the payments provided for under part D (in
which case the payments shall be made from the Prescription
Drug Account in the Trust Fund),'';
(3) in subsection (h), by inserting after ``1840(d)'' the
following: ``and sections 1860D-18 and 1858A(e) (in which case
the payments shall be made from the Prescription Drug Account
in the Trust Fund)''; and
(4) in subsection (i), by inserting after ``section
1840(b)(1)'' the following: ``, sections 1860D-18 and 1858A(e)
(in which case the payments shall be made from the Prescription
Drug Account in the Trust Fund),''.
(c) Conforming References to Previous Part D.--Any reference in law
(in effect before the date of enactment of this Act) to part D of title
XVIII of the Social Security Act is deemed a reference to part F of
such title (as in effect after such date).
(d) Submission of Legislative Proposal.--Not later than 6 months
after the date of the enactment of this Act, the Secretary shall submit
to the appropriate committees of Congress a legislative proposal
providing for such technical and conforming amendments in the law as
are required by the provisions of this Act.

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

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

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

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

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

(a) Determinations of Eligibility for Low-Income Subsidies.--
Section 1902(a) (42 U.S.C. 1396a(a)) is amended--
(1) by striking ``and'' at the end of paragraph (64);
(2) by striking the period at the end of paragraph (65) and
inserting ``; and''; and
(3) by inserting after paragraph (65) the following new
paragraph:
``(66) provide for making eligibility determinations under
section 1935(a).''.
(b) New Section.--
(1) In general.--Title XIX (42 U.S.C. 1396 et seq.) is
amended--
(A) by redesignating section 1935 as section 1936;
and
(B) by inserting after section 1934 the following
new section:

``special provisions relating to medicare prescription drug benefit

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

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

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

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

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

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

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

SEC. 108. PROTECTING SENIORS WITH CANCER.

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

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

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

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

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

SEC. 110A. MEDICATION THERAPY MANAGEMENT ASSESSMENT PROGRAM.

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

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

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

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

``medicare prescription drug discount card endorsement program

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

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

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

Subtitle C--Standards for Electronic Prescribing

SEC. 121. STANDARDS FOR ELECTRONIC PRESCRIBING.

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

``Part D--Electronic Prescribing

``standards for electronic prescribing

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

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

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

Subtitle D--Other Provisions

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

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

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

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

SEC. 133. PHARMACY BENEFIT MANAGERS TRANSPARENCY REQUIREMENTS.

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

``pharmacy benefit managers transparency requirements

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

SEC. 134. OFFICE OF THE MEDICARE BENEFICIARY ADVOCATE.

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

TITLE II--MEDICAREADVANTAGE

Subtitle A--MedicareAdvantage Competition

SEC. 201. ELIGIBILITY, ELECTION, AND ENROLLMENT.

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

``eligibility, election, and enrollment

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

SEC. 202. BENEFITS AND BENEFICIARY PROTECTIONS.

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

``benefits and beneficiary protections

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

SEC. 203. PAYMENTS TO MEDICAREADVANTAGE ORGANIZATIONS.

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

``payments to medicareadvantage organizations

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

SEC. 204. SUBMISSION OF BIDS; PREMIUMS.

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

``submission of bids; premiums

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

SEC. 205. SPECIAL RULES FOR PRESCRIPTION DRUG BENEFITS.

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

``special rules for prescription drug benefits

``Sec. 1858A. (a) Availability.--
``(1) Plans required to provide qualified prescription drug
coverage to enrollees.--
``(A) In general.--Except as provided in
subparagraph (B), on and after January 1, 2006, a
MedicareAdvantage organization offering a
MedicareAdvantage plan (except for an MSA plan) shall
make available qualified prescription drug coverage
that meets the requirements for such coverage under
this part and part D to each enrollee of the plan.
``(B) Private fee-for-service plans may, but are
not required to, provide qualified prescription drug
coverage.--Pursuant to section 1852(a)(2)(D), a private
fee-for-service plan may elect not to provide qualified
prescription drug coverage under part D to individuals
residing in the area served by the plan.
``(2) Reference to provision permitting additional
prescription drug coverage.--For the provisions of part D, made
applicable to this part pursuant to paragraph (1), that permit
a plan to make available qualified prescription drug coverage
that includes coverage of covered drugs that exceeds the
coverage required under paragraph (1) of section 1860D-6 in an
area, but only if the MedicareAdvantage organization offering
the plan also offers a MedicareAdvantage plan in the area that
only provides the coverage that is required under such
paragraph (1), see paragraph (2) of such section.
``(3) Rule for approval of medical and prescription drug
benefits.--Pursuant to sections 1854(g)(1)(F) and
1852(a)(3)(D), a MedicareAdvantage organization offering a
MedicareAdvantage plan that provides qualified prescription
drug coverage may not make available coverage of any
prescription drugs (other than that relating to prescription
drugs covered under the original medicare fee-for-service
program option) to an enrollee as an additional benefit or as
an enhanced medical benefit.
``(b) Compliance With Additional Beneficiary Protections.--With
respect to the offering of qualified prescription drug coverage by a
MedicareAdvantage organization under a MedicareAdvantage plan, the
organization and plan shall meet the requirements of section 1860D-5,
including requirements relating to information dissemination and
grievance and appeals, and such other requirements under part D that
the Secretary determines appropriate in the same manner as such
requirements apply to an eligible entity and a Medicare Prescription
Drug plan under part D. The Secretary shall waive such requirements to
the extent the Secretary determines that such requirements duplicate
requirements otherwise applicable to the organization or the plan under
this part.
``(c) Payments for Prescription Drugs.--
``(1) Payment of full amount of premium to organizations
for qualified prescription drug coverage.--
``(A) In general.--For each year (beginning with
2006), the Secretary shall pay to each
MedicareAdvantage organization offering a
MedicareAdvantage plan that provides qualified
prescription drug coverage, an amount equal to the full
amount of the monthly premium submitted under section
1854(a)(2)(B) for the year, as adjusted using the risk
adjusters that apply to the standard prescription drug
coverage published under section 1860D-11.
``(B) Application of part d risk corridor,
stabilization reserve fund, and administrative expenses
provisions.--The provisions of subsections (b), (c),
and (d) of section 1860D-16 shall apply to a
MedicareAdvantage organization offering a
MedicareAdvantage plan that provides qualified
prescription drug coverage and payments made to such
organization under subparagraph (A) in the same manner
as such provisions apply to an eligible entity offering
a Medicare Prescription Drug plan and payments made to
such entity under subsection (a) of section 1860D-16.
``(2) Payment from prescription drug account.--Payment made
to MedicareAdvantage organizations under this subsection shall
be made from the Prescription Drug Account in the Federal
Supplementary Medical Insurance Trust Fund under section 1841.
``(d) Computation of MedicareAdvantage Monthly Beneficiary
Obligation for Qualified Prescription Drug Coverage.--In the case of a
MedicareAdvantage eligible individual receiving qualified prescription
drug coverage under a MedicareAdvantage plan during a year after 2005,
the MedicareAdvantage monthly beneficiary obligation for qualified
prescription drug coverage of such individual in the year shall be
determined in the same manner as the monthly beneficiary obligation is
determined under section 1860D-17 for eligible beneficiaries enrolled
in a Medicare Prescription Drug plan, except that, for purposes of this
subparagraph, any reference to the monthly plan premium approved by the
Secretary under section 1860D-13 shall be treated as a reference to the
monthly premium for qualified prescription drug coverage submitted by
the MedicareAdvantage organization offering the plan under section
1854(a)(2)(A) and approved by the Secretary.
``(e) Collection of MedicareAdvantage Monthly Beneficiary
Obligation for Qualified Prescription Drug Coverage.--The provisions of
section 1860D-18, including subsection (b) of such section, shall apply
to the amount of the MedicareAdvantage monthly beneficiary obligation
for qualified prescription drug coverage (as determined under
subsection (d)) required to be paid by a MedicareAdvantage eligible
individual enrolled in a MedicareAdvantage plan in the same manner as
such provisions apply to the amount of the monthly beneficiary
obligation required to be paid by an eligible beneficiary enrolled in a
Medicare Prescription Drug plan under part D.
``(f) Availability of Premium Subsidy and Cost-Sharing Reductions
for Low-Income Enrollees and Reinsurance Payments.--For provisions--
``(1) providing premium subsidies and cost-sharing
reductions for low-income individuals receiving qualified
prescription drug coverage through a MedicareAdvantage plan,
see section 1860D-19; and
``(2) providing a MedicareAdvantage organization with
reinsurance payments for certain expenses incurred in providing
qualified prescription drug coverage through a
MedicareAdvantage plan, see section 1860D-20.''.
(b) Treatment of Reduction for Purposes of Determining Government
Contribution Under Part B.--Section 1844(c) (42 U.S.C. 1395w) is
amended by striking ``section 1854(f)(1)(E)'' and inserting ``section
1854(d)(1)(A)(i)''.

SEC. 206. FACILITATING EMPLOYER PARTICIPATION.

Section 1858(h) (as added by section 211) is amended--
(1) by inserting ``(including subsection (i) of such
section)'' after ``section 1857''; and
(2) by adding at the end the following new sentence: ``In
applying the authority under section 1857(i) pursuant to this
subsection, the Administrator may permit MedicareAdvantage
plans to establish separate premium amounts for enrollees in an
employer or other group health plan that provides employment-
based retiree health coverage (as defined in section 1860D-
20(d)(4)(B)).''

SEC. 207. ADMINISTRATION BY THE CENTER FOR MEDICARE CHOICES.

On and after January 1, 2006, the MedicareAdvantage program under
part C of title XVIII of the Social Security Act shall be administered
by the Center for Medicare Choices established under section 1808 such
title (as added by section 301), and each reference to the Secretary
made in such part shall be deemed to be a reference to the
Administrator of the Center for Medicare Choices.

SEC. 208. CONFORMING AMENDMENTS.

(a) Organizational and Financial Requirements for MedicareAdvantage
Organizations; Provider-Sponsored Organizations.--Section 1855 (42
U.S.C. 1395w-25) is amended--
(1) in subsection (b), in the matter preceding paragraph
(1), by inserting ``subparagraphs (A), (B), and (D) of'' before
``section 1852(A)(1)''; and
(2) by striking ``Medicare+Choice'' and inserting
``MedicareAdvantage'' each place it appears.
(b) Establishment of PSO Standards.--Section 1856 (42 U.S.C. 1395w-
26) is amended by striking ``Medicare+Choice'' and inserting
``MedicareAdvantage'' each place it appears.
(c) Contracts With MedicareAdvantage Organizations.--Section 1857
(42 U.S.C. 1395w-27) is amended--
(1) in subsection (g)(1)--
(A) in subparagraph (B), by striking ``amount of
the Medicare+Choice monthly basic and supplemental
beneficiary premiums'' and inserting ``amounts of the
MedicareAdvantage monthly basic premium and
MedicareAdvantage monthly beneficiary premium for
enhanced medical benefits'';
(B) in subparagraph (F), by striking ``or'' after
the semicolon at the end;
(C) in subparagraph (G), by adding ``or'' after the
semicolon at the end; and
(D) by inserting after subparagraph (G) the
following new subparagraph:
``(H)(i) charges any individual an amount in excess
of the MedicareAdvantage monthly beneficiary obligation
for qualified prescription drug coverage under section
1858A(d);
``(ii) provides coverage for prescription drugs
that is not qualified prescription drug coverage;
``(iii) offers prescription drug coverage, but does
not make standard prescription drug coverage available;
or
``(iv) provides coverage for prescription drugs
(other than that relating to prescription drugs covered
under the original medicare fee-for-service program
option described in section 1851(a)(1)(A)(i)) as an
enhanced medical benefit under section 1852(a)(3)(D) or
as an additional benefit under section
1854(g)(1)(F),''; and
(2) by striking ``Medicare+Choice'' and inserting
``MedicareAdvantage'' each place it appears.
(d) Definitions; Miscellaneous Provisions.--Section 1859 (42 U.S.C.
1395w-28) is amended--
(1) by striking subsection (c) and inserting the following
new subsection:
``(c) Other References to Other Terms.--
``(1) Enhanced medical benefits.--The term `enhanced
medical benefits' is defined in section 1852(a)(3)(E).
``(2) Medicareadvantage eligible individual.--The term
`MedicareAdvantage eligible individual' is defined in section
1851(a)(3).
``(3) Medicareadvantage payment area.--The term
`MedicareAdvantage payment area' is defined in section 1853(d).
``(4) National per capita medicare+choice growth
percentage.--The `national per capita Medicare+Choice growth
percentage' is defined in section 1853(c)(6).
``(5) Medicareadvantage monthly basic beneficiary premium;
medicareadvantage monthly beneficiary obligation for qualified
prescription drug coverage; medicareadvantage monthly
beneficiary premium for enhanced medical benefits.--The terms
`MedicareAdvantage monthly basic beneficiary premium',
`MedicareAdvantage monthly beneficiary obligation for qualified
prescription drug coverage', and `MedicareAdvantage monthly
beneficiary premium for enhanced medical benefits' are defined
in section 1854(b)(2).
``(6) Qualified prescription drug coverage.--The term
`qualified prescription drug coverage' has the meaning given
such term in section 1860D(9).
``(7) Standard prescription drug coverage.--The term
`standard prescription drug coverage' has the meaning given
such term in section 1860D(10).''; and
(2) by striking ``Medicare+Choice'' and inserting
``MedicareAdvantage'' each place it appears.
(e) Conforming Amendments Effective Before 2006.--
(1) Extension of MSAs.--Section 1851(b)(4) (42 U.S.C.
1395w-21(b)(4)) is amended by striking ``January 1, 2003'' and
inserting ``January 1, 2004''.
(2) Continuous open enrollment and disenrollment through
2005.--Section 1851(e) of the Social Security Act (42 U.S.C.
1395w-21(e)) is amended--
(A) in paragraph (2)(A), by striking ``through
2004'' and ``December 31,2004'' and inserting ``through
2005'' and ``December 31, 2005'', respectively;
(B) in the heading of paragraph (2)(B), by striking
``during 2005'' and inserting ``during 2006'';
(C) in paragraphs (2)(B)(i) and (2)(C)(i), by
striking ``2005'' and inserting ``2006'' each place it
appears;
(D) in paragraph (2)(D), by striking ``2004'' and
inserting ``2005''; and
(E) in paragraph (4), by striking ``2005'' and
inserting ``2006'' each place it appears.
(3) Update in minimum percentage increase.--Section
1853(c)(1)(C) (42 U.S.C. 1395w-23(c)(1)(C)) is amended by
striking clause (iv) and inserting the following new clauses:
``(iv) For 2002, 2003, and 2004, 102
percent of the annual Medicare+Choice
capitation rate under this paragraph for the
area for the previous year.
``(v) For 2005, 103 percent of the annual
Medicare+Choice capitation rate under this
paragraph for the area for 2003.
``(vi) For 2006 and each succeeding year,
102 percent of the annual Medicare+Choice
capitation rate under this paragraph for the
area for the previous year, except that such
rate shall be determined by substituting `102'
for `103' in clause (v).''.
(4) Effective date.--The amendments made by this subsection
shall take effect on the date of enactment of this Act.
(e) Other Conforming Amendments.--
(1) Conforming medicare cross-references.--
(A) Section 1839(a)(2) (42 U.S.C. 1395r(a)(2)) is
amended by striking ``section 1854(f)(1)(E)'' and
inserting ``section 1854(g)(1)(C)(i)''.
(B) Section 1840(i) (42 U.S.C. 1395s(i)) is amended
by striking ``section 1854(f)(1)(E)'' and inserting
``section 1854(g)(1)(C)(i)''.
(C) Section 1844(c) (42 U.S.C. 1395w(c)) is amended
by striking ``section 1854(f)(1)(E)'' and inserting
``section 1854(g)(1)(C)(i)''.
(D) Section 1876(k)(3)(A) (42 U.S.C.
1395mm(k)(3)(A)) is amended by inserting ``(as in
effect immediately before the enactment of the
Prescription Drug and Medicare Improvements Act of
2003)'' after section 1853(a).
(F) Section 1876(k)(4) (42 U.S.C. 1395mm(k)(4)(A))
is amended--
(i) in subparagraph (A), by striking
``section 1853(a)(3)(B)'' and inserting
``section 1853(a)(3)(D)''; and
(ii) in subparagraph (B), by striking
``section 1854(g)'' and inserting ``section
1854(h)''.
(G) Section 1876(k)(4)(C) (42 U.S.C.
1395mm(k)(4)(C)) in amended by inserting ``(as in
effect immediately before the enactment of the
Prescription Drug and Medicare Improvements Act of
2003)'' after ``section 1851(e)(6)''.
(H) Section 1894(d) (42 U.S.C. 1395eee(d)) is
amended by adding at the end the following new
paragraph:
``(3) Application of provisions.--For purposes of
paragraphs (1) and (2), the references to section 1853 and
subsection (a)(2) of such section in such paragraphs shall be
deemed to be references to those provisions as in effect
immediately before the enactment of the Prescription Drug and
Medicare Improvements Act of 2003.''.
(2) Conforming medicare terminology.--Title XVIII (42
U.S.C. 1395 et seq.), except for part C of such title (42
U.S.C. 1395w-21 et seq.), and title XIX (42 U.S.C. 1396 et
seq.) are each amended by striking ``Medicare+Choice'' and
inserting ``MedicareAdvantage'' each place it appears.

SEC. 209. EFFECTIVE DATE.

(a) In General.--Except as provided in section 208(d)(3) and
subsection (b), the amendments made by this title shall apply with
respect to plan years beginning on and after January 1, 2006.
(b) MedicareAdvantage MSA Plans.--Notwithstanding any provision of
this title, the Secretary shall apply the payment and other rules that
apply with respect to an MSA plan described in section 1851(a)(2)(B) of
the Social Security Act (42 U.S.C. 1395w-21(a)(2)(B)) as if this title
had not been enacted.

SEC. 210. IMPROVEMENTS IN MEDICAREADVANTAGE BENCHMARK DETERMINATIONS.

(a) Inclusion of Costs of DOD and VA Military Facility Services to
Medicare-Eligible Beneficiaries in Calculation of MedicareAdvantage
Payment Rates.--
(1) For purposes of calculating medicare+choice payment
rates.--Section 1853(c)(3) (42 U.S.C. 1395w-23(c)(3)), as
amended by section 203, is amended--
(A) in subparagraph (A), by striking ``subparagraph
(B)'' and inserting ``subparagraphs (B) and (E)''; and
(B) by adding at the end the following new
subparagraph:
``(E) Inclusion of costs of dod and va military
facility services to medicare-eligible beneficiaries.--
In determining the area-specific Medicare+Choice
capitation rate under subparagraph (A) for a year
(beginning with 2006), the annual per capita rate of
payment for 1997 determined under section 1876(a)(1)(C)
shall be adjusted to include in the rate the
Secretary's estimate, on a per capita basis, of the
amount of additional payments that would have been made
in the area involved under this title if individuals
entitled to benefits under this title had not received
services from facilities of the Department of Defense
or the Department of Veterans Affairs.''.
(2) For purposes of calculating local fee-for-service
rates.--Section 1853(d)(5) (42 U.S.C. 1395w-23(d)(5)), as
amended by section 203, is amended--
(A) in subparagraph (A), by striking ``subparagraph
(B)'' and inserting ``subparagraphs (B) and (C)''; and
(B) by adding at the end the following new
subparagraph:
``(C) Inclusion of costs of dod and va military
facility services to medicare-eligible beneficiaries.--
In determining the local fee-for-service rate under
subparagraph (A) for a year (beginning with 2006), the
annual per capita rate of payment for 1997 determined
under section 1876(a)(1)(C) shall be adjusted to
include in the rate the Secretary's estimate, on a per
capita basis, of the amount of additional payments that
would have been made in the area involved under this
title if individuals entitled to benefits under this
title had not received services from facilities of the
Department of Defense or the Department of Veterans
Affairs.''.
(b) Effective Date.--The amendments made by this section shall
apply with respect to plan years beginning on and after January 1,
2006.

Subtitle B--Preferred Provider Organizations

SEC. 211. ESTABLISHMENT OF MEDICAREADVANTAGE PREFERRED PROVIDER PROGRAM
OPTION.

(a) Establishment of Preferred Provider Program Option.--Section
1851(a)(2) is amended by adding at the end the following new
subparagraph:
``(D) Preferred provider organization plans.--A
MedicareAdvantage preferred provider organization plan
under the program established under section 1858.''.
(b) Program Specifications.--Part C of title XVIII (42 U.S.C.
1395w-21 et seq.) is amended by inserting after section 1857 the
following new section:

``preferred provider organizations

``Sec. 1858. (a) Establishment of Program.--
``(1) In general.--Beginning on January 1, 2006, there is
established a preferred provider program under which preferred
provider organization plans offered by preferred provider
organizations are offered to MedicareAdvantage eligible
individuals in preferred provider regions.
``(2) Definitions.--
``(A) Preferred provider organization.--The term
`preferred provider organization' means an entity with
a contract under section 1857 that meets the
requirements of this section applicable with respect to
preferred provider organizations.
``(B) Preferred provider organization plan.--The
term `preferred provider organization plan' means a
MedicareAdvantage plan that--
``(i) has a network of providers that have
agreed to a contractually specified
reimbursement for covered benefits with the
organization offering the plan;
``(ii) provides for reimbursement for all
covered benefits regardless of whether such
benefits are provided within such network of
providers; and
``(iii) is offered by a preferred provider
organization.
``(C) Preferred provider region.--The term
`preferred provider region' means--
``(i) a region established under paragraph
(3); and
``(ii) a region that consists of the entire
United States.
``(3) Preferred provider regions.--For purposes of this
part the Secretary shall establish preferred provider regions
as follows:
``(A) There shall be at least 10 regions.
``(B) Each region must include at least 1 State.
``(C) The Secretary may not divide States so that
portions of the State are in different regions.
``(D) To the extent possible, the Secretary shall
include multistate metropolitan statistical areas in a
single region. The Secretary may divide metropolitan
statistical areas where it is necessary to establish
regions of such size and geography as to maximize the
participation of preferred provider organization plans.
``(E) The Secretary may conform the preferred
provider regions to the service areas established under
section 1860D-10.
``(b) Eligibility, Election, and Enrollment; Benefits and
Beneficiary Protections.--
``(1) In general.--Except as provided in the succeeding
provisions of this subsection, the provisions of sections 1851
and 1852 that apply with respect to coordinated care plans
shall apply to preferred provider organization plans offered by
a preferred provider organization.
``(2) Service area.--The service area of a preferred
provider organization plan shall be a preferred provider
region.
``(3) Availability.--Each preferred provider organization
plan must be offered to each MedicareAdvantage eligible
individual who resides in the service area of the plan.
``(4) Authority to prohibit risk selection.--The provisions
of section 1852(a)(6) shall apply to preferred provider
organization plans.
``(5) Assuring access to services in preferred provider
organization plans.--
``(A) In general.--In addition to any other
requirements under this section, in the case of a
preferred provider organization plan, the organization
offering the plan must demonstrate to the Secretary
that the organization has sufficient number and range
of health care professionals and providers willing to
provide services under the terms of the plan.
``(B) Determination of sufficient access.--The
Secretary shall find that an organization has met the
requirement under subparagraph (A) with respect to any
category of health care professional or provider if,
with respect to that category of provider the plan has
contracts or agreements with a sufficient number and
range of providers within such category to provide
covered services under the terms of the plan.
``(C) Construction.--Subparagraph (B) shall not be
construed as restricting--
``(i) the persons from whom enrollees under
such plan may obtain covered benefits; or
``(ii) the categories of licensed health
professionals or providers from whom enrollees
under such a plan may obtain covered benefits
if the covered services are provided to
enrollees in a State where 25 percent or more
of the population resides in health
professional shortage areas designated pursuant
to section 332 of the Public Health Service
Act.
``(c) Payments to Preferred Provider Organizations.--
``(1) Payments to organizations.--
``(A) Monthly payments.--
``(i) In general.--Under a contract under
section 1857 and subject to paragraph (5),
subsection (e), and section 1859(e)(4), the
Secretary shall make, to each preferred
provider organization, with respect to coverage
of an individual for a month under this part in
a preferred provider region, separate monthly
payments with respect to--
``(I) benefits under the original
medicare fee-for-service program under
parts A and B in accordance with
paragraph (4); and
``(II) benefits under the voluntary
prescription drug program under part D
in accordance with section 1858A and
the other provisions of this part.
``(ii) Special rule for end-stage renal
disease.--The Secretary shall establish
separate rates of payment applicable with
respect to classes of individuals determined to
have end-stage renal disease and enrolled in a
preferred provider organization plan under this
clause that are similar to the separate rates
of payment described in section 1853(a)(1)(B).
``(B) Adjustment to reflect number of enrollees.--
The Secretary may retroactively adjust the amount of
payment under this paragraph in a manner that is
similar to the manner in which payment amounts may be
retroactively adjusted under section 1853(a)(2).
``(C) Comprehensive risk adjustment methodology.--
The Secretary shall apply the comprehensive risk
adjustment methodology described in section
1853(a)(3)(B) to 100 percent of the amount of payments
to plans under paragraph (4)(D)(ii).
``(D) Adjustment for spending variations within a
region.--The Secretary shall establish a methodology
for adjusting the amount of payments to plans under
paragraph (4)(D)(ii) that achieves the same objective
as the adjustment described in paragraph 1853(a)(2)(C).
``(2) Annual calculation of benchmark amounts for preferred
provider regions.--For each year (beginning in 2006), the
Secretary shall calculate a benchmark amount for each preferred
provider region for each month for such year with respect to
coverage of the benefits available under the original medicare
fee-for-service program option equal to the average of each
benchmark amount calculated under section 1853(a)(4) for each
MedicareAdvantage payment area for the year within such region,
weighted by the number of MedicareAdvantage eligible
individuals residing in each such payment area for the year.
``(3) Annual announcement of payment factors.--
``(A) Annual announcement.--Beginning in 2005, at
the same time as the Secretary publishes the risk
adjusters under section 1860D-11, the Secretary shall
annually announce (in a manner intended to provide
notice to interested parties) the following payment
factors:
``(i) The benchmark amount for each
preferred provider region (as calculated under
paragraph (2)(A)) for the year.
``(ii) The factors to be used for adjusting
payments described under--
``(I) the comprehensive risk
adjustment methodology described in
paragraph (1)(C) with respect to each
preferred provider region for the year;
and
``(II) the methodology used for
adjustment for geographic variations
within such region established under
paragraph (1)(D).
``(B) Advance notice of methodological changes.--At
least 45 days before making the announcement under
subparagraph (A) for a year, the Secretary shall--
``(i) provide for notice to preferred
provider organizations of proposed changes to
be made in the methodology from the methodology
and assumptions used in the previous
announcement; and
``(ii) provide such organizations with an
opportunity to comment on such proposed
changes.
``(C) Explanation of assumptions.--In each
announcement made under subparagraph (A), the Secretary
shall include an explanation of the assumptions and
changes in methodology used in the announcement in
sufficient detail so that preferred provider
organizations can compute each payment factor described
in such subparagraph.
``(4) Secretary's determination of payment amount for
benefits under the original medicare fee-for-service program.--
The Secretary shall determine the payment amount for plans as
follows:
``(A) Review of plan bids.--The Secretary shall
review each plan bid submitted under subsection (d)(1)
for the coverage of benefits under the original
medicare fee-for-service program option to ensure that
such bids are consistent with the requirements under
this part and are based on the assumptions described in
section 1854(a)(2)(A)(iii) that the plan used with
respect to numbers of enrolled individuals.
``(B) Determination of preferred provider regional
benchmark amounts.--The Secretary shall calculate a
preferred provider regional benchmark amount for that
plan for the benefits under the original medicare fee-
for-service program option for each plan equal to the
regional benchmark adjusted by using the assumptions
described in section 1854(a)(2)(A)(iii) that the plan
used with respect to numbers of enrolled individuals.
``(C) Comparison to benchmark.--The Secretary shall
determine the difference between each plan bid (as
adjusted under subparagraph (A)) and the preferred
provider regional benchmark amount (as determined under
subparagraph (B)) for purposes of determining--
``(i) the payment amount under subparagraph
(D); and
``(ii) the additional benefits required and
MedicareAdvantage monthly basic beneficiary
premiums.
``(D) Determination of payment amount.--
``(i) In general.--Subject to clause (ii),
the Secretary shall determine the payment
amount to a preferred provider organization for
a preferred provider organization plan as
follows:
``(I) Bids that equal or exceed the
benchmark.--In the case of a plan bid
that equals or exceeds the preferred
provider regional benchmark amount, the
amount of each monthly payment to the
organization with respect to each
individual enrolled in a plan shall be
the preferred provider regional
benchmark amount.
``(II) Bids below the benchmark.--
In the case of a plan bid that is less
than the preferred provider regional
benchmark amount, the amount of each
monthly payment to the organization
with respect to each individual
enrolled in a plan shall be the
preferred provider regional benchmark
amount reduced by the amount of any
premium reduction elected by the plan
under section 1854(d)(1)(A)(i).
``(ii) Application of adjustment
methodologies.--The Secretary shall adjust the
amounts determined under subparagraph (A) using
the factors described in paragraph (3)(A)(ii).
``(E) Factors used in adjusting bids and benchmarks
for preferred provider organizations and in determining
enrollee premiums.--Subject to subparagraph (F), in
addition to the factors used to adjust payments to
plans described in section 1853(d)(6), the Secretary
shall use the adjustment for geographic variation
within the region established under paragraph (1)(D).
``(F) Adjustment for national coverage
determinations and legislative changes in benefits.--
The Secretary shall provide for adjustments for
national coverage determinations and legislative
changes in benefits applicable with respect to
preferred provider organizations in the same manner as
the Secretary provides for adjustments under section
1853(d)(7).
``(5) Payments from trust fund.--The payment to a preferred
provider organization under this section shall be made from the
Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund in a manner similar
to the manner described in section 1853(g).
``(6) Special rule for certain inpatient hospital stays.--
Rules similar to the rules applicable under section 1853(h)
shall apply with respect preferred provider organizations.
``(7) Special rule for hospice care.--Rules similar to the
rules applicable under section 1853(i) shall apply with respect
to preferred provider organizations.
``(d) Submission of Bids by PPOs; Premiums.--
``(1) Submission of bids by preferred provider
organizations.--
``(A) In general.--For the requirements on
submissions by MedicareAdvantage preferred provider
organization plans, see section 1854(a)(1).
``(B) Uniform premiums.--Each bid amount submitted
under subparagraph (A) for a preferred provider
organization plan in a preferred provider region may
not vary among MedicareAdvantage eligible individuals
residing in such preferred provider region.
``(C) Application of fehbp standard; prohibition on
price gouging.--Each bid amount submitted under
subparagraph (A) for a preferred provider organization
plan must reasonably and equitably reflect the cost of
benefits provided under that plan.
``(D) Review.--The Secretary shall review the
adjusted community rates (as defined in section
1854(g)(3)), the amounts of the MedicareAdvantage
monthly basic premium and the MedicareAdvantage monthly
beneficiary premium for enhanced medical benefits filed
under this paragraph and shall approve or disapprove
such rates and amounts so submitted. The Secretary
shall review the actuarial assumptions and data used by
the preferred provider organization with respect to
such rates and amounts so submitted to determine the
appropriateness of such assumptions and data.
``(E) Authority to limit number of plans in a
region.--If there are bids for more than 3 preferred
provider organization plans in a preferred provider
region, the Secretary shall accept only the 3 lowest-
cost credible bids for that region that meet or exceed
the quality and minimum standards applicable under this
section.
``(2) Monthly premiums charged.--The amount of the monthly
premium charged to an individual enrolled in a preferred
provider organization plan offered by a preferred provider
organization shall be equal to the sum of the following:
``(A) The MedicareAdvantage monthly basic
beneficiary premium, as defined in section
1854(b)(2)(A) (if any).
``(B) The MedicareAdvantage monthly beneficiary
premium for enhanced medical benefits, as defined in
section 1854(b)(2)(C) (if any).
``(C) The MedicareAdvantage monthly obligation for
qualified prescription drug coverage, as defined in
section 1854(b)(2)(B) (if any).
``(3) Determination of premium reductions, reduced cost-
sharing, additional benefits, and beneficiary premiums.--The
rules for determining premium reductions, reduced cost-sharing,
additional benefits, and beneficiary premiums under section
1854(d) shall apply with respect to preferred provider
organizations.
``(4) Prohibition of segmenting preferred provider
regions.--The Secretary may not permit a preferred provider
organization to elect to apply the provisions of this section
uniformly to separate segments of a preferred provider region
(rather than uniformly to an entire preferred provider region).
``(e) Portion of Total Payments to an Organization Subject to Risk
for 2 Years.--
``(1) Notification of spending under the plan.--
``(A) In general.--For 2007 and 2008, the preferred
provider organization offering a preferred provider
organization plan shall notify the Secretary of the
total amount of costs that the organization incurred in
providing benefits covered under parts A and B of the
original medicare fee-for-service program for all
enrollees under the plan in the previous year.
``(B) Certain expenses not included.--The total
amount of costs specified in subparagraph (A) may not
include--
``(i) subject to subparagraph (C),
administrative expenses incurred in providing
the benefits described in such subparagraph; or
``(ii) amounts expended on providing
enhanced medical benefits under section
1852(a)(3)(D).
``(C) Establishment of allowable administrative
expenses.--For purposes of applying subparagraph
(B)(i), the administrative expenses incurred in
providing benefits described in subparagraph (A) under
a preferred provider organization plan may not exceed
an amount determined appropriate by the Administrator.
``(2) Adjustment of payment.--
``(A) No adjustment if costs within risk
corridor.--If the total amount of costs specified in
paragraph (1)(A) for the plan for the year are not more
than the first threshold upper limit of the risk
corridor (specified in paragraph (3)(A)(iii)) and are
not less than the first threshold lower limit of the
risk corridor (specified in paragraph (3)(A)(i)) for
the plan for the year, then no additional payments
shall be made by the Secretary and no reduced payments
shall be made to the preferred provider organization
offering the plan.
``(B) Increase in payment if costs above upper
limit of risk corridor.--
``(i) In general.--If the total amount of
costs specified in paragraph (1)(A) for the
plan for the year are more than the first
threshold upper limit of the risk corridor for
the plan for the year, then the Secretary shall
increase the total of the monthly payments made
to the preferred provider organization offering
the plan for the year under subsection
(c)(1)(A) by an amount equal to the sum of--
``(I) 50 percent of the amount of
such total costs which are more than
such first threshold upper limit of the
risk corridor and not more than the
second threshold upper limit of the
risk corridor for the plan for the year
(as specified under paragraph
(3)(A)(iv)); and
``(II) 90 percent of the amount of
such total costs which are more than
such second threshold upper limit of
the risk corridor.
``(C) Reduction in payment if costs below lower
limit of risk corridor.--If the total amount of costs
specified in paragraph (1)(A) for the plan for the year
are less than the first threshold lower limit of the
risk corridor for the plan for the year, then the
Secretary shall reduce the total of the monthly
payments made to the preferred provider organization
offering the plan for the year under subsection
(c)(1)(A) by an amount (or otherwise recover from the
plan an amount) equal to--
``(i) 50 percent of the amount of such
total costs which are less than such first
threshold lower limit of the risk corridor and
not less than the second threshold lower limit
of the risk corridor for the plan for the year
(as specified under paragraph (3)(A)(ii)); and
``(ii) 90 percent of the amount of such
total costs which are less than such second
threshold lower limit of the risk corridor.
``(3) Establishment of risk corridors.--
``(A) In general.--For 2006 and 2007, the Secretary
shall establish a risk corridor for each preferred
provider organization plan. The risk corridor for a
plan for a year shall be equal to a range as follows:
``(i) First threshold lower limit.--The
first threshold lower limit of such corridor
shall be equal to--
``(I) the target amount described
in subparagraph (B) for the plan; minus
``(II) an amount equal to 5 percent
of such target amount.
``(ii) Second threshold lower limit.--The
second threshold lower limit of such corridor
shall be equal to--
``(I) the target amount described
in subparagraph (B) for the plan; minus
``(II) an amount equal to 10
percent of such target amount.
``(iii) First threshold upper limit.--The
first threshold upper limit of such corridor
shall be equal to the sum of--
``(I) such target amount; and
``(II) the amount described in
clause (i)(II).
``(iv) Second threshold upper limit.--The
second threshold upper limit of such corridor
shall be equal to the sum of--
``(I) such target amount; and
``(II) the amount described in
clause (ii)(II).
``(B) Target amount described.--The target amount
described in this paragraph is, with respect to a
preferred provider organization plan offered by a
preferred provider organization in a year, an amount
equal to the sum of--
``(i) the total monthly payments made to
the organization for enrollees in the plan for
the year under subsection (c)(1)(A); and
``(ii) the total MedicareAdvantage basic
beneficiary premiums collected for such
enrollees for the year under subsection
(d)(2)(A).
``(4) Plans at risk for entire amount of enhanced medical
benefits.--A preferred provider organization that offers a
preferred provider organization plan that provides enhanced
medial benefits under section 1852(a)(3)(D) shall be at full
financial risk for the provision of such benefits.
``(5) No effect on eligible beneficiaries.--No change in
payments made by reason of this subsection shall affect the
amount of the MedicareAdvantage basic beneficiary premium that
a beneficiary is otherwise required to pay under the plan for
the year under subsection (d)(2)(A).
``(6) Disclosure of information.--The provisions of section
1860D-16(b)(7), including subparagraph (B) of such section,
shall apply to a preferred provider organization and a
preferred provider organization plan in the same manner as such
provisions apply to an eligible entity and a Medicare
Prescription Drug plan under part D.
``(f) Organizational and Financial Requirements for Preferred
Provider Organizations.--A preferred provider organization shall be
organized and licensed under State law as a risk-bearing entity
eligible to offer health insurance or health benefits coverage in each
State within the preferred provider region in which it offers a
preferred provider organization plan.
``(g) Inapplicability of Provider-Sponsored Organization Solvency
Standards.--The requirements of section 1856 shall not apply with
respect to preferred provider organizations.
``(h) Contracts With Preferred Provider Organizations.--The
provisions of section 1857 shall apply to a preferred provider
organization plan offered by a preferred provider organization under
this section.''.
(c) Preferred Provider Terminology Defined.--Section 1859(a) is
amended by adding at the end the following new paragraph:
``(3) Preferred provider organization; preferred provider
organization plan; preferred provider region.--The terms
`preferred provider organization', `preferred provider
organization plan', and `preferred provider region' have the
meaning given such terms in section 1858(a)(2).''.

Subtitle C--Other Managed Care Reforms

SEC. 221. EXTENSION OF REASONABLE COST CONTRACTS.

(a) Five-Year Extension.--Section 1876(h)(5)(C) (42 U.S.C.
1395mm(h)(5)(C)) is amended by striking ``2004'' and inserting
``2009''.
(b) Application of Certain Medicare+Choice Requirements to Cost
Contracts Extended or Renewed After 2003.--Section 1876(h) (42 U.S.C.
1395mm(h)(5)), as amended by subsection (a), is amended--
(1) by redesignating paragraph (5) as paragraph (6); and
(2) by inserting after paragraph (4) the following new
paragraph:
``(5) Any reasonable cost reimbursement contract with an eligible
organization under this subsection that is extended or renewed on or
after the date of enactment of the Prescription Drug and Medicare
Improvements Act of 2003 for plan years beginning on or after January
1, 2004, shall provide that the following provisions of the
Medicare+Choice program under part C (and, on and after January 1,
2006, the provisions of the MedicareAdvantage program under such part)
shall apply to such organization and such contract in a substantially
similar manner as such provisions apply to Medicare+Choice
organizations and Medicare+Choice plans (or, on and after January 1,
2006, MedicareAdvantage organizations and MedicareAdvantage plans,
respectively) under such part:
``(A) Paragraph (1) of section 1852(e) (relating to the
requirement of having an ongoing quality assurance program) and
paragraph (2)(B) of such section (relating to the required
elements for such a program).
``(B) Section 1852(j)(4) (relating to limitations on
physician incentive plans).
``(C) Section 1854(c) (relating to the requirement of
uniform premiums among individuals enrolled in the plan).
``(D) Section 1854(g), or, on and after January 1, 2006,
section 1854(h) (relating to restrictions on imposition of
premium taxes with respect to payments to organizations).
``(E) Section 1856(b) (regarding compliance with the
standards established by regulation pursuant to such section,
including the provisions of paragraph (3) of such section
relating to relation to State laws).
``(F) Section 1852(a)(3)(A) (regarding the authority of
organizations to include supplemental health care benefits and,
on and after January 1, 2006, enhanced medical benefits under
the plan subject to the approval of the Secretary).
``(G) The provisions of part C relating to timelines for
benefit filings, contract renewal, and beneficiary
notification.
``(H) Section 1854(e), or, on and after January 1, 2006,
section 1854(f) (relating to proposed cost-sharing under the
contract being subject to review by the Secretary).''.
(c) Permitting Dedicated Group Practice Health Maintenance
Organizations To Participate in the Medicare Cost Contract Program.--
Section 1876(h)(6) of the Social Security Act (42 U.S.C. 1395mm(h)(6)),
as redesignated and amended by subsections (a) and (b), is amended--
(1) in subparagraph (A), by striking ``After the date of
the enactment'' and inserting ``Except as provided in
subparagraph (C), after the date of the enactment'';
(2) in subparagraph (B), by striking ``subparagraph (C)''
and inserting ``subparagraph (D)'';
(3) by redesignating subparagraph (C) as subparagraph (D);
and
(4) by inserting after subparagraph (B), the following new
subparagraph:
``(C) Subject to paragraph (5) and subparagraph (D), the Secretary
shall approve an application to enter into a reasonable cost contract
under this section if--
``(i) the application is submitted to the Secretary by a
health maintenance organization (as defined in section 1301(a)
of the Public Health Service Act) that, as of January 1, 2004,
and except as provided in section 1301(b)(3)(B) of such Act,
provides at least 85 percent of the services of a physician
which are provided as basic health services through a medical
group (or groups), as defined in section 1302(4) of such Act;
and
``(ii) the Secretary determines that the organization meets
the requirements applicable to such organizations and contracts
under this section.''.

SEC. 222. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS
BENEFICIARIES.

(a) Treatment as Coordinated Care Plan.--Section 1851(a)(2)(A) (42
U.S.C. 1395w-21(a)(2)(A)) is amended by adding at the end the following
new sentence: ``Specialized Medicare+Choice plans for special needs
beneficiaries (as defined in section 1859(b)(4)) may be any type of
coordinated care plan.''.
(b) Specialized Medicare+Choice Plan for Special Needs
Beneficiaries Defined.--Section 1859(b) (42 U.S.C. 1395w-28(b)) is
amended by adding at the end the following new paragraph:
``(4) Specialized medicare+choice plans for special needs
beneficiaries.--
``(A) In general.--The term `specialized
Medicare+Choice plans for special needs beneficiaries'
means a Medicare+Choice plan that--
``(i) exclusively serves special needs
beneficiaries (as defined in subparagraph (B)),
or
``(ii) to the extent provided in
regulations prescribed by the Secretary,
disproportionately serves such special needs
beneficiaries, frail elderly medicare
beneficiaries, or both.
``(B) Special needs beneficiary.--The term `special
needs beneficiary' means a Medicare+Choice eligible
individual who--
``(i) is institutionalized (as defined by
the Secretary);
``(ii) is entitled to medical assistance
under a State plan under title XIX; or
``(iii) meets such requirements as the
Secretary may determine would benefit from
enrollment in such a specialized
Medicare+Choice plan described in subparagraph
(A) for individuals with severe or disabling
chronic conditions.''.
(c) Restriction on Enrollment Permitted.--Section 1859 (42 U.S.C.
1395w-28) is amended by adding at the end the following new subsection:
``(f) Restriction on Enrollment for Specialized Medicare+Choice
Plans for Special Needs Beneficiaries.--In the case of a specialized
Medicare+Choice plan (as defined in subsection (b)(4)), notwithstanding
any other provision of this part and in accordance with regulations of
the Secretary and for periods before January 1, 2008, the plan may
restrict the enrollment of individuals under the plan to individuals
who are within 1 or more classes of special needs beneficiaries.''.
(d) Report to Congress.--Not later than December 31, 2006, the
Secretary shall submit to Congress a report that assesses the impact of
specialized Medicare+Choice plans for special needs beneficiaries on
the cost and quality of services provided to enrollees. Such report
shall include an assessment of the costs and savings to the medicare
program as a result of amendments made by subsections (a), (b), and
(c).
(e) Effective Dates.--
(1) In general.--The amendments made by subsections (a),
(b), and (c) shall take effect on the date of enactment of this
Act.
(2) Deadline for issuance of requirements for special needs
beneficiaries; transition.--No later than 1 year after the date
of enactment of this Act, the Secretary shall issue final
regulations to establish requirements for special needs
beneficiaries under section 1859(b)(4)(B)(iii) of the Social
Security Act, as added by subsection (b).

SEC. 223. PAYMENT BY PACE PROVIDERS FOR MEDICARE AND MEDICAID SERVICES
FURNISHED BY NONCONTRACT PROVIDERS.

(a) Medicare Services.--
(1) Medicare services furnished by providers of services.--
Section 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended--
(A) by striking ``part C or'' and inserting ``part
C, with a PACE provider under section 1894 or 1934,
or'';
(B) by striking ``(i)'';
(C) by striking ``and (ii)''; and
(D) by striking ``members of the organization'' and
inserting ``members of the organization or PACE program
eligible individuals enrolled with the PACE
provider,''.
(2) Medicare services furnished by physicians and other
entities.--Section 1894(b) (42 U.S.C. 1395eee(b)) is amended by
adding at the end the following new paragraphs:
``(3) Treatment of medicare services furnished by
noncontract physicians and other entities.--
``(A) Application of medicare+choice requirement
with respect to medicare services furnished by
noncontract physicians and other entities.--Section
1852(k)(1) (relating to limitations on balance billing
against Medicare+Choice organizations for noncontract
physicians and other entities with respect to services
covered under this title) shall apply to PACE
providers, PACE program eligible individuals enrolled
with such PACE providers, and physicians and other
entities that do not have a contract establishing
payment amounts for services furnished to such an
individual in the same manner as such section applies
to Medicare+Choice organizations, individuals enrolled
with such organizations, and physicians and other
entities referred to in such section.
``(B) Reference to related provision for
noncontract providers of services.--For the provision
relating to limitations on balance billing against PACE
providers for services covered under this title
furnished by noncontract providers of services, see
section 1866(a)(1)(O).
``(4) Reference to related provision for services
covered under title xix but not under this title.--For
provisions relating to limitations on payments to
providers participating under the State plan under
title XIX that do not have a contract with a PACE
provider establishing payment amounts for services
covered under such plan (but not under this title) when
such services are furnished to enrollees of that PACE
provider, see section 1902(a)(66).''.
(b) Medicaid Services.--
(1) Requirement under state plan.--Section 1902(a) (42
U.S.C. 1396a(a)) is amended--
(A) in paragraph (64), by striking ``and'' at the
end;
(B) in paragraph (65), by striking the period at
the end and inserting ``; and''; and
(C) by inserting after paragraph (65) the following
new paragraph:
``(66) provide, with respect to services covered
under the State plan (but not under title XVIII) that
are furnished to a PACE program eligible individual
enrolled with a PACE provider by a provider
participating under the State plan that does not have a
contract with the PACE provider that establishes
payment amounts for such services, that such
participating provider may not require the PACE
provider to pay the participating provider an amount
greater than the amount that would otherwise be payable
for the service to the participating provider under the
State plan for the State where the PACE provider is
located (in accordance with regulations issued by the
Secretary).''.
(2) Reference in medicaid statute.--Section 1934(b) (42
U.S.C. 1396u-4(b)) is amended by adding at the end the
following new paragraphs:
``(3) Treatment of medicare services furnished by
noncontract physicians and other entities.--
``(A) Application of medicare+choice requirement
with respect to medicare services furnished by
noncontract physicians and other entities.--Section
1852(k)(1) (relating to limitations on balance billing
against Medicare+Choice organizations for noncontract
physicians and other entities with respect to services
covered under title XVIII) shall apply to PACE
providers, PACE program eligible individuals enrolled
with such PACE providers, and physicians and other
entities that do not have a contract establishing
payment amounts for services furnished to such an
individual in the same manner as such section applies
to Medicare+Choice organizations, individuals enrolled
with such organizations, and physicians and other
entities referred to in such section.
``(B) Reference to related provision for
noncontract providers of services.--For the provision
relating to limitations on balance billing against PACE
providers for services covered under title XVIII
furnished by noncontract providers of services, see
section 1866(a)(1)(O).
``(4) Reference to related provision for services
covered under this title but not under title xviii.--
For provisions relating to limitations on payments to
providers participating under the State plan under this
title that do not have a contract with a PACE provider
establishing payment amounts for services covered under
such plan (but not under title XVIII) when such
services are furnished to enrollees of that PACE
provider, see section 1902(a)(66).''.
(c) Effective Date.--The amendments made by this section shall
apply to services furnished on or after January 1, 2004.

SEC. 224. INSTITUTE OF MEDICINE EVALUATION AND REPORT ON HEALTH CARE
PERFORMANCE MEASURES.

(a) Evaluation.--
(1) In general.--Not later than the date that is 2 months
after the date of enactment of this Act, the Secretary of
Health and Human Services shall enter into an arrangement under
which the Institute of Medicine of the National Academy of
Sciences (in this section referred to as the ``Institute'')
shall conduct an evaluation of leading health care performance
measures and options to implement policies that align
performance with payment under the medicare program under title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.).
(2) Specific matters evaluated.--In conducting the
evaluation under paragraph (1), the Institute shall--
(A) catalogue, review, and evaluate the validity of
leading health care performance measures;
(B) catalogue and evaluate the success and utility
of alternative performance incentive programs in public
or private sector settings; and
(C) identify and prioritize options to implement
policies that align performance with payment under the
medicare program that indicate--
(i) the performance measurement set to be
used and how that measurement set will be
updated;
(ii) the payment policy that will reward
performance; and
(iii) the key implementation issues (such
as data and information technology
requirements) that must be addressed.
(3) Scope of health care performance measures.--The health
care performance measures described in paragraph (2)(A) shall
encompass a variety of perspectives, including physicians,
hospitals, health plans, purchasers, and consumers.
(4) Consultation with medpac.--In evaluating the matters
described in paragraph (2)(C), the Institute shall consult with
the Medicare Payment Advisory Commission established under
section 1805 of the Social Security Act (42 U.S.C. 1395b-6).
(b) Report.--Not later than the date that is 18 months after the
date of enactment of this Act, the Institute shall submit to the
Secretary of Health and Human Services, the Committees on Ways and
Means and Energy and Commerce of the House of Representatives, and the
Committee on Finance of the Senate a report on the evaluation conducted
under subsection (a)(1) describing the findings of such evaluation and
recommendations for an overall strategy and approach for aligning
payment with performance in the original medicare fee-for-service
program under parts A and B of title XVIII of the Social Security Act,
the Medicare+Choice program under part C of such title, and any other
programs under such title XVIII.
(c) Authorization of Appropriations.--There are authorized to be
appropriated $1,000,000 for purposes of conducting the evaluation and
preparing the report required by this section.

SEC. 225. EXPANDING THE WORK OF MEDICARE QUALITY IMPROVEMENT
ORGANIZATIONS TO INCLUDE PARTS C AND D.

(a) Application to Medicare Managed Care and Prescription Drug
Coverage.--Section 1154(a)(1) (42 U.S.C. 1320c-3(a)(1)) is amended by
inserting ``, Medicare+Choice organizations and MedicareAdvantage
organizations under part C, and prescription drug card sponsors and
eligible entities under part D'' after ``under section 1876''.
(b) Prescription Drug Therapy Quality Improvement.--Section 1154(a)
(42 U.S.C. 1320c-3(a)) is amended by adding at the end the following
new paragraph:
``(17) The organization shall execute its responsibilities
under subparagraphs (A) and (B) of paragraph (1) by offering to
providers, practitioners, prescription drug card sponsors and
eligible entities under part D, and Medicare+Choice and
MedicareAdvantage plans under part C quality improvement
assistance pertaining to prescription drug therapy. For
purposes of this part and title XVIII, the functions described
in this paragraph shall be treated as a review function.''.
(c) Effective Date.--The amendments made by this section shall
apply on and after January 1, 2004.

SEC. 226. EXTENSION OF DEMONSTRATION FOR ESRD MANAGED CARE.

The Secretary shall extend without interruption, through December
31, 2007, the approval of the demonstration project, Contract No.
H1021, under the authority of section 2355(b)(1)(B)(iv) of the Deficit
Reduction Act of 1984, as amended by section 13567 of the Omnibus
Reconciliation Act of 1993. Such approval shall be subject to the terms
and conditions in effect for the 2002 project year with respect to
eligible participants and covered benefits. The Secretary shall set the
monthly capitation rate for enrollees on the basis of the reasonable
medical and direct administrative costs of providing those benefits to
such participants.

Subtitle D--Evaluation of Alternative Payment and Delivery Systems

SEC. 231. ESTABLISHMENT OF ALTERNATIVE PAYMENT SYSTEM FOR PREFERRED
PROVIDER ORGANIZATIONS IN HIGHLY COMPETITIVE REGIONS.

(a) Establishment of Alternative Payment System for Preferred
Provider Organizations in Highly Competitive Regions.--Section 1858 (as
added by section 211(b)) is amended by adding at the end the following
new subsection:
``(i) Alternative Payment Methodology for Highly Competitive
Regions.--
``(1) Annual determination and designation.--
``(A) In 2008.--In 2008, prior to the date on which
the Secretary expects to publish the risk adjusters
under section 1860D-11, the Secretary shall designate a
limited number (but in no case fewer than 1) of
preferred provider regions (other than the region
described in subsection (a)(2)(C)(ii)) as highly
competitive regions.
``(B) Subsequent years.--For each year (beginning
with 2009) the Secretary may designate a limited number
of preferred provider regions (other than the region
described in subsection (a)(2)(C)(ii)) as highly
competitive regions in addition to any region
designated as a highly competitive region under
subparagraph (A).
``(C) Considerations.--In determining which
preferred provider regions to designate as highly
competitive regions under subparagraph (A) or (B), the
Secretary shall consider the following:
``(i) Whether the application of this
subsection to the preferred provider region
would enhance the participation of preferred
provider organization plans in that region.
``(ii) Whether the Secretary anticipates
that there is likely to be at least 3 bids
submitted under subsection (d)(1) with respect
to the preferred provider region if the
Secretary designates such region as a highly
competitive region under subparagraph (A) or
(B).
``(iii) Whether the Secretary expects that
MedicareAdvantage eligible individuals will
elect preferred provider organization plans in
the preferred provider region if the region is
designated as a highly competitive region under
subparagraph (A) or (B).
``(iv) Whether the designation of the
preferred provider region as a highly
competitive region will permit compliance with
the limitation described in paragraph (5).
In considering the matters described in clauses (i)
through (iv), the Secretary shall give special
consideration to preferred provider regions where no
bids were submitted under subsection (d)(1) for the
previous year.
``(2) Effect of designation.--If a preferred provider
region is designated as a highly competitive region under
subparagraph (A) or (B) of paragraph (1)--
``(A) the provisions of this subsection shall apply
to such region and shall supersede the provisions of
this part relating to benchmarks for preferred provider
regions; and
``(B) such region shall continue to be a highly
competitive region until such designation is rescinded
pursuant to paragraph (5)(B)(ii).
``(3) Submission of bids.--
``(A) In general.--Notwithstanding subsection
(d)(1), for purposes of applying section
1854(a)(2)(A)(i), the plan bid for a highly competitive
region shall consist of a dollar amount that represents
the total amount that the plan is willing to accept
(not taking into account the application of the
comprehensive risk adjustment methodology under section
1853(a)(3)) for providing coverage of only the benefits
described in section 1852(a)(1)(A) to an individual
enrolled in the plan that resides in the service area
of the plan for a month.
``(B) Construction.--Nothing in subparagraph (A)
shall be construed as permitting a preferred provider
organization plan not to provide coverage for the
benefits described in section 1852(a)(1)(C).
``(4) Payments to preferred provider organizations in
highly competitive areas.--With respect to highly competitive
regions, the following rules shall apply:
``(A) In general.--Notwithstanding subsection (c),
of the plans described in subsection (d)(1)(E), the
Secretary shall substitute the second lowest bid for
the benchmark applicable under subsection (c)(4).
``(B) If there are fewer than three bids.--
Notwithstanding subsection (c), if there are fewer than
3 bids in a highly competitive region for a year, the
Secretary shall substitute the lowest bid for the
benchmark applicable under subsection (c)(4).
``(5) Funding limitation.--
``(A) In general.--
``(i) In general.--The total amount
expended as a result of the application of this
subsection during the period or year, as
applicable, may not exceed the applicable
amount (as defined in clause (ii)).
``(ii) Applicable amount defined.--In this
paragraph, the term `applicable amount' means--
``(I) for the period beginning on
January 1, 2009, and ending on
September 30, 2013, the total amount
that would have been expended under
this title during the period if this
subsection had not been enacted plus
$6,000,000,000; and
``(II) for fiscal year 2014 and any
subsequent fiscal year, the total
amount that would have been expended
under this title during the year if
this subsection had not been enacted.
``(B) Application of limitation.--If the Secretary
determines that the application of this subsection will
cause expenditures to exceed the applicable amount, the
Secretary shall--
``(i) take appropriate steps to stay within
the applicable amount, including through
providing limitations on enrollment; or
``(ii) rescind the designation under
subparagraph (A) or (B) of paragraph (1) of 1
or more preferred provider regions as highly
competitive regions.
``(C) Transition.--If the Secretary rescinds a
designation under subparagraph (A) or (B) of paragraph
(1) pursuant to subparagraph (B)(ii) with respect to a
preferred provider region, the Secretary shall provide
for an appropriate transition from the payment system
applicable under this subsection to the payment system
described in the other provisions of this section in
that region. Any amount expended by reason of the
preceding sentence shall be considered to be part of
the total amount expended as a result of the
application of this subsection for purposes of applying
the limitation under subparagraph (A).
``(D) Application.--Notwithstanding paragraph
(1)(B), on or after January 1 of the year in which the
fiscal year described in subparagraph (A)(ii)(II)
begins, the Secretary may designate appropriate regions
under such paragraph.
``(6) Limitation of judicial review.--There shall be no
administrative or judicial review under section 1869, section
1878, or otherwise, of designations made under subparagraph (A)
or (B) of paragraph (1).
``(7) Secretary reports.--Not later than April 1 of each
year (beginning in 2010), the Secretary shall submit a report
to Congress and the Comptroller General of the United States
that includes--
``(A) a detailed description of--
``(i) the total amount expended as a result
of the application of this subsection in the
previous year compared to the total amount that
would have been expended under this title in
the year if this subsection had not been
enacted;
``(ii) the projections of the total amount
that will be expended as a result of the
application of this subsection in the year in
which the report is submitted compared to the
total amount that would have been expended
under this title in the year if this subsection
had not been enacted;
``(iii) amounts remaining within the
funding limitation specified in paragraph (5);
and
``(iv) the steps that the Secretary will
take under clauses (i) and (ii) of paragraph
(5)(B) to ensure that the application of this
subsection will not cause expenditures to
exceed the applicable amount described in
paragraph (5)(A); and
``(B) a certification from the Chief Actuary of the
Centers for Medicare & Medicaid Services that the
descriptions under clauses (i), (ii), (iii), and (iv)
of subparagraph (A) are reasonable, accurate, and based
on generally accepted actuarial principles and
methodologies.
``(8) Biennial gao reports.--Not later than January 1,
2011, and biennially thereafter, the Comptroller General of the
United States shall submit to the Secretary and Congress a
report on the designation of highly competitive regions under
this subsection and the application of the payment system under
this subsection within such regions. Each report shall
include--
``(A) an evaluation of--
``(i) the quality of care provided to
beneficiaries enrolled in a MedicareAdvantage
preferred provider plan in a highly competitive
region;
``(ii) the satisfaction of beneficiaries
with benefits under such a plan;
``(iii) the costs to the medicare program
for payments made to such plans; and
``(iv) any improvements in the delivery of
health care services under such a plan;
``(B) a comparative analysis of the benchmark
system applicable under the other provisions of this
section and the payment system applicable in highly
competitive regions under this subsection; and
``(C) recommendations for such legislation or
administrative action as the Comptroller General
determines to be appropriate.
``(9) Report on budget neutrality for fiscal years after
2013.--
``(A) In general.--If the Secretary intends to
designate 1 or more regions as highly competitive
regions with respect to calendar 2014 or any subsequent
calendar year, the Secretary shall submit a report to
Congress indicating such intent no later than April 1
of the calendar year prior to the calendar year in
which the applicable designation year begins.
``(B) Requirements.--A report submitted under
subparagraph (A) shall--
``(i) specify the steps (if any) that the
Secretary will take pursuant to paragraph
(5)(B) to ensure that the total amount expended
as a result of the application of this
subsection during the year will not exceed the
applicable amount for the year (as defined in
paragraph (5)(A)(ii)(II)); and
``(ii) contain a certification from the
Chief Actuary of the Centers for Medicare and
Medicaid Services that such steps will meet the
requirements of paragraph (5)(A) based on an
analysis using generally accepted actuarial
principles and methodologies.''.
(b) Conforming Amendment.--Section 1858(c)(3)(A)(i) (as added by
section 211(b)) is amended to read as follows:
``(i) Whether each preferred provider
region has been designated as a highly
competitive region under subparagraph (A) or
(B) of subsection (i)(1) and the benchmark
amount for any preferred provider region (as
calculated under paragraph (2)(A)) for the year
that has not been designated as a highly
competitive region.''.

SEC. 232. FEE-FOR-SERVICE MODERNIZATION PROJECTS.

(a) Establishment.--
(1) Review and report on results of existing
demonstrations.--
(A) Review.--The Secretary shall conduct an
empirical review of the results of the demonstrations
under sections 442, 443, and 444.
(B) Report.--Not later than January 1, 2008, the
Secretary shall submit a report to Congress on the
empirical review conducted under subparagraph (A) which
shall include estimates of the total costs of the
demonstrations, including expenditures as a result of
the provision of services provided to beneficiaries
under the demonstrations that are incidental to the
services provided under the demonstrations, and all
other expenditures under title XVIII of the Social
Security Act. The report shall also include a
certification from the Chief Actuary of the Centers for
Medicare & Medicaid Services that such estimates are
reasonable, accurate, and based on generally accepted
actuarial principles and methodologies.
(2) Projects.--Beginning in 2009, the Secretary, based on
the empirical review conducted under paragraph (1), shall
establish projects under which medicare beneficiaries receiving
benefits under the medicare fee-for-service program under parts
A and B of title XVIII of the Social Security Act are provided
with coverage of enhanced benefits or services under such
program. The purpose of such projects is to evaluate whether
the provision of such enhanced benefits or services to such
beneficiaries--
(A) improves the quality of care provided to such
beneficiaries under the medicare program;
(B) improves the health care delivery system under
the medicare program; and
(C) results in reduced expenditures under the
medicare program.
(2) Enhanced benefits or services.--For purposes of this
section, enhanced benefits or services shall include--
(A) preventive services not otherwise covered under
title XVIII of the Social Security Act;
(B) chronic care coordination services;
(C) disease management services; or
(D) other benefits or services that the Secretary
determines will improve preventive health care for
medicare beneficiaries, result in improved chronic
disease management, and management of complex, life-
threatening, or high-cost conditions and are consistent
with the goals described in subparagraphs (A), (B), and
(C) of paragraph (1).
(b) Project Sites and Duration.--
(1) In general.--Subject to subsection (e)(2), the projects
under this section shall be conducted--
(A) in a region or regions that are comparable (as
determined by the Secretary) to the region or regions
that are designated as a highly competitive region
under subparagraph (A) or (B) of section 1858(i)(1) of
the Social Security Act, as added by section 231 of
this Act; and
(B) during the years that a region or regions are
designated as such a highly competitive region.
(2) Rule of construction.--For purposes of paragraph (1), a
comparable region does not necessarily mean the identical
region.
(c) Waiver Authority.--The Secretary shall waive compliance with
the requirements of title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) only to the extent and for such period as the Secretary
determines is necessary to provide for enhanced benefits or services
consistent with the projects under this section.
(d) Biennial GAO Reports.--Not later than January 1, 2011, and
biennially thereafter for as long as the projects under this section
are being conducted, the Comptroller General of the United States shall
submit to the Secretary and Congress a report that evaluates the
projects. Each report shall include--
(1) an evaluation of--
(A) the quality of care provided to beneficiaries
receiving benefits or services under the projects;
(B) the satisfaction of beneficiaries receiving
benefits or services under the projects;
(C) the costs to the medicare program under the
projects; and
(D) any improvements in the delivery of health care
services under the projects; and
(2) recommendations for such legislation or administrative
action as the Comptroller General determines to be appropriate.
(e) Funding.--
(1) In general.--Payments for the costs of carrying out the
projects under this section shall be made from the Federal
Hospital Insurance Trust Fund under section 1817 of the Social
Security Act (42 U.S.C. 1395i) and the Federal Supplementary
Insurance Trust Fund under section 1841 of such Act (42 U.S.C.
1395t), as determined appropriate by the Secretary.
(2) Limitation.--The total amount expended under the
medicare fee-for-service program under parts A and B of title
XVIII of the Social Security Act (including all amounts
expended as a result of the projects under this section) during
the period or year, as applicable, may not exceed--
(A) for the period beginning on January 1, 2009,
and ending on September 30, 2013, an amount equal to
the total amount that would have been expended under
the medicare fee-for-service program under parts A and
B of title XVIII of the Social Security Act during the
period if the projects had not been conducted plus
$6,000,000,000; and
(B) for fiscal year 2014 and any subsequent fiscal
year, an amount equal to the total amount that would
have been expended under the medicare fee-for-service
program under parts A and B of such title during the
year if the projects had not been conducted.
(3) Monitoring and reports.--
(A) Ongoing monitoring by the secretary to ensure
funding limitation is not violated.--The Secretary
shall continually monitor expenditures made under title
XVIII of the Social Security Act by reason of the
projects under this section to ensure that the
limitations described in subparagraphs (A) and (B) of
paragraph (2) are not violated.
(B) Reports.--Not later than April 1 of each year
(beginning in 2010), the Secretary shall submit a
report to Congress and the Comptroller General of the
United States that includes--
(i) a detailed description of--
(I) the total amount expended under
the medicare fee-for-service program
under parts A and B of title XVIII of
the Social Security Act (including all
amounts expended as a result of the
projects under this section) during the
previous year compared to the total
amount that would have been expended
under the original medicare fee-for-
service program in the year if the
projects had not been conducted;
(II) the projections of the total
amount expended under the medicare fee-
for-service program under parts A and B
of title XVIII of the Social Security
Act (including all amounts expended as
a result of the projects under this
section) during the year in which the
report is submitted compared to the
total amount that would have been
expended under the original medicare
fee-for-service program in the year if
the projects had not been conducted;
(III) amounts remaining within the
funding limitation specified in
paragraph (2); and
(IV) how the Secretary will change
the scope, site, and duration of the
projects in subsequent years in order
to ensure that the limitations
described in subparagraphs (A) and (B)
of paragraph (2) are not violated; and
(ii) a certification from the Chief Actuary
of the Centers for Medicare & Medicaid Services
that the descriptions under subclauses (I),
(II), (III), and (IV) of clause (i) are
reasonable, accurate, and based on generally
accepted actuarial principles and
methodologies.
(C) Report on budget neutrality for fiscal years
after 2013.--
(i) In general.--If the Secretary intends
to continue the projects under this section for
fiscal year 2014 or any subsequent fiscal year,
the Secretary shall submit a report to Congress
indicating such intent no later than April 1 of
the year prior to the year in which the fiscal
year begins.
(ii) Requirements.--A report submitted
under clause (i) shall--
(I) specify the steps (if any) that
the Secretary will take pursuant to
paragraph (4) to ensure that the
limitations described in paragraph
(2)(B) will not be violated for the
year; and
(II) contain a certification from
the Chief Actuary of the Centers for
Medicare and Medicaid Services that
such steps will meet the requirements
of paragraph (2) based on an analysis
using generally accepted actuarial
principles and methodologies.
(4) Application of Limitation.--If the Secretary determines
that the projects under this section will cause the limitations
described in subparagraphs (A) and (B) of paragraph (2) to be
violated, the Secretary shall take appropriate steps to reduce
spending under the projects, including through reducing the
scope, site, and duration of the projects.
(5) Authority.--Beginning in 2014, the Secretary shall make
necessary spending adjustments (including pro rata reductions
in payments to health care providers under the medicare
program) to recoup amounts so that the limitations described in
subparagraphs (A) and (B) of paragraph (2) are not violated.

Subtitle E--National Bipartisan Commission on Medicare Reform

SEC. 241. MEDICAREADVANTAGE GOAL; ESTABLISHMENT OF COMMISSION.

(a) Enrollment Goal.--It is the goal of this title that, not later
than January 1, 2010, at least 15 percent of individuals entitled to,
or enrolled for, benefits under part A of title XVIII of the Social
Security Act and enrolled under part B of such title should be enrolled
in a MedicareAdvantage plan, as determined by the Center for Medicare
Choices.
(b) Failure to Achieve Goal.--If the goal described in subsection
(a) is not met by January 1, 2012, as determined by the Center for
Medicare Choices, there shall be established a commission as described
in section 2.

SEC. 242. NATIONAL BIPARTISAN COMMISSION ON MEDICARE REFORM.

(a) Establishment.--Upon a determination under section 241(b) that
the enrollment goal has not been met, there shall be established a
commission to be known as the National Bipartisan Commission on
Medicare Reform (in this section referred to as the ``Commission'').
(b) Duties of the Commission.--The Commission shall--
(1) review and analyze the long-term financial condition of
the medicare program under title XVIII of the Social Security
Act (42 U.S.C. 1395 et seq.);
(2) identify problems that threaten the financial integrity
of the Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund established under
sections 1817 and 1841 of such Act (42 U.S.C. 1395i and 1395t),
including--
(A) the financial impact on the medicare program of
the significant increase in the number of medicare
eligible individuals; and
(B) the ability of the Federal Government to
sustain the program into the future;
(3) analyze potential solutions to the problems identified
under paragraph (2) that will ensure both the financial
integrity of the medicare program and the provision of
appropriate benefits under such program, including methods used
by other nations to respond to comparable demographic patterns
in eligibility for health care benefits for elderly and
disabled individuals and trends in employment-related health
care for retirees;
(4) make recommendations to restore the solvency of the
Federal Hospital Insurance Trust Fund and the financial
integrity of the Federal Supplementary Medical Insurance Trust
Fund;
(5) make recommendations for establishing the appropriate
financial structure of the medicare program as a whole;
(6) make recommendations for establishing the appropriate
balance of benefits covered under, and beneficiary
contributions to, the medicare program;
(7) make recommendations for the time periods during which
the recommendations described in paragraphs (4), (5) and (6)
should be implemented;
(8) make recommendations on the impact of chronic disease
and disability trends on future costs and quality of services
under the current benefit, financing, and delivery system
structure of the medicare program;
(9) make recommendations regarding a comprehensive approach
to preserve the medicare program, including ways to increase
the effectiveness of the MedicareAdvantage program and to
increase MedicareAdvantage enrollment rates; and
(10) review and analyze such other matters as the
Commission determines appropriate.
(c) Membership.--
(1) Number and appointment.--The Commission shall be
composed of 17 members, of whom--
(A) four shall be appointed by the President;
(B) six shall be appointed by the Majority Leader
of the Senate, in consultation with the Minority Leader
of the Senate, of whom not more than 4 shall be of the
same political party;
(C) six shall be appointed by the Speaker of the
House of Representatives, in consultation with the
Minority Leader of the House of Representatives, of
whom not more than 4 shall be of the same political
party; and
(D) one, who shall serve as Chairperson of the
Commission, shall be appointed jointly by the
President, Majority Leader of the Senate, and the
Speaker of the House of Representatives.
(2) Deadline for appointment.--Members of the Commission
shall be appointed by not later than October 1, 2012.
(3) Terms of appointment.--The term of any member appointed
under paragraph (1) shall be for the life of the Commission.
(4) Meetings.--The Commission shall meet at the call of the
Chairperson or a majority of its members.
(5) Quorum.--A quorum for purposes of conducting the
business of the Commission shall consist of 8 members of the
Commission, except that 4 members may conduct a hearing under
subsection (e).
(6) Vacancies.--A vacancy in the membership of the
Commission shall be filled, not later than 30 days after the
Commission is given notice of the vacancy, in the same manner
in which the original appointment was made. Such a vacancy
shall not affect the power of the remaining members to carry
out the duties of the Commission.
(7) Compensation.--Members of the Commission shall receive
no additional pay, allowances, or benefits by reason of their
service on the Commission.
(8) Expenses.--Each member of the Commission shall receive
travel expenses and per diem in lieu of subsistence in
accordance with sections 5702 and 5703 of title 5, United
States Code.
(d) Staff and Support Services.--
(1) Executive director.--
(A) Appointment.--The Chairperson shall appoint an
executive director of the Commission.
(B) Compensation.--The executive director shall be
paid the rate of basic pay for level V of the Executive
Schedule under title 5, United States Code.
(2) Staff.--With the approval of the Commission, the
executive director may appoint such personnel as the executive
director considers appropriate.
(3) Applicability of civil service laws.--The staff of the
Commission shall be appointed without regard to the provisions
of title 5, United States Code, governing appointments in the
competitive service, and shall be paid without regard to the
provisions of chapter 51 and subchapter III of chapter 53 of
such title (relating to classification and General Schedule pay
rates).
(4) Experts and consultants.--With the approval of the
Commission, the executive director may procure temporary and
intermittent services under section 3109(b) of title 5, United
States Code.
(5) Physical facilities.--The Administrator of the General
Services Administration shall locate suitable office space for
the operation of the Commission. The facilities shall serve as
the headquarters of the Commission and shall include all
necessary equipment and incidentals required for the proper
functioning of the Commission.
(e) Powers of Commission.--
(1) Hearings and other activities.--The Commission may hold
such hearings and undertake such other activities as the
Commission determines to be necessary to carry out its duties
under this section.
(2) Studies by gao.--Upon the request of the Commission,
the Comptroller General shall conduct such studies or
investigations as the Commission determines to be necessary to
carry out its duties under this section.
(3) Cost estimates by congressional budget office and
office of the chief actuary of the centers for medicare &
medicaid.--
(A) In general.--The Director of the Congressional
Budget Office or the Chief Actuary of the Center for
Medicare & Medicaid Services, or both, shall provide to
the Commission, upon the request of the Commission,
such cost estimates as the Commission determines to be
necessary to carry out its duties under this section.
(B) Reimbursements.--The Commission shall reimburse
the Director of the Congressional Budget Office for
expenses relating to the employment in the office of
the Director of such additional staff as may be
necessary for the Director to comply with requests by
the Commission under subparagraph (A).
(4) Detail of federal employees.--Upon the request of the
Commission, the head of any Federal agency is authorized to
detail, without reimbursement, any of the personnel of such
agency to the Commission to assist the Commission in carrying
out its duties under this section. Any such detail shall not
interrupt or otherwise affect the civil service status or
privileges of the Federal employee.
(5) Technical assistance.--Upon the request of the
Commission, the head of a Federal agency shall provide such
technical assistance to the Commission as the Commission
determines to be necessary to carry out its duties under this
section.
(6) Use of mails.--The Commission may use the United States
mails in the same manner and under the same conditions as
Federal agencies and shall, for purposes of the frank, be
considered a commission of Congress as described in section
3215 of title 39, United States Code.
(7) Obtaining information.--The Commission may secure
directly from any Federal agency information necessary to
enable it to carry out its duties under this section, if the
information may be disclosed under section 552 of title 5,
United States Code. Upon request of the Chairperson of the
Commission, the head of each such agency shall furnish such
information to the Commission.
(8) Administrative support services.--Upon the request of
the Commission, the Administrator of General Services shall
provide to the Commission on a reimbursable basis such
administrative support services as the Commission may request.
(9) Printing.--For purposes of costs relating to printing
and binding, including the cost of personnel detailed from the
Government Printing Office, the Commission shall be deemed to
be a committee of Congress.
(f) Report.--Not later than April 1, 2014, the Commission shall
submit to the President and Congress a report and an implementation
bill that shall contain a detailed statement of only those
recommendations, findings, and conclusions of the Commission that
receive the approval of at least 11 members of the Commission.
(g) Termination.--The Commission shall terminate on the date that
is 30 days after the date on which the report and implementation bill
is submitted under subsection (f).

SEC. 243. CONGRESSIONAL CONSIDERATION OF REFORM PROPOSALS.

(a) Definitions.--In this section:
(1) Implementation bill.--The term ``implementation bill''
means only a bill that is introduced as provided under
subsection (b), and contains the proposed legislation included
in the report submitted to Congress under section 242(f),
without modification.
(2) Calendar day.--The term ``calendar day'' means a
calendar day other than 1 on which either House is not in
session because of an adjournment of more than 3 days to a date
certain.
(b) Introduction; Referral; and Report or Discharge.--
(1) Introduction.--On the first calendar day on which both
Houses are in session immediately following the date on which
the report is submitted to Congress under section 242(f), a
single implementation bill shall be introduced (by request)--
(A) in the Senate by the Majority Leader of the
Senate, for himself and the Minority Leader of the
Senate, or by Members of the Senate designated by the
Majority Leader and Minority Leader of the Senate; and
(B) in the House of Representatives by the Speaker
of the House of Representatives, for himself and the
Minority Leader of the House of Representatives, or by
Members of the House of Representatives designated by
the Speaker and Minority Leader of the House of
Representatives.
(2) Referral.--The implementation bills introduced under
paragraph (1) shall be referred to any appropriate committee of
jurisdiction in the Senate and any appropriate committee of
jurisdiction in the House of Representatives. A committee to
which an implementation bill is referred under this paragraph
may report such bill to the respective House without amendment.
(3) Report or discharge.--If a committee to which an
implementation bill is referred has not reported such bill by
the end of the 15th calendar day after the date of the
introduction of such bill, such committee shall be immediately
discharged from further consideration of such bill, and upon
being reported or discharged from the committee, such bill
shall be placed on the appropriate calendar.
(c) Floor Consideration.--
(1) In general.--When the committee to which an
implementation bill is referred has reported, or has been
discharged under subsection (b)(3), it is at any time
thereafter in order (even though a previous motion to the same
effect has been disagreed to) for any Member of the respective
House to move to proceed to the consideration of the
implementation bill, and all points of order against the
implementation bill (and against consideration of the
implementation bill) are waived. The motion is highly
privileged in the House of Representatives and is privileged in
the Senate. The motion is not subject to amendment, or to a
motion to postpone, or to a motion to proceed to the
consideration of other business. A motion to reconsider the
vote by which the motion is agreed to or disagreed to shall not
be in order. If a motion to proceed to the consideration of the
implementation bill is agreed to, the implementation bill shall
remain the unfinished business of the respective House until
disposed of.
(2) Amendments.--An implementation bill may not be amended
in the Senate or the House of Representatives.
(3) Debate.--Debate on the implementation bill, and on all
debatable motions and appeals in connection therewith, shall be
limited to not more than 20 hours, which shall be divided
equally between those favoring and those opposing the
resolution. A motion further to limit debate is in order and
not debatable. An amendment to, or a motion to postpone, or a
motion to proceed to the consideration of other business, or a
motion to recommit the implementation bill is not in order. A
motion to reconsider the vote by which the implementation bill
is agreed to or disagreed to is not in order.
(4) Vote on final passage.--Immediately following the
conclusion of the debate on an implementation bill, and a
single quorum call at the conclusion of the debate if requested
in accordance with the rules of the appropriate House, the vote
on final passage of the implementation bill shall occur.
(5) Rulings of the chair on procedure.--Appeals from the
decisions of the Chair relating to the application of the rules
of the Senate or the House of Representatives, as the case may
be, to the procedure relating to an implementation bill shall
be decided without debate.
(d) Coordination With Action by Other House.--If, before the
passage by 1 House of an implementation bill of that House, that House
receives from the other House an implementation bill, then the
following procedures shall apply:
(1) Nonreferral.--The implementation bill of the other
House shall not be referred to a committee.
(2) Vote on bill of other house.--With respect to an
implementation bill of the House receiving the implementation
bill--
(A) the procedure in that House shall be the same
as if no implementation bill had been received from the
other House; but
(B) the vote on final passage shall be on the
implementation bill of the other House.
(e) Rules of Senate and House of Representatives.--This section is
enacted by Congress--
(1) as an exercise of the rulemaking power of the Senate
and House of Representatives, respectively, and as such it is
deemed a part of the rules of each House, respectively, but
applicable only with respect to the procedure to be followed in
that House in the case of an implementation bill described in
subsection (a), and it supersedes other rules only to the
extent that it is inconsistent with such rules; and
(2) with full recognition of the constitutional right of
either House to change the rules (so far as relating to the
procedure of that House) at any time, in the same manner, and
to the same extent as in the case of any other rule of that
House.

SEC. 244. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated such sums as may be
necessary to carry out this subtitle for each of fiscal years 2012
through 2013.

TITLE III--CENTER FOR MEDICARE CHOICES

SEC. 301. ESTABLISHMENT OF THE CENTER FOR MEDICARE CHOICES.

(a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as amended
by section 111, is amended by inserting after 1806 the following new
section:

``establishment of the center for medicare choices

``Sec. 1808. (a) Establishment.--By not later than March 1, 2004,
the Secretary shall establish within the Department of Health and Human
Services the Center for Medicare Choices, which shall be separate from
the Centers for Medicare & Medicaid Services.
``(b) Administrator and Deputy Administrator.--
``(1) Administrator.--
``(A) In general.--The Center for Medicare Choices
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 report
directly 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 Center for Medicare
Choices, 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 Center for Medicare
Choices. 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 Center for Medicare Choices 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 Center
for Medicare Choices 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 Center for Medicare Choices who
shall be appointed by the Administrator.
``(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 the Acting
Administrator of the Center for Medicare Choices 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 Centers for Medicare
& Medicaid Services 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 MedicareAdvantage plans under part
C, including the offering of qualified
prescription drug coverage under such plans;
and
``(ii) negotiating, entering into, and
enforcing, contracts with eligible entities for
the offering of Medicare Prescription Drug
plans under part D.
``(B) Other duties.--The Administrator shall carry
out any duty provided for under part C or D, including
duties relating to--
``(i) reasonable cost contracts with
eligible organizations under section 1876(h);
and
``(ii) demonstration projects carried out
in part or in whole under such parts, including
the demonstration project carried out through a
MedicareAdvantage (formerly Medicare+Choice)
project that demonstrates the application of
capitation payment rates for frail elderly
medicare beneficiaries through the use of an
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 order to promote
competition under parts C and D, the Administrator, in
carrying out the duties required under this section,
may not, to the extent possible, interfere in any way
with negotiations between eligible entities,
MedicareAdvantage organizations, hospitals, physicians,
other entities or individuals furnishing items and
services under this title (including contractors for
such items and services), and drug manufacturers,
wholesalers, or other suppliers of covered drugs
``(D) Annual reports.--Not later than March 31 of
each year, the Administrator shall submit to Congress
and the President a report on the administration of the
voluntary prescription drug delivery program under this
part during the previous fiscal year.
``(2) Management staff.--
``(A) In general.--The Administrator, with the
approval of the Secretary, may employ, such management
staff as determined appropriate. Any such manager shall
be required to have demonstrated, by their education
and experience (either in the public or private
sector), superior expertise in the following areas:
``(i) The review, negotiation, and
administration of health care contracts.
``(ii) The design of health care benefit
plans.
``(iii) Actuarial sciences.
``(iv) Compliance with health plan
contracts.
``(v) Consumer education and decision
making.
``(B) Compensation.--
``(i) In general.--Subject to clause (ii),
the Administrator shall establish the rate of
pay for an individual employed under
subparagraph (A).
``(ii) Maximum rate.--In no case may the
rate of compensation determined under clause
(i) exceed the highest rate of basic pay for
the Senior Executive Service under section
5382(b) of title 5, United States Code.
``(3) Redelegation of certain functions of the centers for
medicare & medicaid services.--
``(A) In general.--The Secretary, the Administrator
of the Center for Medicare Choices, and the
Administrator of the Centers for Medicare & Medicaid
Services shall establish an appropriate transition of
responsibility in order to redelegate the
administration of part C from the Secretary and the
Administrator of the Centers for Medicare & Medicaid
Services to the Administrator of the Center for
Medicare Choices 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
Centers for Medicare & Medicaid Services transfers to
the Administrator such information and data in the
possession of the Administrator of the Centers for
Medicare & Medicaid Services as the Administrator
requires to carry out the duties described in paragraph
(1).
``(C) Construction.--Insofar as a responsibility of
the Secretary or the Administrator of the Centers for
Medicare & Medicaid Services is redelegated to the
Administrator under this section, any reference to the
Secretary or the Administrator of the Centers for
Medicare & Medicaid Services 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 Center for Medicare Choices 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 a separate operating division within the Center for
Medicare Choices.
``(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 Center for Medicare Choices, 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.
``(iii) Other areas determined to be
appropriate by the Administrator.
Such information shall be presented in a manner so that
medicare beneficiaries may compare benefits under parts
A, B, and D, and medicare supplemental policies with
benefits under MedicareAdvantage 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 MedicareAdvantage program under part C, and the
voluntary prescription drug delivery 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,
MedicareAdvantage organization, an
eligible entity under part D, or the
Secretary; and
``(II) assistance to such
beneficiaries with any problems arising
from disenrollment from a
MedicareAdvantage plan under part C or
a prescription drug plan under part D;
and
``(iii) submit annual reports to Congress,
the Secretary, and the Medicare Competitive
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 Competitive Policy Advisory Board.--
``(1) Establishment.--There is established within the
Center for Medicare Choices the Medicare Competitive Policy
Advisory Board (in this section referred to as the `Board').
The Board shall advise, consult with, and make recommendations
to the Administrator 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 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 stability and solvency of the programs under such
parts and 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 of 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) Quality.--Recommendations on ways
to improve the quality of benefits provided
under plans under parts C and D.
``(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.--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 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) Three members shall be appointed by
the President.
``(ii) Two 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 Energy and Commerce of the House
of Representatives.
``(iii) Two 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 Committee on Finance of
the Senate.
``(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) one shall be appointed for a term of
1 year;
``(ii) three shall be appointed for terms
of 2 years; and
``(iii) three 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 such additional personnel as
the Director considers appropriate.
``(C) Assistance from the administrator.--The
Administrator 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 Prescription Drug Account), such sums as are necessary to carry out
this section.''.
(b) Use of Central, Toll-Free Number (1-800-MEDICARE).--Section
1804(b) (42 U.S.C. 1395b-2(b)) is amended by adding at the end the
following: ``By not later than 1 year after the date of the enactment
of the Prescription Drug and Medicare Improvement Act of 2003, the
Secretary shall provide, through the toll-free number 1-800-MEDICARE,
for a means by which individuals seeking information about, or
assistance with, such programs who phone such toll-free number are
transferred (without charge) to appropriate entities for the provision
of such information or assistance. Such toll-free number shall be the
toll-free number listed for general information and assistance in the
annual notice under subsection (a) instead of the listing of numbers of
individual contractors.''.

SEC. 302. MISCELLANEOUS ADMINISTRATIVE PROVISIONS.

(a) Administrator as Member and Co-Secretary of the Board of
Trustees of the Medicare Trust Funds.--The fifth sentence of sections
1817(b) and 1841(b) (42 U.S.C. 1395i(b), 1395t(b)) are each amended by
striking ``shall serve as the Secretary'' and inserting ``and the
Administrator of the Center for Medicare Choices shall serve as the Co-
Secretaries''.
(b) Increase in Grade to Executive Level III for the Administrator
of the Centers for Medicare & Medicaid Services.--
(1) In general.--Section 5314 of title 5, United States
Code, is amended by adding at the end the following:
``Administrator of the Centers for Medicare & Medicaid
Services.''.
(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, 2004.

TITLE IV--MEDICARE FEE-FOR-SERVICE IMPROVEMENTS

Subtitle A--Provisions Relating to Part A

SEC. 401. EQUALIZING URBAN AND RURAL STANDARDIZED PAYMENT AMOUNTS UNDER
THE MEDICARE INPATIENT HOSPITAL PROSPECTIVE PAYMENT
SYSTEM.

(a) In General.--Section 1886(d)(3)(A)(iv) (42 U.S.C.
1395ww(d)(3)(A)(iv)) is amended--
(1) by striking ``(iv) For discharges'' and inserting
``(iv)(I) Subject to subclause (II), for discharges''; and
(2) by adding at the end the following new subclause:
``(II) For discharges occurring in a fiscal year (beginning
with fiscal year 2004), the Secretary shall compute a
standardized amount for hospitals located in any area within
the United States and within each region equal to the
standardized amount computed for the previous fiscal year under
this subparagraph for hospitals located in a large urban area
(or, beginning with fiscal year 2005, for applicable for all
hospitals in the previous fiscal year) increased by the
applicable percentage increase under subsection (b)(3)(B)(i)
for the fiscal year involved.''.
(b) Application to Subsection (d) Puerto Rico Hospitals.--Section
1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
(1) in subparagraph (A)--
(A) in clause (i), by striking ``and'' after the
comma at the end;
(B) in clause (ii)--
(i) in the matter preceding subclause (I),
by inserting ``and before October 1, 2003''
after ``October 1, 1997''; and
(ii) in the matter following clause (III),
by striking the period at the end and inserting
``, and''; and
(iii) by adding at the end the following
new clause:
``(iii) for discharges in a fiscal year beginning on or
after October 1, 2003, 50 percent of the national standardized
rate (determined under paragraph (3)(D)(iii)) for hospitals
located in any area.'';
(2) in subparagraph (C)--
(A) in clause (i)--
(i) by striking ``(i) The Secretary'' and
inserting ``(i)(I) For discharges in a fiscal
year after fiscal year 1988 and before fiscal
year 2004, the Secretary; and
(ii) by adding at the end the following:
``(II) For discharges in fiscal year 2004, the Secretary
shall compute an average standardized amount for hospitals
located in any area of Puerto Rico that is equal to the average
standardized amount computed under subclause (I) for fiscal
year 2003 for hospitals in an urban area, increased by the
applicable percentage increase under subsection (b)(3)(B) for
fiscal year 2004.
``(III) For discharges in a fiscal year after fiscal year
2004, the Secretary shall compute an average standardized
amount for hospitals located in any are of Puerto Rico that is
equal to the average standardized amount computed under
subclause (II) or this subclause for the previous fiscal year,
increased by the applicable percentage increase under
subsection (b)(3)(B), adjusted to reflect the most recent case
mix data.'';
(B) in clause (ii), by inserting ``(or for fiscal
year 2004 and thereafter, the standardized amount)''
after ``each of the average standardized amounts''; and
(C) in clause (iii)(I), by striking ``for hospitals
located in an urban or rural area, respectively''.
(c) Conforming Amendments.--
(1) Computing drg-specific rates.--Section 1886(d)(3)(D)
(42 U.S.C. 1395ww(d)(3)(D)) is amended--
(A) in the heading, by striking ``in different
areas'';
(B) in the matter preceding clause (i), by striking
``, each of'';
(C) in clause (i)--
(i) in the matter preceding subclause (I),
by inserting ``for fiscal years before fiscal
year 2004,'' before ``for hospitals''; and
(ii) in subclause (II), by striking ``and''
after the semicolon at the end;
(D) in clause (ii)--
(i) in the matter preceding subclause (I),
by inserting ``for fiscal years before fiscal
year 2004,'' before ``for hospitals''; and
(ii) in subclause (II), by striking the
period at the end and inserting ``; and''; and
(E) by adding at the end the following new clause:
``(iii) for a fiscal year beginning after fiscal
year 2003, for hospitals located in all areas, to the
product of--
``(I) the applicable standardized amount
(computed under subparagraph (A)), reduced
under subparagraph (B), and adjusted or reduced
under subparagraph (C) for the fiscal year; and
``(II) the weighting factor (determined
under paragraph (4)(B)) for that diagnosis-
related group.''.
(2) Technical conforming sunset.--Section 1886(d)(3) (42
U.S.C. 1395ww(d)(3)) is amended--
(A) in the matter preceding subparagraph (A), by
inserting ``, for fiscal years before fiscal year
1997,'' before ``a regional adjusted DRG prospective
payment rate''; and
(B) in subparagraph (D), in the matter preceding
clause (i), by inserting ``, for fiscal years before
fiscal year 1997,'' before ``a regional DRG prospective
payment rate for each region,''.

SEC. 402. ADJUSTMENT TO THE MEDICARE INPATIENT HOSPITAL PPS WAGE INDEX
TO REVISE THE LABOR-RELATED SHARE OF SUCH INDEX.

(a) In General.--Section 1886(d)(3)(E) (42 U.S.C. 1395ww(d)(3)(E))
is amended--
(1) by striking ``wage levels.--The Secretary'' and
inserting ``wage levels.--
``(i) In general.--Except as provided in clause
(ii), the Secretary''; and
(2) by adding at the end the following new clause:
``(ii) Alternative proportion to be adjusted
beginning in fiscal year 2005.--
``(I) In general.--Except as provided in
subclause (II), for discharges occurring on or
after October 1, 2004, the Secretary shall
substitute `62 percent' for the proportion
described in the first sentence of clause (i).
``(II) Hold harmless for certain
hospitals.--If the application of subclause (I)
would result in lower payments to a hospital
than would otherwise be made, then this
subparagraph shall be applied as if this clause
had not been enacted.''.
(b) Waiving Budget Neutrality.--Section 1886(d)(3)(E) (42 U.S.C.
1395ww(d)(3)(E)), as amended by subsection (a), is amended by adding at
the end of clause (i) the following new sentence: ``The Secretary shall
apply the previous sentence for any period as if the amendments made by
section 402(a) of the Prescription Drug and Medicare Improvement Act of
2003 had not been enacted.''.

SEC. 403. MEDICARE INPATIENT HOSPITAL PAYMENT ADJUSTMENT FOR LOW-VOLUME
HOSPITALS.

Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by adding at the
end the following new paragraph:
``(12) Payment adjustment for low-volume hospitals.--
``(A) Payment adjustment.--
``(i) In general.--Notwithstanding any
other provision of this section, for each cost
reporting period (beginning with the cost
reporting period that begins in fiscal year
2005), the Secretary shall provide for an
additional payment amount to each low-volume
hospital (as defined in clause (iii)) for
discharges occurring during that cost reporting
period which is equal to the applicable
percentage increase (determined under clause
(ii)) in the amount paid to such hospital under
this section for such discharges.
``(ii) Applicable percentage increase.--The
Secretary shall determine a percentage increase
applicable under this paragraph that ensures
that--
``(I) no percentage increase in
payments under this paragraph exceeds
25 percent of the amount of payment
that would (but for this paragraph)
otherwise be made to a low-volume
hospital under this section for each
discharge;
``(II) low-volume hospitals that
have the lowest number of discharges
during a cost reporting period receive
the highest percentage increases in
payments due to the application of this
paragraph; and
``(III) the percentage increase in
payments to any low-volume hospital due
to the application of this paragraph is
reduced as the number of discharges per
cost reporting period increases.
``(iii) Low-volume hospital defined.--For
purposes of this paragraph, the term `low-
volume hospital' means, for a cost reporting
period, a subsection (d) hospital (as defined
in paragraph (1)(B)) other than a critical
access hospital (as defined in section
1861(mm)(1)) that--
``(I) the Secretary determines had
an average of less than 2,000
discharges (determined with respect to
all patients and not just individuals
receiving benefits under this title)
during the 3 most recent cost reporting
periods for which data are available
that precede the cost reporting period
to which this paragraph applies; and
``(II) is located at least 15 miles
from a like hospital (or is deemed by
the Secretary to be so located by
reason of such factors as the Secretary
determines appropriate, including the
time required for an individual to
travel to the nearest alternative
source of appropriate inpatient care
(after taking into account the location
of such alternative source of inpatient
care and any weather or travel
conditions that may affect such travel
time).
``(B) Prohibiting certain reductions.--
Notwithstanding subsection (e), the Secretary shall not
reduce the payment amounts under this section to offset
the increase in payments resulting from the application
of subparagraph (A).''.

SEC. 404. FAIRNESS IN THE MEDICARE DISPROPORTIONATE SHARE HOSPITAL
(DSH) ADJUSTMENT FOR RURAL HOSPITALS.

(a) Equalizing DSH Payment Amounts.--
(1) In general.--Section 1886(d)(5)(F)(vii) (42 U.S.C.
1395ww(d)(5)(F)(vii)) is amended by inserting ``, and, after
October 1, 2004, for any other hospital described in clause
(iv),'' after ``clause (iv)(I)'' in the matter preceding
subclause (I).
(2) Conforming amendments.--Section 1886(d)(5)(F) (42
U.S.C. 1395ww(d)(5)(F)) is amended--
(A) in clause (iv)--
(i) in subclause (II)--
(I) by inserting ``and before
October 1, 2004,'' after ``April 1,
2001,''; and
(II) by inserting ``or, for
discharges occurring on or after
October 1, 2004, is equal to the
percent determined in accordance with
the applicable formula described in
clause (vii)'' after ``clause (xiii)'';
(ii) in subclause (III)--
(I) by inserting ``and before
October 1, 2004,'' after ``April 1,
2001,''; and
(II) by inserting ``or, for
discharges occurring on or after
October 1, 2004, is equal to the
percent determined in accordance with
the applicable formula described in
clause (vii)'' after ``clause (xii)'';
(iii) in subclause (IV)--
(I) by inserting ``and before
October 1, 2004,'' after ``April 1,
2001,''; and
(II) by inserting ``or, for
discharges occurring on or after
October 1, 2004, is equal to the
percent determined in accordance with
the applicable formula described in
clause (vii)'' after ``clause (x) or
(xi)'';
(iv) in subclause (V)--
(I) by inserting ``and before
October 1, 2004,'' after ``April 1,
2001,''; and
(II) by inserting ``or, for
discharges occurring on or after
October 1, 2004, is equal to the
percent determined in accordance with
the applicable formula described in
clause (vii)'' after ``clause (xi)'';
and
(v) in subclause (VI)--
(I) by inserting ``and before
October 1, 2004,'' after ``April 1,
2001,''; and
(II) by inserting ``or, for
discharges occurring on or after
October 1, 2004, is equal to the
percent determined in accordance with
the applicable formula described in
clause (vii)'' after ``clause (x)'';
(B) in clause (viii), by striking ``The formula''
and inserting ``For discharges occurring before October
1, 2004, the formula''; and
(C) in each of clauses (x), (xi), (xii), and
(xiii), by striking ``For purposes'' and inserting
``With respect to discharges occurring before October
1, 2004, for purposes''.
(b) Effective Date.--The amendments made by this section shall
apply to discharges occurring on or after October 1, 2004.

SEC. 404A. MEDPAC STUDY AND REPORT REGARDING MEDICARE DISPROPORTIONATE
SHARE HOSPITAL (DSH) ADJUSTMENT PAYMENTS.

(a) Study.--The Medicare Payment Advisory Commission established
under section 1805 of the Social Security Act (42 U.S.C. 1395b-6) (in
this section referred to as ``MedPAC'') shall conduct a study to
determine, with respect to additional payment amounts paid to
subsection (d) hospitals under section 1886(d)(5)(F) of the Social
Security Act (42 U.S.C. 1395ww(d)(5)(F))--
(1) whether such payments should be made in the same manner
as payments are made with respect to graduate medical education
under title XVIII and with respect to hospitals that serve a
disproportionate share of low-income patients under the
medicaid program; and
(2) whether to add costs attributable to uncompensated care
to the formula for determining such payment amounts.
(b) Report.--Not later than 1 year after the date of enactment of
this Act, MedPAC shall submit a report to Congress on the study
conducted under subsection (a), together with such recommendations for
legislation as MedPAC determines are appropriate.

SEC. 405. CRITICAL ACCESS HOSPITAL (CAH) IMPROVEMENTS.

(a) Permitting CAHs To Allocate Swing Beds and Acute Care Inpatient
Beds Subject to a Total Limit of 25 Beds.--
(1) In general.--Section 1820(c)(2)(B)(iii) (42 U.S.C.
1395i-4(c)(2)(B)(iii)) is amended to read as follows:
``(iii) provides not more than a total of
25 extended care service beds (pursuant to an
agreement under subsection (f)) and acute care
inpatient beds (meeting such standards as the
Secretary may establish) for providing
inpatient care for a period that does not
exceed, as determined on an annual, average
basis, 96 hours per patient;''.
(2) Conforming amendment.--Section 1820(f) (42 U.S.C.
1395i-4(f)) is amended by striking ``and the number of beds
used at any time for acute care inpatient services does not
exceed 15 beds''.
(3) Effective date.--The amendments made by this subsection
shall with respect to designations made on or after October 1,
2004.
(b) Elimination of the Isolation Test for Cost-Based CAH Ambulance
Services.--
(1) Elimination.--
(A) In general.--Section 1834(l)(8) (42 U.S.C.
1395m(l)(8)), as added by section 205(a) of BIPA (114
Stat. 2763A-482), is amended by striking the comma at
the end of subparagraph (B) and all that follows and
inserting a period.
(B) Effective date.--The amendment made by
subparagraph (A) shall apply to services furnished on
or after January 1, 2005.
(2) Technical correction.--Section 1834(l) (42 U.S.C.
1395m(l)) is amended by redesignating paragraph (8), as added
by section 221(a) of BIPA (114 Stat. 2763A-486), as paragraph
(9).
(c) Coverage of Costs for Certain Emergency Room On-Call
Providers.--
(1) In general.--Section 1834(g)(5) (42 U.S.C. 1395m(g)(5))
is amended--
(A) in the heading--
(i) by inserting ``certain'' before
``emergency''; and
(ii) by striking ``physicians'' and
inserting ``providers'';
(B) by striking ``emergency room physicians who are
on-call (as defined by the Secretary)'' and inserting
``physicians, physician assistants, nurse
practitioners, and clinical nurse specialists who are
on-call (as defined by the Secretary) to provide
emergency services''; and
(C) by striking ``physicians' services'' and
inserting ``services covered under this title''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to costs incurred for services provided on or after
January 1, 2005.
(d) Authorization of Periodic Interim Payment (PIP).--
(1) In general.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2))
is amended--
(A) in subparagraph (C), by striking ``and'' after
the semicolon at the end;
(B) in subparagraph (D), by adding ``and'' after
the semicolon at the end; and
(C) by inserting after subparagraph (D) the
following new subparagraph:
``(E) inpatient critical access hospital services;''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to payments for inpatient critical access facility
services furnished on or after January 1, 2005.
(e) Exclusion of New CAHs From PPS Hospital Wage Index
Calculation.--Section 1886(d)(3)(E)(i) (42 U.S.C. 1395ww(d)(3)(E)(i)),
as amended by section 402, is amended by inserting after the first
sentence the following new sentence: ``In calculating the hospital wage
levels under the preceding sentence applicable with respect to cost
reporting periods beginning on or after January 1, 2004, the Secretary
shall exclude the wage levels of any facility that became a critical
access hospital prior to the cost reporting period for which such
hospital wage levels are calculated.''.
(f) Provisions Related to Certain Rural Grants.--
(1) Small rural hospital improvement program.--Section
1820(g) (42 U.S.C. 1395i-4(g)) is amended--
(A) by redesignating paragraph (3)(F) as paragraph
(5) and redesignating and indenting appropriately; and
(B) by inserting after paragraph (3) the following
new paragraph:
``(4) Small rural hospital improvement program.--
``(A) Grants to hospitals.--The Secretary may award
grants to hospitals that have submitted applications in
accordance with subparagraph (B) to assist eligible
small rural hospitals (as defined in paragraph (3)(B))
in meeting the costs of reducing medical errors,
increasing patient safety, protecting patient privacy,
and improving hospital quality and performance.
``(B) Application.--A hospital seeking a grant
under this paragraph shall submit an application to the
Secretary on or before such date and in such form and
manner as the Secretary specifies.
``(C) Amount of grant.--A grant to a hospital under
this paragraph may not exceed $50,000.
``(D) Use of funds.--A hospital receiving a grant
under this paragraph may use the funds for the purchase
of computer software and hardware, the education and
training of hospital staff, and obtaining technical
assistance.''.
(2) Authorization for appropriations.--Section 1820(j) (42
U.S.C. 1395i-4(j)) is amended to read as follows:
``(j) Authorization of Appropriations.--
``(1) HI trust fund.--There are authorized to be
appropriated from the Federal Hospital Insurance Trust Fund for
making grants to all States under--
``(A) subsection (g), $25,000,000 in each of the
fiscal years 1998 through 2002; and
``(B) paragraphs (1) and (2) of subsection (g),
$40,000,000 in each of the fiscal years 2004 through
2008.
``(2) General revenues.--There are authorized to be
appropriated from amounts in the Treasury not otherwise
appropriated for making grants to all States under subsection
(g)(4), $25,000,000 in each of the fiscal years 2004 through
2008.''.
(3) Requirement that states awarded grants consult with the
state hospital association and rural hospitals on the most
appropriate ways to use such grants.--
(A) In general.--Section 1820(g) (42 U.S.C. 1395i-
4(g)), as amended by paragraph (1), is amended by
adding at the end the following new paragraph:
``(6) Required consultation for states awarded grants.--A
State awarded a grant under paragraph (1) or (2) shall consult
with the hospital association of such State and rural hospitals
located in such State on the most appropriate ways to use the
funds under such grant.''.
(B) Effective date and application.--The amendment
made by subparagraph (A) shall take effect on the date
of enactment of this Act and shall apply to grants
awarded on or after such date and to grants awarded
prior to such date to the extent that funds under such
grants have not been obligated as of such date.
(g) Exclusion of Certain Beds From Bed Count and Removal of
Barriers to Establishment of Distinct Part Units.--
(1) Exclusion of certain beds from bed count.--Section
1820(c)(2) (42 U.S.C. 1395i-4(c)(2)) is amended by adding at
the end the following:
``(E) Exclusion of certain beds from bed count.--In
determining the number of beds of a facility for
purposes of applying the bed limitations referred to in
subparagraph (B)(iii) and subsection (f), the Secretary
shall not take into account any bed of a distinct part
psychiatric or rehabilitation unit (described in the
matter following clause (v) of section 1886(d)(1)(B))
of the facility, except that the total number of beds
that are not taken into account pursuant to this
subparagraph with respect to a facility shall not
exceed 25.''.
(2) Removing barriers to establishment of distinct part
units by critical access hospitals.--Section 1886(d)(1)(B) (42
U.S.C. 195ww(d)(1)(B)) is amended by striking ``a distinct part
of the hospital (as defined by the Secretary)'' in the matter
following cause (v) and inserting ``a distinct part (as defined
by the Secretary) of the hospital or of a critical access
hospital''.
(3) Effective date.--The amendments made by this subsection
shall apply to determinations with respect to distinct part
unit status, and with respect to designations, that are made on
or after October 1, 2003.

SEC. 406. AUTHORIZING USE OF ARRANGEMENTS TO PROVIDE CORE HOSPICE
SERVICES IN CERTAIN CIRCUMSTANCES.

(a) In General.--Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is
amended by adding at the end the following:
``(D) In extraordinary, exigent, or other non-routine
circumstances, such as unanticipated periods of high patient loads,
staffing shortages due to illness or other events, or temporary travel
of a patient outside a hospice program's service area, a hospice
program may enter into arrangements with another hospice program for
the provision by that other program of services described in paragraph
(2)(A)(ii)(I). The provisions of paragraph (2)(A)(ii)(II) shall apply
with respect to the services provided under such arrangements.
``(E) A hospice program may provide services described in paragraph
(1)(A) other than directly by the program if the services are highly
specialized services of a registered professional nurse and are
provided non-routinely and so infrequently so that the provision of
such services directly would be impracticable and prohibitively
expensive.''.
(b) Conforming Payment Provision.--Section 1814(i) (42 U.S.C.
1395f(i)) is amended by adding at the end the following new paragraph:
``(4) In the case of hospice care provided by a hospice program
under arrangements under section 1861(dd)(5)(D) made by another hospice
program, the hospice program that made the arrangements shall bill and
be paid for the hospice care.''.
(c) Effective Date.--The amendments made by this section shall
apply to hospice care provided on or after October 1, 2004.

SEC. 407. SERVICES PROVIDED TO HOSPICE PATIENTS BY NURSE PRACTITIONERS,
CLINICAL NURSE SPECIALISTS, AND PHYSICIAN ASSISTANTS.

(a) In General.--Section 1812(d)(2)(A) (42 U.S.C. 1395d(d)(2)(A) in
the matter following clause (i)(II), is amended--
(1) by inserting ``or services described in section
1861(s)(2)(K)'' after ``except that clause (i) shall not apply
to physicians' services''; and
(2) by inserting ``, or by a physician assistant, nurse
practitioner, or clinical nurse specialist whom is not an
employee of the hospice program, and who the individual
identifies as the health care provider having the most
significant role in the determination and delivery of medical
care to the individual at the time the individual makes an
election to receive hospice care,'' after the ``(if not an
employee of the hospice program)''.
(b) Permitting Nurse Practitioners, Physician Assistants, and
Clinical Nurse Specialist to Review Hospice Plans of Care.--Section
1814(a)(7)(B) is amended by inserting ``(or by a physician assistant,
nurse practitioner or clinical nurse specialist who is not an employee
of the hospice program, and whom the individual identifies as the
health care provider having the most significant role in the
determination and delivery of medical care to the individual at the
time the individual makes an election to receive hospice care)'' after
``and is periodically reviewed by the individual's attending
physician''.
(c) Effective Date.--The amendments made by this section shall
apply to hospice care furnished on or after October 1, 2004.

SEC. 408. AUTHORITY TO INCLUDE COSTS OF TRAINING OF PSYCHOLOGISTS IN
PAYMENTS TO HOSPITALS UNDER MEDICARE.

Effective for cost reporting periods beginning on or after October
1, 2004, for purposes of payments to hospitals under the medicare
program under title XVIII of the Social Security Act for costs of
approved educational activities (as defined in section 413.85 of title
42 of the Code of Federal Regulations), such approved educational
activities shall include professional educational training programs,
recognized by the Secretary, for psychologists.

SEC. 409. REVISION OF FEDERAL RATE FOR HOSPITALS IN PUERTO RICO.

Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
(1) in subparagraph (A)--
(A) in clause (i), by striking ``for discharges
beginning on or after October 1, 1997, 50 percent (and
for discharges between October 1, 1987, and September
30, 1997, 75 percent)'' and inserting ``the applicable
Puerto Rico percentage (specified in subparagraph
(E))''; and
(B) in clause (ii), by striking ``for discharges
beginning in a fiscal year beginning on or after
October 1, 1997, 50 percent (and for discharges between
October 1, 1987, and September 30, 1997, 25 percent)''
and inserting ``the applicable Federal percentage
(specified in subparagraph (E))''; and
(2) by adding at the end the following new subparagraph:
``(E) For purposes of subparagraph (A), for discharges occurring--
``(i) between October 1, 1987, and September 30, 1997, the
applicable Puerto Rico percentage is 75 percent and the
applicable Federal percentage is 25 percent;
``(ii) on or after October 1, 1997, and before October 1,
2004, the applicable Puerto Rico percentage is 50 percent and
the applicable Federal percentage is 50 percent;
``(iii) on or after October 1, 2004, and before October 1,
2009, the applicable Puerto Rico percentage is 0 percent and
the applicable Federal percentage is 100 percent; and
``(iv) on or after October 1, 2009, the applicable Puerto
Rico percentage is 50 percent and the applicable Federal
percentage is 50 percent.''.

SEC. 410. EXCEPTION TO INITIAL RESIDENCY PERIOD FOR GERIATRIC RESIDENCY
OR FELLOWSHIP PROGRAMS.

(a) Clarification of Congressional Intent.--Congress intended
section 1886(h)(5)(F)(ii) of the Social Security Act (42 U.S.C.
1395ww(h)(5)(F)(ii)), as added by section 9202 of the Consolidated
Omnibus Budget Reconciliation Act of 1985 (Public Law 99-272), to
provide an exception to the initial residency period for geriatric
residency or fellowship programs such that, where a particular approved
geriatric training program requires a resident to complete 2 years of
training to initially become board eligible in the geriatric specialty,
the 2 years spent in the geriatric training program are treated as part
of the resident's initial residency period, but are not counted against
any limitation on the initial residency period.
(b) Interim Final Regulatory Authority and Effective Date.--The
Secretary shall promulgate interim final regulations consistent with
the congressional intent expressed in this section after notice and
pending opportunity for public comment to be effective for cost
reporting periods beginning on or after October 1, 2003.

SEC. 411. CLARIFICATION OF CONGRESSIONAL INTENT REGARDING THE COUNTING
OF RESIDENTS IN A NONPROVIDER SETTING AND A TECHNICAL
AMENDMENT REGARDING THE 3-YEAR ROLLING AVERAGE AND THE
IME RATIO.

(a) Clarification of Requirements for Counting Residents Training
in Nonprovider Setting.--
(1) D-GME.--Section 1886(h)(4)(E) (42 U.S.C.
1395ww(h)(4)(E)) is amended by adding at the end the following
new sentence: For purposes of the preceding sentence time shall
only be counted from the effective date of a written agreement
between the hospital and the entity owning or operating a
nonprovider setting. The effective date of such written
agreement shall be determined in accordance with generally
accepted accounting principles. All, or substantially all, of
the costs for the training program in that setting shall be
defined as the residents' stipends and benefits and other
costs, if any, as determined by the parties.''.
(2) IME.--Section 1886(d)(5)(B)(iv) (42 U.S.C.
1395ww(d)(5)(B)(iv)) is amended by adding at the end the
following new sentence: For purposes of the preceding sentence
time shall only be counted from the effective date of a written
agreement between the hospital and the entity owning or
operating a nonprovider setting. The effective date of such
written agreement shall be determined in accordance with
generally accepted accounting principles. All, or substantially
all, of the costs for the training program in that setting
shall be defined as the residents' stipends and benefits and
other costs, if any, as determined by the parties.''.
(b) Limiting One-Year Lag in the Indirect Medical Education (IME)
Ratio and Three-Year Rolling Average in Resident Count for IME and for
Direct Graduate Medical Education (D-GME) to Medical Residency
Programs.--
(1) IME ratio and ime rolling average.--Section
1886(d)(5)(B)(vi) of the Social Security Act (42 U.S.C.
1395ww(d)(5)(B)(vi)) is amended by adding at the end the
following new sentence: ``For cost reporting periods beginning
during fiscal years beginning on or after October 1, 2004,
subclauses (I) and (II) shall be applied only with respect to a
hospital's approved medical residency training programs in the
fields of allopathic and osteopathic medicine.''.
(2) D-GME rolling average.--Section 1886(h)(4)(G) of the
Social Security Act (42 U.S.C. 1395ww(h)(4)(G)) is amended by
adding at the end the following new clause:
``(iv) Application for fiscal year 2004 and
subsequent years.--For cost reporting periods
beginning during fiscal years beginning on or
after October 1, 2004, clauses (i) through
(iii) shall be applied only with respect to a
hospital's approved medical residency training
program in the fields of allopathic and
osteopathic medicine.''.

SEC. 412. LIMITATION ON CHARGES FOR INPATIENT HOSPITAL CONTRACT HEALTH
SERVICES PROVIDED TO INDIANS BY MEDICARE PARTICIPATING
HOSPITALS.

(a) In General.--Section 1866(a)(1) (42 U.S.C. 1395cc(a)(1)) is
amended--
(1) in subparagraph (R), by striking ``and'' at the end;
(2) in subparagraph (S), by striking the period and
inserting ``, and''; and
(3) by adding at the end the following new subparagraph:
``(T) in the case of hospitals which furnish
inpatient hospital services for which payment may be
made under this title, to be a participating provider
of medical care--
``(i) under the contract health services
program funded by the Indian Health Service and
operated by the Indian Health Service, an
Indian tribe, or tribal organization (as those
terms are defined in section 4 of the Indian
Health Care Improvement Act), with respect to
items and services that are covered under such
program and furnished to an individual eligible
for such items and services under such program;
and
``(ii) under a program funded by the Indian
Health Service and operated by an urban Indian
organization with respect to the purchase of
items and services for an eligible urban Indian
(as those terms are defined in such section 4),
in accordance with regulations promulgated by the
Secretary regarding admission practices, payment
methodology, and rates of payment (including the
acceptance of no more than such payment rate as payment
in full for such items and services).''.
(b) Effective Date.--The amendments made by this section shall
apply as of a date specified by the Secretary of Health and Human
Services (but in no case later than 6 months after the date of
enactment of this Act) to medicare participation agreements in effect
(or entered into) on or after such date.

SEC. 413. GAO STUDY AND REPORT ON APPROPRIATENESS OF PAYMENTS UNDER THE
PROSPECTIVE PAYMENT SYSTEM FOR INPATIENT HOSPITAL
SERVICES.

(a) Study.--The Comptroller General of the United States, using the
most current data available, shall conduct a study to determine--
(1) the appropriate level and distribution of payments in
relation to costs under the prospective payment system under
section 1886 of the Social Security Act (42 U.S.C. 1395ww) for
inpatient hospital services furnished by subsection (d)
hospitals (as defined in subsection (d)(1)(B) of such section);
and
(2) whether there is a need to adjust such payments under
such system to reflect legitimate differences in costs across
different geographic areas, kinds of hospitals, and types of
cases.
(b) Report.--Not later than 24 months after the date of enactment
of this Act, the Comptroller General of the United States shall submit
to Congress a report on the study conducted under subsection (a)
together with such recommendations for legislative and administrative
action as the Comptroller General determines appropriate.

SEC. 414. RURAL COMMUNITY HOSPITAL DEMONSTRATION PROGRAM.

(a) Establishment of Rural Community Hospital (RCH) Demonstration
Program.--
(1) In general.--The Secretary shall establish a
demonstration program to test the feasibility and advisability
of the establishment of rural community hospitals that furnish
rural community hospital services to medicare beneficiaries.
(2) Designation of rchs.--
(A) Application.--Each hospital that is located in
a demonstration area described in subparagraph (C) that
desires to participate in the demonstration program
under this section shall submit an application to the
Secretary at such time, in such manner, and containing
such information as the Secretary may require.
(B) Designation.--The Secretary shall designate any
hospital that is located in a demonstration area
described in subparagraph (C), submits an application
in accordance with subparagraph (A), and meets the
other requirements of this section as a rural community
hospital for purposes of the demonstration program.
(C) Demonstration areas.--There shall be four
demonstration areas within this program. Two of these
demonstration areas described in this subparagraph
shall include Kansas and Nebraska.
(3) Duration.--The Secretary shall conduct the
demonstration program under this section for a 5-year period.
(4) Implementation.--The Secretary shall implement the
demonstration program not later than January 1, 2005, but may
not implement the program before October 1, 2004.
(b) Payment.--
(1) Inpatient hospital services.--The amount of payment
under the demonstration program for inpatient hospital services
furnished in a rural community hospital, other than such
services furnished in a psychiatric or rehabilitation unit of
the hospital which is a distinct part, is, at the election of
the hospital in the application referred to in subsection
(a)(2)(A)--
(A) the reasonable costs of providing such
services, without regard to the amount of the customary
or other charge; or
(B) the amount of payment provided for under the
prospective payment system for inpatient hospital
services under section 1886(d) of the Social Security
Act (42 U.S.C. 1395ww(d)).
(2) Outpatient services.--The amount of payment under the
demonstration program for outpatient services furnished in a
rural community hospital is, at the election of the hospital in
the application referred to in subsection (a)(2)(A)--
(A) the reasonable costs of providing such
services, without regard to the amount of the customary
or other charge and any limitation under section
1861(v)(1)(U) of the Social Security Act (42 U.S.C.
1395x(v)(1)(U)); or
(B) the amount of payment provided for under the
prospective payment system for covered OPD services
under section 1833(t) of the Social Security Act (42
U.S.C. 1395l(t)).
(3) Home health services.--In determining payments under
the demonstration program for home health services furnished by
a qualified RCH-based home health agency (as defined in
paragraph (2))--
(A) the agency may make a one-time election to
waive application of the prospective payment system
established under section 1895 of the Social Security
Act (42 U.S.C. 1395fff) to such services furnished by
the agency; and
(B) in the case of such an election, payment shall
be made on the basis of the reasonable costs incurred
in furnishing such services as determined under section
1861(v) of the Social Security Act (42 U.S.C.
1395x(v)), but without regard to the amount of the
customary or other charges with respect to such
services or the limitations established under paragraph
(1)(L) of such section.
(4) Consolidated billing.--The Secretary shall permit
consolidated billing under section 1842(b)(6)(E) of the Social
Security Act (42 U.S.C. 1395u(b)(6)(E)).
(5) Exemption from 30 percent reduction in reimbursement
for bad debt.--In determining the reasonable costs for rural
community hospitals, section 1861(v)(1)(T) of the Social
Security Act (42 U.S.C. 1395x(v)(1)(T)) shall not apply.
(6) Beneficiary cost-sharing for outpatient services.--The
amounts of beneficiary cost-sharing for outpatient services
furnished in a rural community hospital under the demonstration
program shall be as follows:
(A) For items and services that would have been
paid under section 1833(t) of the Social Security Act
(42 U.S.C. 1395l(t)) if provided by a hospital, the
amount of cost-sharing determined under paragraph (8)
of such section.
(B) For items and services that would have been
paid under section 1833(h) of such Act (42 U.S.C.
1395l(h)) if furnished by a provider or supplier, no
cost-sharing shall apply.
(C) For all other items and services, the amount of
cost-sharing that would apply to the item or service
under the methodology that would be used to determine
payment for such item or service if provided by a
physician, provider, or supplier, as the case may be.
(7) Return on equity.--
(A) In general.--Notwithstanding subparagraph
(P)(i) and (S)(i) of section 1861(v)(1) of the Social
Security Act (42 U.S.C. 1395x(v)(1)) and section
1886(g)(2) of such Act (42 U.S.C. 1395ww(g)(2)), in
determining the reasonable costs of the services
described in subclause (II) furnished by a rural
community hospital for payment of a return on equity
capital at a rate of return equal to 150 percent of the
average specified in section 1861(v)(1)(P)(i) of such
Act (42 U.S.C. 1395x(v)(1)(P)(i)).
(B) Services described.--The services referred to
in subclause (I) are rural community hospital services.
(C) Disregard of proprietary provider status.--
Payment under the demonstration program shall be made
without regard to whether a provider is a proprietary
provider.
(8) Removing barriers to establishment of distinct part
units by rch facilities.--Notwithstanding section 1886(d)(1)(B)
of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)), the
Secretary shall permit rural community hospitals to establish
distinct part units for purposes of applying such section.
(c) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Hospital Insurance Trust Fund under
section 1817 of the Social Security Act (42 U.S.C. 1395i) and
the Federal Supplementary Insurance Trust Fund established
under section 1841 of such Act (42 U.S.C. 1395t), in such
proportion as the Secretary determines to be appropriate, of
such funds as are necessary for the costs of carrying out the
demonstration program under this section.
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration
program under this section was not implemented.
(d) Waiver Authority.--The Secretary may waive such requirements of
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.;
1395 et seq.) as may be necessary for the purpose of carrying out the
demonstration program under this section.
(e) Report.--Not later than 6 months after the completion of the
demonstration program under this section, the Secretary shall submit to
Congress a report on such program, together with recommendations for
such legislation and administrative action as the Secretary determines
to be appropriate.
(f) Definitions.--In this section:
(1) Rural community hospital.--
(A) In general.--The term ``rural community
hospital'' means a hospital (as defined in section
1861(e) of the Social Security Act (42 U.S.C.
1395x(e))) that--
(i) is located in a rural area (as defined
in section 1886(d)(2)(D) of such Act (42 U.S.C.
1395ww(d)(2)(D))) or treated as being so
located pursuant to section 1886(d)(8)(E) of
such Act (42 U.S.C. 1395ww(d)(8)(E));
(ii) subject to subparagraph (B), has less
than 51 acute care inpatient beds, as reported
in its most recent cost report;
(iii) makes available 24-hour emergency
care services;
(iv) subject to subparagraph (C), has a
provider agreement in effect with the Secretary
and is open to the public as of January 1,
2003; and
(v) applies to the Secretary for such
designation.
(B) Treatment of psychiatric and rehabilitation
units.--For purposes of paragraph (1)(B), beds in a
psychiatric or rehabilitation unit of the hospital
which is a distinct part of the hospital shall not be
counted.
(C) Types of hospitals that may participate.--
Subparagraph (1)(D) shall not be construed to prohibit
any of the following from qualifying as a rural
community hospital:
(i) A replacement facility (as defined by
the Secretary in regulations in effect on
January 1, 2003) with the same service area (as
defined by the Secretary in regulations in
effect on such date).
(ii) A facility obtaining a new provider
number pursuant to a change of ownership.
(iii) A facility which has a binding
written agreement with an outside, unrelated
party for the construction, reconstruction,
lease, rental, or financing of a building as of
January 1, 2003.
(D) Inclusion of cahs.--Nothing in this subsection
shall be construed as prohibiting a critical access
hospital from qualifying as a rural community hospital
if the critical access hospital meets the conditions
otherwise applicable to hospitals under section 1861(e)
of the Social Security Act (42 U.S.C. 1395x(e)) and
section 1866 of such Act (42 U.S.C. 1395cc).
(2) Qualified rch-based home health agency defined.--The
term ``qualified RCH-based home health agency'' is a home
health agency that is a provider-based entity (as defined in
section 404 of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (Public Law 106-554;
Appendix F, 114 Stat. 2763A-506)) of a rural community hospital
that is located--
(A) in a county in which no main or branch office
of another home health agency is located; or
(B) at least 35 miles from any main or branch
office of another home health agency.

SEC. 415. CRITICAL ACCESS HOSPITAL IMPROVEMENT DEMONSTRATION PROGRAM.

(a) Establishment of Critical Access Hospital Demonstration
Program.--
(1) In general.--The Secretary shall establish a
demonstration program to test various methods to improve the
critical access hospital program under section 1820 of the
Social Security Act (42 U.S.C. 1395i-4).
(2) Critical access hospital improvement.--In conducting
the demonstration program under this section, the Secretary
shall apply rules with respect to critical access hospitals
participating in the program as follows:
(A) Exclusion of certain beds from bed count.--In
determining the number of beds of a facility for
purposes of applying the bed limitations referred to in
subsections (c)(2)(B)(iii) and (f) of section 1820 of
the Social Security Act (42 U.S.C. 1395i-4), the
Secretary shall not take into account any bed of a
distinct part psychiatric or rehabilitation unit
(described in the matter following clause (v) of
section 1886(d)(1)(B) of such Act (42 U.S.C.
1395ww(d)(1)(B))) of the facility, except that the
total number of beds that are not taken into account
pursuant to this subparagraph with respect to a
facility shall not exceed 10.
(B) Exclusion from home health pps.--
Notwithstanding section 1895 of the Social Security Act
(42 U.S.C. 1395fff), in determining payments under the
demonstration program for home health services
furnished by a home health agency that is owned and
operated by a critical access hospital participating in
the demonstration program--
(i) the agency may make an election to
waive application of the prospective payment
system established under such section to such
services furnished by the agency; and
(ii) in the case of such an election,
payment shall be made on the basis of the
reasonable costs incurred in furnishing such
services as determined under section 1861(v),
but without regard to the amount of the
customary or other charges with respect to such
services or the limitations established under
paragraph (1)(L) of such section.
(C) Exemption of cah facilities from pps.--
Notwithstanding section 1888(e) of the Social Security
Act (42 U.S.C. 1395yy(e)), in determining payments
under this part for covered skilled nursing facility
services furnished by a skilled nursing facility that
is a distinct part unit of a critical access hospital
participating in the demonstration program or is owned
and operated by a critical access hospital
participating in the demonstration program--
(i) the prospective payment system
established under such section shall not apply;
and
(ii) payment shall be made on the basis of
the reasonable costs incurred in furnishing
such services as determined under section
1861(v) of such Act (42 U.S.C. 1395x(v)), but
without regard to the amount of the customary
or other charges with respect to such services.
(D) Consolidated billing.--The Secretary shall
permit consolidated billing under section 1842(b)(6)(E)
of the Social Security Act (42 U.S.C. 1395u(b)(6)(E)).
(E) Exemption of certain distinct part psychiatric
or rehabilitation units from cost limits.--
Notwithstanding section 1886(b) of the Social Security
Act (42 U.S.C. 1395ww(b)), in determining payments
under the demonstration program for inpatient hospital
services furnished by a distinct part psychiatric or
rehabilitation unit (described in the matter following
section 1886(d)(1)(B)(v) of such Act (42 U.S.C.
1395ww(d)(1)(B)(v))) of a critical access hospital
participating in the demonstration program--
(i) the limits imposed under the preceding
paragraphs of this subsection shall not apply;
and
(ii) payment shall be made on the basis of
the reasonable costs incurred in furnishing
such services as determined under section
1861(v) of such Act (42 U.S.C. 1395x(v)), but
without regard to the amount of the customary
or other charges with respect to such services.
(F) Return on equity.--
(i) In general.--Notwithstanding
subparagraph (P)(i) and (S)(i) of section
1861(v)(1) of the Social Security Act (42
U.S.C. 1395x(v)(1)) and section 1886(g)(2) of
such Act (42 U.S.C. 1395ww(g)(2)), in
determining the reasonable costs of the
services described in subclause (II) furnished
by a critical access hospital participating in
the demonstration program for payment of a
return on equity capital at a rate of return
equal to 150 percent of the average specified
in section 1861(v)(1)(P)(i) of such Act (42
U.S.C. 1395x(v)(1)(P)(i)).
(ii) Services described.--The services
referred to in subclause (I) are inpatient
critical access hospital services, outpatient
critical access hospital services, extended
care services, posthospital extended care
services, home health services, ambulance
services, and inpatient hospital services.
(iii) Disregard of proprietary provider
status.--Payment under the demonstration
program shall be made without regard to whether
a provider is a proprietary provider.
(G) Removing barriers to establishment of distinct
part units by cah facilities.--Notwithstanding section
1886(d)(1)(B) of the Social Security Act (42 U.S.C.
1395ww(d)(1)(B)), the Secretary shall permit critical
access hospitals participating in the demonstration
program to establish distinct part units for purposes
of applying such section.
(3) Participation of cahs.--
(A) Application.--Each critical access hospital
that is located in a demonstration area described in
subparagraph (C) that desires to participate in the
demonstration program under this section shall submit
an application to the Secretary at such time, in such
manner, and containing such information as the
Secretary may require.
(B) Participation.--The Secretary shall permit any
critical access hospital that is located in a
demonstration area described in subparagraph (C),
submits an application in accordance with subparagraph
(A), and meets the other requirements of this section
to participate in the demonstration program.
(C) Demonstration areas.--There shall be four
demonstration areas within this program. Two of these
demonstration areas described in this subparagraph
shall include Kansas and Nebraska.
(4) Duration.--The Secretary shall conduct the
demonstration program under this section for a 5-year period.
(5) Implementation.--The Secretary shall implement the
demonstration program not later than January 1, 2005, but may
not implement the program before October 1, 2004.
(b) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Hospital Insurance Trust Fund under
section 1817 of the Social Security Act (42 U.S.C. 1395i) and
the Federal Supplementary Insurance Trust Fund established
under section 1841 of such Act (42 U.S.C. 1395t), in such
proportion as the Secretary determines to be appropriate, of
such funds as are necessary for the costs of carrying out the
demonstration program under this section.
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration
program under this section was not implemented.
(c) Waiver Authority.--The Secretary may waive such requirements of
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.;
1395 et seq.) as may be necessary for the purpose of carrying out the
demonstration program under this section.
(d) Report.--Not later than 6 months after the completion of the
demonstration program under this section, the Secretary shall submit to
Congress a report on such program, together with recommendations for
such legislation and administrative action as the Secretary determines
to be appropriate.

SEC. 416. TREATMENT OF GRANDFATHERED LONG-TERM CARE HOSPITALS.

(a) In General.--The last sentence of section 1886(d)(1)(B) is
amended by inserting ``, and the Secretary may not impose any special
conditions on the operation, size, number of beds, or location of any
hospital so classified for continued participation under this title or
title XIX or for continued classification as a hospital described in
clause (iv)'' before the period at the end.
(b) Treatment of Proposed Revision.--The Secretary shall not adopt
the proposed revision to section 412.22(f) of title 42, Code of Federal
Regulations contained in 68 Federal Register 27154 (May 19, 2003) or
any revision reaching the same or substantially the same result as such
revision.
(c) Effective Date.--The amendment made by, and provisions of, this
section shall apply to cost reporting periods ending on or after
December 31, 2002.

SEC. 417. TREATMENT OF CERTAIN ENTITIES FOR PURPOSES OF PAYMENTS UNDER
THE MEDICARE PROGRAM.

(a) Payments to Hospitals.--
(1) In general.--Notwithstanding any other provision of
law, effective for discharges occurring on or after October 1,
2003, for purposes of making payments to hospitals (as defined
in section 1886(d) and 1833(t) of the Social Security Act (42
U.S.C. 1395(d)) under the medicare program under title XVIII of
such Act (42 U.S.C. 1395 et seq.), Iredell County, North
Carolina, and Rowan County, North Carolina, are deemed to be
located in the Charlotte-Gastonia-Rock Hill, North Carolina,
South Carolina Metropolitan Statistical Area.
(2) Budget neutral within north carolina.--The Secretary
shall adjust the area wage index referred to in paragraph (1)
with respect to payments to hospitals located in North Carolina
in a manner which assures that the total payments made under
section 1886(d) of the Social Security Act (42 U.S.C.,
1395(ww)(d)) in a fiscal year for the operating cost of
inpatient hospital services are not greater or less than the
total of such payments that would have been made in the year if
this subsection had not been enacted.
(b) Payments to Skilled Nursing Facilities and Home Health
Agencies.--
(1) In general.--Notwithstanding any other provision of
law, effective beginning October 1, 2003, for purposes of
making payments to skilled nursing facilities (SNFs) and home
health agencies (as defined in sections 1861(j) and 1861(o) of
the Social Security Act (42 U.S.C. 1395x(j); 1395x(o)) under
the medicare program under title XVIII of such Act, Iredell
County, North Carolina, and Rowan County, North Carolina, are
deemed to be located in the Charlotte-Gastonia-Rock Hill, North
Carolina, South Carolina Metropolitan Statistical Area.
(2) Application and budget neutral within north carolina.--
Effective for fiscal year 2004, the skilled nursing facility
PPS and home health PPS rates for Iredell County, North
Carolina, and Rowan County, North Carolina, will be updated by
the prefloor, prereclassified hospital wage index available for
the Charlotte-Gastonia-Rock Hill, North Carolina, South
Carolina Metropolitan Statistical Area. This subsection shall
be implemented in a budget neutral manner, using a methodology
that ensures that the total amount of expenditures for skilled
nursing facility services and home health services in a year
does not exceed the total amount of expenditures that would
have been made in the year if this subsection had not been
enacted. Required adjustments by reason of the preceding
sentence shall be done with respect to skilled nursing
facilities and home health agencies located in North Carolina.
(c) Construction.--The provisions of this section shall have no
effect on the amount of payments made under title XVIII of the Social
Security Act to entities located in States other than North Carolina.

SEC. 418. REVISION OF THE INDIRECT MEDICAL EDUCATION (IME) ADJUSTMENT
PERCENTAGE.

(a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C.
1395ww(d)(5)(B)(ii)) is amended--
(1) in subclause (VI), by striking ``and'' after the
semicolon at the end;
(2) in subclause (VII)--
(A) by striking ``on or after October 1, 2002'' and
inserting ``during fiscal year 2003''; and
(B) by striking the period at the end and inserting
a semicolon; and
(3) by adding at the end the following new subclauses:
``(VIII) during each of fiscal years 2004 and 2005,
`c' is equal to 1.36; and
``(IX) on or after October 1, 2005, `c' is equal to
1.355.''.
(b) Conforming Amendment Relating to Determination of Standardized
Amount.--Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is
amended--
(1) by striking ``1999 or'' and inserting ``1999,''; and
(2) by inserting ``, or the Prescription Drug and Medicare
Improvement Act of 2003'' after ``2000''.
(c) Effective Date.--The amendments made by this section shall
apply to discharges occurring on or after October 1, 2003.

SEC. 419. CALCULATION OF WAGE INDICES FOR HOSPITALS.

Notwithstanding any other provision of law, in the calculation of a
wage index in a State for purposes of making payments for discharges
occurring during fiscal year 2004, the Secretary may waive such other
criteria for reclassification, as deemed appropriate by the Secretary.

SEC. 420. CONFORMING CHANGES REGARDING FEDERALLY QUALIFIED HEALTH
CENTERS.

Section 1833(a)(3) (42 U.S.C. 1395l(a)(3)) is amended by inserting
``(which regulations shall exclude any cost incurred for the provision
of services pursuant to a contract with an eligible entity (as defined
in section 1860D(4)) operating a Medicare Prescription Drug plan or
with an entity with a contract under section 1860D-13(e), for which
payment is made by the entity)'' after ``the Secretary may prescribe in
regulations''.

SEC. 420A. INCREASE FOR HOSPITALS WITH DISPROPORTIONATE INDIGENT CARE
REVENUES.

(a) Disproportionate Share Adjustment Percentage.--Section
1886(d)(5)(F)(iii) (42 U.S.C. 1395ww(d)(5)(F)(iii)) is amended by
striking ``35 percent'' and inserting ``35 percent (or, for discharges
occurring on or after October 1, 2003, 40 percent)''.
(b) Capital Costs.--Section 1886(g)(1)(B) (42 U.S.C.
1395ww(g)(1)(B)) is amended--
(1) in clause (iii), by striking ``and'' at the end;
(2) in clause (iv), by striking the period at the end and
inserting ``, and''; and
(3) by adding at the end the following new clause:
``(v) in the case of cost reporting periods beginning on or
after October 1, 2003, shall provide for a disproportionate
share adjustment in the same manner as section
1886(d)(5)(F)(iii).''.

SEC. 420B. TREATMENT OF GRANDFATHERED LONG-TERM CARE HOSPITALS.

(a) In General.--The last sentence of section 1886(d)(1)(B) is
amended by inserting ``, and the Secretary may not impose any special
conditions on the operation, size, number of beds, or location of any
hospital so classified for continued participation under this title or
title XIX or for continued classification as a hospital described in
clause (iv)'' before the period at the end.
(b) Treatment of Proposed Revision.--The Secretary shall not adopt
the proposed revision to section 412.22(f) of title 42, Code of Federal
Regulations contained in 68 Federal Register 27154 (May 19, 2003) or
any revision reaching the same or substantially the same result as such
revision.
(c) Effective Date.--The amendment made by, and provisions of, this
section shall apply to cost reporting periods ending on or after
December 31, 2002.

Subtitle B--Provisions Relating to Part B

SEC. 421. ESTABLISHMENT OF FLOOR ON GEOGRAPHIC ADJUSTMENTS OF PAYMENTS
FOR PHYSICIANS' SERVICES.

Section 1848(e)(1) (42 U.S.C. 1395w-4(e)(1)) is amended--
(1) in subparagraph (A), by striking ``subparagraphs (B)
and (C)'' and inserting ``subparagraphs (B), (C), (E), and
(F)''; and
(2) by adding at the end the following new subparagraphs:
``(E) Floor for work geographic indices.--
``(i) In general.--For purposes of payment
for services furnished on or after January 1,
2004, and before January 1, 2008, after
calculating the work geographic indices in
subparagraph (A)(iii), the Secretary shall
increase the work geographic index to the work
floor index for any locality for which such
geographic index is less than the work floor
index.
``(ii) Work floor index.--For purposes of
clause (i), the term `applicable floor index'
means--
``(I) 0.980 with respect to
services furnished during 2004; and
``(II) 1.000 for services furnished
during 2005, 2006, and 2007.
``(F) Floor for practice expense and malpractice
geographic indices.--For purposes of payment for
services furnished on or after January 1, 2005, and
before January 1, 2008, after calculating the practice
expense and malpractice indices in clauses (i) and (ii)
of subparagraph (A) and in subparagraph (B), the
Secretary shall increase any such index to 1.00 for any
locality for which such index is less than 1.00.''.

SEC. 422. MEDICARE INCENTIVE PAYMENT PROGRAM IMPROVEMENTS.

(a) Procedures for Secretary, and Not Physicians, To Determine When
Bonus Payments Under Medicare Incentive Payment Program Should Be
Made.--Section 1833(m) (42 U.S.C. 1395l(m)) is amended--
(1) by inserting ``(1)'' after ``(m)''; and
(2) by adding at the end the following new paragraph:
``(2) The Secretary shall establish procedures under which the
Secretary, and not the physician furnishing the service, is responsible
for determining when a payment is required to be made under paragraph
(1).''.
(b) Educational Program Regarding the Medicare Incentive Payment
Program.--The Secretary shall establish and implement an ongoing
educational program to provide education to physicians under the
medicare program on the medicare incentive payment program under
section 1833(m) of the Social Security Act (42 U.S.C. 1395l(m)).
(c) Ongoing GAO Study and Annual Report on the Medicare Incentive
Payment Program.--
(1) Ongoing study.--The Comptroller General of the United
States shall conduct an ongoing study on the medicare incentive
payment program under section 1833(m) of the Social Security
Act (42 U.S.C. 1395l(m)). Such study shall focus on whether
such program increases the access of medicare beneficiaries who
reside in an area that is designated (under section
332(a)(1)(A) of the Public Health Service Act (42 U.S.C.
254e(a)(1)(A))) as a health professional shortage area to
physicians' services under the medicare program.
(2) Annual reports.--Not later than 1 year after the date
of enactment of this Act, and annually thereafter, the
Comptroller General of the United States shall submit to
Congress a report on the study conducted under paragraph (1),
together with recommendations as the Comptroller General
considers appropriate.

SEC. 423. EXTENSION OF HOLD HARMLESS PROVISIONS FOR SMALL RURAL
HOSPITALS AND TREATMENT OF CERTAIN SOLE COMMUNITY
HOSPITALS TO LIMIT DECLINE IN PAYMENT UNDER THE OPD PPS.

(a) Small Rural Hospitals.--Section 1833(t)(7)(D)(i) (42 U.S.C.
1395l(t)(7)(D)(i)) is amended by inserting ``and during 2006'' after
``2004,''.
(b) Sole Community Hospitals.--Section 1833(t)(7)(D) (42 U.S.C.
1395l(t)(7)(D)) is amended by adding at the end the following:
``(iii) Temporary treatment for sole
community hospitals.--In the case of a sole
community hospital (as defined in section
1886(d)(5)(D)(iii)) located in a rural area,
for covered OPD services furnished in 2006, for
which the PPS amount is less than the pre-BBA
amount, the amount of payment under this
subsection shall be increased by the amount of
such difference.''.

SEC. 424. INCREASE IN PAYMENTS FOR CERTAIN SERVICES FURNISHED BY SMALL
RURAL AND SOLE COMMUNITY HOSPITALS UNDER MEDICARE
PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES.

(a) Increase.--
(1) In general.--In the case of an applicable covered OPD
service (as defined in paragraph (2)) that is furnished by a
hospital described in clause (i) or (iii) of paragraph (7)(D)
of section 1833(t) of the Social Security Act (42 U.S.C.
1395l(t)), as amended by section 424, on or after January 1,
2005, and before January 1, 2008, the Secretary shall increase
the medicare OPD fee schedule amount (as determined under
paragraph (4)(A) of such section) that is applicable for such
service in that year (determined without regard to any increase
under this section in a previous year) by 5 percent.
(2) Applicable covered opd services defined.--For purposes
of this section, the term ``applicable covered OPD service''
means a covered clinic or emergency room visit that is
classified within the groups of covered OPD services (as
defined in paragraph (1)(B) of section 1833(t) of the Social
Security Act (42 U.S.C. 1395l(t))) established under paragraph
(2)(B) of such section.
(b) No Effect on Copayment Amount.--The Secretary shall compute the
copayment amount for applicable covered OPD services under section
1833(t)(8)(A) of the Social Security Act (42 U.S.C. 1395l(t)(8)(A)) as
if this section had not been enacted.
(c) No Effect on Increase Under Hold Harmless or Outlier
Provisions.--The Secretary shall apply the temporary hold harmless
provision under clause (i) and (iii) of paragraph (7)(D) of section
1833(t) of the Social Security Act (42 U.S.C. 1395l(t)) and the outlier
provision under paragraph (5) of such section as if this section had
not been enacted.
(d) Waiving Budget Neutrality and No Revision or Adjustments.--The
Secretary shall not make any revision or adjustment under subparagraph
(A), (B), or (C) of section 1833(t)(9) of the Social Security Act (42
U.S.C. 1395l(t)(9)) because of the application of subsection (a)(1).
(e) No Effect on Payments After Increase Period Ends.--The
Secretary shall not take into account any payment increase provided
under subsection (a)(1) in determining payments for covered OPD
services (as defined in paragraph (1)(B) of section 1833(t) of the
Social Security Act (42 U.S.C. 1395l(t))) under such section that are
furnished after January 1, 2008.
(f) Technical Amendment.--Section 1833(t)(2)(B) (42 U.S.C.
1395l(t)(2)(B)) is amended by inserting ``(and periodically revise such
groups pursuant to paragraph (9)(A))'' after ``establish groups''.

SEC. 425. TEMPORARY INCREASE FOR GROUND AMBULANCE SERVICES.

Section 1834(l) (42 U.S.C. 1395m(l)), as amended by section
405(b)(2), is amended by adding at the end the following new
paragraphs:
``(10) Temporary increase for ground ambulance services.--
``(A) In general.--Notwithstanding any other
provision of this subsection, in the case of ground
ambulance services furnished on or after January 1,
2005, and before January 1, 2008, for which the
transportation originates in--
``(i) a rural area described in paragraph
(9) or in a rural census tract described in
such paragraph, the fee schedule established
under this section shall provide that the rate
for the service otherwise established, after
application of any increase under such
paragraph, shall be increased by 5 percent; and
``(ii) an area not described in clause (i),
the fee schedule established under this section
shall provide that the rate for the service
otherwise established shall be increased by 2
percent.
``(B) Application of increased payments after
2007.--The increased payments under subparagraph (A)
shall not be taken into account in calculating payments
for services furnished on or after the period specified
in such subparagraph.
``(11) Conversion factor adjustments.--The Secretary shall
not adjust downward the conversion factor in any year because
of an evaluation of the prior year conversion factor.''.

SEC. 426. ENSURING APPROPRIATE COVERAGE OF AIR AMBULANCE SERVICES UNDER
AMBULANCE FEE SCHEDULE.

(a) Coverage.--Section 1834(l) (42 U.S.C. 1395m(l)), as amended by
section 426, is amended by adding at the end the following new
paragraph:
``(11) Ensuring appropriate coverage of air ambulance
services.--
``(A) In general.--The regulations described in
section 1861(s)(7) shall ensure that air ambulance
services (as defined in subparagraph (C)) are
reimbursed under this subsection at the air ambulance
rate if the air ambulance service--
``(i) is medically necessary based on the
health condition of the individual being
transported at or immediately prior to the time
of the transport; and
``(ii) complies with equipment and crew
requirements established by the Secretary.
``(B) Medically necessary.--An air ambulance
service shall be considered to be medically necessary
for purposes of subparagraph (A)(i) if such service is
requested--
``(i) by a physician or a hospital in
accordance with the physician's or hospital's
responsibilities under section 1867 (commonly
known as the Emergency Medical Treatment and
Active Labor Act);
``(ii) as a result of a protocol
established by a State or regional emergency
medical service (EMS) agency;
``(iii) by a physician, nurse practitioner,
physician assistant, registered nurse, or
emergency medical responder who reasonably
determines or certifies that the patient's
condition is such that the time needed to
transport the individual by land or the lack of
an appropriate ground ambulance, significantly
increases the medical risks for the individual;
or
``(iv) by a Federal or State agency to
relocate patients following a natural disaster,
an act of war, or a terrorist attack.
``(C) Air ambulance services defined.--For purposes
of this paragraph, the term `air ambulance service'
means fixed wing and rotary wing air ambulance
services.''.
(b) Conforming Amendment.--Section 1861(s)(7) (42 U.S.C.
1395x(s)(7)) is amended by inserting ``, subject to section
1834(l)(11),'' after ``but''.
(c) Effective Date.--The amendments made by this section shall
apply to services furnished on or after January 1, 2005.

SEC. 427. TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC LABORATORY TESTS
FURNISHED BY A SOLE COMMUNITY HOSPITAL.

Notwithstanding subsections (a), (b), and (h) of section 1833 of
the Social Security Act (42 U.S.C. 1395l) and section 1834(d)(1) of
such Act (42 U.S.C. 1395m(d)(1)), in the case of a clinical diagnostic
laboratory test covered under part B of title XVIII of such Act that is
furnished in 2005 or 2006 by a sole community hospital (as defined in
section 1886(d)(5)(D)(iii) of such Act (42 U.S.C.
1395ww(d)(5)(D)(iii))) as part of services furnished to patients of the
hospital, the following rules shall apply:
(1) Payment based on reasonable costs.--The amount of
payment for such test shall be 100 percent of the reasonable
costs of the hospital in furnishing such test.
(2) No beneficiary cost-sharing.--Notwithstanding section
432, no coinsurance, deductible, copayment, or other cost-
sharing otherwise applicable under such part B shall apply with
respect to such test.

SEC. 428. IMPROVEMENT IN RURAL HEALTH CLINIC REIMBURSEMENT.

Section 1833(f) (42 U.S.C. 1395l(f)) is amended--
(1) in paragraph (1), by striking ``, and'' at the end and
inserting a semicolon;
(2) in paragraph (2)--
(A) by striking ``in a subsequent year'' and
inserting ``in 1989 through 2004''; and
(B) by striking the period at the end and inserting
a semicolon; and
(3) by adding at the end the following new paragraphs:
``(3) in 2005, at $80 per visit; and
``(4) in a subsequent year, at the limit established under
this subsection for the previous year increased by the
percentage increase in the MEI (as so defined) applicable to
primary care services (as so defined) furnished as of the first
day of that year.''.

SEC. 429. ELIMINATION OF CONSOLIDATED BILLING FOR CERTAIN SERVICES
UNDER THE MEDICARE PPS FOR SKILLED NURSING FACILITY
SERVICES.

(a) Certain Rural Health Clinic and Federally Qualified Health
Center Services.--Section 1888(e) (42 U.S.C. 1395yy(e)) is amended--
(1) in paragraph (2)(A)(i)(II), by striking ``clauses (ii)
and (iii)'' and inserting ``clauses (ii), (iii), and (iv)'';
and
(2) by adding at the end of paragraph (2)(A) the following
new clause:
``(iv) Exclusion of certain rural health
clinic and federally qualified health center
services.--Services described in this clause
are--
``(I) rural health clinic services
(as defined in paragraph (1) of section
1861(aa)); and
``(II) Federally qualified health
center services (as defined in
paragraph (3) of such section);
that would be described in clause (ii) if such
services were furnished by a physician or
practitioner not affiliated with a rural health
clinic or a Federally qualified health
center.''.
(b) Certain Services Furnished by an Entity Jointly Owned by
Hospitals and Critical Access Hospitals.--For purposes of applying
section 411.15(p)-(3)(iii) of title 42 of the Code of Federal
Regulations, the Secretary shall treat an entity that is 100 percent
owned as a joint venture by 2 Medicare-participating hospitals or
critical access hospitals as a Medicare-participating hospital or a
critical access hospital.
(c) Technical Amendments.--Sections 1842(b)(6)(E) and
1866(a)(1)(H)(ii) (42 U.S.C. 1395u(b)(6)(E); 1395cc(a)(1)(H)(ii)) are
each amended by striking ``section 1888(e)(2)(A)(ii)'' and inserting
``clauses (ii), (iii), and (iv) of section 1888(e)(2)(A)''.
(d) Effective Date.--The amendments made by this section and the
provision of subsection (b) shall apply to services furnished on or
after January 1, 2005.

SEC. 430. FREEZE IN PAYMENTS FOR CERTAIN ITEMS OF DURABLE MEDICAL
EQUIPMENT AND CERTAIN ORTHOTICS; ESTABLISHMENT OF QUALITY
STANDARDS AND ACCREDITATION REQUIREMENTS FOR DME
PROVIDERS.

(a) Freeze for DME.--Section 1834(a)(14) (42 U.S.C. 1395m(a)(14))
is amended--
(1) in subparagraph (E), by striking ``and'' at the end;
(2) in subparagraph (F)--
(A) by striking ``a subsequent year'' and inserting
``2003''; and
(B) by striking ``the previous year.'' and
inserting ``2002;''; and
(3) by adding at the end the following new subparagraphs:
``(G) for each of the years 2004 through 2010--
``(i) in the case of class III medical
devices described in section 513(a)(1)(C) of
the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 360(c)(1)(C)), the percentage increase
described in subparagraph (B) for the year
involved; and
``(ii) in the case of covered items not
described in clause (i), 0 percentage points;
and
``(H) for a subsequent year, the percentage
increase described in subparagraph (B) for the year
involved.''.
(b) Freeze for Off-the-Shelf Orthotics.--Section 1834(h)(4)(A) of
the Social Security Act (42 U.S.C. 1395m(h)(4)(A)) is amended--
(1) in clause (vii), by striking ``and'' at the end;
(2) in clause (viii), by striking ``a subsequent year'' and
inserting ``2003''; and
(3) by adding at the end the following new clauses:
``(ix) for each of the years 2004 through
2010--
``(I) in the case of orthotics that
have not been custom-fabricated, 0
percent; and
``(II) in the case of prosthetics,
prosthetic devices, and custom-
fabricated orthotics, the percentage
increase described in clause (viii) for
the year involved; and
``(x) for 2011 and each subsequent year,
the percentage increase described in clause
(viii) for the year involved;''.
(c) Establishment of Quality Standards and Accreditation
Requirements for Durable Medical Equipment Providers.--Section 1834(a)
(42 U.S.C. 1395m(a)) is amended--
(1) by redesignating paragraph (17), as added by section
4551(c)(1) of the Balanced Budget Act of 1997 (111 Stat. 458),
as paragraph (19); and
(2) by adding at the end the following new paragraph:
``(20) Identification of quality standards.--
``(A) In general.--Subject to subparagraph (C), the
Secretary shall establish and implement quality
standards for providers of durable medical equipment
throughout the United States that are developed by
recognized independent accreditation organizations (as
designated under subparagraph (B)(i)) and with which
such providers shall be required to comply in order
to--
``(i) participate in the program under this
title;
``(ii) furnish any item or service
described in subparagraph (D) for which payment
is made under this part; and
``(iii) receive or retain a provider or
supplier number used to submit claims for
reimbursement for any item or service described
in subparagraph (D) for which payment may be
made under this title.
``(B) Designation of independent accreditation
organizations.--
``(i) In general.--Not later that the date
that is 6 months after the date of enactment of
the Prescription Drug and Medicare Improvement
Act of 2003, the Secretary shall designate
independent accreditation organizations for
purposes of subparagraph (A).
``(ii) Consultation.--In determining which
independent accreditation organizations to
designate under clause (i), the Secretary shall
consult with an expert outside advisory panel
composed of an appropriate selection of
representatives of physicians, practitioners,
suppliers, and manufacturers to review (and
advise the Secretary concerning) selection of
accrediting organizations and the quality
standards of such organizations.
``(C) Quality standards.--The quality standards
described in subparagraph (A) may not be less stringent
than the quality standards that would otherwise apply
if this paragraph did not apply and shall include
consumer services standards.
``(D) Items and services described.--The items and
services described in this subparagraph are covered
items (as defined in paragraph (13)) for which payment
may otherwise be made under this subsection, other than
items used in infusion, and inhalation drugs used in
conjunction with durable medical equipment.
``(E) Phased-in implementation.--The application of
the quality standards described in subparagraph (A)
shall be phased-in over a period that does not exceed 3
years.''.

SEC. 431. APPLICATION OF COINSURANCE AND DEDUCTIBLE FOR CLINICAL
DIAGNOSTIC LABORATORY TESTS.

(a) Coinsurance.--
(1) In general.--Section 1833(a) (42 U.S.C. 1395l(a)) is
amended--
(A) in paragraph (1)(D)(i), by striking ``(or 100
percent, in the case of such tests for which payment is
made on an assignment-related basis)''; and
(B) in paragraph (2)(D)(i), by striking ``(or 100
percent, in the case of such tests for which payment is
made on an assignment-related basis or to a provider
having an agreement under section 1866)''.
(2) Conforming amendment.--The third sentence of section
1866(a)(2)(A) of the Social Security Act (42 U.S.C.
1395cc(a)(2)(A) is amended by striking ``and with respect to
clinical diagnostic laboratory tests for which payment is made
under part B''.
(b) Deductible.--Section 1833(b) of the Social Security Act (42
U.S.C. 1395l(b)) is amended--
(1) by striking paragraph (3); and
(2) by redesignating paragraphs (4), (5), and (6) as
paragraphs (3), (4), and (5), respectively.
(c) Effective Date.--The amendments made by this section shall
apply to tests furnished on or after January 1, 2004.

SEC. 432. BASING MEDICARE PAYMENTS FOR COVERED OUTPATIENT DRUGS ON
MARKET PRICES.

(a) Medicare Market Based Payment Amount.--Section 1842(o) (42
U.S.C. 1395u(o)) is amended--
(1) in paragraph (1), by striking ``equal to 95 percent of
the average wholesale price.'' and inserting ``equal to--
``(A) in the case of a drug or biological furnished prior
to January 1, 2004, 95 percent of the average wholesale price;
and
``(B) in the case of a drug or biological furnished on or
after January 1, 2004, the payment amount specified in--
``(i) in the case of such a drug or biological that
is first available for payment under this part on or
before April 1, 2003, paragraph (4); and
``(ii) in the case of such a drug or biological
that is first available for payment under this part
after such date, paragraph (5).''; and
(2) by adding at the end the following new paragraphs:
``(4)(A) Subject to subparagraph (C), the payment amount specified
in this paragraph for a year for a drug or biological is an amount
equal to the lesser of--
``(i) the average wholesale price for the drug or
biological; or
``(ii) the amount determined under subparagraph (B)
``(B)(i) Subject to clause (ii), the amount determined under this
subparagraph is an amount equal to--
``(I) in the case of a drug or biological furnished in
2004, 85 percent of the average wholesale price for the drug or
biological (determined as of April 1, 2003); and
``(II) in the case of a drug or biological furnished in
2005 or a subsequent year, the amount determined under this
subparagraph for the previous year increased by the percentage
increase in the consumer price index for medical care for the
12-month period ending with June of the previous year.
``(ii) In the case of a vaccine described in subparagraph (A) or
(B) of section 1861(s)(10), the amount determined under this
subparagraph is an amount equal to the average wholesale price for the
drug or biological.
``(C)(i) The Secretary shall establish a process under which the
Secretary determines, for such drugs or biologicals as the Secretary
determines appropriate, whether the widely available market price to
physicians or suppliers for the drug or biological furnished in a year
is different from the payment amount established under subparagraph (B)
for the year. Such determination shall be based on the information
described in clause (ii) as the Secretary determines appropriate.
``(ii) The information described in this clause is the following
information:
``(I) Any report on drug or biological market prices by the
Inspector General of the Department of Health and Human
Services or the Comptroller General of the United States that
is made available after December 31, 1999.
``(II) A review of drug or biological market prices by the
Secretary, which may include information on such market prices
from insurers, private health plans, manufacturers,
wholesalers, distributors, physician supply houses, specialty
pharmacies, group purchasing arrangements, physicians,
suppliers, or any other source the Secretary determines
appropriate.
``(III) Data and information submitted by the manufacturer
of the drug or biological or by another entity.
``(IV) Other data and information as determined appropriate
by the Secretary.
``(iii) If the Secretary makes a determination under clause (i)
with respect to the widely available market price for a drug or
biological for a year, the following provisions shall apply:
``(I) Subject to clause (iv), the amount determined under
this subparagraph shall be substituted for the amount
determined under subparagraph (B) for purposes of applying
subparagraph (A)(ii)(I) for the year and all subsequent years.
``(II) The Secretary may make subsequent determinations
under clause (i) with respect to the widely available market
price for the drug or biological.
``(III) If the Secretary does not make a subsequent
determination under clause (i) with respect to the widely
available market price for the drug or biological for a year,
the amount determined under this subparagraph shall be an
amount equal to the amount determined under this subparagraph
for the previous year increased by the percentage increase
described in subparagraph (B)(i)(II) for the year involved.
``(iv) If the first determination made under clause (i) with
respect to the widely available market price for a drug or biological
would result in a payment amount in a year that is more than 15 percent
less than the amount determined under subparagraph (B) for the drug or
biological for the previous year (or, for 2004, the payment amount
determined under paragraph (1)(A), determined as of April 1, 2003), the
Secretary shall provide for a transition to the amount determined under
clause (i) so that the payment amount is reduced in annual increments
equal to 15 percent of the payment amount in such previous year until
the payment amount is equal to the amount determined under clause (i),
as increased each year by the percentage increase described in
subparagraph (B)(i)(II) for the year. The preceding sentence shall not
apply to a drug or biological where a generic version of the drug or
biological first enters the market on or after January 1, 2004 (even if
the generic version of the drug or biological is not marketed under the
chemical name of such drug or biological).
``(5) In the case of a drug or biological that is first available
for payment under this part after April 1, 2003, the following rules
shall apply:
``(A) As a condition of obtaining a code to report such new
drug or biological and to receive payment under this part, a
manufacturer shall provide the Secretary (in a time, manner,
and form approved by the Secretary) with data and information
on prices at which the manufacturer estimates physicians and
suppliers will be able to routinely obtain the drug or
biological in the market during the first year that the drug or
biological is available for payment under this part and such
additional information that the manufacturer determines
appropriate.
``(B) During the year that the drug or biological is first
available for payment under this part, the manufacturer of the
drug or biological shall provide the Secretary (in a time,
manner, and form approved by the Secretary) with updated
information on the actual market prices paid by such physicians
or suppliers for the drug or biological in the year.
``(C) The amount specified in this paragraph for a drug or
biological for the year described in subparagraph (B) is equal
to an amount determined by the Secretary based on the
information provided under subparagraph (A) and other
information that the Secretary determines appropriate.
``(D) The amount specified in this paragraph for a drug or
biological for the year after the year described in
subparagraph (B) is equal to an amount determined by the
Secretary based on the information provided under subparagraph
(B) and other information that the Secretary determines
appropriate.
``(E) The amount specified in this paragraph for a drug or
biological for the year beginning after the year described in
subparagraph (D) and each subsequent year is equal to the
lesser of--
``(i) the average wholesale price for the drug or
biological; or
``(ii) the amount determined--
``(I) by the Secretary under paragraph
(4)(C)(i) with respect to the widely available
market price for the drug or biological for the
year, if such paragraph was applied by
substituting `the payment determined under
paragraph (5)(E)(ii)(II) for the year' for
`established under subparagraph (B) for the
year'; and
``(II) if no determination described in
subclause (I) is made for the drug or
biological for the year, under this
subparagraph with respect to the drug or
biological for the previous year increased by
the percentage increase described in paragraph
(4)(B)(i)(II) for the year involved.''.
(b) Adjustments to Payment Amounts for Administration of Drugs and
Biologicals.--
(1) Adjustment in physician practice expense relative value
units.--Section 1848(c)(2) (42 U.S.C. 1395w-4(c)(2)) is
amended--
(A) in subparagraph (B)--
(i) in clause (ii)(II), by striking ``The
adjustments'' and inserting ``Subject to clause
(iv), the adjustments''; and
(ii) by adding at the end the following new
clause:
``(iv) Exemption from budget neutrality in
2004.--Any additional expenditures under this
part that are attributable to subparagraph (H)
shall not be taken into account in applying
clause (ii)(II) for 2004.''; and
(B) by adding at the end the following new
subparagraph:
``(H) Adjustments in practice expense relative
value units for drug administration services for
2004.--In establishing the physician fee schedule under
subsection (b) with respect to payments for services
furnished in 2004, the Secretary shall, in determining
practice expense relative value units under this
subsection, utilize a survey submitted to the Secretary
as of January 1, 2003, by a physician specialty
organization pursuant to section 212 of the Medicare,
Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 if the survey--
``(i) covers practice expenses for oncology
administration services; and
``(ii) meets criteria established by the
Secretary for acceptance of such surveys.''.
(2) Payment for multiple chemotherapy agents furnished on a
single day through the push technique.--
(A) Review of policy.--The Secretary shall review
the policy, as in effect on the date of enactment of
this Act, with respect to payment under section 1848 of
the Social Security Act (42 U.S.C. 1395w-4) for the
administration of more than 1 anticancer
chemotherapeutic agent to an individual on a single day
through the push technique.
(B) Modification of policy.--After conducting the
review under subparagraph (A), the Secretary shall
modify such payment policy if the Secretary determines
such modification to be appropriate.
(C) Exemption from budget neutrality under
physician fee schedule.--If the Secretary modifies such
payment policy pursuant to subparagraph (B), any
increased expenditures under title XVIII of the Social
Security Act resulting from such modification shall be
treated as additional expenditures attributable to
subparagraph (H) of section 1848(c)(2) of the Social
Security Act (42 U.S.C. 1395w-4(c)(2)), as added by
paragraph (1)(B), for purposes of applying the
exemption to budget neutrality under subparagraph
(B)(iv) of such section, as added by paragraph (1)(A).
(3) Treatment of other services currently in the
nonphysician work pool.--The Secretary shall make adjustments
to the nonphysician work pool methodology (as such term is used
in the final rule promulgated by the Secretary in the Federal
Register on December 31, 2002 (67 Fed. Reg. 251)), for the
determination of practice expense relative value units under
the physician fee schedule under section 1848(c)(2)(C)(ii) of
the Social Security Act (42 U.S.C. 1395w-4(c)(2)(C)(ii)), so
that the practice expense relative value units for services
determined under such methodology are not disproportionately
reduced relative to the practice expense relative value units
of services not determined under such methodology, as a result
of the amendments to such Act made by paragraph (1).
(4) Administration of blood clotting factors.--Section
1842(o) (42 U.S.C. 1395u(o)), as amended by subsection (a)(2),
is amended by adding at the end the following new paragraph:
``(6)(A) Subject to subparagraph (B), in the case of clotting
factors furnished on or after January 1, 2004, the Secretary shall,
after reviewing the January 2003 report to Congress by the Comptroller
General of the United States entitled `Payment for Blood Clotting
Factor Exceeds Providers Acquisition Cost' (GAO-03-184), provide for a
separate payment for the administration of such blood clotting factors
in an amount that the Secretary determines to be appropriate.
``(B) In determining the separate payment amount under subparagraph
(A) for blood clotting factors furnished in 2004, the Secretary shall
ensure that the total amount of payments under this part (as estimated
by the Secretary) for such factors under paragraphs (4) and (5) and
such separate payments for such factors does not exceed the total
amount of payments that would have been made for such factors under
this part (as estimated by the Secretary) if the amendments made by
section 433 of the Prescription Drug and Medicare Improvement Act of
2003 had not been enacted.
``(C) The separate payment amount under this subparagraph for blood
clotting factors furnished in 2005 or a subsequent year shall be equal
to the separate payment amount determined under this paragraph for the
previous year increased by the percentage increase described in
paragraph (4)(B)(i)(II) for the year involved.''.
(5) Increase in composite rate for end stage renal disease
facilities.--Section 1881(b) (42 U.S.C. 1395rr(b) is amended--
(A) in paragraph (7), by adding at the end the
following new sentence: ``In the case of dialysis
services furnished in 2004 or a subsequent year, the
composite rate for such services shall be determined
under paragraph (12).''; and
(B) by adding at the end the following new
paragraph:
``(12)(A) In the case of dialysis services furnished during 2004,
the composite rate for such services shall be the composite rate that
would otherwise apply under paragraph (7) for the year increased by an
amount to ensure (as estimated by the Secretary) that--
``(i) the sum of the total amount of--
``(I) the composite rate payments for such services
for the year, as increased under this paragraph; and
``(II) the payments for drugs and biologicals
(other than erythropoetin) furnished in connection with
the furnishing of renal dialysis services and
separately billed by renal dialysis facilities under
paragraphs (4) and (5) of section 1842(o) for the year;
is equal to
``(ii) the sum of the total amount of the composite rate
payments under paragraph (7) for the year and the payments for
the separately billed drugs and biologicals described in clause
(i)(II) that would have been made if the amendments made by
section 433 of the Prescription Drug and Medicare Improvement
Act of 2003 had not been enacted.
``(B) Subject to subparagraph (E), in the case of dialysis services
furnished in 2005, the composite rate for such services shall be an
amount equal to the composite rate established under subparagraph (A),
increased by 0.05 percent and further increased by 1.6 percent.
``(C) Subject to subparagraph (E), in the case of dialysis services
furnished in 2006, the composite rate for such services shall be an
amount equal to the composite rate established under subparagraph (B),
increased by 0.05 percent and further increased by 1.6 percent.
``(D) Subject to subparagraph (E), in the case of dialysis services
furnished in 2007 and all subsequent years, the composite rate for such
services shall be an amount equal to the composite rate established
under this paragraph for the previous year, increased by 0.05 percent.
``(E) If the Secretary implements a reduction in the payment amount
under paragraph (4)(C) or (5) for a drug or biological described in
subparagraph (A)(i)(II) for a year after 2004, the Secretary shall, as
estimated by the Secretary--
``(i) increase the composite rate for dialysis services
furnished in such year in the same manner that the composite
rate for such services for 2004 was increased under
subparagraph (A); and
``(ii) increase the percentage increase under subparagraph
(C) or (D) (as applicable) for years after the year described
in clause (i) to ensure that such increased percentage would
result in expenditures equal to the sum of the total composite
rate payments for such services for such years and the total
payments for drugs and biologicals described in subparagraph
(A)(i)(II) is equal to the sum of the total amount of the
composite rate payments under this paragraph for such years and
the payments for the drugs and biologicals described in
subparagraph (A)(i)(II) that would have been made if the
reduction in payment amount described in subparagraph had not
been made.
``(F) There shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, of determinations of payment
amounts, methods, or adjustments under this paragraph.''.
(6) Home infusion drugs.--Section 1842(o) (42 U.S.C.
1395u(o)), as amended by subsection (a)(2) and paragraph (4),
is amended by adding at the end the following new paragraph:
``(7)(A) Subject to subparagraph (B), in the case of infusion drugs
and biologicals furnished through an item of durable medical equipment
covered under section 1861(n) on or after January 1, 2004, the
Secretary may make separate payments for furnishing such drugs and
biologicals in an amount determined by the Secretary if the Secretary
determines such separate payment to be appropriate.
``(B) In determining the amount of any separate payment under
subparagraph (A) for a year, the Secretary shall ensure that the total
amount of payments under this part for such infusion drugs and
biologicals for the year and such separate payments for the year does
not exceed the total amount of payments that would have been made under
this part for the year for such infusion drugs and biologicals if
section 433 of the Prescription Drug and Medicare Improvement Act of
2003 had not been enacted.''.
(7) Inhalation drugs.--Section 1842(o) (42 U.S.C.
1395u(o)), as amended by subsection (a)(2) and paragraphs (4)
and (6), is amended by adding at the end the following new
paragraph:
``(8)(A) Subject to subparagraph (B), in the case of inhalation
drugs and biologicals furnished through durable medical equipment
covered under section 1861(n) on or after January 1, 2004, the
Secretary may increase payments for such equipment under section
1834(a) and may make separate payments for furnishing such drugs and
biologicals if the Secretary determines such increased or separate
payments are necessary to appropriately furnish such equipment and
drugs and biologicals to beneficiaries.
``(B) The total amount of any increased payments and separate
payments under subparagraph (A) for a year may not exceed an amount
equal to 10 percent of the amount (as estimated by the Secretary) by
which--
``(i) the total amount of payments that would have been
made for such drugs and biologicals for the year if section 433
of the Prescription Drug and Medicare Improvement Act of 2003
had not been enacted; exceeds
``(ii) the total amount of payments for such drugs and
biologicals under paragraphs (4) and (5).''.
(8) Pharmacy dispensing fee for certain drugs and
biologicals.--Section 1842(o)(2) (42 U.S.C. 1395u(o)(2)) is
amended to read as follows:
``(2) If payment for a drug or biological is made to a licensed
pharmacy approved to dispense drugs or biologicals under this part, the
Secretary--
``(A) in the case of an immunosuppressive drug described in
subparagraph (J) of section 1861(s)(2) and an oral drug
described in subparagraph (Q) or (T) of such section, shall pay
a dispensing fee determined appropriate by the Secretary (less
the applicable deductible and coinsurance amounts) to the
pharmacy; and
``(B) in the case of a drug or biological not described in
subparagraph (A), may pay a dispensing fee determined
appropriate by the Secretary (less the applicable deductible
and coinsurance amounts) to the pharmacy.''.
(9) Payment for chemotherapy drugs purchased but not
administered by physicians.--Section 1842(o) (42 U.S.C.
1395u(o)), as amended by subsection (a)(2) and paragraphs (4),
(6) and (7), is amended by adding at the end the following new
paragraph:
``(9)(A) Subject to subparagraph (B), the Secretary may
increase (in an amount determined appropriate) the amount of
payments to physicians for anticancer chemotherapeutic drugs or
biologicals that would otherwise be made under this part in
order to compensate such physicians for anticancer
chemotherapeutic drugs or biologicals that are purchased by
physicians with a reasonable intent to administer to an
individual enrolled under this part but which cannot be
administered to such individual despite the reasonable efforts
of the physician.
``(B) The total amount of increased payments made under
subparagraph (A) in a year (as estimated by the Secretary) may
not exceed an amount equal to 1 percent of the total amount of
payments made under paragraphs (4) and (5) for such anticancer
chemotherapeutic drugs or biologicals furnished by physicians
in such year (as estimated by the Secretary).''.
(c) Linkage of Revised Drug Payments and Increases for Drug
Administration.--The Secretary shall not implement the revisions in
payment amounts for a category of drug or biological as a result of the
amendments made by subsection (a) unless the Secretary concurrently
implements the adjustments to payment amounts for administration of
such category of drug or biological for which the Secretary is required
to make an adjustment, as specified in the amendments made by, and
provisions of, subsection (b).
(d) Prohibition of Administrative and Judicial Review.--
(1) Drugs.--Section 1842(o) (42 U.S.C. 1395u(o)), as
amended by subsection (a)(2) and paragraphs (4), (6), (7), and
(9) of subsection (b), is amended by adding at the end the
following new paragraph:
``(10) There shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, of determinations of payment
amounts, methods, or adjustments under paragraph (2) or paragraphs (4)
through (9).''.
(2) Physician fee schedule.--Section 1848(i)(1) (42 U.S.C.
1395w-4(i)(1)) is amended--
(A) in subparagraph (D), by striking ``and'' at the
end;
(B) in subparagraph (E), by striking the period at
the end and inserting ``, and''; and
(C) by adding at the end the following new
subparagraph:
``(F) adjustments in practice expense relative
value units under subsection (c)(2)(H).''.
(3) Multiple chemotherapy agents and other services
currently on the non-physician work pool.--There shall be no
administrative or judicial review under section 1869, section
1878, or otherwise, of determinations of payment amounts,
methods, or adjustments under paragraphs (2) and (3) of
subsection (b).
(e) Studies and Reports.--
(1) GAO study and report on beneficiary access to drugs and
biologicals.--
(A) Study.--The Comptroller General of the United
States shall conduct a study that examines the impact
the provisions of, and the amendments made by, this
section have on access by medicare beneficiaries to
drugs and biologicals covered under the medicare
program.
(B) Report.--Not later than January 1, 2006, the
Comptroller General shall submit a report to Congress
on the study conducted under subparagraph (A) together
with such recommendations as the Comptroller General
determines to be appropriate.
(2) Study and report by the hhs inspector general on market
prices of drugs and biologicals.--
(A) Study.--The Inspector General of the Department
of Health and Human Services shall conduct 1 or more
studies that--
(i) examine the market prices that drugs
and biologicals covered under the medicare
program are widely available to physicians and
suppliers; and
(ii) compare such widely available market
prices to the payment amount for such drugs and
biologicals under section 1842(o) of the Social
Security Act (42 U.S.C. 1395u(o).
(B) Requirement.--In conducting the study under
subparagraph (A), the Inspector General shall focus on
those drugs and biologicals that represent the largest
portions of expenditures under the medicare program for
drugs and biologicals.
(C) Report.--The Inspector General shall prepare a
report on any study conducted under subparagraph (A).

SEC. 433. INDEXING PART B DEDUCTIBLE TO INFLATION.

The first sentence of section 1833(b) (42 U.S.C. 1395l(b)) is
amended by striking ``and $100 for 1991 and subsequent years'' and
inserting the following: ``, $100 for 1991 through 2005, $125 for 2006,
and for 2007 and thereafter, the amount in effect for the previous
year, increase by the percentage increase in the consumer price index
for all urban consumers (U.S. city average) for the 12-month period
ending with June of the previous year, rounded to the nearest dollar''.

SEC. 434. REVISIONS TO REASSIGNMENT PROVISIONS.

(a) In General.--Section 1842(b)(6)(A)(ii) (42 U.S.C.
1395u(b)(6)(A)(ii)) is amended to read as follows: ``(ii) where the
service was provided under a contractual arrangement between such
physician or other person and an entity (as defined by the Secretary),
to the entity if under such arrangement such entity submits the bill
for such service and such arrangement meets such program integrity and
other safeguards as the Secretary may determine to be appropriate,''.
(b) Conforming Amendment.--The second sentence of section
1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended by striking ``except to
an employer or facility as described in clause (A)'' and inserting
``except to an employer or entity as described in subparagraph (A)''.
(c) Effective Date.--The amendments made by this section shall
apply to payments made on or after the date of enactment of this Act.

SEC. 435. EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY
SERVICES UNDER MEDICARE.

Section 542(c) of BIPA (114 Stat. 2763A-551) is amended by
inserting ``, and for services furnished during 2005'' before the
period at the end.

SEC. 436. ADEQUATE REIMBURSEMENT FOR OUTPATIENT PHARMACY THERAPY UNDER
THE HOSPITAL OUTPATIENT PPS.

(a) Special Rules for Drugs and Biologicals.--Section 1833(t) (42
U.S.C. 1395(t)) is amended--
(1) by redesignating paragraph (13) as paragraph (14); and
(2) by inserting after paragraph (12) the following new
paragraph:
``(13) Special rules for certain drugs and biologicals.--
``(A) Before 2007.--
``(i) In general.--Notwithstanding
paragraph (6), but subject to clause (ii), with
respect to a separately payable drug or
biological described in subparagraph (D)
furnished on or after January 1, 2005, and
before January 1, 2007, hospitals shall be
reimbursed as follows:
``(I) Drugs and biologicals
furnished as part of a current opd
service.--The amount of payment for a
drug or biological described in
subparagraph (D) provided as a part of
a service that was a covered OPD
service on May 1, 2003, shall be the
applicable percentage (as defined in
subparagraph (C)) of the average
wholesale price for the drug or
biological that would have been
determined under section 1842(o) on
such date.
``(II) Drugs and biologicals
furnished as part of other opd
services.--The amount of payment for a
drug or biological described in
subparagraph (D) provided as part of
any other covered OPD service shall be
the applicable percentage (as defined
in subparagraph (C)) of the average
wholesale price that would have been
determined under section 1842(o) on May
1, 2003, if payment for such a drug or
biological could have been made under
this part on that date.
``(ii) Update for 2006.--For 2006, the
amounts determined under clauses (i) and (ii)
shall be the amount established for 2005
increased by the percentage increase in the
Consumer Price Index for all urban consumers
(U.S. urban average) for the 12-month period
ending with June of the previous year.
``(B) After 2007.--
``(i) Ongoing study and reports on adequate
reimbursements.--
``(I) Study.--The Secretary shall
contract with an eligible organization
(as defined in subclause (IV)) to
conduct a study to determine the
hospital acquisition, pharmacy
services, and handling costs for each
individual drug or biological described
in subparagraph (D).
``(II) Study requirements.--The
study conducted under subclause (I)
shall--
``(aa) be accurate to
within 3 percent of true mean
hospital acquisition and
handling costs for each drug
and biological at the 95
percent confidence level;
``(bb) begin not later than
January 1, 2005; and
``(cc) be updated annually
for changes in hospital costs
and the addition of newly
marketed products.
``(III) Reports.--Not later than
January 1 of each year (beginning with
2006), the Secretary shall submit to
Congress a report on the study
conducted under clause (i) together
with recommendations for such
legislative or administrative action as
the Secretary determines to be
appropriate.
``(IV) Eligible organization
defined.--In this clause, the term
`eligible organization' means a
private, nonprofit organization within
the meaning of section 501(c) of the
Internal Revenue Code.
``(ii) Establishment of payment
methodology.--Notwithstanding paragraph (6),
the Secretary, in establishing a payment
methodology on or after the date of enactment
of the Prescription Drug and Medicare
Improvement Act of 2003, shall take into
consideration the findings of the study
conducted under clause (i)(I) in determining
payment amounts for each drug and biological
provided as part of a covered OPD service
furnished on or after January 1, 2007.
``(C) Applicable percentage defined.--In this
paragraph, the term `applicable percentage' means--
``(i) with respect to a biological product
(approved under a biologics license application
under section 351 of the Public Health Service
Act), a single source drug (as defined in
section 1927(k)(7)(A)(iv)), or an orphan
product designated under section 526 of the
Food, Drug, and Cosmetic Act to which the
prospective payment system established under
this subsection did not apply under the final
rule for 2003 payments under such system, 94
percent;
``(ii) with respect to an innovator
multiple source drug (as defined in section
1927(k)(7)(A)(ii)), 91 percent; and
``(iii) with respect to a noninnovator
multiple source drug (as defined in as defined
in section 1927(k)(7)(A)(iii)), 71 percent.
``(D) Drugs and biologicals described.--A drug or
biological described in this paragraph is any drug or
biological--
``(i) for which the amount of payment was
determined under paragraph (6) prior to January
1, 2005; and
``(ii)(I) which is assigned to a drug
specific ambulatory payment classification on
or after the date of enactment of the
Prescription Drug and Medicare Improvement Act
of 2003; or
``(II) that would have been reimbursed
under paragraph (6) but for the application of
this paragraph.''.
(b) Exceptions to Budget Neutrality requirement.--Section
1833(t)(9)(B) (42 U.S.C. 1395l(t)(9)(B)) is amended by adding at the
end the following: ``In determining the budget neutrality adjustment
required by the preceding sentence for fiscal years 2005 and 2006, the
Secretary shall not take into account any expenditures that would not
have been made but for the application of paragraph (13).''.

SEC. 437. LIMITATION OF APPLICATION OF FUNCTIONAL EQUIVALENCE STANDARD.

Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) is amended by adding at
the end the following new subparagraph:
``(F) Limitation of application of functional
equivalence standard.--
``(i) In general.--The Secretary may not
publish regulations that apply a functional
equivalence standard to a drug or biological
under this paragraph.
``(ii) Application.--Paragraph (1) shall
apply to the application of a functional
equivalence standard to a drug or biological on
or after the date of enactment of the
Prescription Drug and Medicare Improvement Act
of 2003 unless--
``(I) such application was being
made to such drug or biological prior
to such date of enactment; and
``(II) the Secretary applies such
standard to such drug or biological
only for the purpose of determining
eligibility of such drug or biological
for additional payments under this
paragraph and not for the purpose of
any other payments under this title.
``(iii) Rule of construction.--Nothing in
this subparagraph shall be construed to effect
the Secretary's authority to deem a particular
drug to be identical to another drug if the 2
products are pharmaceutically equivalent and
bioequvalent, as determined by the Commissioner
of Food and Drugs.

SEC. 438. MEDICARE COVERAGE OF ROUTINE COSTS ASSOCIATED WITH CERTAIN
CLINICAL TRIALS.

(a) In General.--With respect to the coverage of routine costs of
care for beneficiaries participating in a qualifying clinical trial, as
set forth on the date of the enactment of this Act in National Coverage
Determination 30-1 of the Medicare Coverage Issues Manual, the
Secretary shall deem clinical trials conducted in accordance with an
investigational device exemption approved under section 520(g) of the
Federal Food, Drug, and Cosmetic Act (42 U.S.C. 360j(g)) to be
automatically qualified for such coverage.
(b) Rule of Construction.--Nothing in this section shall be
construed as authorizing or requiring the Secretary to modify the
regulations set forth on the date of the enactment of this Act at
subpart B of part 405 of title 42, Code of Federal Regulations, or
subpart A of part 411 of such title, relating to coverage of, and
payment for, a medical device that is the subject of an investigational
device exemption by the Food and Drug Administration (except as may be
necessary to implement subsection (a)).
(c) Limitation of Expenditures in Years Prior to 2014.--
(1) In general.--The Secretary shall ensure that the total
amount of expenditures under title XVIII of the Social Security
Act (including amounts expended by reason of this section) in a
year prior to 2014 does not exceed the sum of--
(A) the total amount of expenditures under such
title XVIII that would have made if this section had
not been enacted; and
(B) the applicable amount.
(2) Applicable amount.--For purposes of paragraph (1), the
term ``applicable amount'' means--
(A) for 2005, $32,000,000;
(B) for 2006, $34,000,000;
(C) for 2007, $36,000,000;
(D) for 2008, $38,000,000;
(E) for 2009, $40,000,000;
(F) for 2010, $42,000,000;
(G) for 2011, $44,000,000;
(H) for 2012, $48,000,000; and
(I) for 2013, $50,000,000.
(3) Steps to ensure funding limitation not violated.--If
the Secretary determines that the application of this section
will result in the funding limitation described in paragraph
(1) being violated for any year, the Secretary shall take
appropriate steps to stay within such funding limitation,
including through limiting the number of clinical trials deemed
under subsection (a) and only covering a portion of the routine
costs described in such subsection.
(d) Effective Date.--This section shall apply to clinical trials
begun on or after January 1, 2005.

SEC. 439. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR CERTAIN MILITARY
RETIREES; SPECIAL ENROLLMENT PERIOD.

(a) Waiver of Penalty.--
(1) In general.--Section 1839(b) (42 U.S.C. 1395r(b)) is
amended by adding at the end the following new sentence: ``No
increase in the premium shall be effected for a month in the
case of an individual who is 65 years of age or older, who
enrolls under this part during 2002, 2003, 2004, or 2005 and
who demonstrates to the Secretary before December 31, 2005,
that the individual is a covered beneficiary (as defined in
section 1072(5) of title 10, United States Code). The Secretary
shall consult with the Secretary of Defense in identifying
individuals described in the previous sentence.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to premiums for months beginning with January 2005.
The Secretary shall establish a method for providing rebates of
premium penalties paid for months on or after January 2005 for
which a penalty does not apply under such amendment but for
which a penalty was previously collected.
(b) Medicare Part B Special Enrollment Period.--
(1) In general.--In the case of any individual who, as of
the date of enactment of this Act, is 65 years of age or older,
is eligible to enroll but is not enrolled under part B of title
XVIII of the Social Security Act, and is a covered beneficiary
(as defined in section 1072(5) of title 10, United States
Code), the Secretary shall provide for a special enrollment
period during which the individual may enroll under such part.
Such period shall begin 1 year after the date of the enactment
of this Act and shall end on December 31, 2005.
(2) Coverage period.--In the case of an individual who
enrolls during the special enrollment period provided under
paragraph (1), the coverage period under part B of title XVIII
of the Social Security Act shall begin on the first day of the
month following the month in which the individual enrolls.

SEC. 440. DEMONSTRATION OF COVERAGE OF CHIROPRACTIC SERVICES UNDER
MEDICARE.

(a) Definitions.--In this section:
(1) Chiropractic services.--The term ``chiropractic
services'' has the meaning given that term by the Secretary for
purposes of the demonstration projects, but shall include, at a
minimum--
(A) care for neuromusculoskeletal conditions
typical among eligible beneficiaries; and
(B) diagnostic and other services that a
chiropractor is legally authorized to perform by the
State or jurisdiction in which such treatment is
provided.
(2) Demonstration project.--The term ``demonstration
project'' means a demonstration project established by the
Secretary under subsection (b)(1).
(3) Eligible beneficiary.--The term ``eligible
beneficiary'' means an individual who is enrolled under part B
of the medicare program.
(4) Medicare program.--The term ``medicare program'' means
the health benefits program under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.).
(b) Demonstration of Coverage of Chiropractic Services Under
Medicare.--
(1) Establishment.--The Secretary shall establish
demonstration projects in accordance with the provisions of
this section for the purpose of evaluating the feasibility and
advisability of covering chiropractic services under the
medicare program (in addition to the coverage provided for
services consisting of treatment by means of manual
manipulation of the spine to correct a subluxation described in
section 1861(r)(5) of the Social Security Act (42 U.S.C.
1395x(r)(5))).
(2) No physician approval required.--In establishing the
demonstration projects, the Secretary shall ensure that an
eligible beneficiary who participates in a demonstration
project, including an eligible beneficiary who is enrolled for
coverage under a Medicare+Choice plan (or, on and after January
1, 2006, under a MedicareAdvantage plan), is not required to
receive approval from a physician or other health care provider
in order to receive a chiropractic service under a
demonstration project.
(3) Consultation.--In establishing the demonstration
projects, the Secretary shall consult with chiropractors,
organizations representing chiropractors, eligible
beneficiaries, and organizations representing eligible
beneficiaries.
(4) Participation.--Any eligible beneficiary may
participate in the demonstration projects on a voluntary basis.
(c) Conduct of Demonstration Projects.--
(1) Demonstration sites.--
(A) Selection of demonstration sites.--The
Secretary shall conduct demonstration projects at 6
demonstration sites.
(B) Geographic diversity.--Of the sites described
in subparagraph (A)--
(i) 3 shall be in rural areas; and
(ii) 3 shall be in urban areas.
(C) Sites located in hpsas.--At least 1 site
described in clause (i) of subparagraph (B) and at
least 1 site described in clause (ii) of such
subparagraph shall be located in an area that is
designated under section 332(a)(1)(A) of the Public
Health Service Act (42 U.S.C. 254e(a)(1)(A)) as a
health professional shortage area.
(2) Implementation; duration.--
(A) Implementation.--The Secretary shall not
implement the demonstration projects before October 1,
2004.
(B) Duration.--The Secretary shall complete the
demonstration projects by the date that is 3 years
after the date on which the first demonstration project
is implemented.
(d) Evaluation and Report.--
(1) Evaluation.--The Secretary shall conduct an evaluation
of the demonstration projects--
(A) to determine whether eligible beneficiaries who
use chiropractic services use a lesser overall amount
of items and services for which payment is made under
the medicare program than eligible beneficiaries who do
not use such services;
(B) to determine the cost of providing payment for
chiropractic services under the medicare program;
(C) to determine the satisfaction of eligible
beneficiaries participating in the demonstration
projects and the quality of care received by such
beneficiaries; and
(D) to evaluate such other matters as the Secretary
determines is appropriate.
(2) Report.--Not later than the date that is 1 year after
the date on which the demonstration projects conclude, the
Secretary shall submit to Congress a report on the evaluation
conducted under paragraph (1) together with such
recommendations for legislation or administrative action as the
Secretary determines is appropriate.
(e) Waiver of Medicare Requirements.--The Secretary shall waive
compliance with such requirements of the medicare program to the extent
and for the period the Secretary finds necessary to conduct the
demonstration projects.
(f) Funding.--
(1) Demonstration projects.--
(A) In general.--Subject to subparagraph (B) and
paragraph (2), the Secretary shall provide for the
transfer from the Federal Supplementary Insurance Trust
Fund under section 1841 of the Social Security Act (42
U.S.C. 1395t) of such funds as are necessary for the
costs of carrying out the demonstration projects under
this section.
(B) Limitation.--In conducting the demonstration
projects under this section, the Secretary shall ensure
that the aggregate payments made by the Secretary under
the medicare program do not exceed the amount which the
Secretary would have paid under the medicare program if
the demonstration projects under this section were not
implemented.
(2) Evaluation and report.--There are authorized to be
appropriated such sums as are necessary for the purpose of
developing and submitting the report to Congress under
subsection (d).

SEC. 441. MEDICARE HEALTH CARE QUALITY DEMONSTRATION PROGRAMS.

Title XVIII (42 U.S.C. 1395 et seq.) is amended by inserting after
section 1866B the following new section:

``health care quality demonstration program

``Sec. 1866C. (a) Definitions.--In this section:
``(1) Beneficiary.--The term `beneficiary' means a
beneficiary who is enrolled in the original medicare fee-for-
service program under parts A and B or a beneficiary in a staff
model or dedicated group model health maintenance organization
under the Medicare+Choice program (or, on and after January 1,
2006, under the MedicareAdvantage program) under part C.
``(2) Health care group.--
``(A) In general.--The term `health care group'
means--
``(i) a group of physicians that is
organized at least in part for the purpose of
providing physician's services under this
title;
``(ii) an integrated health care delivery
system that delivers care through coordinated
hospitals, clinics, home health agencies,
ambulatory surgery centers, skilled nursing
facilities, rehabilitation facilities and
clinics, and employed, independent, or
contracted physicians; or
``(iii) an organization representing
regional coalitions of groups or systems
described in clause (i) or (ii).
``(B) Inclusion.--As the Secretary determines
appropriate, a health care group may include a hospital
or any other individual or entity furnishing items or
services for which payment may be made under this title
that is affiliated with the health care group under an
arrangement structured so that such hospital,
individual, or entity participates in a demonstration
project under this section.
``(3) Physician.--Except as otherwise provided for by the
Secretary, the term `physician' means any individual who
furnishes services that may be paid for as physicians' services
under this title.
``(b) Demonstration Projects.--The Secretary shall establish a 5-
year demonstration program under which the Secretary shall approve
demonstration projects that examine health delivery factors that
encourage the delivery of improved quality in patient care, including--
``(1) the provision of incentives to improve the safety of
care provided to beneficiaries;
``(2) the appropriate use of best practice guidelines by
providers and services by beneficiaries;
``(3) reduced scientific uncertainty in the delivery of
care through the examination of variations in the utilization
and allocation of services, and outcomes measurement and
research;
``(4) encourage shared decision making between providers
and patients;
``(5) the provision of incentives for improving the quality
and safety of care and achieving the efficient allocation of
resources;
``(6) the appropriate use of culturally and ethnically
sensitive health care delivery; and
``(7) the financial effects on the health care marketplace
of altering the incentives for care delivery and changing the
allocation of resources.
``(c) Administration by Contract.--
``(1) In general.--Except as otherwise provided in this
section, the Secretary may administer the demonstration program
established under this section in a manner that is similar to
the manner in which the demonstration program established under
section 1866A is administered in accordance with section 1866B.
``(2) Alternative payment systems.--A health care group
that receives assistance under this section may, with respect
to the demonstration project to be carried out with such
assistance, include proposals for the use of alternative
payment systems for items and services provided to
beneficiaries by the group that are designed to--
``(A) encourage the delivery of high quality care
while accomplishing the objectives described in
subsection (b); and
``(B) streamline documentation and reporting
requirements otherwise required under this title.
``(3) Benefits.--A health care group that receives
assistance under this section may, with respect to the
demonstration project to be carried out with such assistance,
include modifications to the package of benefits available
under the traditional fee-for-service program under parts A and
B or the package of benefits available through a staff model or
a dedicated group model health maintenance organization under
part C. The criteria employed under the demonstration program
under this section to evaluate outcomes and determine best
practice guidelines and incentives shall not be used as a basis
for the denial of medicare benefits under the demonstration
program to patients against their wishes (or if the patient is
incompetent, against the wishes of the patient's surrogate) on
the basis of the patient's age or expected length of life or of
the patient's present or predicted disability, degree of
medical dependency, or quality of life.
``(d) Eligibility Criteria.--To be eligible to receive assistance
under this section, an entity shall--
``(1) be a health care group;
``(2) meet quality standards established by the Secretary,
including--
``(A) the implementation of continuous quality
improvement mechanisms that are aimed at integrating
community-based support services, primary care, and
referral care;
``(B) the implementation of activities to increase
the delivery of effective care to beneficiaries;
``(C) encouraging patient participation in
preference-based decisions;
``(D) the implementation of activities to encourage
the coordination and integration of medical service
delivery; and
``(E) the implementation of activities to measure
and document the financial impact on the health care
marketplace of altering the incentives of health care
delivery and changing the allocation of resources; and
``(3) meet such other requirements as the Secretary may
establish.
``(e) Waiver Authority.--The Secretary may waive such requirements
of titles XI and XVIII as may be necessary to carry out the purposes of
the demonstration program established under this section.
``(f) Budget Neutrality.--With respect to the 5-year period of the
demonstration program under subsection (b), the aggregate expenditures
under this title for such period shall not exceed the aggregate
expenditures that would have been expended under this title if the
program established under this section had not been implemented.
``(g) Notice Requirements.--In the case of an individual that
receives health care items or services under a demonstration program
carried out under this section, the Secretary shall ensure that such
individual is notified of any waivers of coverage or payment rules that
are applicable to such individual under this title as a result of the
participation of the individual in such program.
``(h) Participation and Support by Federal Agencies.--In carrying
out the demonstration program under this section, the Secretary may
direct--
``(1) the Director of the National Institutes of Health to
expand the efforts of the Institutes to evaluate current
medical technologies and improve the foundation for evidence-
based practice;
``(2) the Administrator of the Agency for Healthcare
Research and Quality to, where possible and appropriate, use
the program under this section as a laboratory for the study of
quality improvement strategies and to evaluate, monitor, and
disseminate information relevant to such program; and
``(3) the Administrator of the Centers for Medicare &
Medicaid Services and the Administrator of the Center for
Medicare Choices to support linkages of relevant medicare data
to registry information from participating health care groups
for the beneficiary populations served by the participating
groups, for analysis supporting the purposes of the
demonstration program, consistent with the applicable
provisions of the Health Insurance Portability and
Accountability Act of 1996.
``(i) Implementation.--The Secretary shall not implement the
demonstration program before October 1, 2004.''.

SEC. 442. MEDICARE COMPLEX CLINICAL CARE MANAGEMENT PAYMENT
DEMONSTRATION.

(a) Establishment.--
(1) In general.--The Secretary shall establish a
demonstration program to make the medicare program more
responsive to needs of eligible beneficiaries by promoting
continuity of care, helping stabilize medical conditions,
preventing or minimizing acute exacerbations of chronic
conditions, and reducing adverse health outcomes, such as
adverse drug interactions related to polypharmacy.
(2) Sites.--The Secretary shall designate 6 sites at which
to conduct the demonstration program under this section, of
which at least 3 shall be in an urban area and at least 1 shall
be in a rural area. One of the sites shall be located in the
State of Arkansas.
(3) Duration.--The Secretary shall conduct the
demonstration program under this section for a 3-year period.
(4) Implementation.--The Secretary shall not implement the
demonstration program before October 1, 2004.
(b) Participants.--Any eligible beneficiary who resides in an area
designated by the Secretary as a demonstration site under subsection
(a)(2) may participate in the demonstration program under this section
if such beneficiary identifies a principal care physician who agrees to
manage the complex clinical care of the eligible beneficiary under the
demonstration program.
(c) Principal Care Physician Responsibilities.--The Secretary shall
enter into an agreement with each principal care physician who agrees
to manage the complex clinical care of an eligible beneficiary under
subsection (b) under which the principal care physician shall--
(1) serve as the primary contact of the eligible
beneficiary in accessing items and services for which payment
may be made under the medicare program;
(2) maintain medical information related to care provided
by other health care providers who provide health care items
and services to the eligible beneficiary, including clinical
reports, medication and treatments prescribed by other
physicians, hospital and hospital outpatient services, skilled
nursing home care, home health care, and medical equipment
services;
(3) monitor and advocate for the continuity of care of the
eligible beneficiary and the use of evidence-based guidelines;
(4) promote self-care and family caregiver involvement
where appropriate;
(5) have appropriate staffing arrangements to conduct
patient self-management and other care coordination activities
as specified by the Secretary;
(6) refer the eligible beneficiary to community services
organizations and coordinate the services of such organizations
with the care provided by health care providers; and
(7) meet such other complex care management requirements as
the Secretary may specify.
(d) Complex Clinical Care Management Fee.--
(1) Payment.--Under an agreement entered into under
subsection (c), the Secretary shall pay to each principal care
physician, on behalf of each eligible beneficiary under the
care of that physician, the complex clinical care management
fee developed by the Secretary under paragraph (2).
(2) Development of fee.--The Secretary shall develop a
complex care management fee under this paragraph that is paid
on a monthly basis and which shall be payment in full for all
the functions performed by the principal care physician under
the demonstration program, including any functions performed by
other qualified practitioners acting on behalf of the
physician, appropriate staff under the supervision of the
physician, and any other person under a contract with the
physician, including any person who conducts patient self-
management and caregiver education under subsection (c)(4).
(e) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Supplementary Insurance Trust Fund
established under section 1841 of the Social Security Act (42
U.S.C. 1395t) of such funds as are necessary for the costs of
carrying out the demonstration program under this section.
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration
program under this section was not implemented.
(f) Waiver Authority.--The Secretary may waive such requirements of
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.;
1395 et seq.) as may be necessary for the purpose of carrying out the
demonstration program under this section.
(g) Report.--Not later than 6 months after the completion of the
demonstration program under this section, the Secretary shall submit to
Congress a report on such program, together with recommendations for
such legislation and administrative action as the Secretary determines
to be appropriate.
(h) Definitions.--In this section:
(1) Activity of daily living.--The term ``activity of daily
living'' means eating, toiling, transferring, bathing,
dressing, and continence.
(2) Chronic condition.--The term ``chronic condition''
means a biological, physical, or mental condition that is
likely to last a year or more, for which there is no known
cure, for which there is a need for ongoing medical care, and
which may affect an individual's ability to carry out
activities of daily living or instrumental activities of daily
living, or both.
(3) Eligible beneficiary.--The term ``eligible
beneficiary'' means any individual who--
(A) is enrolled for benefits under part B of the
medicare program;
(B) has at least 4 complex medical conditions (one
of which may be cognitive impairment); and
(C) has--
(i) an inability to self-manage their care;
or
(ii) a functional limitation defined as an
impairment in 1 or more activity of daily
living or instrumental activity of daily
living.
(4) Instrumental activity of daily living.--The term
``instrumental activity of daily living'' means meal
preparation, shopping, housekeeping, laundry, money management,
telephone use, and transportation use.
(5) Medicare program.--The term ``medicare program'' means
the health care program under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.).
(6) Principal care physician.--The term ``principal care
physician'' means the physician with primary responsibility for
overall coordination of the care of an eligible beneficiary (as
specified in a written plan of care) who may be a primary care
physician or a specialist.

SEC. 443. MEDICARE FEE-FOR-SERVICE CARE COORDINATION DEMONSTRATION
PROGRAM.

(a) Establishment.--
(1) In general.--The Secretary shall establish a
demonstration program to contract with qualified care
management organizations to provide health risk assessment and
care management services to eligible beneficiaries who receive
care under the original medicare fee-for-service program under
parts A and B of title XVIII of the Social Security Act to
eligible beneficiaries.
(2) Sites.--The Secretary shall designate 6 sites at which
to conduct the demonstration program under this section. In
selecting sites under this paragraph, the Secretary shall give
preference to sites located in rural areas.
(3) Duration.--The Secretary shall conduct the
demonstration program under this section for a 5-year period.
(4) Implementation.--The Secretary shall not implement the
demonstration program before October 1, 2004.
(b) Participants.--Any eligible beneficiary who resides in an area
designated by the Secretary as a demonstration site under subsection
(a)(2) may participate in the demonstration program under this section
if such beneficiary identifies a care management organization who
agrees to furnish care management services to the eligible beneficiary
under the demonstration program.
(c) Contracts With CMOs.--
(1) In general.--The Secretary shall enter into a contract
with care management organizations to provide care management
services to eligible beneficiaries residing in the area served
by the care management organization.
(2) Cancellation.--The Secretary may cancel a contract
entered into under paragraph (1) if the care management
organization does not meet negotiated savings or quality
outcomes targets for the year.
(3) Number of cmos.--The Secretary may contract with more
than 1 care management organization in a geographic area.
(d) Payment to CMOs.--
(1) Payment.--Under an contract entered into under
subsection (c), the Secretary shall pay care management
organizations a fee for which the care management organization
is partially at risk based on bids submitted by care management
organizations.
(2) Portion of payment at risk.--The Secretary shall
establish a benchmark for quality and cost against which the
results of the care management organization are to be measured.
The Secretary may not pay a care management organization the
portion of the fee described in paragraph (1) that is at risk
unless the Secretary determines that the care management
organization has met the agreed upon savings and outcomes
targets for the year.
(e) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Hospital Insurance Trust Fund under
section 1817 of the Social Security Act (42 U.S.C. 1395i) and
the Federal Supplementary Insurance Trust Fund established
under section 1841 of such Act (42 U.S.C. 1395t), in such
proportion as the Secretary determines to be appropriate, of
such funds as are necessary for the costs of carrying out the
demonstration program under this section.
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration
program under this section was not implemented.
(f) Waiver Authority.--
(1) In general.--The Secretary may waive such requirements
of titles XI and XVIII of the Social Security Act (42 U.S.C.
1301 et seq.; 1395 et seq.) as may be necessary for the purpose
of carrying out the demonstration program under this section.
(2) Waiver of medigap preemptions.--The Secretary shall
waive any provision of section 1882 of the Social Security Act
that would prevent an insurance carrier described in subsection
(h)(3)(D) from participating in the demonstration program under
this section.
(g) Report.--Not later than 6 months after the completion of the
demonstration program under this section, the Secretary shall submit to
Congress a report on such program, together with recommendations for
such legislation and administrative action as the Secretary determines
to be appropriate.
(h) Definitions.--In this section:
(1) Care management services.--The term ``care management
services'' means services that are furnished to an eligible
beneficiary (as defined in paragraph (2)) by a care management
organization (as defined in paragraph (3)) in accordance with
guidelines established by the Secretary that are consistent
with guidelines established by the American Geriatrics Society.
(2) Eligible beneficiary.--The term ``eligible
beneficiary'' means an individual who is--
(A) entitled to (or enrolled for) benefits under
part A and enrolled for benefits under part B of the
Social Security Act (42 U.S.C. 1395c et seq.; 1395j et
seq.);
(B) not enrolled with a Medicare+Choice plan or a
MedicareAdvantage plan under part C; and
(C) at high-risk (as defined by the Secretary, but
including eligible beneficiaries with multiple
sclerosis or another disabling chronic condition,
eligible beneficiaries residing in a nursing home or at
risk for nursing home placement, or eligible
beneficiaries eligible for assistance under a State
plan under title XIX).
(3) Care management organization.--The term ``care
management organization'' means an organization that meets such
qualifications as the Secretary may specify and includes any of
the following:
(A) A physician group practice, hospital, home
health agency, or hospice program.
(B) A disease management organization.
(C) A Medicare+Choice or MedicareAdvantage
organization.
(D) Insurance carriers offering medicare
supplemental policies under section 1882 of the Social
Security Act (42 U.S.C. 1395ss).
(E) Such other entity as the Secretary determines
to be appropriate.

SEC. 444. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN PAYMENTS FOR
PHYSICIANS' SERVICES.

(a) Study.--The Comptroller General of the United States shall
conduct a study of differences in payment amounts under the physician
fee schedule under section 1848 of the Social Security Act (42 U.S.C.
1395w-4) for physicians' services in different geographic areas. Such
study shall include--
(1) an assessment of the validity of the geographic
adjustment factors used for each component of the fee schedule;
(2) an evaluation of the measures used for such adjustment,
including the frequency of revisions;
(3) an evaluation of the methods used to determine
professional liability insurance costs used in computing the
malpractice component, including a review of increases in
professional liability insurance premiums and variation in such
increases by State and physician specialty and methods used to
update the geographic cost of practice index and relative
weights for the malpractice component;
(4) an evaluation of whether there is a sound economic
basis for the implementation of the adjustment under
subparagraphs (E) and (F) of section 1848(e)(1) of the Social
Security Act (42 U.S.C. 1395w-4(e)(1)), as added by section
421, in those areas in which the adjustment applies;
(5) an evaluation of the effect of such adjustment on
physician location and retention in areas affected by such
adjustment, taking into account--
(A) differences in recruitment costs and retention
rates for physicians, including specialists, between
large urban areas and other areas; and
(B) the mobility of physicians, including
specialists, over the last decade;
(6) an evaluation of the appropriateness of extending such
adjustment or making such adjustment permanent;
(7) an evaluation of the adjustment of the work geographic
practice cost index required under section 1848(e)(1)(A)(iii)
of the Social Security Act (42 U.S.C. 1395w-4(e)(1)(A)(iii)) to
reflect \1/4\ of the area cost difference in physician work;
(8) an evaluation of the effect of the adjustment described
in paragraph (7) on physician location and retention in higher
than average cost-of-living areas, taking into account
difference in recruitment costs and retention rates for
physicians, including specialists; and
(9) an evaluation of the appropriateness of the \1/4\
adjustment for the work geographic practice cost index.''.
(b) Report.--Not later than 1 year after the date of enactment of
this Act, the Comptroller General of the United States shall submit to
Congress a report on the study conducted under subsection (a). The
report shall include recommendations regarding the use of more current
data in computing geographic cost of practice indices as well as the
use of data directly representative of physicians' costs (rather than
proxy measures of such costs).

SEC. 445. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

(a) Exclusion From OPD Fee Schedule.--Section 1833(t)(1)(B)(iv) (42
U.S.C. 13951(t)(1)(B)(iv)) is amended by inserting before the period at
the end the following: ``and does not include screening mammography (as
defined in section 1861(jj)) and unilateral and bilateral diagnostic
mammography''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to mammography performed on or after January 1, 2005.

SEC. 446. IMPROVEMENT OF OUTPATIENT VISION SERVICES UNDER PART B.

(a) Coverage Under Part B.--Section 1861(s)(2) (42 U.S.C.
1395x(s)(2)) is amended--
(1) in subparagraph (U), by striking ``and'' after the
semicolon at the end;
(2) in subparagraph (V)(iii), by adding ``and'' after the
semicolon at the end; and
(3) by adding at the end the following new subparagraph:
``(W) vision rehabilitation services (as defined in
subsection (ww)(1));''.
(b) Services Described.--Section 1861 (42 U.S.C. 1395x) is amended
by adding at the end the following new subsection:

``Vision Rehabilitation Services; Vision Rehabilitation Professional

``(ww)(1)(A) The term `vision rehabilitation services' means
rehabilitative services (as determined by the Secretary in regulations)
furnished--
``(i) to an individual diagnosed with a vision impairment
(as defined in paragraph (6));
``(ii) pursuant to a plan of care established by a
qualified physician (as defined in subparagraph (C)) or by a
qualified occupational therapist that is periodically reviewed
by a qualified physician;
``(iii) in an appropriate setting (including the home of
the individual receiving such services if specified in the plan
of care); and
``(iv) by any of the following individuals:
``(I) A qualified physician.
``(II) A qualified occupational therapist.
``(III) A vision rehabilitation professional (as
defined in paragraph (2)) while under the general
supervision (as defined in subparagraph (D)) of a
qualified physician.
``(B) In the case of vision rehabilitation services furnished by a
vision rehabilitation professional, the plan of care may only be
established and reviewed by a qualified physician.
``(C) The term `qualified physician' means--
``(i) a physician (as defined in subsection (r)(1)) who is
an ophthalmologist; or
``(ii) a physician (as defined in subsection (r)(4)
(relating to a doctor of optometry)).
``(D) The term `general supervision' means, with respect to a
vision rehabilitation professional, overall direction and control of
that professional by the qualified physician who established the plan
of care for the individual, but the presence of the qualified physician
is not required during the furnishing of vision rehabilitation services
by that professional to the individual.
``(2) The term `vision rehabilitation professional' means any of
the following individuals:
``(A) An orientation and mobility specialist (as defined in
paragraph (3)).
``(B) A rehabilitation teacher (as defined in paragraph
(4)).
``(C) A low vision therapist (as defined in paragraph (5)).
``(3) The term `orientation and mobility specialist' means an
individual who--
``(A) if a State requires licensure or certification of
orientation and mobility specialists, is licensed or certified
by that State as an orientation and mobility specialist;
``(B)(i) holds a baccalaureate or higher degree from an
accredited college or university in the United States (or an
equivalent foreign degree) with a concentration in orientation
and mobility; and
``(ii) has successfully completed 350 hours of clinical
practicum under the supervision of an orientation and mobility
specialist and has furnished not less than 9 months of
supervised full-time orientation and mobility services;
``(C) has successfully completed the national examination
in orientation and mobility administered by the Academy for
Certification of Vision Rehabilitation and Education
Professionals; and
``(D) meets such other criteria as the Secretary
establishes.
``(4) The term `rehabilitation teacher' means an individual who--
``(A) if a State requires licensure or certification of
rehabilitation teachers, is licensed or certified by the State
as a rehabilitation teacher;
``(B)(i) holds a baccalaureate or higher degree from an
accredited college or university in the United States (or an
equivalent foreign degree) with a concentration in
rehabilitation teaching, or holds such a degree in a health
field; and
``(ii) has successfully completed 350 hours of clinical
practicum under the supervision of a rehabilitation teacher and
has furnished not less than 9 months of supervised full-time
rehabilitation teaching services;
``(C) has successfully completed the national examination
in rehabilitation teaching administered by the Academy for
Certification of Vision Rehabilitation and Education
Professionals; and
``(D) meets such other criteria as the Secretary
establishes.
``(5) The term `low vision therapist' means an individual who--
``(A) if a State requires licensure or certification of low
vision therapists, is licensed or certified by the State as a
low vision therapist;
``(B)(i) holds a baccalaureate or higher degree from an
accredited college or university in the United States (or an
equivalent foreign degree) with a concentration in low vision
therapy, or holds such a degree in a health field; and
``(ii) has successfully completed 350 hours of clinical
practicum under the supervision of a physician, and has
furnished not less than 9 months of supervised full-time low
vision therapy services;
``(C) has successfully completed the national examination
in low vision therapy administered by the Academy for
Certification of Vision Rehabilitation and Education
Professionals; and
``(D) meets such other criteria as the Secretary
establishes.
``(6) The term `vision impairment' means vision loss that
constitutes a significant limitation of visual capability resulting
from disease, trauma, or a congenital or degenerative condition that
cannot be corrected by conventional means, including refractive
correction, medication, or surgery, and that is manifested by 1 or more
of the following:
``(A) Best corrected visual acuity of less than 20/60, or
significant central field defect.
``(B) Significant peripheral field defect including
homonymous or heteronymous bilateral visual field defect or
generalized contraction or constriction of field.
``(C) Reduced peak contrast sensitivity in conjunction with
a condition described in subparagraph (A) or (B).
``(D) Such other diagnoses, indications, or other
manifestations as the Secretary may determine to be
appropriate.''.
(c) Payment Under Part B.--
(1) Physician fee schedule.--Section 1848(j)(3) (42 U.S.C.
1395w-4(j)(3)) is amended by inserting ``(2)(W),'' after
``(2)(S),''.
(2) Carve out from hospital outpatient department
prospective payment system.--Section 1833(t)(1)(B)(iv) (42
U.S.C. 1395l(t)(1)(B)(iv)) is amended by inserting ``vision
rehabilitation services (as defined in section 1861(ww)(1))
or'' after ``does not include''.
(3) Clarification of billing requirements.--The first
sentence of section 1842(b)(6) of such Act (42 U.S.C.
1395u(b)(6)) is amended--
(A) by striking ``and'' before ``(G)''; and
(B) by inserting before the period the following:
``, and (H) in the case of vision rehabilitation
services (as defined in section 1861(ww)(1)) furnished
by a vision rehabilitation professional (as defined in
section 1861(ww)(2)) while under the general
supervision (as defined in section 1861(ww)(1)(D)) of a
qualified physician (as defined in section
1861(ww)(1)(C)), payment shall be made to (i) the
qualified physician or (ii) the facility (such as a
rehabilitation agency, a clinic, or other facility)
through which such services are furnished under the
plan of care if there is a contractual arrangement
between the vision rehabilitation professional and the
facility under which the facility submits the bill for
such services''.
(d) Plan of Care.--Section 1835(a)(2) (42 U.S.C. 1395n(a)(2)) is
amended--
(1) in subparagraph (E), by striking ``and'' after the
semicolon at the end;
(2) in subparagraph (F), by striking the period at the end
and inserting ``; and''; and
(3) by inserting after subparagraph (F) the following new
subparagraph:
``(G) in the case of vision rehabilitation
services, (i) such services are or were required
because the individual needed vision rehabilitation
services, (ii) an individualized, written plan for
furnishing such services has been established (I) by a
qualified physician (as defined in section
1861(ww)(1)(C)), (II) by a qualified occupational
therapist, or (III) in the case of such services
furnished by a vision rehabilitation professional, by a
qualified physician, (iii) the plan is periodically
reviewed by the qualified physician, and (iv) such
services are or were furnished while the individual is
or was under the care of the qualified physician.''.
(e) Relationship to Rehabilitation Act of 1973.--The provision of
vision rehabilitation services under the medicare program under title
XVIII (42 U.S.C. 1395 et seq.) shall not be taken into account for any
purpose under the Rehabilitation Act of 1973 (29 U.S.C. 701 et seq.).
(f) Effective Date.--
(1) Interim, final regulations.--The Secretary shall
publish a rule under this section in the Federal Register by
not later than 180 days after the date of enactment of this Act
to carry out the provisions of this section. Such rule shall be
effective and final immediately on an interim basis, but is
subject to change and revision after public notice and
opportunity for a period for public comment of not less than 60
days.
(2) Consultation.--The Secretary shall consult with the
National Vision Rehabilitation Cooperative, the Association for
Education and Rehabilitation of the Blind and Visually
Impaired, the Academy for Certification of Vision
Rehabilitation and Education Professionals, the American
Academy of Ophthalmology, the American Occupational Therapy
Association, the American Optometric Association, and such
other qualified professional and consumer organizations as the
Secretary determines appropriate in promulgating regulations to
carry out this section.

SEC. 447. GAO STUDY AND REPORT ON THE PROPAGATION OF CONCIERGE CARE.

(a) Study.--
(1) In general.--The Comptroller General of the United
States shall conduct a study on concierge care (as defined in
paragraph (2)) to determine the extent to which such care--
(A) is used by medicare beneficiaries (as defined
in section 1802(b)(5)(A) of the Social Security Act (42
U.S.C. 1395a(b)(5)(A))); and
(B) has impacted upon the access of medicare
beneficiaries (as so defined) to items and services for
which reimbursement is provided under the medicare
program under title XVIII of the Social Security Act
(42 U.S.C. 1395 et seq.).
(2) Concierge care.--In this section, the term ``concierge
care'' means an arrangement under which, as a prerequisite for
the provision of a health care item or service to an
individual, a physician, practitioner (as described in section
1842(b)(18)(C) of the Social Security Act (42 U.S.C.
1395u(b)(18)(C))), or other individual--
(A) charges a membership fee or another incidental
fee to an individual desiring to receive the health
care item or service from such physician, practitioner,
or other individual; or
(B) requires the individual desiring to receive the
health care item or service from such physician,
practitioner, or other individual to purchase an item
or service.
(b) Report.--Not later than the date that is 12 months after the
date of enactment of this Act, the Comptroller General of the United
States shall submit to Congress a report on the study conducted under
subsection (a)(1) together with such recommendations for legislative or
administrative action as the Comptroller General determines to be
appropriate.

SEC. 448. COVERAGE OF MARRIAGE AND FAMILY THERAPIST SERVICES AND MENTAL
HEALTH COUNSELOR SERVICES UNDER PART B OF THE MEDICARE
PROGRAM.

(a) Coverage of Services.--
(1) In general.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2))
is amended--
(A) in subparagraph (U), by striking ``and'' after
the semicolon at the end;
(B) in subparagraph (V)(iii), by inserting ``and''
after the semicolon at the end; and
(C) by adding at the end the following new
subparagraph:
``(W) marriage and family therapist services (as defined in
subsection (ww)(1)) and mental health counselor services (as
defined in subsection (ww)(3));''.
(2) Definitions.--Section 1861 (42 U.S.C. 1395x) is amended
by adding at the end the following new subsection:

``Marriage and Family Therapist Services; Marriage and Family
Therapist; Mental Health Counselor Services; Mental Health Counselor

``(ww)(1) The term `marriage and family therapist services' means
services performed by a marriage and family therapist (as defined in
paragraph (2)) for the diagnosis and treatment of mental illnesses,
which the marriage and family therapist is legally authorized to
perform under State law (or the State regulatory mechanism provided by
State law) of the State in which such services are performed, as would
otherwise be covered if furnished by a physician or as an incident to a
physician's professional service, but only if no facility or other
provider charges or is paid any amounts with respect to the furnishing
of such services.
``(2) The term `marriage and family therapist' means an individual
who--
``(A) possesses a master's or doctoral degree which
qualifies for licensure or certification as a marriage and
family therapist pursuant to State law;
``(B) after obtaining such degree has performed at least 2
years of clinical supervised experience in marriage and family
therapy; and
``(C) in the case of an individual performing services in a
State that provides for licensure or certification of marriage
and family therapists, is licensed or certified as a marriage
and family therapist in such State.
``(3) The term `mental health counselor services' means services
performed by a mental health counselor (as defined in paragraph (4))
for the diagnosis and treatment of mental illnesses which the mental
health counselor is legally authorized to perform under State law (or
the State regulatory mechanism provided by the State law) of the State
in which such services are performed, as would otherwise be covered if
furnished by a physician or as incident to a physician's professional
service, but only if no facility or other provider charges or is paid
any amounts with respect to the furnishing of such services.
``(4) The term `mental health counselor' means an individual who--
``(A) possesses a master's or doctor's degree in mental
health counseling or a related field;
``(B) after obtaining such a degree has performed at least
2 years of supervised mental health counselor practice; and
``(C) in the case of an individual performing services in a
State that provides for licensure or certification of mental
health counselors or professional counselors, is licensed or
certified as a mental health counselor or professional
counselor in such State.''.
(3) Provision for payment under part b.--Section
1832(a)(2)(B) (42 U.S.C. 1395k(a)(2)(B)) is amended by adding
at the end the following new clause:
``(v) marriage and family therapist
services and mental health counselor
services;''.
(4) Amount of payment.--Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)) is amended--
(A) by striking ``and (U)'' and inserting ``(U)'';
and
(B) by inserting before the semicolon at the end
the following: ``, and (V) with respect to marriage and
family therapist services and mental health counselor
services under section 1861(s)(2)(W), the amounts paid
shall be 80 percent of the lesser of the actual charge
for the services or 75 percent of the amount determined
for payment of a psychologist under subparagraph (L)''.
(5) Exclusion of marriage and family therapist services and
mental health counselor services from skilled nursing facility
prospective payment system.--Section 1888(e)(2)(A)(ii) (42
U.S.C. 1395yy(e)(2)(A)(ii)), as amended in section 301(a), is
amended by inserting ``marriage and family therapist services
(as defined in subsection (ww)(1)), mental health counselor
services (as defined in section 1861(ww)(3)),'' after
``qualified psychologist services,''.
(6) Inclusion of marriage and family therapists and mental
health counselors as practitioners for assignment of claims.--
Section 1842(b)(18)(C) (42 U.S.C. 1395u(b)(18)(C)) is amended
by adding at the end the following new clauses:
``(vii) A marriage and family therapist (as defined in
section 1861(ww)(2)).
``(viii) A mental health counselor (as defined in section
1861(ww)(4)).''.
(b) Coverage of Certain Mental Health Services Provided in Certain
Settings.--
(1) Rural health clinics and federally qualified health
centers.--Section 1861(aa)(1)(B) (42 U.S.C. 1395x(aa)(1)(B)) is
amended by striking ``or by a clinical social worker (as
defined in subsection (hh)(1)),'' and inserting ``, by a
clinical social worker (as defined in subsection (hh)(1)), by a
marriage and family therapist (as defined in subsection
(ww)(2)), or by a mental health counselor (as defined in
subsection (ww)(4)),''.
(2) Hospice programs.--Section 1861(dd)(2)(B)(i)(III) (42
U.S.C. 1395x(dd)(2)(B)(i)(III)) is amended by inserting ``or a
marriage and family therapist (as defined in subsection
(ww)(2))'' after ``social worker''.
(c) Authorization of Marriage and Family Therapists To Develop
Discharge Plans for Post-Hospital Services.--Section 1861(ee)(2)(G) (42
U.S.C. 1395x(ee)(2)(G)) is amended by inserting ``marriage and family
therapist (as defined in subsection (ww)(2)),'' after ``social
worker,''.
(d) Effective Date.--The amendments made by this section shall
apply with respect to services furnished on or after January 1, 2004.

SEC. 449. MEDICARE DEMONSTRATION PROJECT FOR DIRECT ACCESS TO PHYSICAL
THERAPY SERVICES.

(a) In General.--The Secretary shall conduct a demonstration
project under this section (in this section referred to as the
``project'') to demonstrate the impact of allowing medicare fee-for-
service beneficiaries direct access to outpatient physical therapy
services and physical therapy services furnished as comprehensive
rehabilitation facility services on--
(1) costs under the medicare program under title XVIII of
the Social Security Act; and
(2) the satisfaction of beneficiaries receiving such
services.
(b) Deadline for Establishment; Duration; Sites.--
(1) Deadline.--The Secretary shall establish the project
not later than 1 year after the date of enactment of this Act.
(2) Duration; sites.--The project shall--
(A) be conducted for a period of 3 years;
(B) include sites in at least 5 States; and
(C) to the extent feasible, be conducted on a
statewide basis in each State included under
subparagraph (B).
(3) Early termination.--Notwithstanding paragraph (2)(A),
the Secretary may terminate the operation of the project at a
site before the end of the 3-year period specified in such
paragraph if the Secretary determines, based on actual data,
that the total amount expended for all services under this
title for individuals at such site for a 12-month period are
greater than the total amount that would have been expended for
such services for such individuals for such period but for the
operation of the project at such site.
(c) Waiver of Medicare Requirements.--The Secretary shall waive
compliance with such requirements of the medicare program under title
XVIII of the Social Security Act to the extent and for the period the
Secretary finds necessary to conduct the demonstration project.
(d) Evaluations and Reports.--
(1) Evaluations.--
(A) In general.--The Secretary shall conduct
interim and final evaluations of the project.
(B) Focus.--The evaluations conducted under
paragraph (1) shall--
(i) focus on the impact of the project on
program costs under title XVIII of the Social
Security Act and patient satisfaction with
health care items and services for which
payment is made under such title; and
(ii) include comparisons, with respect to
episodes of care involving direct access to
physical therapy services and episodes of care
involving a physician referral for such
services, of--
(I) the average number of claims
paid per episode for outpatient
physical therapy services and physical
therapy services furnished as
comprehensive outpatient rehabilitation
facility services;
(II) the average number of
physician office visits per episode;
and
(III) the average expenditures
under such title per episode.
(2) Interim and final reports.--The Secretary shall submit
to the Committee on Finance of the Senate and the Committees on
Ways and Means and Energy and Commerce of the House of
Representatives reports on the evaluations conducted under
paragraph (1) by--
(A) in the case of the report on the interim
evaluation, not later than the end of the second year
the project has been in operation; and
(B) in the case of the report on the final
evaluation, not later than 180 days after the closing
date of the project.
(3) Funding for evaluation.--There are authorized to be
appropriated such sums as may be necessary to provide for the
evaluations and reports required by this subsection.
(e) Definitions.--In this section:
(1) Comprehensive outpatient rehabilitation services.--
Subject to paragraph (2), the term ``comprehensive outpatient
rehabilitation services'' has the meaning given to such term in
section 1861(cc) of the Social Security Act (42 U.S.C.
1395x(cc)).
(2) Direct access.--The term ``direct access'' means, with
respect to outpatient physical therapy services and physical
therapy services furnished as comprehensive outpatient
rehabilitation facility services, coverage of and payment for
such services in accordance with the provisions of title XVIII
of the Social Security Act, except that sections 1835(a)(2),
1861(p), and 1861(cc) of such Act (42 U.S.C. 1395n(a)(2),
1395x(p), and 1395x(cc), respectively) shall be applied--
(A) without regard to any requirement that--
(i) an individual be under the care of (or
referred by) a physician; or
(ii) services be provided under the
supervision of a physician; and
(B) by allowing a physician or a qualified physical
therapist to satisfy any requirement for--
(i) certification and recertification; and
(ii) establishment and periodic review of a
plan of care.
(3) Fee-for-service medicare beneficiary.--The term ``fee-
for-service medicare beneficiary'' means an individual who--
(A) is enrolled under part B of title XVIII of the
Social Security Act (42 U.S.C. 1395j et seq.); and
(B) is not enrolled in--
(i) a Medicare+Choice plan under part C of
such title (42 U.S.C. 1395w-21 et seq.);
(ii) a plan offered by an eligible
organization under section 1876 of such Act (42
U.S.C. 1395mm);
(iii) a program of all-inclusive care for
the elderly (PACE) under section 1894 of such
Act (42 U.S.C. 1395eee); or
(iv) a social health maintenance
organization (SHMO) demonstration project
established under section 4018(b) of the
Omnibus Budget Reconciliation Act of 1987
(Public Law 100-203).
(4) Outpatient physical therapy services.--Subject to
paragraph (2), the term ``outpatient physical therapy
services'' has the meaning given to such term in section
1861(p) of the Social Security Act (42 U.S.C. 1395x(p)), except
that such term shall not include the speech-language pathology
services described in the fourth sentence of such section.
(5) Physician.--The term ``physician'' has the meaning
given to such term in section 1861(r)(1) of such Act (42 U.S.C.
1395x(r)(1)).
(6) Qualified physical therapist.--The term ``qualified
physical therapist'' has the meaning given to such term for
purposes of section 1861(p) of such Act (42 U.S.C. 1395x(p)),
as in effect on the date of enactment of this Act.

SEC. 450. DEMONSTRATION PROJECT TO CLARIFY THE DEFINITION OF HOMEBOUND.

(a) Demonstration Project.--Not later than 180 days after the date
of enactment of this Act, the Secretary shall conduct a two-year
demonstration project under part B of title XVIII of the Social
Security Act under which medicare beneficiaries with chronic conditions
described in subsection (b) are deemed to be homebound for purposes of
receiving home health services under the medicare program.
(b) Medicare Beneficiary Described.--For purposes of subsection
(a), a medicare beneficiary is eligible to be deemed to be homebound,
without regard to the purpose, frequency, or duration of absences from
the home, if the beneficiary--
(1) has been certified by one physician as an individual
who has a permanent and severe condition that will not improve;
(2) requires the individual to receive assistance from
another individual with at least 3 out of the 5 activities of
daily living for the rest of the individual's life;
(3) requires 1 or more home health services to achieve a
functional condition that gives the individual the ability to
leave home; and
(4) requires technological assistance or the assistance of
another person to leave the home.
(c) Demonstration Project Sites.--The demonstration project
established under this section shall be conducted in 3 States selected
by the Secretary to represent the Northeast, Midwest, and Western
regions of the United States.
(d) Limitation on Number of Participants.--The aggregate number of
such beneficiaries that may participate in the project may not exceed
15,000.
(e) Data.--The Secretary shall collect such data on the
demonstration project with respect to the provision of home health
services to medicare beneficiaries that relates to quality of care,
patient outcomes, and additional costs, if any, to the medicare
program.
(f) Report to Congress.--Not later than 1 year after the date of
the completion of the demonstration project under this section, the
Secretary shall submit to Congress a report on the project using the
data collected under subsection (e) and shall include--
(1) an examination of whether the provision of home health
services to medicare beneficiaries under the project--
(A) adversely effects the provision of home health
services under the medicare program; or
(B) directly causes an unreasonable increase of
expenditures under the medicare program for the
provision of such services that is directly
attributable to such clarification;
(2) the specific data evidencing the amount of any increase
in expenditures that is a directly attributable to the
demonstration project (expressed both in absolute dollar terms
and as a percentage) above expenditures that would otherwise
have been incurred for home health services under the medicare
program; and
(3) specific recommendations to exempt permanently and
severely disabled homebound beneficiaries from restrictions on
the length, frequency and purpose of their absences from the
home to qualify for home health services without incurring
additional unreasonable costs to the medicare program.
(g) Waiver Authority.--The Secretary shall waive compliance with
the requirements of title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) to such extent and for such period as the Secretary
determines is necessary to conduct demonstration projects.
(h) Construction.--Nothing in this section shall be construed as
waiving any applicable civil monetary penalty, criminal penalty, or
other remedy available to the Secretary under title XI or title XVIII
of the Social Security Act for acts prohibited under such titles,
including penalties for false certifications for purposes of receipt of
items or services under the medicare program.
(i) Authorization of Appropriations.--Payments for the costs of
carrying out the demonstration project under this section shall be made
from the Federal Supplementary Insurance Trust Fund under section 1841
of such Act (42 U.S.C. 1395t).
(j) Definitions.--In this section:
(1) Medicare beneficiary.--The term ``medicare
beneficiary'' means an individual who is enrolled under part B
of title XVIII of the Social Security Act.
(2) Home health services.--The term ``home health
services'' has the meaning given such term in section 1861(m)
of the Social Security Act (42 U.S.C. 1395x(m)).
(3) Activities of daily living defined.--The term
``activities of daily living'' means eating, toileting,
transferring, bathing, and dressing.
(4) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.

SEC. 450A. DEMONSTRATION PROJECT FOR EXCLUSION OF BRACHYTHERAPY DEVICES
FROM PROSPECTIVE PAYMENT SYSTEM FOR OUTPATIENT HOSPITAL
SERVICES.

(a) Demonstration Project.--The Secretary shall conduct a
demonstration project under part B of title XVIII of the Social
Security Act under which brachytherapy devices shall be excluded from
the prospective payment system for outpatient hospital services under
the medicare program and, notwithstanding section 1833(t) of the Social
Security Act (42 U.S.C. 1395l(t)), the amount of payment for a device
of brachytherapy furnished under the demonstration project shall be
equal to the hospital's charges for each device furnished, adjusted to
cost.
(b) Specification of Groups for Brachytherapy Devices.--The
Secretary shall create additional groups of covered OPD services that
classify devices of brachytherapy furnished under the demonstration
project separately from the other services (or group of services) paid
for under section 1833(t) of the Social Security Act (42 U.S.C.
1395l(t)) in a manner reflecting the number, isotope, and radioactive
intensity of such devices furnished, including separate groups for
palladium-103 and iodine-125 devices.
(c) Duration.--The Secretary shall conduct the demonstration
project under this section for the 3-year period beginning on the date
that is 90 days after the date of enactment of this Act.
(d) Report.--Not later than January 1, 2007, the Secretary shall
submit to Congress a report on the demonstration project conducted
under this section. The report shall include an evaluation of patient
outcomes under the demonstration project, as well as an analysis of the
cost effectiveness of the demonstration project.
(e) Waiver Authority.--The Secretary shall waive compliance with
the requirements of title XVIII of the Social Security Act to such
extent and for such period as the Secretary determines is necessary to
conduct the demonstration project under this section.
(f) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Supplementary Insurance Trust Fund
established under section 1841 of the Social Security Act (42
U.S.C. 1395t) of such funds as are necessary for the costs of
carrying out the demonstration project under this section.
(2) Budget neutrality.--In conducting the demonstration
project under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration
project under this section was not implemented.

SEC. 450B. REIMBURSEMENT FOR TOTAL BODY ORTHOTIC MANAGEMENT FOR CERTAIN
NURSING HOME PATIENTS.

(a) In General.--Not later than 60 days after the date of the
enactment of this Act, the Secretary shall issue product codes that
qualified practioners and suppliers may use to receive reimbursement
under section 1834(h) of the Social Security Act (42 U.S.C. 1395m(h))
for qualified total body orthotic management devices used for the
treatment of nonambulatory individuals with severe musculoskeletal
conditions who are in the full-time care of skilled nursing facilities
(as defined in section 1861(j) of such Act (42 U.S.C. 1395x(j))). In
issuing such codes, the Secretary shall take all steps necessary to
prevent fraud and abuse.
(b) Qualified Total Body Orthotic Management Device.--For purposes
of this section, the term ``qualified total body orthotic management
device'' means a medically-prescribed device which--
(1) consists of custom fitted individual braces with
adjustable points at the hips, knee, ankle, elbow, and wrist,
but only if--
(A) the individually adjustable braces are attached
to a frame which is an integral component of the device
and cannot function or be used apart from the frame;
and
(B) the frame is designed such that it serves no
purpose without the braces; and
(2) is designed to--
(A) improve function;
(B) retard progression of musculoskeletal
deformity; or
(C) restrict, eliminate, or assist in the
functioning of lower and upper extremities and pelvic,
spinal, and cervical regions of the body affected by
injury, weakness, or deformity,
of an individual for whom stabilization of affected areas of
the body, or relief of pressure points, is required for medical
reasons.

SEC. 450C. AUTHORIZATION OF REIMBURSEMENT FOR ALL MEDICARE PART B
SERVICES FURNISHED BY CERTAIN INDIAN HOSPITALS AND
CLINICS.

(a) In General.--Section 1880(e) (42 U.S.C. 1395qq(e)) is amended--
(1) in paragraph (1)(A), by striking ``for services
described in paragraph (2)'' and inserting ``for all items and
services for which payment may be made under such part'';
(2) by striking paragraph (2); and
(3) by redesignating paragraph (3) as paragraph (2).
(b) Effective Date.--The amendments made by this section shall
apply to items and services furnished on or after October 1, 2004.

SEC. 450D. COVERAGE OF CARDIOVASCULAR SCREENING TESTS.

(a) Coverage.--Section 1861(s)(2) of the Social Security Act (42
U.S.C. 1395x(s)(2)) is amended--
(1) in subparagraph (U), by striking ``and'' at the end;
(2) in subparagraph (V)(iii), by inserting ``and'' at the
end; and
(3) by adding at the end the following new subparagraph:
``(W) cardiovascular screening tests (as defined in
subsection (ww)(1));''.
(b) Services Described.--Section 1861 of the Social Security Act
(42 U.S.C. 1395x) is amended by adding at the end the following new
subsection:

``Cardiovascular Screening Tests

``(ww)(1) The term `cardiovascular screening tests' means the
following diagnostic tests for the early detection of cardiovascular
disease:
``(A) Tests for the determination of cholesterol levels.
``(B) Tests for the determination of lipid levels of the
blood.
``(C) Such other tests for cardiovascular disease as the
Secretary may approve.
``(2)(A) Subject to subparagraph (B), the Secretary shall establish
standards, in consultation with appropriate organizations, regarding
the frequency and type of cardiovascular screening tests.
``(B) With respect to the frequency of cardiovascular screening
tests approved by the Secretary under subparagraph (A), in no case may
the frequency of such tests be more often than once every 2 years.''.
(c) Frequency.--Section 1862(a)(1) of the Social Security Act (42
U.S.C. 1395y(a)(1)) is amended--
(1) by striking ``and'' at the end of subparagraph (H);
(2) by striking the semicolon at the end of subparagraph
(I) and inserting ``, and''; and
(3) by adding at the end the following new subparagraph:
``(J) in the case of a cardiovascular screening test (as
defined in section 1861(ww)(1)), which is performed more
frequently than is covered under section 1861(ww)(2).''.
(d) Effective Date.--The amendments made by this section shall
apply to tests furnished on or after January 1, 2005.

SEC. 450E. MEDICARE COVERAGE OF SELF-INJECTED BIOLOGICALS.

(a) Coverage.--
(1) In general.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2))
is amended--
(A) in subparagraph (U), by striking ``and'' at the
end;
(B) in subparagraph (V), by inserting ``and'' at
the end; and
(C) by adding at the end the following new
subparagraph:
``(W)(i) a self-injected biological (which is approved by
the Food and Drug Administration) that is prescribed as a
complete replacement for a drug or biological (including the
same biological for which payment is made under this title when
it is furnished incident to a physicians' service) that would
otherwise be described in subparagraph (A) or (B) and that is
furnished during 2004 or 2005; and
``(ii) a self-injected drug that is used to treat multiple
sclerosis;''.
(2) Conforming amendment.--Subparagraphs (A) and (B) of
section 1861(s)(2) of the Social Security Act (42 U.S.C.
1395x(s)(2)) are each amended by inserting ``, except for any
drug or biological described in subparagraph (W),'' after
``which''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to drugs and biologicals furnished on or after January 1, 2004
and before January 1, 2006.

SEC. 450F. EXTENSION OF MEDICARE SECONDARY PAYER RULES FOR INDIVIDUALS
WITH END-STAGE RENAL DISEASE.

Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended--
(1) in the last sentence, by inserting ``, and before
January 1, 2004'' after ``prior to such date)''; and
(2) by adding at the end the following new sentence:
``Effective for items and services furnished on or after
January 1, 2004 (with respect to periods beginning on or after
June 1, 2002), clauses (i) and (ii) shall be applied by
substituting `36-month' for `12-month' each place it appears in
the first sentence.

SEC. 450G. REQUIRING THE INTERNAL REVENUE SERVICE TO DEPOSIT
INSTALLMENT AGREEMENT AND OTHER FEES IN THE TREASURY AS
MISCELLANEOUS RECEIPTS.

Notwithstanding any other provision of law, the Secretary of the
Treasury is required to deposit in the Treasury as miscellaneous
receipts any fee receipts, including fees from installment agreements
and restructured installment agreements, collected under the authority
provided by Section 3 of the Administrative Provisions of the Internal
Revenue Service of Public Law 103-329, the Treasury, Postal Service and
General Government Appropriations Act, 1995. Fees collected under this
section shall be available for use by the Internal Revenue Service only
to the extent that such authority is provided in advance in an
appropriations Act.

SEC. 450H INCREASING TYPES OF ORIGINATING TELEHEALTH SITES AND
FACILITATING THE PROVISION OF TELEHEALTH SERVICES ACROSS
STATE LINES.

(a) Increasing Types of Originating Sites.--Section
1834(m)(4)(C)(ii) (42 U.S.C. 1395m(m)(4)(C)(ii)) is amended by adding
at the end the following new subclauses:
``(VI) A skilled nursing facility
(as defined in section 1819(a)).
``(VII) An assisted-living facility
(as defined by the Secretary).
``(VIII) A board-and-care home (as
defined by the Secretary).
``(IX) A county of community health
clinic (as defined by the Secretary).
``(X) A community mental health
center (as described in section
1861(ff)(2)(B)).
``(XI) A long-term care facility
(as defined by the Secretary).
``(XII) A facility operated by the
Indian Health Service or by an Indian
tribe, tribal organization, or an urban
Indian organization (as such terms are
defined in section 4 of the Indian
Health Care Improvement Act (25 U.S.C.
1603)) directly, or under contract or
other arrangement.''.
(b) Facilitating the Provision of Telehealth Services Across State
Lines.--
(1) In general.--For purposes of expediting the provision
of telehealth services for which payment is made under the
medicare program under section 1834(m) of the Social Security
Act (42 U.S.C. 1395m(m)), across State lines, the Secretary
shall, in consultation with representatives of States,
physicians, health care practitioners, and patient advocates,
encourage and facilitate the adoption of State provisions
allowing for multistate practitioner licensure across State
lines.
(2) Definitions.--In this subsection:
(A) Telehealth service.--The term ``telehealth
service'' has the meaning given that term in
subparagraph (F)(i) of section 1834(m)(4) of the Social
Security Act (42 U.S.C. 1395m(m)(4)).
(B) Physician, practitioner.--The terms
``physician'' and ``practitioner'' have the meaning
given those terms in subparagraphs (D) and (E),
respectively, of such section.
(C) Medicare program.--The term ``medicare
program'' means the program of health insurance
administered by the Secretary under title XVIII of the
Social Security Act (42 U.S.C. 1395 et seq.).

SEC. 450I. DEMONSTRATION PROJECT FOR COVERAGE OF SURGICAL FIRST
ASSISTING SERVICES OF CERTIFIED REGISTERED NURSE FIRST
ASSISTANTS.

(a) Demonstration Project.--The Secretary shall conduct a
demonstration project under part B of title XVIII of the Social
Security Act under which payment is made for surgical first assisting
services furnished by a certified registered nurse first assistant to
medicare beneficiaries.
(b) Definitions.--In this section:
(1) Surgical First Assisting Services.--The term ``surgical
first assisting services'' means services consisting of first
assisting a physician with surgery and related preoperative,
intraoperative, and postoperative care (as determined by the
Secretary) furnished by a certified registered nurse first
assistant (as defined in paragraph (2)) which the certified
registered nurse first assistant is legally authorized to
perform by the State in which the services are performed.
(2) Certified Registered Nurse First Assistant.--The term
``certified registered nurse first assistant'' means an
individual who--
(A) is a registered nurse and is licensed to practice
nursing in the State in which the surgical first assisting
services are performed;
(B) has completed a minimum of 2,000 hours of first
assisting a physician with surgery and related preoperative,
intraoperative, and postoperative care; and
(C) is certified as a registered nurse first assistant by
an organization recognized by the Secretary.
(c) Payment Rates.--Payment under the demonstration project for
surgical first assisting services furnished by a certified registered
nurse first assistant shall be made at the rate of 80 percent of the
lesser of the actual charge for the services or 85 percent of the
amount determined under the fee schedule established under section
1848(b) of the Social Security Act (42 U.S.C. 1395w-4(b)) for the same
services if furnished by a physician.
(d) Demonstration Project Sites.--The project established under
this section shall be conducted in 5 States selected by the Secretary.
(e) Duration.--The Secretary shall conduct the demonstration
project for the 3-year period beginning on the date that is 90 days
after the date of the enactment of this Act.
(f) Report.--Not later than January 1, 2007, the Secretary shall
submit to Congress a report on the project. The report shall include an
evaluation of patient outcomes under the project, as well as an
analysis of the cost effectiveness of the project.
(g) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Supplementary Insurance Trust Fund
established under section 1841 of the Social Security Act (42
U.S.C. 1395t) of such funds as are necessary for the costs of
carrying out the project under this section.
(2) Budget neutrality.--In conducting the project under
this section, the Secretary shall ensure that the aggregate
payments made by the Secretary do not exceed the amount which
the Secretary would have paid if the project under this section
was not implemented.
(i) Waiver Authority.--The Secretary shall waive compliance with
the requirements of title XVIII of the Social Security Act to such
extent and for such period as the Secretary determines is necessary to
conduct demonstration projects.

SEC. 450J. EQUITABLE TREATMENT FOR CHILDREN'S HOSPITALS.

(a) In General.--Section 1833(t)(7)(D)(ii) (42 U.S.C.
1395l(t)(7)(D)(ii)) is amended to read as follows:
``(ii) Permanent treatment for cancer
hospitals and children's hospitals.--
``(I) In general.--Subject to
subclause (II), in the case of a
hospital described in clause (iii) or
(v) of section 1886(d)(1)(B), for
covered OPD services for which the PPS
amount is less than the pre-BBA amount,
the amount of payment under this
subsection shall be increased by the
amount of such difference.
``(II) Special rule for certain
children's hospitals.--In the case of a
hospital described in section
1886(d)(1)(B)(iii) that is located in a
State with a reimbursement system under
section 1814(b)(3), but that is not
reimbursed under such system, for
covered OPD services furnished on or
after October 1, 2003, and for which
the PPS amount is less than the greater
of the pre-BBA amount or the reasonable
operating and capital costs without
reductions of the hospital in providing
such services, the amount of payment
under this subsection shall be
increased by the amount of such
difference.''.

SEC. 450K. TREATMENT OF PHYSICIANS' SERVICES FURNISHED IN ALASKA.

Section 1848(b) (42 U.S.C. 1395w-4(b)) is amended--
(1) in paragraph (1), in the matter preceding subparagraph
(A), by striking ``paragraph (2)'' and inserting ``paragraphs
(2) and (4)''; and
(2) by adding at the end the following new paragraph:
``(4) Treatment of physicians' services furnished in
alaska.--
``(A) In general.--With respect to physicians'
services furnished in Alaska on or after January 1,
2004, and before January 1, 2006, the fee schedule for
such services shall be determined as follows:
``(i) Subject to clause (ii), the payment
amount for a service furnished in a year shall
be an amount equal to--
``(I) in the case of services
furnished in calendar year 2004, 90
percent of the VA Alaska fee schedule
amount for the service for fiscal year
2001; and
``(II) in the case of services
furnished in calendar year 2005, the
amount determined under subclause (I)
for 2004, increased by the annual
update determined under subsection (d)
for the year involved.
``(ii) In the case of a service for which
there was no VA Alaska fee schedule amount for
fiscal year 2001, the payment amount shall be
an amount equal to the sum of--
``(I) the amount of payment for the
service that would otherwise apply
under this section; plus
``(II) an amount equal to the
applicable percent (as described in
subparagraph (C)) of the amount
described in subclause (I).
``(B) VA alaska fee schedule amount.--For purposes
of this paragraph, the term `VA Alaska fee schedule
amount' means the amount that was paid by the
Department of Veterans Affairs in Alaska in fiscal year
2001 for non-Department of Veterans Affairs physicians'
services associated with either outpatient or inpatient
care provided to individuals eligible for hospital care
or medical services under chapter 17 of title 38,
United States Code, at a non-Department facility (as
that term is defined in section 1701(4) of such title
38.
``(C) Applicable percent.--For purposes of this
paragraph, the term `applicable percent' means the
weighted average percentage (based on claims under this
section) by which the fiscal year 2001 VA Alaska fee
schedule amount for physicians' services exceeded the
amount of payment for such services under this section
that applied in Alaska in 2001.''.

SEC. 450L. DEMONSTRATION PROJECT TO EXAMINE WHAT WEIGHT LOSS WEIGHT
MANAGEMENT SERVICES CAN COST EFFECTIVELY REACH THE SAME
RESULT AS THE NIH DIABETES PRIMARY PREVENTION TRIAL
STUDY: A 50 PERCENT REDUCTION IN THE RISK FOR TYPE 2
DIABETES FOR INDIVIDUALS WHO HAVE IMPAIRED GLUCOSE
TOLERANCE AND ARE OBESE.

(a) In General.--Inasmuch as the NIH Diabetes Primary Prevention
Trial study proved that the risk of type 2 diabetes could be cut in
half when the Institute of Medicine definition of successful weight
loss (5 percent weight loss maintained for a year) is achieved by
individuals at risk for type 2 diabetes due to obesity and impaired
glucose tolerance, the Secretary shall conduct a demonstration project
to examine the cost effectiveness and health benefits of providing
group weight loss management services to achieve the same result for
beneficiaries under the medicare program under title XVIII of the
Social Security Act who are obese and have impaired glucose tolerance.
(b) Limitation.--The cost of the group weight loss management
services provided under subsection (a) shall not exceed the cost per
recipient per year of the medical nutritional therapy benefit currently
available to medicare beneficiaries.
(c) Scope of Services.--
(1) Duration.--The project shall be conducted for a period
of 2 fiscal years.
(2) Sites.--The Secretary shall designate the sites at
which to conduct the demonstration program under this section.
In selecting sites under this paragraph, the Secretary shall
give preference to sites located in--
(A) rural areas; or
(B) areas that have a high concentration of Native
Americans with type 2 diabetes.
(3) Funding.--
(A) In general.--Subject to subparagraph (B), the
Secretary shall provide for the transfer from the
Federal Supplementary Insurance Trust Fund established
under section 1841 of such Act (42 U.S.C. 1395t) of
such funds as are necessary for the costs of carrying
out the demonstration program under this section.
(B) Limitation.--The total amount of the payments
that may be made under this section shall not exceed
$2,500,000 for each fiscal year in which the project is
conducted under paragraph (1).
(d) Coverage as Medicare Part B Services.--
(1) In general.--Subject to the succeeding provisions of
this subsection, medical nutrition therapy services furnished
under the project shall be considered to be services covered
under part B of title XVIII of the Social Security Act (42
U.S.C. 1395j et seq.).
(2) Payment.--Payment for such services shall be made at a
rate of 80 percent of the lesser of the actual charge for the
services or 85 percent of the fee schedule amount provided
under section 1848 of the Social Security Act (42 U.S.C. 139w-
4) for the same services if such services were furnished by a
physician.
(3) Application of limits of billing.--The provisions of
section 1842(b)(18) of the Social Security Act (42 U.S.C.
1395u(b)(18)) shall apply to a group weight loss management
professional furnishing services under the project in the same
manner as they to a practitioner described in subparagraph (C)
of such section furnishing services under title XVIII of such
Act.
(e) Reports.--The Secretary shall submit to the Committee on Ways
and Means and the Committee on Commerce of the House of Representatives
and the Committee on Finance of the Senate interim reports on the
project and a final report on the project not later than the date that
is 6 months after the date on which the project concludes. The final
report shall include an evaluation of the impact of the use of group
weight loss management services as part of medical nutrition therapy on
medicare beneficiaries and on the medicare program, including any
impact on reducing costs under the program and improving the health of
beneficiaries.
(f) Definitions.--For purposes of this section:
(1) The term ``obesity'' means that an individual has a
Body Mass Index (BMI) of 30 and above.
(2) Group weight loss management services.--The term
``group weight loss management services'' means comprehensive
services furnished to individuals who have been diagnosed and
referred by a physician as having impaired glucose tolerance
and who are obese that consist of--
(A) assessment and treatment based on the needs of
individuals as determined by a group weight loss
management professional; or
(B) a specific program or method that has
demonstrated its efficacy to produce and maintain
weight loss through results published in peer-reviewed
scientific journals using recognized research methods
and statistical analysis that provides--
(i) assessment of current body weight and
recording of weight status at each meeting
session;
(ii) provision of a healthy eating plan;
(iii) provision of an activity plan;
(iv) provision of a behavior modification
plan; and
(v) a weekly group support meeting.
(3) Group weight loss management professional.--The term
``group weight loss management professional'' means an
individual who has completed training to provide a program or
method that has completed clinical trials and has demonstrated
its efficacy through publications in peer-reviewed scientific
journals who--
(A)(i) holds a baccalaureate or higher degree
granted by a regionally accredited college or
university in the United States (or an equivalent
foreign degree) in nutrition social work, psychology
with experience in behavioral modification methods to
reduce obesity; or
(ii) has completed a curriculum of training for a
specific behavioral based weight management program as
described in section (4)(A)(2) and recommended in the
NIH Clinical Guidelines on Identification, Evaluation,
and Treatment of Overweight and Obesity in Adults,
chapter 4, section H, parts 1, 2, 3, 4, and pursuant to
guidelines by the Secretary; and
(B)(i) is licensed or certified as a group weight
loss management professional by the State in which the
services are performed; or
(ii) is certified by an organization that meets
such criteria as the Secretary establishes with--
(I) national organizations representing
consumers such as the American Obesity
Association and the elderly; and
(II) such other organizations as the
Secretary determines appropriate.

Subtitle C--Provisions Relating to Parts A and B

SEC. 451. INCREASE FOR HOME HEALTH SERVICES FURNISHED IN A RURAL AREA.

(a) In General.--In the case of home health services furnished in a
rural area (as defined in section 1886(d)(2)(D) of the Social Security
Act (42 U.S.C. 1395ww(d)(2)(D))) on or after October 1, 2004, and
before October 1, 2006, the Secretary shall increase the payment amount
otherwise made under section 1895 of such Act (42 U.S.C. 1395fff) for
such services by 5 percent.
(b) Waiving Budget Neutrality.--The Secretary shall not reduce the
standard prospective payment amount (or amounts) under section 1895 of
the Social Security Act (42 U.S.C. 1395fff) applicable to home health
services furnished during a period to offset the increase in payments
resulting from the application of subsection (a).
(c) No Effect on Subsequent Periods.--The payment increase provided
under subsection (a) for a period under such subsection--
(1) shall not apply to episodes and visits ending after
such period; and
(2) shall not be taken into account in calculating the
payment amounts applicable for episodes and visits occurring
after such period.

SEC. 452. LIMITATION ON REDUCTION IN AREA WAGE ADJUSTMENT FACTORS UNDER
THE PROSPECTIVE PAYMENT SYSTEM FOR HOME HEALTH SERVICES.

Section 1895(b)(4)(C) (42 U.S.C. 1395fff(b)(4)(C)) is amended--
(1) by striking ``factors.--The Secretary'' and inserting
``factors.--
``(i) In general.--Subject to clause (ii),
the Secretary''; and
(2) by adding at the end the following new clause:
``(ii) Limitation on reduction in fiscal
year 2005 and 2006.--For fiscal years 2005 and
2006, the area wage adjustment factor
applicable to home health services furnished in
an area in the fiscal year may not be more that
3 percent less than the area wage adjustment
factor applicable to home health services for
the area for the previous year.''.

SEC. 453. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO MEDICARE LIMITS ON
PHYSICIAN REFERRALS.

(a) Limits on Physician Referrals.--
(1) Ownership and investment interests in whole
hospitals.--
(A) In general.--Section 1877(d)(3) (42 U.S.C.
1395nn(d)(3)) is amended--
(i) by striking ``and'' at the end of
subparagraph (A); and
(ii) by redesignating subparagraph (B) as
subparagraph (C) and inserting after
subparagraph (A) the following:
``(B) the hospital is not a specialty hospital (as
defined in subsection (h)(7)); and''.
(B) Definition.--Section 1877(h) (42 U.S.C.
1395nn(h)) is amended by adding at the end the
following:
``(7) Specialty hospital.--
``(A) In general.--For purposes of this section,
except as provided in subparagraph (B), the term
`specialty hospital' means a hospital that is primarily
or exclusively engaged in the care and treatment of one
of the following:
``(i) patients with a cardiac condition;
``(ii) patients with an orthopedic
condition;
``(iii) patients receiving a surgical
procedure; or
``(iv) any other specialized category of
patients or cases that the Secretary designates
as inconsistent with the purpose of permitting
physician ownership and investment interests in
a hospital under this section.
``(B) Exception.--For purposes of this section, the
term `specialty hospital' does not include any
hospital--
``(i) determined by the Secretary--
``(I) to be in operation before
June 12, 2003; or
``(II) under development as of such
date;
``(ii) for which the number of beds and the
number of physician investors at any time on or
after such date is no greater than the number
of such beds or investors as of such date; and
``(iii) that meets such other requirements
as the Secretary may specify.''.
(2) Ownership and investment interests in a rural
provider.--Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is
amended to read as follows:
``(2) Rural providers.--In the case of designated health
services furnished in a rural area (as defined in section
1886(d)(2)(D)) by an entity, if--
``(A) substantially all of the designated health
services furnished by the entity are furnished to
individuals residing in such a rural area;
``(B) the entity is not a specialty hospital (as
defined in subsection (h)(7)); and
``(C) the Secretary determines, with respect to
such entity, that such services would not be available
in such area but for the ownership or investment
interest.''.
(b) Effective Date.--Subject to paragraph (2), the amendments made
by this section shall apply to referrals made for designated health
services on or after January 1, 2004.
(c) Application of Exception for Hospitals Under Development.--For
purposes of section 1877(h)(7)(B)(i)(II) of the Social Security Act, as
added by subsection (a)(1)(B), in determining whether a hospital is
under development as of June 12, 2003, the Secretary shall consider--
(1) whether architectural plans have been completed,
funding has been received, zoning requirements have been met,
and necessary approvals from appropriate State agencies have
been received; and
(2) any other evidence the Secretary determines would
indicate whether a hospital is under development as of such
date.

SEC. 454. DEMONSTRATION PROGRAM FOR SUBSTITUTE ADULT DAY SERVICES.

(a) Establishment.--The Secretary shall establish a demonstration
program (in this section referred to as the ``demonstration program'')
under which the Secretary provides eligible medicare beneficiaries with
coverage under the medicare program of substitute adult day services
furnished by an adult day services facility.
(b) Payment Rate for Substitute Adult Day Services.--
(1) Payment rate.--For purposes of making payments to an
adult day services facility for substitute adult day services
under the demonstration program, the following rules shall
apply:
(A) Estimation of payment amount.--The Secretary
shall estimate the amount that would otherwise be
payable to a home health agency under section 1895 of
the Social Security Act (42 U.S.C. 1395fff) for all
home health services described in subsection
(i)(4)(B)(i) under the plan of care.
(B) Amount of payment.--Subject to paragraph
(3)(B), the total amount payable for substitute adult
day services under the plan of care is equal to 95
percent of the amount estimated to be payable under
subparagraph (A).
(2) Limitation on balance billing.--Under the demonstration
program, an adult day services facility shall accept as payment
in full for substitute adult day services (including those
services described in clauses (ii) through (iv) of subsection
(i)(4)(B)) furnished by the facility to an eligible medicare
beneficiary the amount of payment provided under the
demonstration program for home health services consisting of
substitute adult services.
(3) Adjustment in case of overutilization of substitute
adult day services to ensure budget neutrality.--The Secretary
shall monitor the expenditures under the demonstration program
and under title XVIII of the Social Security Act for home
health services. If the Secretary estimates that the total
expenditures under the demonstration program and under such
title XVIII for home health services for a period determined by
the Secretary exceed expenditures that would have been made
under such title XVIII for home health services for such period
if the demonstration program had not been conducted, the
Secretary shall adjust the rate of payment to adult day
services facilities under paragraph (1)(B) in order to
eliminate such excess.
(c) Demonstration Program Sites.--The demonstration program shall
be conducted in not more than 3 sites selected by the Secretary.
(d) Duration; Implementation.--
(1) Duration.--The Secretary shall conduct the
demonstration program for a period of 3 years.
(2) Implementation.--The Secretary may not implement the
demonstration program before October 1, 2004.
(e) Voluntary Participation.--Participation of eligible medicare
beneficiaries in the demonstration program shall be voluntary.
(f) Waiver Authority.--
(1) In general.--Except as provided in paragraph (2), the
Secretary may waive such requirements of titles XI and XVIII of
the Social Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.)
as may be necessary for the purposes of carrying out the
demonstration program.
(2) May not waive eligibility requirements for home health
services.--The Secretary may not waive the beneficiary
eligibility requirements for home health services under title
XVIII of the Social Security Act.
(g) Evaluation and Report.--
(1) Evaluation.--The Secretary shall conduct an evaluation
of the clinical and cost effectiveness of the demonstration
program.
(2) Report.--Not later than 30 months after the
commencement of the demonstration program, the Secretary shall
submit to Congress a report on the evaluation conducted under
paragraph (1) and shall include in the report the following:
(A) An analysis of the patient outcomes and costs
of furnishing care to the eligible medicare
beneficiaries participating in the demonstration
program as compared to such outcomes and costs to such
beneficiaries receiving only home health services under
title XVIII of the Social Security Act for the same
health conditions.
(B) Such recommendations regarding the extension,
expansion, or termination of the program as the
Secretary determines appropriate.
(i) Definitions.--In this section:
(1) Adult day services facility.--
(A) In general.--Except as provided in
subparagraphs (B) and (C), the term ``adult day
services facility'' means a public agency or private
organization, or a subdivision of such an agency or
organization, that--
(i) is engaged in providing skilled nursing
services and other therapeutic services
directly or under arrangement with a home
health agency;
(ii) provides the items and services
described in paragraph (4)(B); and
(iii) meets the requirements of paragraphs
(2) through (8) of subsection (o).
(B) Inclusion.--Notwithstanding subparagraph (A),
the term ``adult day services facility'' shall include
a home health agency in which the items and services
described in clauses (ii) through (iv) of paragraph
(4)(B) are provided--
(i) by an adult day services program that
is licensed or certified by a State, or
accredited, to furnish such items and services
in the State; and
(ii) under arrangements with that program
made by such agency.
(C) Waiver of surety bond.--The Secretary may waive
the requirement of a surety bond under section
1861(o)(7) of the Social Security Act (42 U.S.C.
1395x(o)(7)) in the case of an agency or organization
that provides a comparable surety bond under State law.
(2) Eligible medicare beneficiary.--The term ``eligible
medicare beneficiary'' means an individual eligible for home
health services under title XVIII of the Social Security Act.
(3) Home health agency.--The term ``home health agency''
has the meaning given such term in section 1861(o) of the
Social Security Act (42 U.S.C. 1395x(o)).
(4) Substitute adult day services.--
(A) In general.--The term ``substitute adult day
services'' means the items and services described in
subparagraph (B) that are furnished to an individual by
an adult day services facility as a part of a plan
under section 1861(m) of the Social Security Act (42
U.S.C. 1395x(m)) that substitutes such services for
some or all of the items and services described in
subparagraph (B)(i) furnished by a home health agency
under the plan, as determined by the physician
establishing the plan.
(B) Items and services described.--The items and
services described in this subparagraph are the
following items and services:
(i) Items and services described in
paragraphs (1) through (7) of such section
1861(m).
(ii) Meals.
(iii) A program of supervised activities
designed to promote physical and mental health
and furnished to the individual by the adult
day services facility in a group setting for a
period of not fewer than 4 and not greater than
12 hours per day.
(iv) A medication management program (as
defined in subparagraph (C)).
(C) Medication management program.--For purposes of
subparagraph (B)(iv), the term ``medication management
program'' means a program of services, including
medicine screening and patient and health care provider
education programs, that provides services to
minimize--
(i) unnecessary or inappropriate use of
prescription drugs; and
(ii) adverse events due to unintended
prescription drug-to-drug interactions.

SEC. 455. MEDPAC STUDY ON MEDICARE PAYMENTS AND EFFICIENCIES IN THE
HEALTH CARE SYSTEM.

Not later than 18 months after the date of enactment of this Act,
the Medicare Payment Advisory Commission established under section 1805
of the Social Security Act (42 U.S.C. 1395b-6) shall provide Congress
with recommendations to recognize and reward, within payment
methodologies for physicians and hospitals established under the
medicare program under title XVIII of the Social Security Act,
efficiencies, and the lower utilization of services created by the
practice of medicine in historically efficient and low-cost areas.
Measures of efficiency recognized in accordance with the preceding
sentence shall include--
(1) shorter hospital stays than the national average;
(2) fewer physician visits than the national average;
(3) fewer laboratory tests than the national average;
(4) a greater utilization of hospice services than the
national average; and
(5) the efficacy of disease management and preventive
health services.

SEC. 456. MEDICARE COVERAGE OF KIDNEY DISEASE EDUCATION SERVICES.

(a) Coverage of Kidney Disease Education Services.--
(1) In general.--Section 1861 of the Social Security Act
(42 U.S.C.1395x) is amended--
(A) in subsection (s)(2)--
(i) in subparagraph (U), by striking
``and'' at the end;
(ii) in subparagraph (V)(iii), by adding
``and'' at the end; and
(iii) by adding at the end the following
new subparagraph:
``(W) kidney disease education services (as defined in
subsection (ww));''; and
(B) by adding at the end the following new
subsection:

``Kidney Disease Education Services

``(ww)(1) The term `kidney disease education services' means
educational services that are--
``(A) furnished to an individual with kidney disease who,
according to accepted clinical guidelines identified by the
Secretary, will require dialysis or a kidney transplant;
``(B) furnished, upon the referral of the physician
managing the individual's kidney condition, by a qualified
person (as defined in paragraph (2)); and
``(C) designed--
``(i) to provide comprehensive information
regarding--
``(I) the management of comorbidities;
``(II) the prevention of uremic
complications; and
``(III) each option for renal replacement
therapy (including peritoneal dialysis,
hemodialysis (including vascular access
options), and transplantation); and
``(ii) to ensure that the individual has the
opportunity to actively participate in the choice of
therapy.
``(2) The term `qualified person' means--
``(A) a physician (as described in subsection (r)(1));
``(B) an individual who--
``(i) is--
``(I) a registered nurse;
``(II) a registered dietitian or nutrition
professional (as defined in subsection
(vv)(2));
``(III) a clinical social worker (as
defined in subsection (hh)(1));
``(IV) a physician assistant, nurse
practitioner, or clinical nurse specialist (as
those terms are defined in subsection (aa)(5));
or
``(V) a transplant coordinator; and
``(ii) meets such requirements related to
experience and other qualifications that the Secretary
finds necessary and appropriate for furnishing the
services described in paragraph (1); or
``(C) a renal dialysis facility subject to the requirements
of section 1881(b)(1) with personnel who--
``(i) provide the services described in paragraph
(1); and
``(ii) meet the requirements of subparagraph (A) or
(B).
``(3) The Secretary shall develop the requirements under paragraph
(2)(B)(ii) after consulting with physicians, health educators,
professional organizations, accrediting organizations, kidney patient
organizations, dialysis facilities, transplant centers, network
organizations described in section 1881(c)(2), and other knowledgeable
persons.
``(4) In promulgating regulations to carry out this subsection, the
Secretary shall ensure that such regulations ensure that each
beneficiary who is entitled to kidney disease education services under
this title receives such services in a timely manner that ensures that
the beneficiary receives the maximum benefit of those services.
``(5) The Secretary shall monitor the implementation of this
subsection to ensure that beneficiaries who are eligible for kidney
disease education services receive such services in the manner
described in paragraph (4).''.
(2) Payment under physician fee schedule.--Section
1848(j)(3) of such Act (42 U.S.C. 1395w-4(j)(3)) is amended by
inserting ``, (2)(W)'', after ``(2)(S)''.
(3) Payment to renal dialysis facilities.--Section 1881(b)
of such Act (42 U.S.C. 1395rr(b)), as amended by section
433(b)(5), is further amended by adding at the end the
following new paragraph:
``(13) For purposes of paragraph (7), the single composite
weighted formulas determined under such paragraph shall not
take into account the amount of payment for kidney disease
education services (as defined in section 1861(ww)). Instead,
payment for such services shall be made to the renal dialysis
facility on an assignment-related basis under section 1848.''.
(4) Annual report to congress.--Not later than April 1,
2004, and annually thereafter, the Secretary of Health and
Human Services shall submit to Congress a report on the number
of medicare beneficiaries who are entitled to kidney disease
education services (as defined in section 1861(ww) of the
Social Security Act, as added by paragraph (1)) under title
XVIII of such Act and who receive such services, together with
such recommendations for legislative and administrative action
as the Secretary determines to be appropriate to fulfill the
legislative intent that resulted in the enactment of that
subsection.
(b) Effective Date.--The amendments made by this section shall
apply to services furnished on or after January 1, 2004.

SEC. 457. FRONTIER EXTENDED STAY CLINIC DEMONSTRATION PROJECT.

(a) Authority To Conduct Demonstration Project.--The Secretary
shall waive such provisions of the medicare program established under
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) as are
necessary to conduct a demonstration project under which frontier
extended stay clinics described in subsection (b) in isolated rural
areas are treated as providers of items and services under the medicare
program.
(b) Clinics Described.--A frontier extended stay clinic is
described in this subsection if the clinic--
(1) is located in a community where the closest short-term
acute care hospital or critical access hospital is at least 75
miles away from the community or is inaccessible by public
road; and
(2) is designed to address the needs of--
(A) seriously or critically ill or injured patients
who, due to adverse weather conditions or other
reasons, cannot be transferred quickly to acute care
referral centers; or
(B) patients who need monitoring and observation
for a limited period of time.
(c) Definitions.--In this section, the terms ``hospital'' and
``critical access hospital'' have the meanings given such terms in
subsections (e) and (mm), respectively, of section 1861 of the Social
Security Act (42 U.S.C. 1395x).

SEC. 458. IMPROVEMENTS IN NATIONAL COVERAGE DETERMINATION PROCESS TO
RESPOND TO CHANGES IN TECHNOLOGY.

(a) In General.--Section 1862 (42 U.S.C. 1395y) is amended--
(A) in the third sentence of subsection (a) by
inserting ``consistent with subsection (j)'' after
``the Secretary shall ensure''; and
(B) by adding at the end the following new
subsection:
``(j) National Coverage Determination Process.--
``(1) Timeframe for decisions on requests for national
coverage determinations.--In the case of a request for a
national coverage determination that--
``(A) does not require a technology assessment from
an outside entity or deliberation from the Medicare
Coverage Advisory Committee, the decision on the
request shall be made not later than 6 months after the
date of the request; or
``(B) requires such an assessment or deliberation
and in which a clinical trial is not requested, the
decision on the request shall be made not later than 9
months after the date of the request.
``(2) Process for public comment in national coverage
determinations.--At the end of the 6-month period (with respect
to a request under paragraph (1)(A)) or 9-month period (with
respect to a request under paragraph (1)(B)) that begins on the
date a request for a national coverage determination is made,
the Secretary shall--
``(A) make a draft of proposed decision on the
request available to the public through the Medicare
Internet site of the Department of Health and Human
Services or other appropriate means;
``(B) provide a 30-day period for public comment on
such draft;
``(C) make a final decision on the request within
60 days of the conclusion of the 30-day period referred
to under subparagraph (B);
``(D) include in such final decision summaries of
the public comments received and responses thereto;
``(E) make available to the public the clinical
evidence and other data used in making such a decision
when the decision differs from the recommendations of
the Medicare Coverage Advisory Committee; and
``(F) in the case of a decision to grant the
coverage determination, assign a temporary or permanent
code and implement the coverage decision at the end of
the 60-day period referred to in subparagraph (C).
``(3) National coverage determination defined.--For
purposes of this subsection, the term `national coverage
determination' has the meaning given such term in section
1869(f)(1)(B).''.
(b) Effective Date.--The amendments made by this section shall
apply to national coverage determinations as of January 1, 2004.

SEC. 459. INCREASE IN MEDICARE PAYMENT FOR CERTAIN HOME HEALTH
SERVICES.

(a) In General.--Section 1895 of the Social Security Act (42 U.S.C.
1395fff) is amended by adding at the end the following:
``(f) Increase in Payment for Services Furnished in a Rural Area.--
``(1) In general.--In the case of home health services
furnished in a rural area (as defined in section 1886(d)(2)(D))
on or after October 1, 2004 and before October 1, 2006, the
Secretary shall increase the payment amount otherwise made
under this section for such services by 10 percent.
``(2) Waiver of budget neutrality.--The Secretary shall not
reduce the standard prospective payment amount (or amounts)
under this section applicable to home health services furnished
during any period to offset the increase in payments resulting
from the application of paragraph (1).''.
(b) Payment Adjustment.--Section 1895(b)(5) of the Social Security
Act (42 U.S.C. 1395fff(b)(5)) is amended by adding at the end the
following: ``Notwithstanding this paragraph, the total amount of the
additional payments or payment adjustments made under this paragraph
may not exceed, with respect to fiscal year 2004, 3 percent, and, with
respect to fiscal years 2005 and 2006, 4 percent, of the total payments
projected or estimated to be made based on the prospective payment
system under this subsection in the year involved.''.
(c) Effective Date.--The amendments made by this section shall
apply to services furnished on or after October 1, 2003.

SEC. 460. FRONTIER EXTENDED STAY CLINIC DEMONSTRATION PROJECT.

(a) Authority To Conduct Demonstration Project.--The Secretary
shall waive such provisions of the medicare program established under
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) as are
necessary to conduct a demonstration project under which frontier
extended stay clinics described in subsection (b) in isolated rural
areas are treated as providers of items and services under the medicare
program.
(b) Clinics Described.--A frontier extended stay clinic is
described in this subsection if the clinic--
(1) is located in a community where the closest short-term
acute care hospital or critical access hospital is at least 75
miles away from the community or is inaccessible by public
road; and
(2) is designed to address the needs of--
(A) seriously or critically ill or injured patients
who, due to adverse weather conditions or other
reasons, cannot be transferred quickly to acute care
referral centers; or
(B) patients who need monitoring and observation
for a limited period of time.
(c) Definitions.--In this section, the terms ``hospital'' and
``critical access hospital'' have the meanings given such terms in
subsections (e) and (mm), respectively, of section 1861 of the Social
Security Act (42 U.S.C. 1395x).

SEC. 461. MEDICARE SECONDARY PAYOR (MSP) PROVISIONS.

(a) Technical Amendment Concerning Secretary's Authority to Make
Conditional Payment When Certain Primary Plans Do Not Pay Promptly.--
(1) In general.--Section 1862(b)(2) (42 U.S.C. 1395y(b)(2))
is amended--
(A) in subparagraph (A)(ii), by striking ``promptly
(as determined in accordance with regulations)'';
(B) in subparagraph (B)--
(i) by redesignating clauses (i) through
(iii) as clauses (ii) through (iv),
respectively; and
(ii) by inserting before clause (ii), as so
redesignated, the following new clause:
``(i) Authority to make conditional
payment.--The Secretary may make payment under
this title with respect to an item or service
if a primary plan described in subparagraph
(A)(ii) has not made or cannot reasonably be
expected to make payment with respect to such
item or service promptly (as determined in
accordance with regulations). Any such payment
by the Secretary shall be conditioned on
reimbursement to the appropriate Trust Fund in
accordance with the succeeding provisions of
this subsection.''.
(2) Effective date.--The amendments made by paragraph (1)
shall be effective as if included in the enactment of title III
of the Medicare and Medicaid Budget Reconciliation Amendments
of 1984 (Public Law 98-369).
(b) Clarifying Amendments to Conditional Payment Provisions.--
Section 1862(b)(2) (42 U.S.C. 1395y(b)(2)) is further amended--
(1) in subparagraph (A), in the matter following clause
(ii), by inserting the following sentence at the end: ``An
entity that engages in a business, trade, or profession shall
be deemed to have a self-insured plan if it carries its own
risk (whether by a failure to obtain insurance, or otherwise)
in whole or in part.'';
(2) in subparagraph (B)(ii), as redesignated by subsection
(a)(2)(B)--
(A) by striking the first sentence and inserting
the following: ``A primary plan, and an entity that
receives payment from a primary plan, shall reimburse
the appropriate Trust Fund for any payment made by the
Secretary under this title with respect to an item or
service if it is demonstrated that such primary plan
has or had a responsibility to make payment with
respect to such item or service. A primary plan's
responsibility for such payment may be demonstrated by
a judgment, a payment conditioned upon the recipient's
compromise, waiver, or release (whether or not there is
a determination or admission of liability) of payment
for items or services included in a claim against the
primary plan or the primary plan's insured, or by other
means.''; and
(B) in the final sentence, by striking ``on the
date such notice or other information is received'' and
inserting ``on the date notice of, or information
related to, a primary plan's responsibility for such
payment or other information is received''; and
(3) in subparagraph (B)(iii), , as redesignated by
subsection (a)(2)(B), by striking the first sentence and
inserting the following: ``In order to recover payment made
under this title for an item or service, the United States may
bring an action against any or all entities that are or were
required or responsible (directly, as an insurer or self-
insurer, as a third-party administrator, as an employer that
sponsors or contributes to a group health plan, or large group
health plan, or otherwise) to make payment with respect to the
same item or service (or any portion thereof) under a primary
plan. The United States may, in accordance with paragraph
(3)(A) collect double damages against any such entity. In
addition, the United States may recover under this clause from
any entity that has received payment from a primary plan or
from the proceeds of a primary plan's payment to any entity.''.
(c) Clerical Amendments.--Section 1862(b) (42 U.S.C. 1395y(b)) is
amended--
(1) in paragraph (1)(A), by moving the indentation of
clauses (ii) through (v) 2 ems to the left; and
(2) in paragraph (3)(A), by striking ``such'' before
``paragraphs''.

SEC. 462. MEDICARE PANCREATIC ISLET CELL TRANSPLANT DEMONSTRATION
PROJECT.

(a) Establishment.--In order to test the appropriateness of
pancreatic islet cell transplantation, not later than 120 days after
the date of the enactment of this Act, the Secretary shall establish a
demonstration project which the Secretary, provides for payment under
the medicare program under title XVIII of the Social Security Act for
pancreatic islet cell transplantation and related items and services in
the case of medicare beneficiaries who have type I (juvenile) diabetes
and have end stage renal disease.
(b) Duration of Project.--The authority of the Secretary to conduct
the demonstration project under this section shall terminate on the
date that is 5 years after the date of the establishment of the
project.
(c) Evaluation and Report.--The Secretary shall conduct an
evaluation of the outcomes of the demonstration project. Not later than
120 days after the date of the termination of the demonstration project
under subsection (b), the Secretary shall submit to Congress a report
on the project, including recommendations for such legislative and
administrative action as the Secretary deems appropriate.
(d) Payment Methodology.--The Secretary shall establish an
appropriate payment methodology for the provision of items and services
under the demonstration project, which may include a payment
methodology that bundles, to the maximum extent feasible, payment for
all such items and services.

SEC. 463. INCREASE IN MEDICARE PAYMENT FOR CERTAIN HOME HEALTH
SERVICES.

(a) In General.--Section 1895 of the Social Security Act (42 U.S.C.
1395fff) is amended by adding at the end the following:
``(f) Increase in Payment for Services Furnished in a Rural Area.--
``(1) In general.--In the case of home health services
furnished in a rural area (as defined in section 1886(d)(2)(D))
on or after October 1, 2004, and before October 1, 2006, the
Secretary shall increase the payment amount otherwise made
under this section for such services by 10 percent.
``(2) Waiver of budget neutrality.--The Secretary shall not
reduce the standard prospective payment amount (or amounts)
under this section applicable to home health services furnished
during any period to offset the increase in payments resulting
from the application of paragraph (1).''.
(b) Payment Adjustment.--Section 1895(b)(5) of the Social Security
Act (42 U.S. C. 1395fff(b)(5)) is amended by adding at the end the
following: ``Notwithstanding this paragraph, the total amount of the
additional payments or payment adjustments made under this paragraph
may not exceed, with respect to fiscal year 2004, 3 percent, and, with
respect to fiscal years 2005 and 2006, 4 percent, of the total payments
projected or estimated to be made based on the prospective payment
system under this subsection in the year involved.''.
(c) Effective Date.--The amendments made by this section shall
apply to services furnished on or after October 1, 2003.

SEC. 464. SENSE OF THE SENATE CONCERNING MEDICARE PAYMENT UPDATE FOR
PHYSICIANS AND OTHER HEALTH PROFESSIONALS.

(a) Findings.--The Senate makes the following findings:
(1) The formula by which medicare payments are updated each
year for services furnished by physicians and other health
professionals is fundamentally flawed.
(2) The flawed physician payment update formula is causing
a continuing physician payment crisis, and, without
congressional action, medicare payment rates for physicians and
other practitioners are predicted to fall by 4.2 percent in
2004.
(3) A physician payment cut in 2004 would the fifth cut
since 1991, and would be on top of a 5.4 percent cut in 2002,
with additional cuts estimated for 2005, 2006, and 2007. From
1991 through 2003, payment rates for physicians and health
professionals fell 14 percent behind practice cost inflation as
measured by medicare's own conservative estimates.
(4) The sustainable growth rate (SGR) expenditure target,
which is the basis for the physician payment update, is linked
to the gross domestic product and penalizes physicians and
other practitioners for volume increases that they cannot
control and that the government actively promotes through new
coverage decisions, quality improvement activities, and other
initiatives that, while beneficial to patients, are not
reflected in the SGR.
(b) Sense of the Senate.--It is the sense of the Senate that
medicare beneficiary access to quality care may be compromised if
Congress does not take action to prevent cuts in 2004 and the following
years that result from the SGR formula.

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

Subtitle A--Regulatory Reform

SEC. 501. RULES FOR THE PUBLICATION OF A FINAL REGULATION BASED ON THE
PREVIOUS PUBLICATION OF AN INTERIM FINAL REGULATION.

(a) In General.--Section 1871(a) (42 U.S.C. 1395hh(a)) is amended
by adding at the end the following new paragraph:
``(3)(A) With respect to the publication of a final regulation
based on the previous publication of an interim final regulation--
``(i) subject to subparagraph (B), the Secretary shall
publish the final regulation within the 12-month period that
begins on the date of publication of the interim final
regulation;
``(ii) if a final regulation is not published by the
deadline established under this paragraph, the interim final
regulation shall not continue in effect unless the Secretary
publishes a notice described in subparagraph (B) by such
deadline; and
``(iii) the final regulation shall include responses to
comments submitted in response to the interim final regulation.
``(B) If the Secretary determines before the deadline otherwise
established in this paragraph that there is good cause, specified in a
notice published before such deadline, for delaying the deadline
otherwise applicable under this paragraph, the deadline otherwise
established under this paragraph shall be extended for such period (not
to exceed 12 months) as the Secretary specifies in such notice.''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date of enactment of this Act and shall apply to
interim final regulations published on or after such date.
(c) Status of Pending Interim Final Regulations.--Not later than 6
months after the date of enactment of this Act, the Secretary shall
publish a notice in the Federal Register that provides the status of
each interim final regulation that was published on or before the date
of enactment of this Act and for which no final regulation has been
published. Such notice shall include the date by which the Secretary
plans to publish the final regulation that is based on the interim
final regulation.

SEC. 502. COMPLIANCE WITH CHANGES IN REGULATIONS AND POLICIES.

(a) No Retroactive Application of Substantive Changes.--
(1) In general.--Section 1871 (42 U.S.C. 1395hh) is amended
by adding at the end the following new subsection:
``(d)(1)(A) A substantive change in regulations, manual
instructions, interpretative rules, statements of policy, or guidelines
of general applicability under this title shall not be applied (by
extrapolation or otherwise) retroactively to items and services
furnished before the effective date of the change, unless the Secretary
determines that--
``(i) such retroactive application is necessary to comply
with statutory requirements; or
``(ii) failure to apply the change retroactively would be
contrary to the public interest.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to substantive changes issued on or after the date
of enactment of this Act.
(b) Timeline for Compliance With Substantive Changes After
Notice.--
(1) In general.--Section 1871(d)(1), as added by subsection
(a), is amended by adding at the end the following:
``(B) A compliance action may be made against a provider of
services, physician, practitioner, or other supplier with respect to
noncompliance with such a substantive change only for items and
services furnished on or after the effective date of the change.
``(C)(i) Except as provided in clause (ii), a substantive change
may not take effect before the date that is the end of the 30-day
period that begins on the date that the Secretary has issued or
published, as the case may be, the substantive change.
``(ii) The Secretary may provide for a substantive change to take
effect on a date that precedes the end of the 30-day period under
clause (i) if the Secretary finds that waiver of such 30-day period is
necessary to comply with statutory requirements or that the application
of such 30-day period is contrary to the public interest. If the
Secretary provides for an earlier effective date pursuant to this
clause, the Secretary shall include in the issuance or publication of
the substantive change a finding described in the first sentence, and a
brief statement of the reasons for such finding.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to compliance actions undertaken on or after the
date of enactment of this Act.

SEC. 503. REPORT ON LEGAL AND REGULATORY INCONSISTENCIES.

Section 1871 (42 U.S.C. 1395hh), as amended by section 502(a)(1),
is amended by adding at the end the following new subsection:
``(e)(1) Not later than 2 years after the date of enactment of this
subsection, and every 3 years thereafter, the Secretary shall submit to
Congress a report with respect to the administration of this title and
areas of inconsistency or conflict among the various provisions under
law and regulation.
``(2) In preparing a report under paragraph (1), the Secretary
shall collect--
``(A) information from beneficiaries, providers of
services, physicians, practitioners, and other suppliers with
respect to such areas of inconsistency and conflict; and
``(B) information from medicare contractors that tracks the
nature of all communications and correspondence.
``(3) A report under paragraph (1) shall include a description of
efforts by the Secretary to reduce such inconsistency or conflicts, and
recommendations for legislation or administrative action that the
Secretary determines appropriate to further reduce such inconsistency
or conflicts.''.

SEC. 504. STREAMLINING AND SIMPLIFICATION OF MEDICARE REGULATIONS.

(a) In General.--The Secretary of Health and Human Services shall
conduct an analysis of the regulations issued under title XVIII of the
Social Security Act and related laws in order to determine how such
regulations may be streamlined and simplified to increase the
efficiency and effectiveness of the medicare program without harming
beneficiaries or providers and to decrease the burdens the medicare
payment systems impose on both beneficiaries and providers.
(b) Reduction in Regulations.--The Secretary, after completion of
the analysis under subsection (a), shall direct the rewriting of the
regulations described in subsection (a) in such a manner as to--
(1) reduce the number of words comprising all regulations
by at least two-thirds by October 1, 2004, and
(2) ensure the simple, effective, and efficient operation
of the medicare program.
(c) Application of the Paperwork Reduction Act.--The Secretary
shall apply the provisions of chapter 35 of title 44, United States
Code (commonly known as the ``Paperwork Reduction Act'') to the
provisions of this Act to ensure that any regulations issued to
implement this Act are written in plain language, are streamlined,
promote the maximum efficiency and effectiveness of the medicare and
medicaid programs without harming beneficiaries or providers, and
minimize the burdens the payment systems affected by this Act impose on
both beneficiaries and providers.
(d) Feasibility.--If the Secretary determines that the two-thirds
reduction in words by October 1, 2004 required in subsection (b)(1) is
not feasible, he shall inform Congress in writing by July 1, 2004 of
the reasons for its unfeasibility. He shall then establish a feasible
reduction to be achieved by January 1, 2005.

Subtitle B--Appeals Process Reform

SEC. 511. SUBMISSION OF PLAN FOR TRANSFER OF RESPONSIBILITY FOR
MEDICARE APPEALS.

(a) Submission of Transition Plan.--
(1) In general.--Not later than April 1, 2004, the
Commissioner of Social Security and the Secretary shall develop
and transmit to Congress and the Comptroller General of the
United States a plan under which the functions of
administrative law judges responsible for hearing cases under
title XVIII of the Social Security Act (and related provisions
in title XI of such Act) are transferred from the
responsibility of the Commissioner and the Social Security
Administration to the Secretary and the Department of Health
and Human Services.
(2) Contents.--The plan shall include information on the
following:
(A) Workload.--The number of such administrative
law judges and support staff required now and in the
future to hear and decide such cases in a timely
manner, taking into account the current and anticipated
claims volume, appeals, number of beneficiaries, and
statutory changes.
(B) Cost projections and financing.--Funding levels
required for fiscal year 2005 and subsequent fiscal
years to carry out the functions transferred under the
plan and how such transfer should be financed.
(C) Transition timetable.--A timetable for the
transition.
(D) Regulations.--The establishment of specific
regulations to govern the appeals process.
(E) Case tracking.--The development of a unified
case tracking system that will facilitate the
maintenance and transfer of case specific data across
both the fee-for-service and managed care components of
the medicare program.
(F) Feasibility of precedential authority.--The
feasibility of developing a process to give decisions
of the Departmental Appeals Board in the Department of
Health and Human Services addressing broad legal issues
binding, precedential authority.
(G) Access to administrative law judges.--The
feasibility of--
(i) filing appeals with administrative law
judges electronically; and
(ii) conducting hearings using tele- or
video-conference technologies.
(H) Independence of administrative law judges.--The
steps that should be taken to ensure the independence
of administrative law judges, including ensuring that
such judges are in an office that is functionally and
operationally separate from the Centers for Medicare &
Medicaid Services and the Center for Medicare Choices.
(I) Geographic distribution.--The steps that should
be taken to provide for an appropriate geographic
distribution of administrative law judges throughout
the United States to ensure timely access to such
judges.
(J) Hiring.--The steps that should be taken to hire
administrative law judges (and support staff).
(K) Performance standards.--The establishment of
performance standards for administrative law judges
with respect to timelines for decisions in cases under
title XVIII of the Social Security Act.
(L) Shared resources.--The feasibility of the
Secretary entering into such arrangements with the
Commissioner of Social Security as may be appropriate
with respect to transferred functions under the plan to
share office space, support staff, and other resources,
with appropriate reimbursement.
(M) Training.--The training that should be provided
to administrative law judges with respect to laws and
regulations under title XVIII of the Social Security
Act.
(3) Additional information.--The plan may also include
recommendations for further congressional action, including
modifications to the requirements and deadlines established
under section 1869 of the Social Security Act (as amended by
sections 521 and 522 of BIPA (114 Stat. 2763A-534) and this
Act).
(b) GAO Evaluation.--The Comptroller General of the United States
shall--
(1) evaluate the plan submitted under subsection (a); and
(2) not later than 6 months after such submission, submit
to Congress, the Commissioner of Social Security, and the
Secretary a report on such evaluation.
(c) Submission of GAO Report Required Before Plan Implementation.--
The Commissioner of Social Security and the Secretary may not implement
the plan developed under subsection (a) before the date that is 6
months after the date the report required under subsection (b)(2) is
submitted to the Commissioner and the Secretary.

SEC. 512. EXPEDITED ACCESS TO JUDICIAL REVIEW.

(a) In General.--Section 1869(b) (42 U.S.C. 1395ff(b)) is amended--
(1) in paragraph (1)(A), by inserting ``, subject to
paragraph (2),'' before ``to judicial review of the Secretary's
final decision''; and
(2) by adding at the end the following new paragraph:
``(2) Expedited access to judicial review.--
``(A) In general.--The Secretary shall establish a
process under which a provider of services or supplier
that furnishes an item or service or a beneficiary who
has filed an appeal under paragraph (1) (other than an
appeal filed under paragraph (1)(F)(i)) may obtain
access to judicial review when a review entity
(described in subparagraph (D)), on its own motion or
at the request of the appellant, determines that the
Departmental Appeals Board does not have the authority
to decide the question of law or regulation relevant to
the matters in controversy and that there is no
material issue of fact in dispute. The appellant may
make such request only once with respect to a question
of law or regulation for a specific matter in dispute
in a case of an appeal.
``(B) Prompt determinations.--If, after or
coincident with appropriately filing a request for an
administrative hearing, the appellant requests a
determination by the appropriate review entity that the
Departmental Appeals Board does not have the authority
to decide the question of law or regulations relevant
to the matters in controversy and that there is no
material issue of fact in dispute, and if such request
is accompanied by the documents and materials as the
appropriate review entity shall require for purposes of
making such determination, such review entity shall
make a determination on the request in writing within
60 days after the date such review entity receives the
request and such accompanying documents and materials.
Such a determination by such review entity shall be
considered a final decision and not subject to review
by the Secretary.
``(C) Access to judicial review.--
``(i) In general.--If the appropriate
review entity--
``(I) determines that there are no
material issues of fact in dispute and
that the only issues to be adjudicated
are ones of law or regulation that the
Departmental Appeals Board does not
have authority to decide; or
``(II) fails to make such
determination within the period
provided under subparagraph (B);
then the appellant may bring a civil action as
described in this subparagraph.
``(ii) Deadline for filing.--Such action
shall be filed, in the case described in--
``(I) clause (i)(I), within 60 days
of the date of the determination
described in such clause; or
``(II) clause (i)(II), within 60
days of the end of the period provided
under subparagraph (B) for the
determination.
``(iii) Venue.--Such action shall be
brought in the district court of the United
States for the judicial district in which the
appellant is located (or, in the case of an
action brought jointly by more than 1
applicant, the judicial district in which the
greatest number of applicants are located) or
in the District Court for the District of
Columbia.
``(iv) Interest on any amounts in
controversy.--Where a provider of services or
supplier is granted judicial review pursuant to
this paragraph, the amount in controversy (if
any) shall be subject to annual interest
beginning on the first day of the first month
beginning after the 60-day period as determined
pursuant to clause (ii) and equal to the rate
of interest on obligations issued for purchase
by the Federal Supplementary Medical Insurance
Trust Fund for the month in which the civil
action authorized under this paragraph is
commenced, to be awarded by the reviewing court
in favor of the prevailing party. No interest
awarded pursuant to the preceding sentence
shall be deemed income or cost for the purposes
of determining reimbursement due providers of
services, physicians, practitioners, and other
suppliers under this Act.
(D) Review entity defined.--For purposes of this
subsection, the term `review entity' means an entity of
up to 3 qualified reviewers drawn from existing appeals
levels other than the redetermination level.
(b) Application to Provider Agreement Determinations.--Section
1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
(1) by inserting ``(A)'' after ``(h)(1)''; and
(2) by adding at the end the following new subparagraph:
``(B) An institution or agency described in subparagraph (A) that
has filed for a hearing under subparagraph (A) shall have expedited
access to judicial review under this subparagraph in the same manner as
providers of services, suppliers, and beneficiaries may obtain
expedited access to judicial review under the process established under
section 1869(b)(2). Nothing in this subparagraph shall be construed to
affect the application of any remedy imposed under section 1819 during
the pendency of an appeal under this subparagraph.''.
(c) GAO Study and Report on Access to Judicial Review.--
(1) Study.--The Comptroller General of the United States
shall conduct a study on the access of medicare beneficiaries
and health care providers to judicial review of actions of the
Secretary and the Department of Health and Human Services with
respect to items and services under title XVIII of the Social
Security Act subsequent to February 29, 2000, the date of the
decision of Shalala, Secretary of Health and Human Services, et
al. v. Illinois Council on Long Term Care, Inc. (529 U.S. 1
(2000)).
(2) Report.--Not later than 1 year after the date of
enactment of this Act, the Comptroller General shall submit to
Congress a report on the study conducted under paragraph (1)
together with such recommendations as the Comptroller General
determines to be appropriate.
(d) Conforming Amendment.--Section 1869(b)(1)(F)(ii) (42 U.S.C.
1395ff(b)(1)(F)(ii)) is amended to read as follows:
``(ii) Reference to expedited access to
judicial review.--For the provision relating to
expedited access to judicial review, see
paragraph (2).''.
(e) Effective Date.--The amendments made by this section shall
apply to appeals filed on or after October 1, 2004.

SEC. 513. EXPEDITED REVIEW OF CERTAIN PROVIDER AGREEMENT
DETERMINATIONS.

(a) Termination and Certain Other Immediate Remedies.--
(1) In general.--The Secretary shall develop and implement
a process to expedite proceedings under sections 1866(h) of the
Social Security Act (42 U.S.C. 1395cc(h)) in which--
(A) the remedy of termination of participation has
been imposed;
(B) a sanction described in clause (i) or (iii) of
section 1819(h)(2)(B) of such Act (42 U.S.C. 1395i-
3(h)(2)(B)) has been imposed, but only if such sanction
has been imposed on an immediate basis; or
(C) the Secretary has required a skilled nursing
facility to suspend operations of a nurse aide training
program.
(2) Priority for cases of termination.--Under the process
described in paragraph (1), priority shall be provided in cases
of termination described in subparagraph (A) of such paragraph.
(b) Increased Financial Support.--In addition to any amounts
otherwise appropriated, to reduce by 50 percent the average time for
administrative determinations on appeals under section 1866(h) of the
Social Security Act (42 U.S.C. 1395cc(h)), there are authorized to be
appropriated (in appropriate part from the Federal Hospital Insurance
Trust Fund and the Federal Supplementary Medical Insurance Trust Fund)
to the Secretary such sums for fiscal year 2004 and each subsequent
fiscal year as may be necessary to increase the number of
administrative law judges (and their staffs) at the Departmental
Appeals Board of the Department of Health and Human Services and to
educate such judges and staff on long-term care issues.

SEC. 514. REVISIONS TO MEDICARE APPEALS PROCESS.

(a) Timeframes for the Completion of the Record.--Section 1869(b)
(42 U.S.C. 1395ff(b)), as amended by section 512(a)(2), is amended by
adding at the end the following new paragraph:
``(3) Timely completion of the record.--
``(A) Deadline.--Subject to subparagraph (B), the
deadline to complete the record in a hearing before an
administrative law judge or a review by the
Departmental Appeals Board is 90 days after the date
the request for the review or hearing is filed.
``(B) Extensions for good cause.--The person filing
a request under subparagraph (A) may request an
extension of such deadline for good cause. The
administrative law judge, in the case of a hearing, and
the Departmental Appeals Board, in the case of a
review, may extend such deadline based upon a finding
of good cause to a date specified by the judge or
Board, as the case may be.
``(C) Delay in decision deadlines until completion
of record.--Notwithstanding any other provision of this
section, the deadlines otherwise established under
subsection (d) for the making of determinations in
hearings or review under this section are 90 days after
the date on which the record is complete.
``(D) Complete record described.--For purposes of
this paragraph, a record is complete when the
administrative law judge, in the case of a hearing, or
the Departmental Appeals Board, in the case of a
review, has received--
``(i) written or testimonial evidence, or
both, submitted by the person filing the
request,
``(ii) written or oral argument, or both,
``(iii) the decision of, and the record
for, the prior level of appeal, and
``(iv) such other evidence as such judge or
Board, as the case may be, determines is
required to make a determination on the
request.''.
(b) Use of Patients' Medical Records.--Section 1869(c)(3)(B)(i) (42
U.S.C. 1395ff(c)(3)(B)(i)) is amended by inserting ``(including the
medical records of the individual involved)'' after ``clinical
experience''.
(c) Notice Requirements for Medicare Appeals.--
(1) Initial determinations and redeterminations.--Section
1869(a) (42 U.S.C. 1395ff(a)) is amended by adding at the end
the following new paragraph:
``(4) Requirements of notice of determinations and
redeterminations.--A written notice of a determination on an
initial determination or on a redetermination, insofar as such
determination or redetermination results in a denial of a claim
for benefits, shall be provided in printed form and written in
a manner to be understood by the beneficiary and shall
include--
``(A) the reasons for the determination, including,
as appropriate--
``(i) upon request in the case of an
initial determination, the provision of the
policy, manual, or regulation that resulted in
the denial; and
``(ii) in the case of a redetermination, a
summary of the clinical or scientific evidence
used in making the determination (as
appropriate);
``(B) the procedures for obtaining additional
information concerning the determination or
redetermination; and
``(C) notification of the right to seek a
redetermination or otherwise appeal the determination
and instructions on how to initiate such a
redetermination or appeal under this section.''.
(2) Reconsiderations.--Section 1869(c)(3)(E) (42 U.S.C.
1395ff(c)(3)(E)) is amended to read as follows:
``(E) Explanation of decision.--Any decision with
respect to a reconsideration of a qualified independent
contractor shall be in writing in a manner to be
understood by the beneficiary and shall include--
``(i) to the extent appropriate, a detailed
explanation of the decision as well as a
discussion of the pertinent facts and
applicable regulations applied in making such
decision;
``(ii) a notification of the right to
appeal such determination and instructions on
how to initiate such appeal under this section;
and
``(iii) in the case of a determination of
whether an item or service is reasonable and
necessary for the diagnosis or treatment of
illness or injury (under section 1862(a)(1)(A))
an explanation of the medical or scientific
rationale for the decision.''.
(3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)) is
amended--
(A) in the heading, by inserting ``; Notice'' after
``Secretary''; and
(B) by adding at the end the following new
paragraph:
``(4) Notice.--Notice of the decision of an administrative
law judge shall be in writing in a manner to be understood by
the beneficiary and shall include--
``(A) the specific reasons for the determination
(including, to the extent appropriate, a summary of the
clinical or scientific evidence used in making the
determination);
``(B) the procedures for obtaining additional
information concerning the decision; and
``(C) notification of the right to appeal the
decision and instructions on how to initiate such an
appeal under this section.''.
(4) Preparation of record for appeal.--Section
1869(c)(3)(J) (42 U.S.C. 1395ff(c)(3)(J)) is amended by
striking ``such information as is required for an appeal'' and
inserting ``the record for the appeal''.
(d) Qualified Independent Contractors.--
(1) Eligibility requirements of qualified independent
contractors.--Section 1869(c) (42 U.S.C. 1395ff(c)) is
amended--
(A) in paragraph (2)--
(i) by inserting ``(except in the case of a
utilization and quality control peer review
organization, as defined in section 1152)''
after ``means an entity or organization that'';
and
(ii) by striking the period at the end and
inserting the following: ``and meets the
following requirements:
``(A) General requirements.--
``(i) The entity or organization has
(directly or through contracts or other
arrangements) sufficient medical, legal, and
other expertise (including knowledge of the
program under this title) and sufficient
staffing to carry out duties of a qualified
independent contractor under this section on a
timely basis.
``(ii) The entity or organization has
provided assurances that it will conduct
activities consistent with the applicable
requirements of this section, including that it
will not conduct any activities in a case
unless the independence requirements of
subparagraph (B) are met with respect to the
case.
``(iii) The entity or organization meets
such other requirements as the Secretary
provides by regulation.
``(B) Independence requirements.--
``(i) In general.--Subject to clause (ii),
an entity or organization meets the
independence requirements of this subparagraph
with respect to any case if the entity--
``(I) is not a related party (as
defined in subsection (g)(5));
``(II) does not have a material
familial, financial, or professional
relationship with such a party in
relation to such case; and
``(III) does not otherwise have a
conflict of interest with such a party
(as determined under regulations).
``(ii) Exception for compensation.--Nothing
in clause (i) shall be construed to prohibit
receipt by a qualified independent contractor
of compensation from the Secretary for the
conduct of activities under this section if the
compensation is provided consistent with clause
(iii).
``(iii) Limitations on entity
compensation.--Compensation provided by the
Secretary to a qualified independent contractor
in connection with reviews under this section
shall not be contingent on any decision
rendered by the contractor or by any reviewing
professional.''; and
(B) in paragraph (3)(A), by striking ``, and shall
have sufficient training and expertise in medical
science and legal matters to make reconsiderations
under this subsection''.
(2) Eligibility requirements for reviewers.--Section 1869
(42 U.S.C. 1395ff) is amended--
(A) by amending subsection (c)(3)(D) to read as
follows:
``(D) Qualifications of reviewers.--The
requirements of subsection (g) shall be met (relating
to qualifications of reviewing professionals).''; and
(B) by adding at the end the following new
subsection:
``(g) Qualifications of Reviewers.--
``(1) In general.--In reviewing determinations under this
section, a qualified independent contractor shall assure that--
``(A) each individual conducting a review shall
meet the qualifications of paragraph (2);
``(B) compensation provided by the contractor to
each such reviewer is consistent with paragraph (3);
and
``(C) in the case of a review by a panel described
in subsection (c)(3)(B) composed of physicians or other
health care professionals (each in this subsection
referred to as a `reviewing professional'), each
reviewing professional meets the qualifications
described in paragraph (4).
``(2) Independence.--
``(A) In general.--Subject to subparagraph (B),
each individual conducting a review in a case shall--
``(i) not be a related party (as defined in
paragraph (5));
``(ii) not have a material familial,
financial, or professional relationship with
such a party in the case under review; and
``(iii) not otherwise have a conflict of
interest with such a party (as determined under
regulations).
``(B) Exception.--Nothing in subparagraph (A) shall
be construed to--
``(i) prohibit an individual, solely on the
basis of affiliation with a fiscal
intermediary, carrier, or other contractor,
from serving as a reviewing professional if--
``(I) a nonaffiliated individual is
not reasonably available;
``(II) the affiliated individual is
not involved in the provision of items
or services in the case under review;
``(III) the fact of such an
affiliation is disclosed to the
Secretary and the beneficiary (or
authorized representative) and neither
party objects; and
``(IV) the affiliated individual is
not an employee of the intermediary,
carrier, or contractor and does not
provide services exclusively or
primarily to or on behalf of such
intermediary, carrier, or contractor;
``(ii) prohibit an individual who has staff
privileges at the institution where the
treatment involved takes place from serving as
a reviewer merely on the basis of such
affiliation if the affiliation is disclosed to
the Secretary and the beneficiary (or
authorized representative), and neither party
objects; or
``(iii) prohibit receipt of compensation by
a reviewing professional from a contractor if
the compensation is provided consistent with
paragraph (3).
``(3) Limitations on reviewer compensation.--Compensation
provided by a qualified independent contractor to a reviewer in
connection with a review under this section shall not be
contingent on the decision rendered by the reviewer.
``(4) Licensure and expertise.--Each reviewing professional
shall be a physician (allopathic or osteopathic) or health care
professional who--
``(A) is appropriately credentialed or licensed in
1 or more States to deliver health care services; and
``(B) has medical expertise in the field of
practice that is appropriate for the items or services
at issue.
``(5) Related party defined.--For purposes of this section,
the term `related party' means, with respect to a case under
this title involving an individual beneficiary, any of the
following:
``(A) The Secretary, the medicare administrative
contractor involved, or any fiduciary, officer,
director, or employee of the Department of Health and
Human Services, or of such contractor.
``(B) The individual (or authorized
representative).
``(C) The health care professional that provides
the items or services involved in the case.
``(D) The institution at which the items or
services (or treatment) involved in the case are
provided.
``(E) The manufacturer of any drug or other item
that is included in the items or services involved in
the case.
``(F) Any other party determined under any
regulations to have a substantial interest in the case
involved.''.
(3) Number of qualified independent contractors.--Section
1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is amended by striking
``12'' and inserting ``4''.
(e) Implementation of Certain BIPA Reforms.--
(1) Delay in certain bipa reforms.--Section 521(d) of BIPA
(114 Stat. 2763A-543) is amended to read as follows:
``(d) Effective Date.--
``(1) In general.--Except as specified in paragraph (2),
the amendments made by this section shall apply with respect to
initial determinations made on or after December 1, 2004.
``(2) Expedited proceedings and reconsideration
requirements.--For the following provisions, the amendments
made by subsection (a) shall apply with respect to initial
determinations made on or after October 1, 2003:
``(A) Subsection (b)(1)(F)(i) of section 1869 of
the Social Security Act.
``(B) Subsection (c)(3)(C)(iii) of such section.
``(C) Subsection (c)(3)(C)(iv) of such section to
the extent that it applies to expedited
reconsiderations under subsection (c)(3)(C)(iii) of
such section.
``(3) Transitional use of peer review organizations to
conduct expedited reconsiderations until qics are
operational.--Expedited reconsiderations of initial
determinations under section 1869(c)(3)(C)(iii) of the Social
Security Act shall be made by peer review organizations until
qualified independent contractors are available for such
expedited reconsiderations.''.
(2) Conforming amendments.--Section 521(c) of BIPA (114
Stat. 2763A-543) and section 1869(c)(3)(C)(iii)(III) of the
Social Security Act (42 U.S.C. 1395ff(c)(3)(C)(iii)(III)), as
added by section 521 of BIPA, are repealed.
(f) Effective Date.--The amendments made by this section shall be
effective as if included in the enactment of the respective provisions
of subtitle C of title V of BIPA, 114 Stat. 2763A-534.
(g) Transition.--In applying section 1869(g) of the Social Security
Act (as added by subsection (d)(2)), any reference to a medicare
administrative contractor shall be deemed to include a reference to a
fiscal intermediary under section 1816 of the Social Security Act (42
U.S.C. 1395h) and a carrier under section 1842 of such Act (42 U.S.C.
1395u).

SEC. 515. HEARING RIGHTS RELATED TO DECISIONS BY THE SECRETARY TO DENY
OR NOT RENEW A MEDICARE ENROLLMENT AGREEMENT;
CONSULTATION BEFORE CHANGING PROVIDER ENROLLMENT FORMS.

(a) Hearing Rights.--
(1) In general.--Section 1866 (42 U.S.C. 1395cc) is amended
by adding at the end the following new subsection:
``(j) Hearing Rights in Cases of Denial or Nonrenewal.--The
Secretary shall establish by regulation procedures under which--
``(1) there are deadlines for actions on applications for
enrollment (and, if applicable, renewal of enrollment); and
``(2) providers of services, physicians, practitioners, and
suppliers whose application to enroll (or, if applicable, to
renew enrollment) are denied are provided a mechanism to appeal
such denial and a deadline for consideration of such
appeals.''.
(2) Effective date.--The Secretary shall provide for the
establishment of the procedures under the amendment made by
paragraph (1) within 18 months after the date of enactment of
this Act.
(b) Consultation Before Changing Provider Enrollment Forms.--
Section 1871 (42 U.S.C. 1395hh), as amended by sections 502 and 503, is
amended by adding at the end the following new subsection:
``(f) The Secretary shall consult with providers of services,
physicians, practitioners, and suppliers before making changes in the
provider enrollment forms required of such providers, physicians,
practitioners, and suppliers to be eligible to submit claims for which
payment may be made under this title.''.

SEC. 516. APPEALS BY PROVIDERS WHEN THERE IS NO OTHER PARTY AVAILABLE.

(a) In General.--Section 1870 (42 U.S.C. 1395gg) is amended by
adding at the end the following new subsection:
``(h) Notwithstanding subsection (f) or any other provision of law,
the Secretary shall permit a provider of services, physician,
practitioner, or other supplier to appeal any determination of the
Secretary under this title relating to services rendered under this
title to an individual who subsequently dies if there is no other party
available to appeal such determination.''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date of enactment of this Act and shall apply to
items and services furnished on or after such date.

SEC. 517. PROVIDER ACCESS TO REVIEW OF LOCAL COVERAGE DETERMINATIONS.

(a) Provider Access To Review of Local Coverage Determinations.--
Section 1869(f)(5) (42 U.S.C. 1395ff(f)(5)) is amended to read as
follows:
``(5) Aggrieved party defined.--In this section, the term
`aggrieved party' means--
``(A) with respect to a national coverage
determination, an individual entitled to benefits under
part A, or enrolled under part B, or both, who is in
need of the items or services that are the subject of
the coverage determination; and
``(B) with respect to a local coverage
determination--
``(i) an individual who is entitled to
benefits under part A, or enrolled under part
B, or both, who is adversely affected by such a
determination; or
``(ii) a provider of services, physician,
practitioner, or supplier that is adversely
affected by such a determination.''.
(b) Clarification of Local Coverage Determination Definition.--
Section 1869(f)(2)(B) (42 U.S.C. 1395ff(f)(2)(B)) is amended by
inserting ``, including, where appropriate, the specific requirements
and clinical indications relating to the medical necessity of an item
or service'' before the period at the end.
(c) Request for Local Coverage Determinations by Providers.--
Section 1869 (42 U.S.C. 1395ff), as amended by section 514(d)(2)(B), is
amended by adding at the end the following new subsection:
``(h) Request for Local Coverage Determinations by Providers.--
``(1) Establishment of process.--The Secretary shall
establish a process under which a provider of services,
physician, practitioner, or supplier who certifies that they
meet the requirements established in paragraph (3) may request
a local coverage determination in accordance with the
succeeding provisions of this subsection.
``(2) Provider local coverage determination request
defined.--In this subsection, the term `provider local coverage
determination request' means a request, filed with the
Secretary, at such time and in such form and manner as the
Secretary may specify, that the Secretary, pursuant to
paragraph (4)(A), require a fiscal intermediary, carrier, or
program safeguard contractor to make or revise a local coverage
determination under this section with respect to an item or
service.
``(3) Request requirements.--Under the process established
under paragraph (1), by not later than 30 days after the date
on which a provider local coverage determination request is
filed under paragraph (1), the Secretary shall determine
whether such request establishes that--
``(A) there have been at least 5 reversals of
redeterminations made by a fiscal intermediary or
carrier after a hearing before an administrative law
judge on claims submitted by the provider in at least 2
different cases before an administrative law judge;
``(B) each reversal described in subparagraph (A)
involves substantially similar material facts;
``(C) each reversal described in subparagraph (A)
involves the same medical necessity issue; and
``(D) at least 50 percent of the total number of
claims submitted by such provider within the past year
involving the substantially similar material facts
described in subparagraph (B) and the same medical
necessity issue described in subparagraph (C) have been
denied and have been reversed by an administrative law
judge.
``(4) Approval or rejection of request.--
``(A) Approval of request.--If the Secretary
determines that subparagraphs (A) through (D) of
paragraph (3) have been satisfied, the Secretary shall
require the fiscal intermediary, carrier, or program
safeguard contractor identified in the provider local
coverage determination request, to make or revise a
local coverage determination with respect to the item
or service that is the subject of the request not later
than the date that is 210 days after the date on which
the Secretary makes the determination. Such fiscal
intermediary, carrier, or program safeguard contractor
shall retain the discretion to determine whether or
not, and/or the circumstances under which, to cover the
item or service for which a local coverage
determination is requested. Nothing in this subsection
shall be construed to require a fiscal intermediary,
carrier or program safeguard contractor to develop a
local coverage determination that is inconsistent with
any national coverage determination, or any coverage
provision in this title or in regulation, manual, or
interpretive guidance of the Secretary.
``(B) Rejection of request.--If the Secretary
determines that subparagraphs (A) through (D) of
paragraph (3) have not been satisfied, the Secretary
shall reject the provider local coverage determination
request and shall notify the provider of services,
physician, practitioner, or supplier that filed the
request of the reason for such rejection and no further
proceedings in relation to such request shall be
conducted.''.
(d) Study and Report on the Use of Contractors To Monitor Medicare
Appeals.--
(1) Study.--The Secretary shall conduct a study on the
feasibility and advisability of requiring fiscal intermediaries
and carriers to monitor and track--
(A) the subject matter and status of claims denied
by the fiscal intermediary or carrier (as applicable)
that are appealed under section 1869 of the Social
Security Act (42 U.S.C. 1395ff), as added by section
522 of BIPA (114 Stat. 2763A-543) and amended by this
Act; and
(B) any final determination made with respect to
such claims.
(2) Report.--Not later than the date that is 1 year after
the date of enactment of this Act, the Secretary shall submit
to Congress a report on the study conducted under paragraph (1)
together with such recommendations for legislation and
administrative action as the Commission determines appropriate.
(e) Authorization of Appropriations.--There are authorized to be
appropriated such sums as are necessary to carry out the amendments
made by subsections (a), (b), and (c).
(f) Effective Dates.--
(1) Provider access to review of local coverage
determinations.--The amendments made by subsections (a) and (b)
shall apply to--
(A) any review of any local coverage determination
filed on or after October 1, 2003;
(B) any request to make such a determination made
on or after such date; or
(C) any local coverage determination made on or
after such date.
(2) Provider local coverage determination requests.--The
amendment made by subsection (c) shall apply with respect to
provider local coverage determination requests (as defined in
section 1869(h)(2) of the Social Security Act, as added by
subsection (c)) filed on or after the date of enactment of this
Act.

SEC. 518. REVISIONS TO APPEALS TIMEFRAMES.

Section 1869 (42 U.S.C. 1395ff) is amended--
(1) in subsection (a)(3)(C)(ii), by striking ``30-day
period'' each place it appears and inserting ``60-day period'';
(2) in subsection (c)(3)(C)(i), by striking ``30-day
period'' and inserting ``60-day period'';
(3) in subsection (d)(1)(A), by striking ``90-day period''
and inserting ``120-day period''; and
(4) in subsection (d)(2)(A), by striking ``90-day period''
and inserting ``120-day period''.

SEC. 519. ELIMINATION OF REQUIREMENT TO USE SOCIAL SECURITY
ADMINISTRATION ADMINISTRATIVE LAW JUDGES.

The first sentence of section 1869(f)(2)(A)(i) (42 U.S.C.
1395ff(f)(2)(A)(i)) is amended by striking ``of the Social Security
Administration''.

SEC. 520. ELIMINATION OF REQUIREMENT FOR DE NOVO REVIEW BY THE
DEPARTMENTAL APPEALS BOARD.

Section 1869(d)(2) (42 U.S.C. 1395ff(d)(2)) is amended to read as
follows:
``(2) 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 paragraph (1) 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.''.

Subtitle C--Contracting Reform

SEC. 521. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

(a) Consolidation and Flexibility in Medicare Administration.--
(1) In general.--Title XVIII is amended by inserting after
section 1874 the following new section:

``contracts with medicare administrative contractors

``Sec. 1874A. (a) Authority.--
``(1) Authority to enter into contracts.--The Secretary may
enter into contracts with any eligible entity to serve as a
medicare administrative contractor with respect to the
performance of any or all of the functions described in
paragraph (4) or parts of those functions (or, to the extent
provided in a contract, to secure performance thereof by other
entities).
``(2) Eligibility of entities.--An entity is eligible to
enter into a contract with respect to the performance of a
particular function described in paragraph (4) only if--
``(A) the entity has demonstrated capability to
carry out such function;
``(B) the entity complies with such conflict of
interest standards as are generally applicable to
Federal acquisition and procurement;
``(C) the entity has sufficient assets to
financially support the performance of such function;
and
``(D) the entity meets such other requirements as
the Secretary may impose.
``(3) Medicare administrative contractor defined.--For
purposes of this title and title XI--
``(A) In general.--The term `medicare
administrative contractor' means an agency,
organization, or other person with a contract under
this section.
``(B) Appropriate medicare administrative
contractor.--With respect to the performance of a
particular function in relation to an individual
entitled to benefits under part A or enrolled under
part B, or both, a specific provider of services,
physician, practitioner, facility, or supplier (or
class of such providers of services, physicians,
practitioners, facilities, or suppliers), the
`appropriate' medicare administrative contractor is the
medicare administrative contractor that has a contract
under this section with respect to the performance of
that function in relation to that individual, provider
of services, physician, practitioner, facility, or
supplier or class of provider of services, physician,
practitioner, facility, or supplier.
``(4) Functions described.--The functions referred to in
paragraphs (1) and (2) are payment functions (including the
function of developing local coverage determinations, as
defined in section 1869(f)(2)(B)), provider services functions,
and beneficiary services functions as follows:
``(A) Determination of payment amounts.--
Determining (subject to the provisions of section 1878
and to such review by the Secretary as may be provided
for by the contracts) the amount of the payments
required pursuant to this title to be made to providers
of services, physicians, practitioners, facilities,
suppliers, and individuals.
``(B) Making payments.--Making payments described
in subparagraph (A) (including receipt, disbursement,
and accounting for funds in making such payments).
``(C) Beneficiary education and assistance.--
Serving as a center for, and communicating to
individuals entitled to benefits under part A or
enrolled under part B, or both, with respect to
education and outreach for those individuals, and
assistance with specific issues, concerns, or problems
of those individuals.
``(D) Provider consultative services.--Providing
consultative services to institutions, agencies, and
other persons to enable them to establish and maintain
fiscal records necessary for purposes of this title and
otherwise to qualify as providers of services,
physicians, practitioners, facilities, or suppliers.
``(E) Communication with providers.--Serving as a
center for, and communicating to providers of services,
physicians, practitioners, facilities, and suppliers,
any information or instructions furnished to the
medicare administrative contractor by the Secretary,
and serving as a channel of communication from such
providers, physicians, practitioners, facilities, and
suppliers to the Secretary.
``(F) Provider education and technical
assistance.--Performing the functions described in
subsections (e) and (f), relating to education,
training, and technical assistance to providers of
services, physicians, practitioners, facilities, and
suppliers.
``(G) Additional functions.--Performing such other
functions, including (subject to paragraph (5))
functions under the Medicare Integrity Program under
section 1893, as are necessary to carry out the
purposes of this title.
``(5) Relationship to mip contracts.--
``(A) Nonduplication of activities.--In entering
into contracts under this section, the Secretary shall
assure that activities of medicare administrative
contractors do not duplicate activities carried out
under contracts entered into under the Medicare
Integrity Program under section 1893. The previous
sentence shall not apply with respect to the activity
described in section 1893(b)(5) (relating to prior
authorization of certain items of durable medical
equipment under section 1834(a)(15)).
``(B) Construction.--An entity shall not be treated
as a medicare administrative contractor merely by
reason of having entered into a contract with the
Secretary under section 1893.
``(6) Application of federal acquisition regulation.--
Except to the extent inconsistent with a specific requirement
of this title, the Federal Acquisition Regulation applies to
contracts under this title.
``(b) Contracting Requirements.--
``(1) Use of competitive procedures.--
``(A) In general.--Except as provided in laws with
general applicability to Federal acquisition and
procurement, the Federal Acquisition Regulation, or in
subparagraph (B), the Secretary shall use competitive
procedures when entering into contracts with medicare
administrative contractors under this section.
``(B) Renewal of contracts.--The Secretary may
renew a contract with a medicare administrative
contractor under this section from term to term without
regard to section 5 of title 41, United States Code, or
any other provision of law requiring competition, if
the medicare administrative contractor has met or
exceeded the performance requirements applicable with
respect to the contract and contractor, except that the
Secretary shall provide for the application of
competitive procedures under such a contract not less
frequently than once every 6 years.
``(C) Transfer of functions.--The Secretary may
transfer functions among medicare administrative
contractors without regard to any provision of law
requiring competition. The Secretary shall ensure that
performance quality is considered in such transfers.
The Secretary shall provide notice (whether in the
Federal Register or otherwise) of any such transfer
(including a description of the functions so
transferred and contact information for the contractors
involved) to providers of services, physicians,
practitioners, facilities, and suppliers affected by
the transfer.
``(D) Incentives for quality.--The Secretary may
provide incentives for medicare administrative
contractors to provide quality service and to promote
efficiency.
``(2) Compliance with requirements.--No contract under this
section shall be entered into with any medicare administrative
contractor unless the Secretary finds that such medicare
administrative contractor will perform its obligations under
the contract efficiently and effectively and will meet such
requirements as to financial responsibility, legal authority,
and other matters as the Secretary finds pertinent.
``(3) Performance requirements.--
``(A) Development of specific performance
requirements.--The Secretary shall develop contract
performance requirements to carry out the specific
requirements applicable under this title to a function
described in subsection (a)(4) and shall develop
standards for measuring the extent to which a
contractor has met such requirements. In developing
such performance requirements and standards for
measurement, the Secretary shall consult with providers
of services, organizations representative of
beneficiaries under this title, and organizations and
agencies performing functions necessary to carry out
the purposes of this section with respect to such
performance requirements. The Secretary shall make such
performance requirements and measurement standards
available to the public.
``(B) Considerations.--The Secretary shall include,
as 1 of the standards, provider and beneficiary
satisfaction levels.
``(C) Inclusion in contracts.--All contractor
performance requirements shall be set forth in the
contract between the Secretary and the appropriate
medicare administrative contractor. Such performance
requirements--
``(i) shall reflect the performance
requirements published under subparagraph (A),
but may include additional performance
requirements;
``(ii) shall be used for evaluating
contractor performance under the contract; and
``(iii) shall be consistent with the
written statement of work provided under the
contract.
``(4) Information requirements.--The Secretary shall not
enter into a contract with a medicare administrative contractor
under this section unless the contractor agrees--
``(A) to furnish to the Secretary such timely
information and reports as the Secretary may find
necessary in performing his functions under this title;
and
``(B) to maintain such records and afford such
access thereto as the Secretary finds necessary to
assure the correctness and verification of the
information and reports under subparagraph (A) and
otherwise to carry out the purposes of this title.
``(5) Surety bond.--A contract with a medicare
administrative contractor under this section may require the
medicare administrative contractor, and any of its officers or
employees certifying payments or disbursing funds pursuant to
the contract, or otherwise participating in carrying out the
contract, to give surety bond to the United States in such
amount as the Secretary may deem appropriate.
``(6) Retaining diversity of local coverage
determinations.--A contract with a medicare administrative
contractor under this section to perform the function of
developing local coverage determinations (as defined in section
1869(f)(2)(B)) shall provide that the contractor shall--
``(A) designate at least 1 different individual to
serve as medical director for each State for which such
contract performs such function;
``(B) utilize such medical director in the
performance of such function; and
``(C) appoint a contractor advisory committee with
respect to each such State to provide a formal
mechanism for physicians in the State to be informed
of, and participate in, the development of a local
coverage determination in an advisory capacity.
``(c) Terms and Conditions.--
``(1) In general.--Subject to subsection (a)(6), a contract
with any medicare administrative contractor under this section
may contain such terms and conditions as the Secretary finds
necessary or appropriate and may provide for advances of funds
to the medicare administrative contractor for the making of
payments by it under subsection (a)(4)(B).
``(2) Prohibition on mandates for certain data
collection.--The Secretary may not require, as a condition of
entering into, or renewing, a contract under this section, that
the medicare administrative contractor match data obtained
other than in its activities under this title with data used in
the administration of this title for purposes of identifying
situations in which the provisions of section 1862(b) may
apply.
``(d) Limitation on Liability of Medicare Administrative
Contractors and Certain Officers.--
``(1) Certifying officer.--No individual designated
pursuant to a contract under this section as a certifying
officer shall, in the absence of the reckless disregard of the
individual's obligations or the intent by that individual to
defraud the United States, be liable with respect to any
payments certified by the individual under this section.
``(2) Disbursing officer.--No disbursing officer shall, in
the absence of the reckless disregard of the officer's
obligations or the intent by that officer to defraud the United
States, be liable with respect to any payment by such officer
under this section if it was based upon an authorization (which
meets the applicable requirements for such internal controls
established by the Comptroller General) of a certifying officer
designated as provided in paragraph (1) of this subsection.
``(3) Liability of medicare administrative contractor.--No
medicare administrative contractor shall be liable to the
United States for a payment by a certifying or disbursing
officer unless, in connection with such a payment, the medicare
administrative contractor acted with reckless disregard of its
obligations under its medicare administrative contract or with
intent to defraud the United States.
``(4) Relationship to false claims act.--Nothing in this
subsection shall be construed to limit liability for conduct
that would constitute a violation of sections 3729 through 3731
of title 31, United States Code (commonly known as the ``False
Claims Act'').
``(5) Indemnification by secretary.--
``(A) In general.--Notwithstanding any other
provision of law and subject to the succeeding
provisions of this paragraph, in the case of a medicare
administrative contractor (or a person who is a
director, officer, or employee of such a contractor or
who is engaged by the contractor to participate
directly in the claims administration process) who is
made a party to any judicial or administrative
proceeding arising from, or relating directly to, the
claims administration process under this title, the
Secretary may, to the extent specified in the contract
with the contractor, indemnify the contractor (and such
persons).
``(B) Conditions.--The Secretary may not provide
indemnification under subparagraph (A) insofar as the
liability for such costs arises directly from conduct
that is determined by the Secretary to be criminal in
nature, fraudulent, or grossly negligent.
``(C) Scope of indemnification.--Indemnification by
the Secretary under subparagraph (A) may include
payment of judgments, settlements (subject to
subparagraph (D)), awards, and costs (including
reasonable legal expenses).
``(D) Written approval for settlements.--A
contractor or other person described in subparagraph
(A) may not propose to negotiate a settlement or
compromise of a proceeding described in such
subparagraph without the prior written approval of the
Secretary to negotiate a settlement. Any
indemnification under subparagraph (A) with respect to
amounts paid under a settlement are conditioned upon
the Secretary's prior written approval of the final
settlement.
``(E) Construction.--Nothing in this paragraph
shall be construed--
``(i) to change any common law immunity
that may be available to a medicare
administrative contractor or person described
in subparagraph (A); or
``(ii) to permit the payment of costs not
otherwise allowable, reasonable, or allocable
under the Federal Acquisition Regulations.''.
(2) Consideration of incorporation of current law
standards.--In developing contract performance requirements
under section 1874A(b) of the Social Security Act (as added by
paragraph (1)) the Secretary shall consider inclusion of the
performance standards described in sections 1816(f)(2) of such
Act (relating to timely processing of reconsiderations and
applications for exemptions) and section 1842(b)(2)(B) of such
Act (relating to timely review of determinations and fair
hearing requests), as such sections were in effect before the
date of enactment of this Act.
(b) Conforming Amendments to Section 1816 (Relating to Fiscal
Intermediaries).--Section 1816 (42 U.S.C. 1395h) is amended as follows:
(1) The heading is amended to read as follows:

``provisions relating to the administration of part a''.

(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted through
contracts with medicare administrative contractors under section
1874A.''.
(3) Subsection (b) is repealed.
(4) Subsection (c) is amended--
(A) by striking paragraph (1); and
(B) in each of paragraphs (2)(A) and (3)(A), by
striking ``agreement under this section'' and inserting
``contract under section 1874A that provides for making
payments under this part''.
(5) Subsections (d) through (i) are repealed.
(6) Subsections (j) and (k) are each amended--
(A) by striking ``An agreement with an agency or
organization under this section'' and inserting ``A
contract with a medicare administrative contractor
under section 1874A with respect to the administration
of this part''; and
(B) by striking ``such agency or organization'' and
inserting ``such medicare administrative contractor''
each place it appears.
(7) Subsection (l) is repealed.
(c) Conforming Amendments to Section 1842 (Relating to Carriers).--
Section 1842 (42 U.S.C. 1395u) is amended as follows:
(1) The heading is amended to read as follows:

``provisions relating to the administration of part b''.

(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted through
contracts with medicare administrative contractors under section
1874A.''.
(3) Subsection (b) is amended--
(A) by striking paragraph (1);
(B) in paragraph (2)--
(i) by striking subparagraphs (A) and (B);
(ii) in subparagraph (C), by striking
``carriers'' and inserting ``medicare
administrative contractors''; and
(iii) by striking subparagraphs (D) and
(E);
(C) in paragraph (3)--
(i) in the matter before subparagraph (A),
by striking ``Each such contract shall provide
that the carrier'' and inserting ``The
Secretary'';
(ii) by striking ``will'' the first place
it appears in each of subparagraphs (A), (B),
(F), (G), (H), and (L) and inserting ``shall'';
(iii) in subparagraph (B), in the matter
before clause (i), by striking ``to the
policyholders and subscribers of the carrier''
and inserting ``to the policyholders and
subscribers of the medicare administrative
contractor'';
(iv) by striking subparagraphs (C), (D),
and (E);
(v) in subparagraph (H)--
(I) by striking ``if it makes
determinations or payments with respect
to physicians' services,''; and
(II) by striking ``carrier'' and
inserting ``medicare administrative
contractor'';
(vi) by striking subparagraph (I);
(vii) in subparagraph (L), by striking the
semicolon and inserting a period;
(viii) in the first sentence, after
subparagraph (L), by striking ``and shall
contain'' and all that follows through the
period; and
(ix) in the seventh sentence, by inserting
``medicare administrative contractor,'' after
``carrier,'';
(D) by striking paragraph (5);
(E) in paragraph (6)(D)(iv), by striking
``carrier'' and inserting ``medicare administrative
contractor''; and
(F) in paragraph (7), by striking ``the carrier''
and inserting ``the Secretary'' each place it appears.
(4) Subsection (c) is amended--
(A) by striking paragraph (1);
(B) in paragraph (2), by striking ``contract under
this section which provides for the disbursement of
funds, as described in subsection (a)(1)(B),'' and
inserting ``contract under section 1874A that provides
for making payments under this part'';
(C) in paragraph (3)(A), by striking ``subsection
(a)(1)(B)'' and inserting ``section 1874A(a)(3)(B)'';
(D) in paragraph (4), by striking ``carrier'' and
inserting ``medicare administrative contractor'';
(E) in paragraph (5), by striking ``contract under
this section which provides for the disbursement of
funds, as described in subsection (a)(1)(B), shall
require the carrier'' and ``carrier responses'' and
inserting ``contract under section 1874A that provides
for making payments under this part shall require the
medicare administrative contractor'' and ``contractor
responses'', respectively; and
(F) by striking paragraph (6).
(5) Subsections (d), (e), and (f) are repealed.
(6) Subsection (g) is amended by striking ``carrier or
carriers'' and inserting ``medicare administrative contractor
or contractors''.
(7) Subsection (h) is amended--
(A) in paragraph (2)--
(i) by striking ``Each carrier having an
agreement with the Secretary under subsection
(a)'' and inserting ``The Secretary''; and
(ii) by striking ``Each such carrier'' and
inserting ``The Secretary'';
(B) in paragraph (3)(A)--
(i) by striking ``a carrier having an
agreement with the Secretary under subsection
(a)'' and inserting ``medicare administrative
contractor having a contract under section
1874A that provides for making payments under
this part''; and
(ii) by striking ``such carrier'' and
inserting ``such contractor'';
(C) in paragraph (3)(B)--
(i) by striking ``a carrier'' and inserting
``a medicare administrative contractor'' each
place it appears; and
(ii) by striking ``the carrier'' and
inserting ``the contractor'' each place it
appears; and
(D) in paragraphs (5)(A) and (5)(B)(iii), by
striking ``carriers'' and inserting ``medicare
administrative contractors'' each place it appears.
(8) Subsection (l) is amended--
(A) in paragraph (1)(A)(iii), by striking
``carrier'' and inserting ``medicare administrative
contractor''; and
(B) in paragraph (2), by striking ``carrier'' and
inserting ``medicare administrative contractor''.
(9) Subsection (p)(3)(A) is amended by striking ``carrier''
and inserting ``medicare administrative contractor''.
(10) Subsection (q)(1)(A) is amended by striking
``carrier''.
(d) Effective Date; Transition Rule.--
(1) Effective date.--
(A) In general.--Except as otherwise provided in
this subsection, the amendments made by this section
shall take effect on October 1, 2005, and the Secretary
is authorized to take such steps before such date as
may be necessary to implement such amendments on a
timely basis.
(B) Construction for current contracts.--Such
amendments shall not apply to contracts in effect
before the date specified under subparagraph (A) that
continue to retain the terms and conditions in effect
on such date (except as otherwise provided under this
title, other than under this section) until such date
as the contract is let out for competitive bidding
under such amendments.
(C) Deadline for competitive bidding.--The
Secretary shall provide for the letting by competitive
bidding of all contracts for functions of medicare
administrative contractors for annual contract periods
that begin on or after October 1, 2011.
(2) General transition rules.--
(A) Authority to continue to enter into new
agreements and contracts and waiver of provider
nomination provisions during transition.--Prior to the
date specified in paragraph (1)(A), the Secretary may,
consistent with subparagraph (B), continue to enter
into agreements under section 1816 and contracts under
section 1842 of the Social Security Act (42 U.S.C.
1395h, 1395u). The Secretary may enter into new
agreements under section 1816 during the time period
without regard to any of the provider nomination
provisions of such section.
(B) Appropriate transition.--The Secretary shall
take such steps as are necessary to provide for an
appropriate transition from agreements under section
1816 and contracts under section 1842 of the Social
Security Act (42 U.S.C. 1395h, 1395u) to contracts
under section 1874A, as added by subsection (a)(1).
(3) Authorizing continuation of mip activities under
current contracts and agreements and under transition
contracts.--The provisions contained in the exception in
section 1893(d)(2) of the Social Security Act (42 U.S.C.
1395ddd(d)(2)) shall continue to apply notwithstanding the
amendments made by this section, and any reference in such
provisions to an agreement or contract shall be deemed to
include agreements and contracts entered into pursuant to
paragraph (2)(A).
(e) References.--On and after the effective date provided under
subsection (d)(1), any reference to a fiscal intermediary or carrier
under title XI or XVIII of the Social Security Act (or any regulation,
manual instruction, interpretative rule, statement of policy, or
guideline issued to carry out such titles) shall be deemed a reference
to an appropriate medicare administrative contractor (as provided under
section 1874A of the Social Security Act).
(f) Secretarial Submission of Legislative Proposal.--Not later than
6 months after the date of enactment of this Act, the Secretary shall
submit to the appropriate committees of Congress a legislative proposal
providing for such technical and conforming amendments in the law as
are required by the provisions of this section.
(g) Reports on Implementation.--
(1) Proposal for implementation.--At least 1 year before
the date specified in subsection (d)(1)(A), the Secretary shall
submit a report to Congress and the Comptroller General of the
United States that describes a plan for an appropriate
transition. The Comptroller General shall conduct an evaluation
of such plan and shall submit to Congress, not later than 6
months after the date the report is received, a report on such
evaluation and shall include in such report such
recommendations as the Comptroller General deems appropriate.
(2) Status of implementation.--The Secretary shall submit a
report to Congress not later than October 1, 2008, that
describes the status of implementation of such amendments and
that includes a description of the following:
(A) The number of contracts that have been
competitively bid as of such date.
(B) The distribution of functions among contracts
and contractors.
(C) A timeline for complete transition to full
competition.
(D) A detailed description of how the Secretary has
modified oversight and management of medicare
contractors to adapt to full competition.

Subtitle D--Education and Outreach Improvements

SEC. 531. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

(a) Coordination of Education Funding.--
(1) In general.--The Social Security Act is amended by
inserting after section 1888 the following new section:

``provider education and technical assistance

``Sec. 1889. (a) Coordination of Education Funding.--The Secretary
shall coordinate the educational activities provided through medicare
contractors (as defined in subsection (e), including under section
1893) in order to maximize the effectiveness of Federal education
efforts for providers of services, physicians, practitioners, and
suppliers.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of enactment of this Act.
(b) Incentives To Improve Contractor Performance.--
(1) In general.--Section 1874A, as added by section
521(a)(1), is amended by adding at the end the following new
subsection:
``(e) Incentives To Improve Contractor Performance in Provider
Education and Outreach.--
``(1) Methodology to measure contractor error rates.--In
order to give medicare contractors (as defined in paragraph
(3)) an incentive to implement effective education and outreach
programs for providers of services, physicians, practitioners,
and suppliers, the Secretary shall develop and implement by
October 1, 2004, a methodology to measure the specific claims
payment error rates of such contractors in the processing or
reviewing of medicare claims.
``(2) GAO review of methodology.--The Comptroller General
of the United States shall review, and make recommendations to
the Secretary, regarding the adequacy of such methodology.
``(3) Medicare contractor defined.--For purposes of this
subsection, the term `medicare contractor' includes a medicare
administrative contractor, a fiscal intermediary with a
contract under section 1816, and a carrier with a contract
under section 1842.''.
(2) Report.--The Secretary shall submit to Congress a
report that describes how the Secretary intends to use the
methodology developed under section 1874A(e)(1) of the Social
Security Act, as added by paragraph (1), in assessing medicare
contractor performance in implementing effective education and
outreach programs, including whether to use such methodology as
a basis for performance bonuses.
(c) Improved Provider Education and Training.--
(1) Increased funding for enhanced education and training
through medicare integrity program.--Section 1817(k)(4) (42
U.S.C. 1395i(k)(4)) is amended--
(A) in subparagraph (A), by striking ``subparagraph
(B)'' and inserting ``subparagraphs (B) and (C)'';
(B) in subparagraph (B), by striking ``The amount
appropriated'' and inserting ``Subject to subparagraph
(C), the amount appropriated''; and
(C) by adding at the end the following new
subparagraph:
``(C) Enhanced provider education and training.--
``(i) In general.--In addition to the
amount appropriated under subparagraph (B), the
amount appropriated under subparagraph (A) for
a fiscal year (beginning with fiscal year 2004)
is increased by $35,000,000.
``(ii) Use.--The funds made available under
this subparagraph shall be used only to
increase the conduct by medicare contractors of
education and training of providers of
services, physicians, practitioners, and
suppliers regarding billing, coding, and other
appropriate items and may also be used to
improve the accuracy, consistency, and
timeliness of contractor responses to written
and phone inquiries from providers of services,
physicians, practitioners, and suppliers.''.
(2) Tailoring education and training for small providers or
suppliers.--
(A) In general.--Section 1889, as added by
subsection (a), is amended by adding at the end the
following new subsection:
``(b) Tailoring Education and Training Activities for Small
Providers or Suppliers.--
``(1) In general.--Insofar as a medicare contractor
conducts education and training activities, it shall take into
consideration the special needs of small providers of services
or suppliers (as defined in paragraph (2)). Such education and
training activities for small providers of services and
suppliers may include the provision of technical assistance
(such as review of billing systems and internal controls to
determine program compliance and to suggest more efficient and
effective means of achieving such compliance).
``(2) Small provider of services or supplier.--In this
subsection, the term `small provider of services or supplier'
means--
``(A) an institutional provider of services with
fewer than 25 full-time-equivalent employees; or
``(B) a physician, practitioner, or supplier with
fewer than 10 full-time-equivalent employees.''.
(B) Effective date.--The amendment made by
subparagraph (A) shall take effect on January 1, 2004.
(d) Additional Provider Education Provisions.--
(1) In general.--Section 1889, as added by subsection (a)
and as amended by subsection (c)(2), is amended by adding at
the end the following new subsections:
``(c) Encouragement of Participation in Education Program
Activities.--A medicare contractor may not use a record of attendance
at (or failure to attend) educational activities or other information
gathered during an educational program conducted under this section or
otherwise by the Secretary to select or track providers of services,
physicians, practitioners, or suppliers for the purpose of conducting
any type of audit or prepayment review.
``(d) Construction.--Nothing in this section or section 1893(g)
shall be construed as providing for disclosure by a medicare
contractor--
``(1) of the screens used for identifying claims that will
be subject to medical review; or
``(2) of information that would compromise pending law
enforcement activities or reveal findings of law enforcement-
related audits.
``(e) Definitions.--For purposes of this section and section
1817(k)(4)(C), the term `medicare contractor' includes the following:
``(1) A medicare administrative contractor with a contract
under section 1874A, a fiscal intermediary with a contract
under section 1816, and a carrier with a contract under section
1842.
``(2) An eligible entity with a contract under section
1893.
Such term does not include, with respect to activities of a specific
provider of services, physician, practitioner, or supplier an entity
that has no authority under this title or title XI with respect to such
activities and such provider of services, physician, practitioner, or
supplier.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of enactment of this Act.

SEC. 532. ACCESS TO AND PROMPT RESPONSES FROM MEDICARE CONTRACTORS.

(a) In General.--Section 1874A, as added by section 521(a)(1) and
as amended by section 531(b)(1), is amended by adding at the end the
following new subsection:
``(f) Communicating With Beneficiaries and Providers.--
``(1) Communication process.--The Secretary shall develop a
process for medicare contractors to communicate with
beneficiaries and with providers of services, physicians,
practitioners, and suppliers under this title.
``(2) Response to written inquiries.--Each medicare
contractor (as defined in paragraph (5)) shall provide general
written responses (which may be through electronic
transmission) in a clear, concise, and accurate manner to
inquiries by beneficiaries, providers of services, physicians,
practitioners, and suppliers concerning the programs under this
title within 45 business days of the date of receipt of such
inquiries.
``(3) Response to toll-free lines.--The Secretary shall
ensure that medicare contractors provide a toll-free telephone
number at which beneficiaries, providers, physicians,
practitioners, and suppliers may obtain information regarding
billing, coding, claims, coverage, and other appropriate
information under this title.
``(4) Monitoring of contractor responses.--
``(A) In general.--Each medicare contractor shall,
consistent with standards developed by the Secretary
under subparagraph (B)--
``(i) maintain a system for identifying who
provides the information referred to in
paragraphs (2) and (3); and
``(ii) monitor the accuracy, consistency,
and timeliness of the information so provided.
``(B) Development of standards.--
``(i) In general.--The Secretary shall
establish (and publish in the Federal Register)
standards regarding the accuracy, consistency,
and timeliness of the information provided in
response to inquiries under this subsection.
Such standards shall be consistent with the
performance requirements established under
subsection (b)(3).
``(ii) Evaluation.--In conducting
evaluations of individual medicare contractors,
the Secretary shall consider the results of the
monitoring conducted under subparagraph (A)
taking into account as performance requirements
the standards established under clause (i). The
Secretary shall, in consultation with
organizations representing providers of
services, suppliers, and individuals entitled
to benefits under part A or enrolled under part
B, or both, establish standards relating to the
accuracy, consistency, and timeliness of the
information so provided.
``(C) Direct monitoring.--Nothing in this paragraph
shall be construed as preventing the Secretary from
directly monitoring the accuracy, consistency, and
timeliness of the information so provided.
``(5) Medicare contractor defined.--For purposes of this
subsection, the term `medicare contractor' has the meaning
given such term in subsection (e)(3).''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect October 1, 2004.
(c) Authorization of Appropriations.--There are authorized to be
appropriated such sums as are necessary to carry out section 1874A(f)
of the Social Security Act, as added by subsection (a).

SEC. 533. RELIANCE ON GUIDANCE.

(a) In General.--Section 1871(d), as added by section 502(a), is
amended by adding at the end the following new paragraph:
``(2) If--
``(A) a provider of services, physician, practitioner, or
other supplier follows written guidance provided--
``(i) by the Secretary; or
``(ii) by a medicare contractor (as defined in
section 1889(e) and whether in the form of a written
response to a written inquiry under section 1874A(f)(1)
or otherwise) acting within the scope of the
contractor's contract authority,
in response to a written inquiry with respect to the furnishing
of items or services or the submission of a claim for benefits
for such items or services;
``(B) the Secretary determines that--
``(i) the provider of services, physician,
practitioner, or supplier has accurately presented the
circumstances relating to such items, services, and
claim to the Secretary or the contractor in the written
guidance; and
``(ii) there is no indication of fraud or abuse
committed by the provider of services, physician,
practitioner, or supplier against the program under
this title; and
``(C) the guidance was in error;
the provider of services, physician, practitioner, or supplier shall
not be subject to any penalty or interest under this title (or the
provisions of title XI insofar as they relate to this title) relating
to the provision of such items or service or such claim if the provider
of services, physician, practitioner, or supplier reasonably relied on
such guidance. In applying this paragraph with respect to guidance in
the form of general responses to frequently asked questions, the
Secretary retains authority to determine the extent to which such
general responses apply to the particular circumstances of individual
claims.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to penalties imposed on or after the date of enactment of this
Act.

SEC. 534. MEDICARE PROVIDER OMBUDSMAN.

(a) Medicare Provider Ombudsman.--Section 1868 (42 U.S.C. 1395ee)
is amended--
(1) by adding at the end of the heading the following: ``;
medicare provider ombudsman'';
(2) by inserting ``Practicing Physicians Advisory
Council.--(1)'' after ``(a)'';
(3) in paragraph (1), as so redesignated under paragraph
(2), by striking ``in this section'' and inserting ``in this
subsection'';
(4) by redesignating subsections (b) and (c) as paragraphs
(2) and (3), respectively; and
(5) by adding at the end the following new subsection:
``(b) Medicare Provider Ombudsman.--
``(1) In general.--By not later than 1 year after the date
of enactment of the Prescription Drug and Medicare Improvement
Act of 2003, the Secretary shall appoint a Medicare Provider
Ombudsman.
``(2) Duties.--The Medicare Provider Ombudsman shall--
``(A) provide assistance, on a confidential basis,
to entities and individuals providing items and
services, including covered drugs under part D, under
this title with respect to complaints, grievances, and
requests for information concerning the programs under
this title (including provisions of title XI insofar as
they relate to this title and are not administered by
the Office of the Inspector General of the Department
of Health and Human Services) and in the resolution of
unclear or conflicting guidance given by the Secretary
and medicare contractors to such providers of services
and suppliers regarding such programs and provisions
and requirements under this title and such provisions;
and
``(B) submit recommendations to the Secretary for
improvement in the administration of this title and
such provisions, including--
``(i) recommendations to respond to
recurring patterns of confusion in this title
and such provisions (including recommendations
regarding suspending imposition of sanctions
where there is widespread confusion in program
administration), and
``(ii) recommendations to provide for an
appropriate and consistent response (including
not providing for audits) in cases of self-
identified overpayments by providers of
services and suppliers.
``(3) Staff.--The Secretary shall provide the Medicare
Provider Ombudsman with appropriate staff.''.
(b) Funding.--There are authorized to be appropriated to the
Secretary (in appropriate part from the Federal Hospital Insurance
Trust Fund and the Federal Supplementary Medical Insurance Trust Fund
(including the Prescription Drug Account)) to carry out the provisions
of subsection (b) of section 1868 of the Social Security Act (42 U.S.C.
1395ee) (relating to the Medicare Provider Ombudsman), as added by
subsection (a)(5), such sums as are necessary for fiscal year 2004 and
each succeeding fiscal year.

SEC. 535. BENEFICIARY OUTREACH DEMONSTRATION PROGRAMS.

(a) Demonstration on the Provision of Advice and Assistance to
Medicare Beneficiaries at Local Offices of the Social Security
Administration.--
(1) Establishment.--The Secretary shall establish a
demonstration program (in this subsection referred to as the
``demonstration program'') under which medicare specialists
employed by the Department of Health and Human Services provide
advice and assistance to medicare beneficiaries at the location
of existing local offices of the Social Security
Administration.
(2) Locations.--
(A) In general.--The demonstration program shall be
conducted in at least 6 offices or areas. Subject to
subparagraph (B), in selecting such offices and areas,
the Secretary shall provide preference for offices with
a high volume of visits by medicare beneficiaries.
(B) Assistance for rural beneficiaries.--The
Secretary shall provide for the selection of at least 2
rural areas to participate in the demonstration
program. In conducting the demonstration program in
such rural areas, the Secretary shall provide for
medicare specialists to travel among local offices in a
rural area on a scheduled basis.
(3) Duration.--The demonstration program shall be conducted
over a 3-year period.
(4) Evaluation and report.--
(A) Evaluation.--The Secretary shall provide for an
evaluation of the demonstration program. Such
evaluation shall include an analysis of--
(i) utilization of, and beneficiary
satisfaction with, the assistance provided
under the program; and
(ii) the cost-effectiveness of providing
beneficiary assistance through out-stationing
medicare specialists at local social security
offices.
(B) Report.--The Secretary shall submit to Congress
a report on such evaluation and shall include in such
report recommendations regarding the feasibility of
permanently out-stationing Medicare specialists at
local social security offices.
(b) Demonstration on Providing Prior Determinations.--
(1) Establishment.--By not later than 1 year after the date
of enactment of this Act, the Secretary shall establish a
demonstration project to test the administrative feasibility of
providing a process for medicare beneficiaries and entities and
individuals furnishing such beneficiaries with items and
services under title XVIII of the Social Security Act program
to make a request for, and receive, a determination (after an
advance beneficiary notice is issued with respect to the item
or service involved but before such item or service is
furnished to the beneficiary) as to whether the item or service
is covered under such title consistent with the applicable
requirements of section 1862(a)(1)(A) of such Act (42 U.S.C.
1395y(a)(1)(A)) (relating to medical necessity).
(2) Evaluation and report.--
(A) Evaluation.--The Secretary shall provide for an
evaluation of the demonstration program conducted under
paragraph (1).
(B) Report.--By not later than January 1, 2006, the
Secretary shall submit to Congress a report on such
evaluation together with recommendations for such
legislation and administrative actions as the Secretary
considers appropriate.

Subtitle E--Review, Recovery, and Enforcement Reform

SEC. 541. PREPAYMENT REVIEW.

(a) In General.--Section 1874A, as added by section 521(a)(1) and
as amended by sections 531(b)(1) and 532(a), is amended by adding at
the end the following new subsection:
``(g) Conduct of Prepayment Review.--
``(1) Standardization of random prepayment review.--A
medicare administrative contractor shall conduct random
prepayment review only in accordance with a standard protocol
for random prepayment audits developed by the Secretary.
``(2) Limitations on initiation of nonrandom prepayment
review.--A medicare administrative contractor may not initiate
nonrandom prepayment review of a provider of services,
physician, practitioner, or supplier based on the initial
identification by that provider of services, physician,
practitioner, or supplier of an improper billing practice
unless there is a likelihood of sustained or high level of
payment error (as defined by the Secretary).
``(3) Termination of nonrandom prepayment review.--The
Secretary shall establish protocols or standards relating to
the termination, including termination dates, of nonrandom
prepayment review. Such regulations may vary such a termination
date based upon the differences in the circumstances triggering
prepayment review.
``(4) Construction.--Nothing in this subsection shall be
construed as preventing the denial of payments for claims
actually reviewed under a random prepayment review. In the case
of a provider of services, physician, practitioner, or supplier
with respect to which amounts were previously overpaid, nothing
in this subsection shall be construed as limiting the ability
of a medicare administrative contractor to request the periodic
production of records or supporting documentation for a limited
sample of submitted claims to ensure that the previous practice
is not continuing.
``(5) Random prepayment review defined.--For purposes of
this subsection, the term `random prepayment review' means a
demand for the production of records or documentation absent
cause with respect to a claim.''.
(b) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendment made by subsection (a) shall take effect on the date
of enactment of this Act.
(2) Deadline for promulgation of certain regulations.--The
Secretary shall first issue regulations under section 1874A(g)
of the Social Security Act, as added by subsection (a), by not
later than 1 year after the date of enactment of this Act.
(3) Application of standard protocols for random prepayment
review.--Section 1874A(g)(1) of the Social Security Act, as
added by subsection (a), shall apply to random prepayment
reviews conducted on or after such date (not later than 1 year
after the date of enactment of this Act) as the Secretary shall
specify. The Secretary shall develop and publish the standard
protocol under such section by not later than 1 year after the
date of enactment of this Act.

SEC. 542. RECOVERY OF OVERPAYMENTS.

(a) In General.--Section 1874A, as added by section 521(a)(1) and
as amended by sections 531(b)(1), 532(a), and 541(a), is amended by
adding at the end the following new subsection:
``(h) Recovery of Overpayments.--
``(1) Use of repayment plans.--
``(A) In general.--If the repayment, within the
period otherwise permitted by a provider of services,
physician, practitioner, or other supplier, of an
overpayment under this title meets the standards
developed under subparagraph (B), subject to
subparagraph (C), and the provider, physician,
practitioner, or supplier requests the Secretary to
enter into a repayment plan with respect to such
overpayment, the Secretary shall enter into a plan with
the provider, physician, practitioner, or supplier for
the offset or repayment (at the election of the
provider, physician, practitioner, or supplier) of such
overpayment over a period of at least 1 year, but not
longer than 3 years. Interest shall accrue on the
balance through the period of repayment. The repayment
plan shall meet terms and conditions determined to be
appropriate by the Secretary.
``(B) Development of standards.--The Secretary
shall develop standards for the recovery of
overpayments. Such standards shall--
``(i) include a requirement that the
Secretary take into account (and weigh in favor
of the use of a repayment plan) the reliance
(as described in section 1871(d)(2)) by a
provider of services, physician, practitioner,
and supplier on guidance when determining
whether a repayment plan should be offered; and
``(ii) provide for consideration of the
financial hardship imposed on a provider of
services, physician, practitioner, or supplier
in considering such a repayment plan.
In developing standards with regard to financial
hardship with respect to a provider of services,
physician, practitioner, or supplier, the Secretary
shall take into account the amount of the proposed
recovery as a proportion of payments made to that
provider, physician, practitioner, or supplier.
``(C) Exceptions.--Subparagraph (A) shall not apply
if--
``(i) the Secretary has reason to suspect
that the provider of services, physician,
practitioner, or supplier may file for
bankruptcy or otherwise cease to do business or
discontinue participation in the program under
this title; or
``(ii) there is an indication of fraud or
abuse committed against the program.
``(D) Immediate collection if violation of
repayment plan.--If a provider of services, physician,
practitioner, or supplier fails to make a payment in
accordance with a repayment plan under this paragraph,
the Secretary may immediately seek to offset or
otherwise recover the total balance outstanding
(including applicable interest) under the repayment
plan.
``(E) Relation to no fault provision.--Nothing in
this paragraph shall be construed as affecting the
application of section 1870(c) (relating to no
adjustment in the cases of certain overpayments).
``(2) Limitation on recoupment.--
``(A) No recoupment until reconsideration
exercised.--In the case of a provider of services,
physician, practitioner, or supplier that is determined
to have received an overpayment under this title and
that seeks a reconsideration of such determination by a
qualified independent contractor under section 1869(c),
the Secretary may not take any action (or authorize any
other person, including any Medicare contractor, as
defined in subparagraph (C)) to recoup the overpayment
until the date the decision on the reconsideration has
been rendered.
``(B) Payment of interest.--
``(i) Return of recouped amount with
interest in case of reversal.--Insofar as such
determination on appeal against the provider of
services, physician, practitioner, or supplier
is later reversed, the Secretary shall provide
for repayment of the amount recouped plus
interest for the period in which the amount was
recouped.
``(ii) Interest in case of affirmation.--
Insofar as the determination on such appeal is
against the provider of services, physician,
practitioner, or supplier, interest on the
overpayment shall accrue on and after the date
of the original notice of overpayment.
``(iii) Rate of interest.--The rate of
interest under this subparagraph shall be the
rate otherwise applicable under this title in
the case of overpayments.
``(C) Medicare contractor defined.--For purposes of
this subsection, the term `medicare contractor' has the
meaning given such term in section 1889(e).
``(3) Payment audits.--
``(A) Written notice for post-payment audits.--
Subject to subparagraph (C), if a medicare contractor
decides to conduct a post-payment audit of a provider
of services, physician, practitioner, or supplier under
this title, the contractor shall provide the provider
of services, physician, practitioner, or supplier with
written notice (which may be in electronic form) of the
intent to conduct such an audit.
``(B) Explanation of findings for all audits.--
Subject to subparagraph (C), if a medicare contractor
audits a provider of services, physician, practitioner,
or supplier under this title, the contractor shall--
``(i) give the provider of services,
physician, practitioner, or supplier a full
review and explanation of the findings of the
audit in a manner that is understandable to the
provider of services, physician, practitioner,
or supplier and permits the development of an
appropriate corrective action plan;
``(ii) inform the provider of services,
physician, practitioner, or supplier of the
appeal rights under this title as well as
consent settlement options (which are at the
discretion of the Secretary); and
``(iii) give the provider of services,
physician, practitioner, or supplier an
opportunity to provide additional information
to the contractor.
``(C) Exception.--Subparagraphs (A) and (B) shall
not apply if the provision of notice or findings would
compromise pending law enforcement activities, whether
civil or criminal, or reveal findings of law
enforcement-related audits.
``(4) Notice of over-utilization of codes.--The Secretary
shall establish, in consultation with organizations
representing the classes of providers of services, physicians,
practitioners, and suppliers, a process under which the
Secretary provides for notice to classes of providers of
services, physicians, practitioners, and suppliers served by a
medicare contractor in cases in which the contractor has
identified that particular billing codes may be overutilized by
that class of providers of services, physicians, practitioners,
or suppliers under the programs under this title (or provisions
of title XI insofar as they relate to such programs).
``(5) Standard methodology for probe sampling.--The
Secretary shall establish a standard methodology for medicare
administrative contractors to use in selecting a sample of
claims for review in the case of an abnormal billing pattern.
``(6) Consent settlement reforms.--
``(A) In general.--The Secretary may use a consent
settlement (as defined in subparagraph (D)) to settle a
projected overpayment.
``(B) Opportunity to submit additional information
before consent settlement offer.--Before offering a
provider of services, physician, practitioner, or
supplier a consent settlement, the Secretary shall--
``(i) communicate to the provider of
services, physician, practitioner, or supplier
in a nonthreatening manner that, based on a
review of the medical records requested by the
Secretary, a preliminary evaluation of those
records indicates that there would be an
overpayment; and
``(ii) provide for a 45-day period during
which the provider of services, physician,
practitioner, or supplier may furnish
additional information concerning the medical
records for the claims that had been reviewed.
``(C) Consent settlement offer.--The Secretary
shall review any additional information furnished by
the provider of services, physician, practitioner, or
supplier under subparagraph (B)(ii). Taking into
consideration such information, the Secretary shall
determine if there still appears to be an overpayment.
If so, the Secretary--
``(i) shall provide notice of such
determination to the provider of services,
physician, practitioner, or supplier, including
an explanation of the reason for such
determination; and
``(ii) in order to resolve the overpayment,
may offer the provider of services, physician,
practitioner, or supplier--
``(I) the opportunity for a
statistically valid random sample; or
``(II) a consent settlement.
The opportunity provided under clause (ii)(I) does not
waive any appeal rights with respect to the alleged
overpayment involved.
``(D) Consent settlement defined.--For purposes of
this paragraph, the term `consent settlement' means an
agreement between the Secretary and a provider of
services, physician, practitioner, or supplier whereby
both parties agree to settle a projected overpayment
based on less than a statistically valid sample of
claims and the provider of services, physician,
practitioner, or supplier agrees not to appeal the
claims involved.''.
(b) Effective Dates and Deadlines.--
(1) Not later than 1 year after the date of enactment of
this Act, the Secretary shall first--
(A) develop standards for the recovery of
overpayments under section 1874A(h)(1)(B) of the Social
Security Act, as added by subsection (a);
(B) establish the process for notice of
overutilization of billing codes under section
1874A(h)(4) of the Social Security Act, as added by
subsection (a); and
(C) establish a standard methodology for selection
of sample claims for abnormal billing patterns under
section 1874A(h)(5) of the Social Security Act, as
added by subsection (a).
(2) Section 1874A(h)(2) of the Social Security Act, as
added by subsection (a), shall apply to actions taken after the
date that is 1 year after the date of enactment of this Act.
(3) Section 1874A(h)(3) of the Social Security Act, as
added by subsection (a), shall apply to audits initiated after
the date of enactment of this Act.
(4) Section 1874A(h)(6) of the Social Security Act, as
added by subsection (a), shall apply to consent settlements
entered into after the date of enactment of this Act.

SEC. 543. PROCESS FOR CORRECTION OF MINOR ERRORS AND OMISSIONS ON
CLAIMS WITHOUT PURSUING APPEALS PROCESS.

(a) In General.--The Secretary shall develop, in consultation with
appropriate medicare contractors (as defined in section 1889(e) of the
Social Security Act, as added by section 531(d)(1)) and representatives
of providers of services, physicians, practitioners, facilities, and
suppliers, a process whereby, in the case of minor errors or omissions
(as defined by the Secretary) that are detected in the submission of
claims under the programs under title XVIII of such Act, a provider of
services, physician, practitioner, facility, or supplier is given an
opportunity to correct such an error or omission without the need to
initiate an appeal. Such process shall include the ability to resubmit
corrected claims.
(b) Deadline.--Not later than 1 year after the date of enactment of
this Act, the Secretary shall first develop the process under
subsection (a).

SEC. 544. AUTHORITY TO WAIVE A PROGRAM EXCLUSION.

The first sentence of section 1128(c)(3)(B) (42 U.S.C. 1320a-
7(c)(3)(B)) is amended to read as follows: ``Subject to subparagraph
(G), in the case of an exclusion under subsection (a), the minimum
period of exclusion shall be not less than 5 years, except that, upon
the request of an administrator of a Federal health care program (as
defined in section 1128B(f)) who determines that the exclusion would
impose a hardship on beneficiaries of that program, the Secretary may,
after consulting with the Inspector General of the Department of Health
and Human Services, waive the exclusion under subsection (a)(1),
(a)(3), or (a)(4) with respect to that program in the case of an
individual or entity that is the sole community physician or sole
source of essential specialized services in a community.''.

Subtitle F--Other Improvements

SEC. 551. INCLUSION OF ADDITIONAL INFORMATION IN NOTICES TO
BENEFICIARIES ABOUT SKILLED NURSING FACILITY AND HOSPITAL
BENEFITS.

(a) In General.--The Secretary shall provide that in medicare
beneficiary notices provided (under section 1806(a) of the Social
Security Act, 42 U.S.C. 1395b-7(a)) with respect to the provision of
post-hospital extended care services and inpatient hospital services
under part A of title XVIII of the Social Security Act, there shall be
included information on the number of days of coverage of such services
remaining under such part for the medicare beneficiary and spell of
illness involved.
(b) Effective Date.--Subsection (a) shall apply to notices provided
during calendar quarters beginning more than 6 months after the date of
enactment of this Act.

SEC. 552. INFORMATION ON MEDICARE-CERTIFIED SKILLED NURSING FACILITIES
IN HOSPITAL DISCHARGE PLANS.

(a) Availability of Data.--The Secretary shall publicly provide
information that enables hospital discharge planners, medicare
beneficiaries, and the public to identify skilled nursing facilities
that are participating in the medicare program.
(b) Inclusion of Information in Certain Hospital Discharge Plans.--
(1) In general.--Section 1861(ee)(2)(D) (42 U.S.C.
1395x(ee)(2)(D)) is amended--
(A) by striking ``hospice services'' and inserting
``hospice care and post-hospital extended care
services''; and
(B) by inserting before the period at the end the
following: ``and, in the case of individuals who are
likely to need post-hospital extended care services,
the availability of such services through facilities
that participate in the program under this title and
that serve the area in which the patient resides''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to discharge plans made on or after such date as
the Secretary shall specify, but not later than 6 months after
the date the Secretary provides for availability of information
under subsection (a).

SEC. 553. EVALUATION AND MANAGEMENT DOCUMENTATION GUIDELINES
CONSIDERATION.

The Secretary shall ensure, before making changes in documentation
guidelines for, or clinical examples of, or codes to report evaluation
and management physician services under title XVIII of Social Security
Act, that the process used in developing such guidelines, examples, or
codes was widely consultative among physicians, reflects a broad
consensus among specialties, and would allow verification of reported
and furnished services.

SEC. 554. COUNCIL FOR TECHNOLOGY AND INNOVATION.

Section 1868 (42 U.S.C. 1395ee), as amended by section 534(a), is
amended by adding at the end the following new subsection:
``(c) Council for Technology and Innovation.--
``(1) Establishment.--The Secretary shall establish a
Council for Technology and Innovation within the Centers for
Medicare & Medicaid Services (in this section referred to as
`CMS').
``(2) Composition.--The Council shall be composed of senior
CMS staff and clinicians and shall be chaired by the Executive
Coordinator for Technology and Innovation (appointed or
designated under paragraph (4)).
``(3) Duties.--The Council shall coordinate the activities
of coverage, coding, and payment processes under this title
with respect to new technologies and procedures, including new
drug therapies, and shall coordinate the exchange of
information on new technologies between CMS and other entities
that make similar decisions.
``(4) Executive coordinator for technology and
innovation.--The Secretary shall appoint (or designate) a
noncareer appointee (as defined in section 3132(a)(7) of title
5, United States Code) who shall serve as the Executive
Coordinator for Technology and Innovation. Such executive
coordinator shall report to the Administrator of CMS, shall
chair the Council, shall oversee the execution of its duties,
and shall serve as a single point of contact for outside groups
and entities regarding the coverage, coding, and payment
processes under this title.''.

SEC. 555. TREATMENT OF CERTAIN DENTAL CLAIMS.

(a) In General.--Section 1862 (42 U.S.C. 1395y) is amended by
adding after subsection (g) the following new subsection:
``(h)(1) Subject to paragraph (2), a group health plan (as defined
in subsection (a)(1)(A)(v)) providing supplemental or secondary
coverage to individuals also entitled to services under this title
shall not require a medicare claims determination under this title for
dental benefits specifically excluded under subsection (a)(12) as a
condition of making a claims determination for such benefits under the
group health plan.
``(2) A group health plan may require a claims determination under
this title in cases involving or appearing to involve inpatient dental
hospital services or dental services expressly covered under this title
pursuant to actions taken by the Secretary.''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date that is 60 days after the date of enactment of
this Act.

TITLE VI--OTHER PROVISIONS

SEC. 601. INCREASE IN MEDICAID DSH ALLOTMENTS FOR FISCAL YEARS 2004 AND
2005.

(a) In General.--Section 1923(f)(4) (42 U.S.C. 1396r-4(f)(4)) is
amended--
(1) in the paragraph heading, by striking ``fiscal years
2001 and 2002'' and inserting ``certain fiscal years'';
(2) in subparagraph (A)--
(A) in clause (i)--
(i) by striking ``paragraph (2)'' and
inserting ``paragraphs (2) and (3)''; and
(ii) by striking ``and'' at the end;
(B) in clause (ii), by striking the period and
inserting a semicolon; and
(C) by adding at the end the following:
``(iii) for fiscal year 2004, shall be the
DSH allotment determined under paragraph (3)
for that fiscal year increased by the amount
equal to the product of 0.50 and the difference
between--
``(I) the amount that the DSH
allotment would be if the DSH allotment
for the State determined under clause
(ii) were increased, subject to
subparagraph (B) and paragraph (5), by
the percentage change in the Consumer
Price Index for all urban consumers
(all items; U.S. city average) for each
of fiscal years 2002 and 2003; and
``(II) the DSH allotment determined
under paragraph (3) for the State for
fiscal year 2004; and
``(iv) for fiscal year 2005, shall be the
DSH allotment determined under paragraph (3)
for that fiscal year increased by the amount
equal to the product of 0.50 and the difference
between--
``(I) the amount that the DSH
allotment would be if the DSH allotment
for the State determined under clause
(ii) were increased, subject to
subparagraph (B) and paragraph (5), by
the percentage change in the Consumer
Price Index for all urban consumers
(all items; U.S. city average) for each
of fiscal years 2002, 2003, and 2004;
and
``(II) the DSH allotment determined
under paragraph (3) for the State for
fiscal year 2005.''; and
(3) in subparagraph (C)--
(A) in the subparagraph heading, by striking
``after fiscal year 2002'' and inserting ``for other
fiscal years''; and
(B) by striking ``2003 or'' and inserting ``2003,
fiscal year 2006, or''.
(b) DSH Allotment for the District of Columbia.--Section 1923(f)(4)
(42 U.S.C. 1396r-4(f)(4)), as amended by paragraph (1), is amended--
(1) in subparagraph (A), by inserting ``and except as
provided in subparagraph (C)'' after ``paragraph (2)'';
(2) by redesignating subparagraph (C) as subparagraph (D);
and
(3) by inserting after subparagraph (B) the following:
``(C) DSH allotment for the district of columbia.--
``(i) In general.--Notwithstanding
subparagraph (A), the DSH allotment for the
District of Columbia for fiscal year 2004,
shall be determined by substituting ``49'' for
``32'' in the item in the table contained in
paragraph (2) with respect to the DSH allotment
for FY 00 (fiscal year 2000) for the District
of Columbia, and then increasing such
allotment, subject to subparagraph (B) and
paragraph (5), by the percentage change in the
Consumer Price Index for all urban consumers
(all items; U.S. city average) for each of
fiscal years 2000, 2001, 2002, and 2003.
``(ii) No application to allotments after
fiscal year 2004.--The DSH allotment for the
District of Columbia for fiscal year 2003,
fiscal year 2005, or any succeeding fiscal year
shall be determined under paragraph (3) without
regard to the DSH allotment determined under
clause (i).''.
(c) Conforming Amendment.--Section 1923(f)(3) of such Act (42
U.S.C. 1396r-4(f)(3)) is amended by inserting ``, paragraph (4),''
after ``subparagraph (B)''.
(d) Urban Health Provider Adjustment.--
(1) In general.--Beginning with fiscal year 2004,
notwithstanding section 1923(f) of the Social Security Act (42
U.S.C. 1396r-4(f)) and subject to paragraph (3), with respect
to a State, payment adjustments made under title XIX of the
Social Security Act (42 U.S.C. 1396 et seq.) to a hospital
described in paragraph (2) shall be made without regard to the
DSH allotment limitation for the State determined under section
1923(f) of that Act (42 U.S.C. 1396r-4(f)).
(2) Hospital described.--A hospital is described in this
paragraph if the hospital--
(A) is owned or operated by a State (as defined for
purposes of title XIX of the Social Security Act), or
by an instrumentality or a municipal governmental unit
within a State (as so defined) as of January 1, 2003;
and
(B) is located in Marion County, Indiana.
(3) Limitation.--The payment adjustment described in
paragraph (1) for fiscal year 2004 and each fiscal year
thereafter shall not exceed 175 percent of the costs of
furnishing hospital services described in section 1923(g)(1)(A)
of the Social Security Act (42 U.S.C. 1396r-4(g)(1)(A)).

SEC. 602. INCREASE IN FLOOR FOR TREATMENT AS AN EXTREMELY LOW DSH STATE
UNDER THE MEDICAID PROGRAM FOR FISCAL YEARS 2004 AND
2005.

(a) In General.--Section 1923(f)(5) (42 U.S.C. 1396r-4(f)(5)) is
amended--
(1) by striking ``In the case of'' and inserting the
following:
``(A) In general.--In the case of''; and
(2) by adding at the end the following:
``(B) Increase in floor for fiscal years 2004 and
2005.--
``(i) Fiscal year 2004.--In the case of a
State in which the total expenditures under the
State plan (including Federal and State shares)
for disproportionate share hospital adjustments
under this section for fiscal year 2000, as
reported to the Administrator of the Centers
for Medicare & Medicaid Services as of August
31, 2003, is greater than 0 but less than 3
percent of the State's total amount of
expenditures under the State plan for medical
assistance during the fiscal year, the DSH
allotment for fiscal year 2004 shall be
increased to 3 percent of the State's total
amount of expenditures under such plan for such
assistance during such fiscal year.
``(ii) Fiscal year 2005.--In the case of a
State in which the total expenditures under the
State plan (including Federal and State shares)
for disproportionate share hospital adjustments
under this section for fiscal year 2001, as
reported to the Administrator of the Centers
for Medicare & Medicaid Services as of August
31, 2004, is greater than 0 but less than 3
percent of the State's total amount of
expenditures under the State plan for medical
assistance during the fiscal year, the DSH
allotment for fiscal year 2005 shall be the DSH
allotment determined for the State for fiscal
year 2004 (under clause (i) or paragraph (4)
(as applicable)), increased by the percentage
change in the consumer price index for all
urban consumers (all items; U.S. city average)
for fiscal year 2004.
``(iii) No application to allotments after
fiscal year 2005.--The DSH allotment for any
State for fiscal year 2006 or any succeeding
fiscal year shall be determined under this
subsection without regard to the DSH allotments
determined under this subparagraph.''.
(b) Allotment Adjustment.--
(1) In general.--Section 1923(f) of the Social Security Act
(42 U.S.C. 1396r-4(f)) is amended--
(A) by redesignating paragraph (6) as paragraph
(7); and
(B) by inserting after paragraph (5) the following:
``(6) Allotment adjustment.--Only with respect to fiscal
year 2004 or 2005, if a statewide waiver under section 1115
that was implemented on January 1, 1994, is revoked or
terminated before the end of either such fiscal year, the
Secretary shall--
``(A) permit the State whose waiver was revoked or
terminated to submit an amendment to its State plan
that would describe the methodology to be used by the
State (after the effective date of such revocation or
termination) to identify and make payments to
disproportionate share hospitals, including children's
hospitals and institutions for mental diseases or other
mental health facilities (other than State-owned
institutions or facilities), on the basis of the
proportion of patients served by such hospitals that
are low-income patients with special needs; and
``(B) provide for purposes of this subsection for
computation of an appropriate DSH allotment for the
State for fiscal year 2004 or 2005 (or both) that
provides for the maximum amount (permitted consistent
with paragraph (3)(B)(ii)) that does not result in
greater expenditures under this title than would have
been made if such waiver had not been revoked or
terminated.''.
(2) Treatment of institutions for mental diseases.--Section
1923(h)(1) of the Social Security Act (42 U.S.C. 1396r-4(h)(1))
is amended--
(A) in paragraph (1), in the matter preceding
subparagraph (A), by inserting ``(subject to paragraph
(3))'' after ``the lesser of the following''; and
(B) by adding at the end the following new
paragraph:
``(3) Special rule.--The limitation of paragraph (1) shall
not apply in the case of a State to which subsection (f)(6)
applies.''.
(3) Application to hawaii.--Section 1923(f) (42 U.S.C.
1396r-4(f)), as amended by paragraph (1), is amended--
(A) by redesignating paragraph (7) as paragraph
(8); and
(B) by inserting after paragraph (6), the
following:
``(7) Treatment of hawaii as a low-dsh state.--The
Secretary shall compute a DSH allotment for the State of Hawaii
for each of fiscal years 2004 and 2005 in the same manner as
DSH allotments are determined with respect to those States to
which paragraph (5) applies (but without regard to the
requirement under such paragraph that total expenditures under
the State plan for disproportionate share hospital adjustments
for any fiscal year exceeds 0).''.

SEC. 603. INCREASED REPORTING REQUIREMENTS TO ENSURE THE
APPROPRIATENESS OF PAYMENT ADJUSTMENTS TO
DISPROPORTIONATE SHARE HOSPITALS UNDER THE MEDICAID
PROGRAM.

Section 1923 (42 U.S.C. 1396r-4) is amended by adding at the end
the following new subsection:
``(j) Annual Reports Regarding Payment Adjustments.--With respect
to fiscal year 2004 and each fiscal year thereafter, the Secretary
shall require a State, as a condition of receiving a payment under
section 1903(a)(1) with respect to a payment adjustment made under this
section, to submit an annual report that--
``(1) identifies each disproportionate share hospital that
received a payment adjustment under this section for the
preceding fiscal year and the amount of the payment adjustment
made to such hospital for the preceding fiscal year; and
``(2) includes such other information as the Secretary
determines necessary to ensure the appropriateness of the
payment adjustments made under this section for the preceding
fiscal year.''.

SEC. 604. CLARIFICATION OF INCLUSION OF INPATIENT DRUG PRICES CHARGED
TO CERTAIN PUBLIC HOSPITALS IN THE BEST PRICE EXEMPTIONS
FOR THE MEDICAID DRUG REBATE PROGRAM.

(a) In General.--Section 1927(c)(1)(C)(i)(I) of the Social Security
Act (42 U.S.C. 1396r-8(c)(1)(C)(i)(I)) is amended by inserting before
the semicolon the following: ``(including inpatient prices charged to
hospitals described in section 340B(a)(4)(L) of the Public Health
Service Act)''.
(b) Anti-Diversion Protection.--Section 1927(c)(1)(C) of the Social
Security Act (42 U.S.C. 1396r-8(c)(1)(C)) is amended by adding at the
end the following:
``(iii) Application of auditing and
recordkeeping requirements.--With respect to a
covered entity described in section
340B(a)(4)(L) of the Public Health Service Act,
any drug purchased for inpatient use shall be
subject to the auditing and recordkeeping
requirements described in section 340B(a)(5)(C)
of the Public Health Service Act.''.
(c) Effective Date.--The amendments made by this section take
effect on October 1, 2003.

SEC. 605. ASSISTANCE WITH COVERAGE OF LEGAL IMMIGRANTS UNDER THE
MEDICAID PROGRAM AND SCHIP.

(a) Medicaid Program.--Section 1903(v) (42 U.S.C. 1396b(v)) is
amended--
(1) in paragraph (1), by striking ``paragraph (2)'' and
inserting ``paragraphs (2) and (4)''; and
(2) by adding at the end the following new paragraph:
``(4)(A) With respect to any or all of fiscal years 2005 through
2007, a State may elect (in a plan amendment under this title) to
provide medical assistance under this title (including under a waiver
authorized by the Secretary) for aliens who are lawfully residing in
the United States (including battered aliens described in section
431(c) of such Act) and who are otherwise eligible for such assistance,
within either or both of the following eligibility categories:
``(i) Pregnant women.--Women during pregnancy (and during
the 60-day period beginning on the last day of the pregnancy).
``(ii) Children.--Children (as defined under such plan),
including optional targeted low-income children described in
section 1905(u)(2)(B).
``(B)(i) In the case of a State that has elected to provide medical
assistance to a category of aliens under subparagraph (A), no debt
shall accrue under an affidavit of support against any sponsor of such
an alien on the basis of provision of assistance to such category and
the cost of such assistance shall not be considered as an unreimbursed
cost.
``(ii) The provisions of sections 401(a), 402(b), 403, and 421 of
the Personal Responsibility and Work Opportunity Reconciliation Act of
1996 shall not apply to a State that makes an election under
subparagraph (A).''.
(b) SCHIP.--Section 2107(e)(1) (42 U.S.C. 1397gg(e)(1)) is amended
by redesignating subparagraphs (C) and (D) as subparagraph (D) and (E),
respectively, and by inserting after subparagraph (B) the following new
subparagraph:
``(C) Section 1903(v)(4) (relating to optional
coverage of categories of permanent resident alien
children), but only if the State has elected to apply
such section to the category of children under title
XIX and only with respect to any or all of fiscal years
2005 through 2007.''.

SEC. 606. ESTABLISHMENT OF CONSUMER OMBUDSMAN ACCOUNT.

(a) In General.--Section 1817 (42 U.S.C. 1395i) is amended by
adding at the end the following new subsection:
``(i) Consumer Ombudsman Account.--
``(1) Establishment.--There is hereby established in the
Trust Fund an expenditure account to be known as the `Consumer
Ombudsman Account' (in this subsection referred to as the
`Account').
``(2) Appropriated amounts to account for health insurance
information, counseling, and assistance grants.--
``(A) In general.--There are hereby appropriated to
the Account from the Trust Fund for each fiscal year
beginning with fiscal year 2005, the amount described
in subparagraph (B) for such fiscal year for the
purpose of making grants under section 4360 of the
Omnibus Budget Reconciliation Act of 1990.
``(B) Amount described.--For purposes of
subparagraph (A), the amount described in this
subparagraph for a fiscal year is the amount equal to
the product of--
``(i) $1; and
``(ii) the total number of individuals
receiving benefits under this title for the
calendar year ending on December 31 of the
preceding fiscal year.''.
(b) Conforming Amendment.--Section 4360(g) of the Omnibus Budget
Reconciliation Act of 1990 (42 U.S.C. 1395b-4(g)) is amended to read as
follows:
``(g) Funding.--The Secretary shall use amounts appropriated to the
Consumer Ombudsman Account in accordance with section 1817(i) of the
Social Security Act for a fiscal year for making grants under this
section for that fiscal year.''.

SEC. 607. GAO STUDY REGARDING IMPACT OF ASSETS TEST FOR LOW-INCOME
BENEFICIARIES.

(a) Study.--The Comptroller General of the United States shall
conduct a study to determine the extent to which drug utilization and
access to covered drugs for an individual described in subsection (b)
differs from the drug utilization and access to covered drugs of an
individual who qualifies for the transitional assistance prescription
drug card program under section 1807A of the Social Security Act (as
added by section 111) or for the premiums and cost-sharing subsidies
applicable to a qualified medicare beneficiary, a specified low-income
medicare beneficiary, or a qualifying individual under section 1860D-19
of the Social Security Act (as added by section 101).
(b) Individual Described.--An individual is described in this
subsection if the individual does not qualify for the transitional
assistance prescription drug card program under section 1807A of the
Social Security Act or for the premiums and cost-sharing subsidies
applicable to a qualified medicare beneficiary, a specified low-income
medicare beneficiary, or a qualifying individual under section 1860D-19
of the Social Security Act solely as a result of the application of an
assets test to the individual.
(c) Report.--Not later than September 30, 2007, the Comptroller
General shall submit a report to Congress on the study conducted under
subsection (a) that includes such recommendations for legislation as
the Comptroller General determines are appropriate.
(d) Definitions.--In this section:
(1) Covered drugs.--The term ``covered drugs'' has the
meaning given that term in section 1860D(a)(D) of the Social
Security Act.
(2) Qualified medicare beneficiary; specified low-income
medicare beneficiary; qualifying individual.--The terms
``qualified medicare beneficiary'', ``specified low-income
medicare beneficiary'' and ``qualifying individual'' have the
meaning given those terms under section 1860D-19 of the Social
Security Act.

SEC. 608. HEALTH CARE INFRASTRUCTURE IMPROVEMENT.

At the end of the Social Security Act, add the following new title:

``TITLE XXII--HEALTH CARE INFRASTRUCTURE IMPROVEMENT

``SEC. 2201. DEFINITIONS.

``In this title, the following definitions apply:
``(1) Eligible project costs.--The term `eligible project
costs' means amounts substantially all of which are paid by, or
for the account of, an obligor in connection with a project,
including the cost of--
``(A) development phase activities, including
planning, feasibility analysis, revenue forecasting,
environmental study and review, permitting,
architectural engineering and design work, and other
preconstruction activities;
``(B) construction, reconstruction, rehabilitation,
replacement, and acquisition of facilities and real
property (including land related to the project and
improvements to land), environmental mitigation,
construction contingencies, and acquisition of
equipment;
``(C) capitalized interest necessary to meet market
requirements, reasonably required reserve funds,
capital issuance expenses, and other carrying costs
during construction;
``(D) major medical equipment determined to be
appropriate by the Secretary; and
``(E) refinancing projects or activities that are
otherwise eligible for financial assistance under
subparagraphs (A) through (D).
``(2) Federal credit instrument.--The term `Federal credit
instrument' means a secured loan, loan guarantee, or line of
credit authorized to be made available under this title with
respect to a project.
``(3) Investment-grade rating.--The term `investment-grade
rating' means a rating category of BBB minus, Baa3, or higher
assigned by a rating agency to project obligations offered into
the capital markets.
``(4) Lender.--The term `lender' means any non-Federal
qualified institutional buyer (as defined in section
230.144A(a) of title 17, Code of Federal Regulations (or any
successor regulation), known as Rule 144A(a) of the Securities
and Exchange Commission and issued under the Securities Act of
1933 (15 U.S.C. 77a et seq.)), including--
``(A) a qualified retirement plan (as defined in
section 4974(c) of the Internal Revenue Code of 1986)
that is a qualified institutional buyer; and
``(B) a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986) that is a
qualified institutional buyer.
``(5) Line of credit.--The term `line of credit' means an
agreement entered into by the Secretary with an obligor under
section 2204 to provide a direct loan at a future date upon the
occurrence of certain events.
``(6) Loan guarantee.--The term `loan guarantee' means any
guarantee or other pledge by the Secretary to pay all or part
of the principal of and interest on a loan or other debt
obligation issued by an obligor and funded by a lender.
``(7) Local servicer.--The term `local servicer' means a
State or local government or any agency of a State or local
government that is responsible for servicing a Federal credit
instrument on behalf of the Secretary.
``(8) Obligor.--The term `obligor' means a party primarily
liable for payment of the principal of or interest on a Federal
credit instrument, which party may be a corporation,
partnership, joint venture, trust, or governmental entity,
agency, or instrumentality.
``(9) Project.--The term `project' means any project that
is designed to improve the health care infrastructure,
including the construction, renovation, or other capital
improvement of any hospital, medical research facility, or
other medical facility or the purchase of any equipment to be
used in a hospital, research facility, or other medical
research facility.
``(10) Project obligation.--The term `project obligation'
means any note, bond, debenture, lease, installment sale
agreement, or other debt obligation issued or entered into by
an obligor in connection with the financing of a project, other
than a Federal credit instrument.
``(11) Rating agency.--The term `rating agency' means a
bond rating agency identified by the Securities and Exchange
Commission as a Nationally Recognized Statistical Rating
Organization.
``(12) Secured loan.--The term `secured loan' means a
direct loan or other debt obligation issued by an obligor and
funded by the Secretary in connection with the financing of a
project under section 2203.
``(13) State.--The term `State' has the meaning given the
term in section 101 of title 23, United States Code.
``(14) Subsidy amount.--The term `subsidy amount' means the
amount of budget authority sufficient to cover the estimated
long-term cost to the Federal Government of a Federal credit
instrument, calculated on a net present value basis, excluding
administrative costs and any incidental effects on governmental
receipts or outlays in accordance with the provisions of the
Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.).
``(15) Substantial completion.--The term `substantial
completion' means the opening of a project to patients or for
research purposes.

``SEC. 2202. DETERMINATION OF ELIGIBILITY AND PROJECT SELECTION.

``(a) Eligibility.--To be eligible to receive financial assistance
under this title, a project shall meet the following criteria:
``(1) Application.--A State, a local servicer identified
under section 2205(a), or the entity undertaking a project
shall submit a project application to the Secretary.
``(2) Eligible project costs.--To be eligible for
assistance under this title, a project shall have total
eligible project costs that are reasonably anticipated to equal
or exceed $40,000,000.
``(3) Sources of repayments.--Project financing shall be
repayable, in whole or in part, from reliable revenue sources
as described in the application submitted under paragraph (1).
``(4) Public sponsorship of private entities.--In the case
of a project that is undertaken by an entity that is not a
State or local government or an agency or instrumentality of a
State or local government, the project that the entity is
undertaking shall be publicly sponsored or sponsored by an
entity that is described in section 501(c)(3) of the Internal
Revenue Code of 1986 and exempt from tax under section 501(a)
of such Code.
``(b) Selection Among Eligible Projects.--
``(1) Establishment.--The Secretary shall establish
criteria for selecting among projects that meet the eligibility
criteria specified in subsection (a).
``(2) Selection criteria.--
``(A) In general.--The selection criteria shall
include the following:
``(i) The extent to which the project is
nationally or regionally significant, in terms
of expanding or improving the health care
infrastructure of the United States or the
region or in terms of the medical benefit that
the project will have.
``(ii) The creditworthiness of the project,
including a determination by the Secretary that
any financing for the project has appropriate
security features, such as a rate covenant,
credit enhancement requirements, or debt
services coverages, to ensure repayment.
``(iii) The extent to which assistance
under this title would foster innovative
public-private partnerships and attract private
debt or equity investment.
``(iv) The likelihood that assistance under
this title would enable the project to proceed
at an earlier date than the project would
otherwise be able to proceed.
``(v) The extent to which the project uses
or results in new technologies.
``(vi) The amount of budget authority
required to fund the Federal credit instrument
made available under this title.
``(vii) The extent to which the project
helps maintain or protect the environment.
``(B) Specific requirements.--The selection
criteria shall require that a project applicant--
``(i) be engaged in research in the causes,
prevention, and treatment of cancer;
``(ii) be designated as a cancer center for
the National Cancer Institute or be designated
by the State as the official cancer institute
of the State; and
``(iii) be located in a State that, on the
date of enactment of this title, has a
population of less than 3,000,000 individuals.
``(C) Rating letter.--For purposes of subparagraph
(A)(ii), the Secretary shall require each project
applicant to provide a rating letter from at least 1
rating agency indicating that the project's senior
obligations have the potential to achieve an
investment-grade rating with or without credit
enhancement.

``SEC. 2203. SECURED LOANS.

``(a) In General.--
``(1) Agreements.--Subject to paragraphs (2) through (4),
the Secretary may enter into agreements with 1 or more obligors
to make secured loans, the proceeds of which shall be used--
``(A) to finance eligible project costs;
``(B) to refinance interim construction financing
of eligible project costs; or
``(C) to refinance existing debt or prior project
obligations;
of any project selected under section 2202.
``(2) Limitation on refinancing of interim construction
financing.--A loan under paragraph (1) shall not refinance
interim construction financing under paragraph (1)(B) later
than 1 year after the date of substantial completion of the
project.
``(3) Risk assessment.--Before entering into an agreement
for a secured loan under this subsection, the Secretary, in
consultation with each rating agency providing a rating letter
under section 2202(b)(2)(B), shall determine an appropriate
capital reserve subsidy amount for each secured loan, taking
into account such letter.
``(4) Investment-grade rating requirement.--The funding of
a secured loan under this section shall be contingent on the
project's senior obligations receiving an investment-grade
rating, except that--
``(A) the Secretary may fund an amount of the
secured loan not to exceed the capital reserve subsidy
amount determined under paragraph (3) prior to the
obligations receiving an investment-grade rating; and
``(B) the Secretary may fund the remaining portion
of the secured loan only after the obligations have
received an investment-grade rating by at least 1
rating agency.
``(b) Terms and Limitations.--
``(1) In general.--A secured loan under this section with
respect to a project shall be on such terms and conditions and
contain such covenants, representations, warranties, and
requirements (including requirements for audits) as the
Secretary determines appropriate.
``(2) Maximum amount.--The amount of the secured loan shall
not exceed 100 percent of the reasonably anticipated eligible
project costs.
``(3) Payment.--The secured loan--
``(A) shall--
``(i) be payable, in whole or in part, from
reliable revenue sources; and
``(ii) include a rate covenant, coverage
requirement, or similar security feature
supporting the project obligations; and
``(B) may have a lien on revenues described in
subparagraph (A) subject to any lien securing project
obligations.
``(4) Interest rate.--The interest rate on the secured loan
shall be not less than the yield on marketable United States
Treasury securities of a similar maturity to the maturity of
the secured loan on the date of execution of the loan
agreement.
``(5) Maturity date.--The final maturity date of the
secured loan shall be not later than 30 years after the date of
substantial completion of the project.
``(6) Nonsubordination.--The secured loan shall not be
subordinated to the claims of any holder of project obligations
in the event of bankruptcy, insolvency, or liquidation of the
obligor.
``(7) Fees.--The Secretary may establish fees at a level
sufficient to cover all or a portion of the costs to the
Federal Government of making a secured loan under this section.
``(c) Repayment.--
``(1) Schedule.--The Secretary shall establish a repayment
schedule for each secured loan under this section based on the
projected cash flow from project revenues and other repayment
sources.
``(2) Commencement.--Scheduled loan repayments of principal
or interest on a secured loan under this section shall commence
not later than 5 years after the date of substantial completion
of the project.
``(3) Sources of repayment funds.--The sources of funds for
scheduled loan repayments under this section shall include any
revenue generated by the project.
``(4) Deferred payments.--
``(A) Authorization.--If, at any time during the 10
years after the date of substantial completion of the
project, the project is unable to generate sufficient
revenues to pay the scheduled loan repayments of
principal and interest on the secured loan, the
Secretary may, subject to subparagraph (C), allow the
obligor to add unpaid principal and interest to the
outstanding balance of the secured loan.
``(B) Interest.--Any payment deferred under
subparagraph (A) shall--
``(i) continue to accrue interest in
accordance with subsection (b)(4) until fully
repaid; and
``(ii) be scheduled to be amortized over
the remaining term of the loan beginning not
later than 10 years after the date of
substantial completion of the project in
accordance with paragraph (1).
``(C) Criteria.--
``(i) In general.--Any payment deferral
under subparagraph (A) shall be contingent on
the project meeting criteria established by the
Secretary.
``(ii) Repayment standards.--The criteria
established under clause (i) shall include
standards for reasonable assurance of
repayment.
``(5) Prepayment.--
``(A) Use of excess revenues.--Any excess revenues
that remain after satisfying scheduled debt service
requirements on the project obligations and secured
loan and all deposit requirements under the terms of
any trust agreement, bond resolution, reimbursement
agreement, credit agreement, loan agreement, or similar
agreement securing project obligations may be applied
annually to prepay the secured loan without penalty.
``(B) Use of proceeds of refinancing.--The secured
loan may be prepaid at any time without penalty,
regardless of whether such repayment is from the
proceeds of refinancing from non-Federal funding
sources.
``(6) Forgiveness of indebtedness.--The Secretary may
forgive a loan secured under this title under terms and
conditions that are analogous to the loan forgiveness provision
for student loans under part D of title IV of the Higher
Education Act of 1965 (20 U.S.C. 1087a et seq.), except that
the Secretary shall condition such forgiveness on the
establishment by the project of--
``(A) an outreach program for cancer prevention,
early diagnosis, and treatment that provides services
to a substantial majority of the residents of a State
or region, including residents of rural areas;
``(B) an outreach program for cancer prevention,
early diagnosis, and treatment that provides services
to multiple Indian tribes; and
``(C)(i) unique research resources (such as
population databases); or
``(ii) an affiliation with an entity that has
unique research resources.
``(d) Sale of Secured Loans.--
``(1) In general.--Subject to paragraph (2), as soon as
practicable after substantial completion of a project and after
notifying the obligor, the Secretary may sell to another entity
or reoffer into the capital markets a secured loan for the
project if the Secretary determines that the sale or reoffering
can be made on favorable terms.
``(2) Consent of obligor.--In making a sale or reoffering
under paragraph (1), the Secretary may not change the original
terms and conditions of the secured loan without the written
consent of the obligor.
``(e) Loan Guarantees.--
``(1) In general.--The Secretary may provide a loan
guarantee to a lender in lieu of making a secured loan if the
Secretary determines that the budgetary cost of the loan
guarantee is substantially the same as that of a secured loan.
``(2) Terms.--The terms of a guaranteed loan shall be
consistent with the terms set forth in this section for a
secured loan, except that the rate on the guaranteed loan and
any prepayment features shall be negotiated between the obligor
and the lender, with the consent of the Secretary.

``SEC. 2204. LINES OF CREDIT.

``(a) In General.--
``(1) Agreements.--Subject to paragraphs (2) through (4),
the Secretary may enter into agreements to make available lines
of credit to 1 or more obligors in the form of direct loans to
be made by the Secretary at future dates on the occurrence of
certain events for any project selected under section 2202.
``(2) Use of proceeds.--The proceeds of a line of credit
made available under this section shall be available to pay
debt service on project obligations issued to finance eligible
project costs, extraordinary repair and replacement costs,
operation and maintenance expenses, and costs associated with
unexpected Federal or State environmental restrictions.
``(3) Risk assessment.--Before entering into an agreement
for a secured loan under this subsection, the Secretary, in
consultation with each rating agency providing a rating letter
under section 2202(b)(2)(B), shall determine an appropriate
subsidy amount for each secured loan, taking into account such
letter.
``(4) Investment-grade rating requirement.--The funding of
a line of credit under this section shall be contingent on the
project's senior obligations receiving an investment-grade
rating from at least 1 rating agency.
``(b) Terms and Limitations.--
``(1) In general.--A line of credit under this section with
respect to a project shall be on such terms and conditions and
contain such covenants, representations, warranties, and
requirements (including requirements for audits) as the
Secretary determines appropriate.
``(2) Maximum amounts.--
``(A) Total amount.--The total amount of the line
of credit shall not exceed 33 percent of the reasonably
anticipated eligible project costs.
``(B) 1-year draws.--The amount drawn in any 1 year
shall not exceed 20 percent of the total amount of the
line of credit.
``(3) Draws.--Any draw on the line of credit shall
represent a direct loan and shall be made only if net revenues
from the project (including capitalized interest, any debt
service reserve fund, and any other available reserve) are
insufficient to pay the costs specified in subsection (a)(2).
``(4) Interest rate.--The interest rate on a direct loan
resulting from a draw on the line of credit shall be not less
than the yield on 30-year marketable United States Treasury
securities as of the date on which the line of credit is
obligated.
``(5) Security.--The line of credit--
``(A) shall--
``(i) be payable, in whole or in part, from
reliable revenue sources; and
``(ii) include a rate covenant, coverage
requirement, or similar security feature
supporting the project obligations; and
``(B) may have a lien on revenues described in
subparagraph (A) subject to any lien securing project
obligations.
``(6) Period of availability.--The line of credit shall be
available during the period beginning on the date of
substantial completion of the project and ending not later than
10 years after that date.
``(7) Rights of third-party creditors.--
``(A) Against federal government.--A third-party
creditor of the obligor shall not have any right
against the Federal Government with respect to any draw
on the line of credit.
``(B) Assignment.--An obligor may assign the line
of credit to 1 or more lenders or to a trustee on the
lenders' behalf.
``(8) Nonsubordination.--A direct loan under this section
shall not be subordinated to the claims of any holder of
project obligations in the event of bankruptcy, insolvency, or
liquidation of the obligor.
``(9) Fees.--The Secretary may establish fees at a level
sufficient to cover all or a portion of the costs to the
Federal Government of providing a line of credit under this
section.
``(10) Relationship to other credit instruments.--A project
that receives a line of credit under this section also shall
not receive a secured loan or loan guarantee under section 2203
of an amount that, combined with the amount of the line of
credit, exceeds 100 percent of eligible project costs.
``(c) Repayment.--
``(1) Terms and conditions.--The Secretary shall establish
repayment terms and conditions for each direct loan under this
section based on the projected cash flow from project revenues
and other repayment sources.
``(2) Timing.--All scheduled repayments of principal or
interest on a direct loan under this section shall commence not
later than 5 years after the end of the period of availability
specified in subsection (b)(6) and be fully repaid, with
interest, by the date that is 25 years after the end of the
period of availability specified in subsection (b)(6).
``(3) Sources of repayment funds.--The sources of funds for
scheduled loan repayments under this section shall include
reliable revenue sources.

``SEC. 2205. PROJECT SERVICING.

``(a) Requirement.--The State in which a project that receives
financial assistance under this title is located may identify a local
servicer to assist the Secretary in servicing the Federal credit
instrument made available under this title.
``(b) Agency; Fees.--If a State identifies a local servicer under
subsection (a), the local servicer--
``(1) shall act as the agent for the Secretary; and
``(2) may receive a servicing fee, subject to approval by
the Secretary.
``(c) Liability.--A local servicer identified under subsection (a)
shall not be liable for the obligations of the obligor to the Secretary
or any lender.
``(d) Assistance From Expert Firms.--The Secretary may retain the
services of expert firms in the field of project finance to assist in
the underwriting and servicing of Federal credit instruments.

``SEC. 2206. STATE AND LOCAL PERMITS.

``The provision of financial assistance under this title with
respect to a project shall not--
``(1) relieve any recipient of the assistance of any
obligation to obtain any required State or local permit or
approval with respect to the project;
``(2) limit the right of any unit of State or local
government to approve or regulate any rate of return on private
equity invested in the project; or
``(3) otherwise supersede any State or local law (including
any regulation) applicable to the construction or operation of
the project.

``SEC. 2207. REGULATIONS.

``The Secretary may issue such regulations as the Secretary
determines appropriate to carry out this title.

``SEC. 2208. FUNDING.

``(a) Funding.--
``(1) In general.--There are authorized to be appropriated
to carry out this title, $49,000,000 to remain available during
the period beginning on July 1, 2004 and ending on September
30, 2008.
``(2) Administrative costs.--From funds made available
under paragraph (1), the Secretary may use, for the
administration of this title, not more than $2,000,000 for each
of fiscal years 2004 through 2008.
``(b) Contract Authority.--Notwithstanding any other provision of
law, approval by the Secretary of a Federal credit instrument that uses
funds made available under this title shall be deemed to be acceptance
by the United States of a contractual obligation to fund the Federal
credit instrument.
``(c) Availability.--Amounts appropriated under this section shall
be available for obligation on July 1, 2004.

``SEC. 2209. REPORT TO CONGRESS.

``Not later than 4 years after the date of enactment of this title,
the Secretary shall submit to Congress a report summarizing the
financial performance of the projects that are receiving, or have
received, assistance under this title, including a recommendation as to
whether the objectives of this title are best served--
``(1) by continuing the program under the authority of the
Secretary;
``(2) by establishing a Government corporation or
Government-sponsored enterprise to administer the program; or
``(3) by phasing out the program and relying on the capital
markets to fund the types of infrastructure investments
assisted by this title without Federal participation.''.

SEC. 609. CAPITAL INFRASTRUCTURE REVOLVING LOAN PROGRAM.

(a) In General.--Part A of title XVI of the Public Health Service
Act (42 U.S.C. 300q et seq.) is amended by adding at the end the
following new section:

``capital infrastructure revolving loan program

``Sec. 1603. (a) Authority To Make and Guarantee Loans.--
``(1) Authority to make loans.--The Secretary may make
loans from the fund established under section 1602(d) to any
rural entity for projects for capital improvements, including--
``(A) the acquisition of land necessary for the
capital improvements;
``(B) the renovation or modernization of any
building;
``(C) the acquisition or repair of fixed or major
movable equipment; and
``(D) such other project expenses as the Secretary
determines appropriate.
``(2) Authority to guarantee loans.--
``(A) In general.--The Secretary may guarantee the
payment of principal and interest for loans made to
rural entities for projects for any capital improvement
described in paragraph (1) to any non-Federal lender.
``(B) Interest subsidies.--In the case of a
guarantee of any loan made to a rural entity under
subparagraph (A), the Secretary may pay to the holder
of such loan, for and on behalf of the project for
which the loan was made, amounts sufficient to reduce
(by not more than 3 percent) the net effective interest
rate otherwise payable on such loan.
``(b) Amount of Loan.--The principal amount of a loan directly made
or guaranteed under subsection (a) for a project for capital
improvement may not exceed $5,000,000.
``(c) Funding Limitations.--
``(1) Government credit subsidy exposure.--The total of the
Government credit subsidy exposure under the Credit Reform Act
of 1990 scoring protocol with respect to the loans outstanding
at any time with respect to which guarantees have been issued,
or which have been directly made, under subsection (a) may not
exceed $50,000,000 per year.
``(2) Total amounts.--Subject to paragraph (1), the total
of the principal amount of all loans directly made or
guaranteed under subsection (a) may not exceed $250,000,000 per
year.
``(d) Capital Assessment and Planning Grants.--
``(1) Nonrepayable grants.--Subject to paragraph (2), the
Secretary may make a grant to a rural entity, in an amount not
to exceed $50,000, for purposes of capital assessment and
business planning.
``(2) Limitation.--The cumulative total of grants awarded
under this subsection may not exceed $2,500,000 per year.
``(e) Termination of Authority.--The Secretary may not directly
make or guarantee any loan under subsection (a) or make a grant under
subsection (d) after September 30, 2008.''.
(b) Rural Entity Defined.--Section 1624 of the Public Health
Service Act (42 U.S.C. 300s-3) is amended by adding at the end the
following new paragraph:
``(14)(A) The term `rural entity' includes--
``(i) a rural health clinic, as defined in section
1861(aa)(2) of the Social Security Act;
``(ii) any medical facility with at least 1 bed,
but with less than 50 beds, that is located in--
``(I) a county that is not part of a
metropolitan statistical area; or
``(II) a rural census tract of a
metropolitan statistical area (as determined
under the most recent modification of the
Goldsmith Modification, originally published in
the Federal Register on February 27, 1992 (57
Fed. Reg. 6725));
``(iii) a hospital that is classified as a rural,
regional, or national referral center under section
1886(d)(5)(C) of the Social Security Act; and
``(iv) a hospital that is a sole community hospital
(as defined in section 1886(d)(5)(D)(iii) of the Social
Security Act).
``(B) For purposes of subparagraph (A), the fact that a
clinic, facility, or hospital has been geographically
reclassified under the medicare program under title XVIII of
the Social Security Act shall not preclude a hospital from
being considered a rural entity under clause (i) or (ii) of
subparagraph (A).''.
(c) Conforming Amendments.--Section 1602 of the Public Health
Service Act (42 U.S.C. 300q-2) is amended--
(1) in subsection (b)(2)(D), by inserting ``or
1603(a)(2)(B)'' after ``1601(a)(2)(B)''; and
(2) in subsection (d)--
(A) in paragraph (1)(C), by striking ``section
1601(a)(2)(B)'' and inserting ``sections 1601(a)(2)(B)
and 1603(a)(2)(B)''; and
(B) in paragraph (2)(A), by inserting ``or
1603(a)(2)(B)'' after ``1601(a)(2)(B)''.

SEC. 610. FEDERAL REIMBURSEMENT OF EMERGENCY HEALTH SERVICES FURNISHED
TO UNDOCUMENTED ALIENS.

(a) Total Amount Available for Allotment.--There is appropriated,
out of any funds in the Treasury not otherwise appropriated,
$250,000,000 for each of fiscal years 2005 through 2008, for the
purpose of making allotments under this section to States described in
paragraph (1) or (2) of subsection (b). Funds appropriated under the
preceding sentence shall remain available until expended.
(b) State Allotments.--
(1) Based on percentage of undocumented aliens.--
(A) In general.--Out of the amount appropriated
under subsection (a) for a fiscal year, the Secretary
shall use $167,000,000 of such amount to make
allotments for such fiscal year in accordance with
subparagraph (B).
(B) Formula.--The amount of the allotment for each
State for a fiscal year shall be equal to the product
of--
(i) the total amount available for
allotments under this paragraph for the fiscal
year; and
(ii) the percentage of undocumented aliens
residing in the State with respect to the total
number of such aliens residing in all States,
as determined by the Statistics Division of the
Immigration and Naturalization Service, as of
January 2003, based on the 2000 decennial
census.
(2) Based on number of undocumented alien apprehension
states.--
(A) In general.--Out of the amount appropriated
under subsection (a) for a fiscal year, the Secretary
shall use $83,000,000 of such amount to make allotments
for such fiscal year for each of the 6 States with the
highest number of undocumented alien apprehensions for
such fiscal year.
(B) Determination of allotments.--The amount of the
allotment for each State described in subparagraph (A)
for a fiscal year shall bear the same ratio to the
total amount available for allotments under this
paragraph for the fiscal year as the ratio of the
number of undocumented alien apprehensions in the State
in that fiscal year bears to the total of such numbers
for all such States for such fiscal year.
(C) Data.--For purposes of this paragraph, the
highest number of undocumented alien apprehensions for
a fiscal year shall be based on the 4 most recent
quarterly apprehension rates for undocumented aliens in
such States, as reported by the Immigration and
Naturalization Service.
(3) Rule of construction.--Nothing in this section shall be
construed as prohibiting a State that is described in both of
paragraphs (1) and (2) from receiving an allotment under both
paragraphs for a fiscal year.
(c) Use of Funds.--
(1) Authority to make payments.--From the allotments made
for a State under subsection (b) for a fiscal year, the
Secretary shall pay directly to local governments, hospitals,
or other providers located in the State (including providers of
services received through an Indian Health Service facility
whether operated by the Indian Health Service or by an Indian
tribe or tribal organization) that provide uncompensated
emergency health services furnished to undocumented aliens
during that fiscal year, and to the State, such amounts
(subject to the total amount available from such allotments) as
the local governments, hospitals, providers, or State
demonstrate were incurred for the provision of such services
during that fiscal year.
(2) Limitation on state use of funds.--Funds paid to a
State from allotments made under subsection (b) for a fiscal
year may only be used for making payments to local governments,
hospitals, or other providers for costs incurred in providing
emergency health services to undocumented aliens or for State
costs incurred with respect to the provision of emergency
health services to such aliens.
(3) Inclusion of costs incurred with respect to certain
aliens.--Uncompensated emergency health services furnished to
aliens who have been allowed to enter the United States for the
sole purpose of receiving emergency health services may be
included in the determination of costs incurred by a State,
local government, hospital, or other provider with respect to
the provision of such services.
(d) Applications; Advance Payments.--
(1) Deadline for establishment of application process.--24
(A) In general.--Not later than September 1, 2004, the
Secretary shall establish a process under which States, local
governments, hospitals, or other providers located in the State
may apply for payments from allotments made under subsection
(b) for a fiscal year for uncompensated emergency health
services furnished to undocumented aliens during that fiscal
year.
(B) Inclusion of measures to combat fraud.--The
Secretary shall include in the process established
under subparagraph (A) measures to ensure that
fraudulent payments are not made from the allotments
determined under subsection (b).
(2) Advance payment; retrospective adjustment.--The process
established under paragraph (1) shall allow for making payments
under this section for each quarter of a fiscal year on the
basis of advance estimates of expenditures submitted by
applicants for such payments and such other investigation as
the Secretary may find necessary, and for making reductions or
increases in the payments as necessary to adjust for any
overpayment or underpayment for prior quarters of such fiscal
year.
(e) Definitions.--In this section:
(1) Hospital.--The term ``hospital'' has the meaning given
such term in section 1861(e) of the Social Security Act (42
U.S.C. 1395x(e)).
(2) Indian tribe; tribal organization.--The terms ``Indian
tribe'' and ``tribal organization'' have the meanings given
such terms in section 4 of the Indian Health Care Improvement
Act (25 U.S.C. 1603).
(3) Provider.--The term ``provider'' includes a physician,
any other health care professional licensed under State law,
and any other entity that furnishes emergency health services,
including ambulance services.
(4) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
(5) State.--The term ``State'' means the 50 States and the
District of Columbia.

SEC. 611. INCREASE IN APPROPRIATION TO THE HEALTH CARE FRAUD AND ABUSE
CONTROL ACCOUNT.

Section 1817(k)(3)(A) (42 U.S.C. 1395i(k)(3)(A)) is amended--
(1) in clause (i)--
(A) in subclause (II), by striking ``and'' at the
end; and
(B) by striking subclause (III), and inserting the
following new subclauses:
``(III) for fiscal year 2004, the
limit for fiscal year 2003 increased by
$10,000,000;
``(IV) for fiscal year 2005, the
limit for fiscal year 2003 increased by
$15,000,000;
``(V) for fiscal year 2006, the
limit for fiscal year 2003 increased by
$25,000,000; and
``(VI) for each fiscal year after
fiscal year 2006, the limit for fiscal
year 2003.''; and
(2) in clause (ii)--
(A) in subclause (VI), by striking ``and'' at the
end;
(B) in subclause (VII)--
(i) by striking ``each fiscal year after
fiscal year 2002'' and inserting ``fiscal year
2003''; and
(ii) by striking the period and inserting a
semicolon; and
(3) by adding at the end the following:
``(VIII) for fiscal year 2004,
$170,000,000;
``(IX) for fiscal year 2005,
$175,000,000;
``(X) for fiscal year 2006,
$185,000,000; and
``(XI) for each fiscal year after
fiscal year 2006, not less than
$150,000,000 and not more than
$160,000,000.''.

SEC. 612. INCREASE IN CIVIL PENALTIES UNDER THE FALSE CLAIMS ACT.

(a) In General.--Section 3729(a) of title 31, United States Code,
is amended--
(1) by striking ``$5,000'' and inserting ``$7,500''; and
(2) by striking ``$10,000'' and inserting ``$15,000''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to violations occurring on or after January 1, 2004.

SEC. 613. INCREASE IN CIVIL MONETARY PENALTIES UNDER THE SOCIAL
SECURITY ACT.

(a) In General.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)), in the
matter following paragraph (7), is amended--
(1) by striking ``$10,000'' each place it appears and
inserting ``$12,500'';
(2) by striking ``$15,000'' and inserting ``$18,750''; and
(3) striking ``$50,000'' and inserting ``$62,500''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to violations occurring on or after January 1, 2004.

SEC. 614. EXTENSION OF CUSTOMS USER FEES.

Section 13031(j)(3) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended by striking
``September 30, 2003'' and inserting ``September 30, 2013''.

SEC. 615. REIMBURSEMENT FOR FEDERALLY QUALIFIED HEALTH CENTERS
PARTICIPATING IN MEDICARE MANAGED CARE.

(a) Reimbursement.--
(1) In general.--Section 1833(a)(3) (42 U.S.C. 1395l(a)(3))
is amended to read as follows:
``(3) in the case of services described in section
1832(a)(2)(D)--
``(A) except as provided in subparagraph (B), the
costs which are reasonable and related to the cost of
furnishing such services or which are based on such
other tests of reasonableness as the Secretary may
prescribe in regulations, including those authorized
under section 1861(v)(1)(A), less the amount a provider
may charge as described in clause (ii) of section
1866(a)(2)(A), but in no case may the payment for such
services (other than for items and services described
in section 1861(s)(10)(A)) exceed 80 percent of such
costs; or
``(B) with respect to the services described in
clause (ii) of section 1832(a)(2)(D) that are furnished
to an individual enrolled with a MedicareAdvantage plan
under part C pursuant to a written agreement described
in section 1853(j), the amount by which--
``(i) the amount of payment that would have
otherwise been provided under subparagraph (A)
(calculated as if `100 percent' were
substituted for `80 percent' in such
subparagraph) for such services if the
individual had not been so enrolled; exceeds
``(ii) the amount of the payments received
under such written agreement for such services
(not including any financial incentives
provided for in such agreement such as risk
pool payments, bonuses, or withholds),
less the amount the Federally qualified health center
may charge as described in section 1857(e)(3)(C);''.
(b) Continuation of MedicareAdvantage Monthly Payments.--
(1) In general.--Section 1853 (42 U.S.C. 1395w-23), as
amended by this Act, is amended by adding at the end the
following new subsection:
``(j) Payment Rule for Federally Qualified Health Center
Services.--If an individual who is enrolled with a MedicareAdvantage
plan under this part receives a service from a Federally qualified
health center that has a written agreement with such plan for providing
such a service (including any agreement required under section
1857(e)(3))--
``(1) the Secretary shall pay the amount determined under
section 1833(a)(3)(B) directly to the Federally qualified
health center not less frequently than quarterly; and
``(2) the Secretary shall not reduce the amount of the
monthly payments to the MedicareAdvantage plan made under
section 1853(a) as a result of the application of paragraph
(1).''.
(2) Conforming amendments.--
(A) Paragraphs (1) and (2) of section 1851(i) (42
U.S.C. 1395w-21(i)(1)), as amended by this Act, are
each amended by inserting ``1853(j),'' after
``1853(i),''.
(B) Section 1853(c)(5) is amended by striking
``subsections (a)(3)(C)(iii) and (i)'' and inserting
``subsections (a)(3)(C)(iii), (i), and (j)(1)''.
(c) Additional MedicareAdvantage Contract Requirements.--Section
1857(e) (42 U.S.C. 1395w-27(e)) is amended by adding at the end the
following new paragraph:
``(3) Agreements with federally qualified health centers.--
``(A) Payment levels and amounts.--A contract under
this part shall require the MedicareAdvantage plan to
provide, in any contract between the plan and a
Federally qualified health center, for a level and
amount of payment to the Federally qualified health
center for services provided by such health center that
is not less than the level and amount of payment that
the plan would make for such services if the services
had been furnished by a provider of services that was
not a Federally qualified health center.
``(B) Cost-sharing.--Under the written agreement
described in subparagraph (A), a Federally qualified
health center must accept the MedicareAdvantage
contract price plus the Federal payment provided for in
section 1833(a)(3)(B) as payment in full for services
covered by the contract, except that such a health
center may collect any amount of cost-sharing permitted
under the contract under this part, so long as the
amounts of any deductible, coinsurance, or copayment
comply with the requirements under section 1854(e).''.
(d) Safe Harbor From Antikickback Prohibition.--Section 1128B(b)(3)
(42 U.S.C. 1320a-7b(b)(3)) is amended--
(1) in subparagraph (E), by striking ``and'' after the
semicolon at the end;
(2) in subparagraph (F), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(G) any remuneration between a Federally
qualified health center (or an entity controlled by
such a health center) and a MedicareAdvantage plan
pursuant to the written agreement described in section
1853(j).''.
(e) Effective Date.--The amendments made by this section shall
apply to services provided on or after January 1, 2006, and contract
years beginning on or after such date.

SEC. 616. PROVISION OF INFORMATION ON ADVANCE DIRECTIVES.

Section 1804(c) of the Social Security Act (42 U.S.C. 1395b-2(c))
is amended--
(1) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively;
(2) in the matter preceding subparagraph (A), as so
redesignated, by striking ``The notice'' and inserting ``(1)
The notice''; and
(3) by adding at the end the following:
``(2)(A) The Secretary shall annually provide each medicare
beneficiary with information concerning advance directives. Such
information shall be provided by the Secretary as part of the Medicare
and You handbook that is provided to each such beneficiary. Such
handbook shall include a separate section on advanced directives and
specific details on living wills and the durable power of attorney for
health care. The Secretary shall ensure that the introductory letter
that accompanies such handbook contain a statement concerning the
inclusion of such information.
``(B) In this section:
``(i) The term `advance directive' has the meaning given
such term in section 1866(f)(3).
``(ii) The term `medicare beneficiary' means an individual
who is entitled to, or enrolled for, benefits under part A or
enrolled under part B, of this title.''.

SEC. 617. SENSE OF THE SENATE REGARDING IMPLEMENTATION OF THE
PRESCRIPTION DRUG AND MEDICARE IMPROVEMENT ACT OF 2003.

(a) In General.--It is the sense of the Senate that the Committee
on Finance of the Senate should hold not less than 4 hearings to
monitor implementation of the Prescription Drug and Medicare
Improvement Act of 2003 (hereinafter in this section referred to as the
``Act'') during which the Secretary or his designee should testify
before the Committee.
(b) Initial Hearing.--It is the sense of the Senate that the first
hearing described in subsection (a) should be held not later than 60
days after the date of the enactment the Act. At the hearing, the
Secretary or his designee should submit written testimony and testify
before the Committee on Finance of the Senate on the following issues:
(1) The progress toward implementation of the prescription
drug discount card under section 111 of the Act.
(2) Development of the blueprint that will direct the
implementation of the provisions of the Act, including the
implementation of title I (Medicare Prescription Drug Benefit),
title II (MedicareAdvantage), and title III (Center for
Medicare Choices) of the Act.
(3) Any problems that will impede the timely implementation
of the Act.
(4) The overall progress toward implementation of the Act.
(c) Subsequent Hearings.--It is the sense of the Senate that the
additional hearings described in subsection (a) should be held in each
of May 2004, October 2004, and May 2005. At each hearing, the Secretary
or his designee should submit written testimony and testify before the
Committee on Finance of the Senate on the following issues:
(1) Progress on implementation of title I (Medicare
Prescription Drug Benefit), title II (MedicareAdvantage), and
title III (Center for Medicare Choices) of the Act.
(2) Any problems that will impede timely implementation of
the Act.

SEC. 618. EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION PROJECTS.

The last sentence of section 9215(a) of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (42 U.S.C. 1395b-1 note), as
previously amended, is amended by striking ``December 31, 2004, and
inserting ``December 31, 2006.

SEC. 619. STUDY ON MAKING PRESCRIPTION PHARMACEUTICAL INFORMATION
ACCESSIBLE FOR BLIND AND VISUALLY-IMPAIRED INDIVIDUALS.

(a) Study.--
(1) In general.--The Secretary of Health and Human Services
shall undertake a study of how to make prescription
pharmaceutical information, including drug labels and usage
instructions, accessible to blind and visually-impaired
individuals.
(2) Study to include existing and emerging technologies.--
The study under paragraph (1) shall include a review of
existing and emerging technologies, including assistive
technology, that makes essential information on the content and
prescribed use of pharmaceutical medicines available in a
usable format for blind and visually-impaired individuals.
(b) Report.--
(1) In general.--Not later than 18 months after the date of
the enactment of this Act, the Secretary of Health and Human
Services shall submit a report to Congress on the study
required under subsection (a).
(2) Contents of report.--The report required under
subsection (a) shall include recommendations for the
implementation of usable formats for making prescription
pharmaceutical information available to blind and visually-
impaired individuals and an estimate of the costs associated
with the implementation of each format.

SEC. 620. HEALTH CARE THAT WORKS FOR ALL AMERICANS-CITIZENS HEALTH CARE
WORKING GROUP.

(a) Findings.--Congress finds the following:
(1) In order to improve the health care system, the
American public must engage in an informed national public
debate to make choices about the services they want covered,
what health care coverage they want, and how they are willing
to pay for coverage.
(2) More than a trillion dollars annually is spent on the
health care system, yet--
(A) 41,000,000 Americans are uninsured;
(B) insured individuals do not always have access
to essential, effective services to improve and
maintain their health; and
(C) employers, who cover over 170,000,000
Americans, find providing coverage increasingly
difficult because of rising costs and double digit
premium increases.
(3) Despite increases in medical care spending that are
greater than the rate of inflation, population growth, and
Gross Domestic Product growth, there has not been a
commensurate improvement in our health status as a nation.
(4) Health care costs for even just 1 member of a family
can be catastrophic, resulting in medical bills potentially
harming the economic stability of the entire family.
(5) Common life occurrences can jeopardize the ability of a
family to retain private coverage or jeopardize access to
public coverage.
(6) Innovations in health care access, coverage, and
quality of care, including the use of technology, have often
come from States, local communities, and private sector
organizations, but more creative policies could tap this
potential.
(7) Despite our Nation's wealth, the health care system
does not provide coverage to all Americans who want it.
(b) Purposes.--The purposes of this Act are--
(1) to provide for a nationwide public debate about
improving the health care system to provide every American with
the ability to obtain quality, affordable health care coverage;
and
(2) to provide for a vote by Congress on the
recommendations that result from the debate.
(c) Establishment.--The Secretary, acting through the Agency for
Healthcare Research and Quality, shall establish an entity to be known
as the Citizens' Health Care Working Group (referred to in this Act as
the ``Working Group'').
(d) Appointment.--Not later than 45 days after the date of
enactment of this Act, the Speaker and Minority Leader of the House of
Representatives and the Majority Leader and Minority Leader of the
Senate (in this section referred to as the ``leadership'') shall each
appoint individuals to serve as members of the Working Group in
accordance with subsections (e), (f), and (g).
(e) Membership Criteria.--
(1) Appointed members.--
(A) Separate appointments.--The Speaker of the
House of Representatives jointly with the Minority
Leader of the House of Representatives, and the
Majority Leader of the Senate jointly with the Minority
Leader of the Senate, shall each appoint 1 member of
the Working Group described in subparagraphs (A), (G),
(J), (K), and (M) of paragraph (2).
(B) Joint appointments.--Members of the Working
Group described in subparagraphs (B), (C), (D), (E),
(F), (I), and (N) of paragraph (2) shall be appointed
jointly by the leadership.
(C) Combined appointments.--Members of the Working
Group described in subparagraphs (H) and (L) shall be
appointed in the following manner:
(i) One member of the Working Group in each
of such subparagraphs shall be appointed
jointly by the leadership.
(ii) The remaining appointments of the
members in each of such subparagraphs shall be
divided equally such that the Speaker of the
House of Representatives jointly with the
Minority Leader of the House of
Representatives, and the Majority Leader of the
Senate jointly with the Minority Leader of the
Senate each appoint an equal number of members.
(2) Categories of appointed members.--Members of the
Working Group shall be appointed as follows:
(A) 2 members shall be patients or family members
of patients who, at least 1 year prior to the date of
enactment of this Act, have had no health insurance.
(B) 1 member shall be a representative of children.
(C) 1 member shall be a representative of the
mentally ill.
(D) 1 member shall be a representative of the
disabled.
(E) 1 member shall be over the age of 65 and a
beneficiary under the medicare program established
under title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.).
(F) 1 member shall be a recipient of benefits under
the medicaid program under title XIX of the Social
Security Act (42 U.S.C. 1396 et seq.).
(G) 2 members shall be State health officials.
(H) 3 members shall be employers, including--
(i) 1 large employer (an employer who
employed 50 or more employees on business days
during the preceding calendar year and who
employed at least 50 employees on the first of
the year);
(ii) 1 small employer (an employer who
employed an average of at least 2 employees but
less than 50 employees on business days in the
preceding calendar year and who employs at
least 2 employees on the first of the year);
and
(iii) 1 multi-state employer.
(I) 1 member shall be a representative of labor.
(J) 2 members shall be health insurance issuers.
(K) 2 members shall be health care providers.
(L) 5 members shall be appointed as follows:
(i) 1 economist.
(ii) 1 academician.
(iii) 1 health policy researcher.
(iv) 1 individual with expertise in
pharmacoeconomics.
(v) 1 health technology expert.
(M) 2 members shall be representatives of community
leaders who have developed State or local community
solutions to the problems addressed by the Working
Group.
(N) 1 member shall be a representative of a medical
school.
(3) Secretary.--The Secretary, or the designee of the
Secretary, shall be a member of the Working Group.
(f) Prohibited Appointments.--Members of the Working Group shall
not include members of Congress or other elected government officials
(Federal, State, or local) other than those individuals specified in
subsection (e). To the extent possible, individuals appointed to the
Working Group shall have used the health care system within the
previous 2 years and shall not be paid employees or representatives of
associations or advocacy organizations involved in the health care
system.
(g) Appointment Criteria.--
(1) House of representatives.--The Speaker and Minority
Leader of the House of Representatives shall make the
appointments described in subsection (d) in consultation with
the chairperson and ranking member of the following committees
of the House of Representatives:
(A) The Committee on Ways and Means.
(B) The Committee on Energy and Commerce.
(C) The Committee on Education and the Workforce.
(2) Senate.--The Majority Leader and Minority Leader of the
Senate shall make the appointments described in subsection (d)
in consultation with the chairperson and ranking member of the
following committees of the Senate:
(A) The Committee on Finance.
(B) The Committee on Health, Education, Labor, and
Pensions.
(h) Period of Appointment.--Members of the Working Group shall be
appointed for a term of 2 years. Such term is renewable and any
vacancies shall not affect the power and duties of the Working Group
but shall be filled in the same manner as the original appointment.
(i) Appointment of the Chairperson.--Not later than 15 days after
the date on which all members of the Working Group have been appointed
under subsection (d), the leadership shall make a joint designation of
the chairperson of the Working Group. If the leadership fails to make
such designation within such time period, the Working Group Members
shall, not later than 10 days after the end of such time period,
designate a chairperson by majority vote.
(j) Subcommittees.--The Working Group may establish subcommittees
if doing so increases the efficiency of the Working Group in completing
its tasks.
(k) Duties.--
(1) Hearings.--Not later than 90 days after the date of
appointment of the chairperson under subsection (i), the
Working Group shall hold hearings to examine--
(A) the capacity of the public and private health
care systems to expand coverage options;
(B) the cost of health care and the effectiveness
of care provided at all stages of disease;
(C) innovative State strategies used to expand
health care coverage and lower health care costs;
(D) local community solutions to accessing health
care coverage;
(E) efforts to enroll individuals currently
eligible for public or private health care coverage;
(F) the role of evidence-based medical practices
that can be documented as restoring, maintaining, or
improving a patient's health, and the use of technology
in supporting providers in improving quality of care
and lowering costs; and
(G) strategies to assist purchasers of health care,
including consumers, to become more aware of the impact
of costs, and to lower the costs of health care.
(2) Additional hearings.--The Working Group may hold
additional hearings on subjects other than those listed in
paragraph (1) so long as such hearings are determined to be
necessary by the Working Group in carrying out the purposes of
this Act. Such additional hearings do not have to be completed
within the time period specified in paragraph (1) but shall not
delay the other activities of the Working Group under this
section.
(3) The health report to the american people.--Not later
than 90 days after the hearings described in paragraphs (1) and
(2) are completed, the Working Group shall prepare and make
available to health care consumers through the Internet and
other appropriate public channels, a report to be entitled,
``The Health Report to the American People''. Such report shall
be understandable to the general public and include--
(A) a summary of--
(i) health care and related services that
may be used by individuals throughout their
life span;
(ii) the cost of health care services and
their medical effectiveness in providing better
quality of care for different age groups;
(iii) the source of coverage and payment,
including reimbursement, for health care
services;
(iv) the reasons people are uninsured or
underinsured and the cost to taxpayers,
purchasers of health services, and communities
when Americans are uninsured or underinsured;
(v) the impact on health care outcomes and
costs when individuals are treated in all
stages of disease;
(vi) health care cost containment
strategies; and
(vii) information on health care needs that
need to be addressed;
(B) examples of community strategies to provide
health care coverage or access;
(C) information on geographic-specific issues
relating to health care;
(D) information concerning the cost of care in
different settings, including institutional-based care
and home and community-based care;
(E) a summary of ways to finance health care
coverage; and
(F) the role of technology in providing future
health care including ways to support the information
needs of patients and providers.
(4) Community meetings.--
(A) In general.--Not later than 1 year after the
date of enactment of this Act, the Working Group shall
initiate health care community meetings throughout the
United States (in this section referred to as
``community meetings''). Such community meetings may be
geographically or regionally based and shall be
completed within 180 days after the initiation of the
first meeting.
(B) Number of meetings.--The Working Group shall
hold a sufficient number of community meetings in order
to receive information that reflects--
(i) the geographic differences throughout
the United States;
(ii) diverse populations; and
(iii) a balance among urban and rural
populations.
(C) Meeting requirements.--
(i) Facilitator.--A State health officer
may be the facilitator at the community
meetings.
(ii) Attendance.--At least 1 member of the
Working Group shall attend and serve as chair
of each community meeting. Other members may
participate through interactive technology.
(iii) Topics.--The community meetings
shall, at a minimum, address the following
issues:
(I) The optimum way to balance
costs and benefits so that affordable
health coverage is available to as many
people as possible.
(II) The identification of services
that provide cost-effective, essential
health care services to maintain and
improve health and which should be
included in health care coverage.
(III) The cost of providing
increased benefits.
(IV) The mechanisms to finance
health care coverage, including
defining the appropriate financial role
for individuals, businesses, and
government.
(iv) Interactive technology.--The Working
Group may encourage public participation in
community meetings through interactive
technology and other means as determined
appropriate by the Working Group.
(D) Interim requirements.--Not later than 180 days
after the date of completion of the community meetings,
the Working Group shall prepare and make available to
the public through the Internet and other appropriate
public channels, an interim set of recommendations on
health care coverage and ways to improve and strengthen
the health care system based on the information and
preferences expressed at the community meetings. There
shall be a 90-day public comment period on such
recommendations.
(l) Recommendations.--Not later than 120 days after the expiration
of the public comment period described in subsection (k)(4)(D), the
Working Group shall submit to Congress and the President a final set of
recommendations.
(m) Administration.--
(1) Executive director.--There shall be an Executive
Director of the Working Group who shall be appointed by the
chairperson of the Working Group in consultation with the
members of the Working Group.
(2) Compensation.--While serving on the business of the
Working Group (including travel time), a member of the Working
Group shall be entitled to compensation at the per diem
equivalent of the rate provided for level IV of the Executive
Schedule under section 5315 of title 5, United States Code, and
while so serving away from home and the member's regular place
of business, a member may be allowed travel expenses, as
authorized by the chairperson of the Working Group. For
purposes of pay and employment benefits, rights, and
privileges, all personnel of the Working Group shall be treated
as if they were employees of the Senate.
(3) Information from federal agencies.--The Working Group
may secure directly from any Federal department or agency such
information as the Working Group considers necessary to carry
out this Act. Upon request of the Working Group, the head of
such department or agency shall furnish such information.
(4) Postal services.--The Working Group may use the United
States mails in the same manner and under the same conditions
as other departments and agencies of the Federal Government.
(n) Detail.--Not more than 10 Federal Government employees employed
by the Department of Labor and 10 Federal Government employees employed
by the Department of Health and Human Services may be detailed to the
Working Group under this section without further reimbursement. Any
detail of an employee shall be without interruption or loss of civil
service status or privilege.
(o) Temporary and Intermittent Services.--The chairperson of the
Working Group may procure temporary and intermittent services under
section 3109(b) of title 5, United States Code, at rates for
individuals which do not exceed the daily equivalent of the annual rate
of basic pay prescribed for level V of the Executive Schedule under
section 5316 of such title.
(p) Annual Report.--Not later than 1 year after the date of
enactment of this Act, and annually thereafter during the existence of
the Working Group, the Working Group shall report to Congress and make
public a detailed description of the expenditures of the Working Group
used to carry out its duties under this section.
(q) Sunset of Working Group.--The Working Group shall terminate
when the report described in subsection (l) is submitted to Congress.
(r) Administration Review and Comments.--Not later than 45 days
after receiving the final recommendations of the Working Group under
subsection (l), the President shall submit a report to Congress which
shall contain--
(1) additional views and comments on such recommendations;
and
(2) recommendations for such legislation and administrative
actions as the President considers appropriate.
(s) Required Congressional Action.--Not later than 45 days after
receiving the report submitted by the President under subsection (r),
each committee of jurisdiction of Congress shall hold at least 1
hearing on such report and on the final recommendations of the Working
Group submitted under subsection (l).
(t) Authorization of Appropriations.--
(1) In General.--There are authorized to be appropriated to
carry out this Act, other than subsection (k)(3), $3,000,000
for each of fiscal years 2004, 2005, and 2006.
(2) Health Report to the American People.--There are
authorized to be appropriated for the preparation and
dissemination of the Health Report to the American People
described in subsection (k)(3), such sums as may be necessary
for the fiscal year in which the report is required to be
submitted.

SEC. 621. GAO STUDY OF PHARMACEUTICAL PRICE CONTROLS AND PATENT
PROTECTIONS IN THE G-7 COUNTRIES.

(a) Study.--The Comptroller General of the United States shall
conduct a study of price controls imposed on pharmaceuticals in France,
Germany, Italy, Japan, the United Kingdom and Canada to review the
impact such regulations have on consumers, including American
consumers, and on innovation in medicine. Such study shall include--
(1) the pharmaceutical price control structure in each
country for a wide range of pharmaceuticals, compared with
average pharmaceutical prices paid by Americans covered by
private sector health insurance;
(2) the proportion of the cost for innovation borne by
American consumers, compared with consumers in the other six
countries;
(3) a review of how closely the observed prices in
regulated markets correspond to the prices that efficiently
distribute common costs of production (``Ramsey prices'');
(4) a review of any peer-reviewed literature that might
show the health consequences to patients in the listed
countries that result from the absence or delayed introduction
of medicines, including the cost of not having access to
medicines, in terms of lower life expectancy and lower quality
of health;
(5) the impact on American consumers, in terms of reduced
research into new or improved pharmaceuticals (including the
cost of delaying the introduction of a significant advance in
certain major diseases), if similar price controls were adopted
in the United States;
(6) the existing standards under international conventions,
including the World Trade Organization and the North American
Free Trade Agreement, regarding regulated pharmaceutical
prices, including any restrictions on anti-competitive laws
that might apply to price regulations and how economic harm
caused to consumers in markets without price regulations may be
remedied;
(7) in parallel trade regimes, how much of the price
difference between countries in the European Union is captured
by middlemen and how much goes to benefit patients and health
systems where parallel importing is significant; and
(8) how much cost is imposed on the owner of a property
right from counterfeiting and from international violation of
intellectual property rights for prescription medicines.
(b) Report.--Not later than 1 year after the date of enactment of
this Act, the Comptroller General of the United States shall submit to
Congress a report on the study conducted under subsection (a).

SEC. 622. SENSE OF THE SENATE CONCERNING MEDICARE PAYMENT UPDATE FOR
PHYSICIANS AND OTHER HEALTH PROFESSIONALS.

(a) Findings.--The Senate makes the following findings:
(1) The formula by which medicare payments are updated each
year for services furnished by physicians and other health
professionals is fundamentally flawed.
(2) The flawed physician payment update formula is causing
a continuing physician payment crisis, and, without
congressional action, medicare payment rates for physicians and
other practitioners are predicted to fall by 4.2 percent in
2004.
(3) A physician payment cut in 2004 would be the fifth cut
since 1991, and would be on top of a 5.4 percent cut in 2002,
with additional cuts estimated for 2005, 2006, and 2007; from
1991-2003, payment rates for physicians and health
professionals fell 14 percent behind practice cost inflation as
measured by medicare's own conservative estimates.
(4) The sustainable growth rate (SGR) expenditure target,
which is the basis for the physician payment update, is linked
to the gross domestic product and penalizes physicians and
other practitioners for volume increases that they cannot
control and that the Government actively promotes through new
coverage decisions, quality improvement activities and other
initiatives that, while beneficial to patients, are not
reflected in the SGR.
(b) Sense of the Senate.--It is the sense of the Senate that
medicare beneficiary access to quality care may be compromised if
Congress does not take action to prevent cuts next year and the
following that result from the SGR formula.

SEC. 623. RESTORATION OF FEDERAL HOSPITAL INSURANCE TRUST FUND.

(a) Definitions.--In this section:
(1) Clerical error.--The term ``clerical error'' means the
failure that occurred on April 15, 2001, to have transferred
the correct amount from the general fund of the Treasury to the
Trust Fund.
(2) Trust fund.--The term ``Trust Fund'' means the Federal
Hospital Insurance Trust Fund established under section 1817 of
the Social Security Act (42 U.S.C. 1395i).
(b) Correction of Trust Fund Holdings.--
(1) In general.--Not later than 120 days after the date of
enactment of this Act, the Secretary of the Treasury shall take
the actions described in paragraph (2) with respect to the
Trust Fund with the goal being that, after such actions are
taken, the holdings of the Trust Fund will replicate, to the
extent practicable in the judgment of the Secretary of the
Treasury, in consultation with the Secretary of Health and
Human Services, the holdings that would have been held by the
Trust Fund if the clerical error had not occurred.
(2) Obligations issued and redeemed.--The Secretary of the
Treasury shall--
(A) issue to the Trust Fund obligations under
chapter 31 of title 31, United States Code, that bear
issue dates, interest rates, and maturity dates that
are the same as those for the obligations that--
(i) would have been issued to the Trust
Fund if the clerical error had not occurred; or
(ii) were issued to the Trust Fund and were
redeemed by reason of the clerical error; and
(B) redeem from the Trust Fund obligations that
would have been redeemed from the Trust Fund if the
clerical error had not occurred.
(c) Appropriation.--Not later than 120 days after the date of
enactment of this Act, there is appropriated to the Trust Fund, out of
any money in the Treasury not otherwise appropriated, an amount
determined by the Secretary of the Treasury, in consultation with the
Secretary of Health and Human Services, to be equal to the interest
income lost by the Trust Fund through the date on which the
appropriation is being made as a result of the clerical error.

SEC. 624. SAFETY NET ORGANIZATIONS AND PATIENT ADVISORY COMMISSION.

(a) In General.--Title XI (42 U.S.C. 1320 et seq.) is amended by
adding at the end the following new part:

``Part D--Safety Net Organizations and Patient Advisory Commission

``safety net organizations and patient advisory commission

``Sec. 1181. (a) Establishment.--There is hereby established the
Safety Net Organizations and Patient Advisory Commission (in this
section referred to as the `Commission').
``(b) Review of Health Care Safety Net Programs and Reporting
Requirements.--
``(1) Review.--The Commission shall conduct an ongoing
review of the health care safety net programs (as described in
paragraph (3)(C)) by--
``(A) monitoring each health care safety net
program to document and analyze the effects of changes
in these programs on the core health care safety net;
``(B) evaluating the impact of the Emergency
Medical Treatment and Labor Act, the Health Insurance
Portability and Accountability Act of 1996, the
Balanced Budget Act of 1997, the Medicare, Medicaid,
and SCHIP Balanced Budget Refinement Act of 1999, the
Medicare, Medicaid, and SCHIP Benefits Protection and
Improvement Act of 2000, Prescription Drug and Medicare
Improvement Act of 2003, and other forces on the
capacity of the core health care safety net to continue
their roles in the core health care safety net system
to care for uninsured individuals, medicaid
beneficiaries, and other vulnerable populations;
``(C) monitoring existing data sets to assess the
status of the core health care safety net and health
outcomes for vulnerable populations;
``(D) wherever possible, linking and integrating
existing data systems to enhance the ability of the
core health care safety net to track changes in the
status of the core health care safety net and health
outcomes for vulnerable populations;
``(E) supporting the development of new data
systems where existing data are insufficient or
inadequate;
``(F) developing criteria and indicators of
impending core health care safety net failure;
``(G) establishing an early-warning system to
identify impending failures of core health care safety
net systems and providers;
``(H) providing accurate and timely information to
Federal, State, and local policymakers on the
indicators that may lead to the failure of the core
health care safety net and an estimate of the projected
consequences of such failures and the impact of such a
failure on the community;
``(I) monitoring and providing oversight for the
transition of individuals receiving supplemental
security income benefits, medical assistance under
title XIX, or child health assistance under title XXI
who enroll with a managed care entity (as defined in
section 1932(a)(1)(B)), including the review of--
``(i) the degree to which health plans have
the capacity (including case management and
management information system infrastructure)
to provide quality managed care services to
such an individual;
``(ii) the degree to which these plans may
be overburdened by adverse selection; and
``(iii) the degree to which emergency
departments are used by enrollees of these
plans; and
``(J) identifying and disseminating the best
practices for more effective application of the lessons
that have been learned.
``(2) Reports.--
``(A) Annual reports.--Not later than June 1 of
each year (beginning with 2005), the Commission shall,
based on the review conducted under paragraph (1),
submit to the appropriate committees of Congress a
report on--
``(i) the health care needs of the
uninsured; and
``(ii) the financial and infrastructure
stability of the Nation's core health care
safety net.
``(B) Agenda and additional reviews.--
``(i) Agenda.--The Chair of the Commission
shall consult periodically with the
Chairpersons and Ranking Minority Members of
the appropriate committees of Congress
regarding the Commission's agenda and progress
toward achieving the agenda.
``(ii) Additional reviews.--The Commission
shall conduct additional reviews and submit
additional reports to the appropriate
committees of Congress on topics relating to
the health care safety net programs under the
following circumstances:
``(I) If requested by the
Chairpersons or Ranking Minority
Members of such committees.
``(II) If the Commission deems such
additional reviews and reports
appropriate.
``(C) Availability of reports.--The Commission
shall transmit to the Comptroller General and the
Secretary a copy of each report submitted under this
subsection and shall make such reports available to the
public.
``(3) Definitions.--In this section:
``(A) Appropriate committees of congress.--The term
`appropriate committees of Congress' means the
Committees on Ways and Means and Energy and Commerce of
the House of Representatives and the Committees on
Finance and Health, Education, Labor, and Pensions of
the Senate.
``(B) Core health care safety net.--The term `core
health care safety net' means any health care provider
that--
``(i) by legal mandate or explicitly
adopted mission, offers access to health care
services to patients, regardless of the ability
of the patient to pay for such services; and
``(ii) has a case mix that is substantially
comprised of patients who are uninsured,
covered under the medicaid program, covered
under any other public health care program, or
are otherwise vulnerable populations.
Such term includes disproportionate share hospitals,
Federally qualified health centers, other Federal,
State, and locally supported clinics, rural health
clinics, local health departments, and providers
covered under the Emergency Medical Treatment and Labor
Act.
``(C) Health care safety net programs.--The term
`health care safety net programs' includes the
following:
``(i) Medicaid.--The medicaid program under
title XIX.
``(ii) SCHIP.--The State children's health
insurance program under title XXI.
``(iii) Maternal and child health services
block grant program.--The maternal and child
health services block grant program under title
V.
``(iv) FQHC programs.--Each federally
funded program under which a health center (as
defined in section 330(1) of the Public Health
Service Act), a Federally qualified health
center (as defined in section 1861(aa)(4)), or
a Federally-qualified health center (as defined
in section 1905(l)(2)(B)) receives funds.
``(v) RHC programs.--Each federally funded
program under which a rural health clinic (as
defined in section 1861(aa)(4) or 1905(l)(1))
receives funds.
``(vi) DSH payment programs.--Each
federally funded program under which a
disproportionate share hospital receives funds.
``(vii) Emergency medical treatment and
active labor act.--All care provided under
section 1867 for the uninsured, underinsured,
beneficiaries under title XIX, and other
vulnerable individuals.
``(viii) Other health care safety net
programs.--Such term also includes any other
health care program that the Commission
determines to be appropriate.
``(D) Vulnerable populations.--The term `vulnerable
populations' includes uninsured and underinsured
individuals, low-income individuals, farm workers,
homeless individuals, individuals with disabilities,
individuals with HIV or AIDS, and such other
individuals as the Commission may designate.
``(c) Membership.--
``(1) Number and appointment.--The Commission shall be
composed of 13 members appointed by the Comptroller General of
the United States (in this section referred to as the
`Comptroller General'), in consultation with the appropriate
committees of Congress.
``(2) Qualifications.--
``(A) In general.--The membership of the Commission
shall include individuals with national recognition for
their expertise in health finance and economics, health
care safety net research and program management,
actuarial science, health facility management, health
plans and integrated delivery systems, reimbursement of
health facilities, allopathic and osteopathic medicine
(including emergency medicine), and other providers of
health services, and other related fields, who provide
a mix of different professionals, broad geographic
representation, and a balance between urban and rural
representatives.
``(B) Inclusion.--The membership of the Commission
shall include health professionals, employers, third-
party payers, individuals skilled in the conduct and
interpretation of biomedical, health services, and
health economics research and expertise in outcomes and
effectiveness research and technology assessment. Such
membership shall also include recipients of care from
core health care safety net and individuals who provide
and manage the delivery of care by the core health care
safety net.
``(C) Majority nonproviders.--Individuals who are
directly involved in the provision, or management of
the delivery, of items and services covered under the
health care safety net programs shall not constitute a
majority of the membership of the Commission.
``(D) Ethical disclosure.--The Comptroller General
shall establish a system for public disclosure by
members of the Commission of financial and other
potential conflicts of interest relating to such
members.
``(3) Terms.--
``(A) In general.--The terms of members of the
Commission shall be for 3 years except that of the
members first appointed, the Comptroller General shall
designate--
``(i) four to serve a term of 1 year;
``(ii) four to serve a term of 2 years; and
``(iii) five to serve a term of 3 years.
``(B) Vacancies.--
``(i) In general.--A vacancy in the
Commission shall be filled in the same manner
in which the original appointment was made.
``(ii) Appointment.--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.
``(iii) Terms.--A member may serve after
the expiration of that member's term until a
successor has taken office.
``(4) Compensation.--
``(A) Members.--While serving on the business of
the Commission (including travel time), a member of the
Commission--
``(i) shall be entitled to compensation at
the per diem equivalent of the rate provided
for level IV of the Executive Schedule under
section 5315 of title 5, United States Code;
and
``(ii) while so serving away from home and
the member's regular place of business, may be
allowed travel expenses, as authorized by the
Commission.
``(B) Treatment.--For purposes of pay (other than
pay of members of the Commission) and employment
benefits, rights, and privileges, all personnel of the
Commission shall be treated as if they were employees
of the United States Senate.
``(5) Chair; vice chair.--The Comptroller General shall
designate a member of the Commission, at the time of
appointment of the member as Chair and a member as Vice Chair
for that term of appointment, except that in the case of
vacancy of the Chair or Vice Chair, the Comptroller General may
designate another member for the remainder of that member's
term.
``(6) Meetings.--The Commission shall meet at the call of
the Chair or upon the written request of a majority of its
members.
``(d) Director and Staff; Experts and Consultants.--Subject to such
review as the Comptroller General determines necessary to ensure the
efficient administration of the Commission, the Commission may--
``(1) employ and fix the compensation of an Executive
Director (subject to the approval of the Comptroller General)
and such other personnel as may be necessary to carry out the
duties of the Commission under this section (without regard to
the provisions of title 5, United States Code, governing
appointments in the competitive service);
``(2) seek such assistance and support as may be required
in the performance of the duties of the Commission under this
section from appropriate Federal departments and agencies;
``(3) enter into contracts or make other arrangements, as
may be necessary for the conduct of the work of the Commission
(without regard to section 3709 of the Revised Statutes (41
U.S.C. 5));
``(4) make advance, progress, and other payments which
relate to the work of the Commission;
``(5) provide transportation and subsistence for persons
serving without compensation; and
``(6) prescribe such rules and regulations as it deems
necessary with respect to the internal organization and
operation of the Commission.
``(e) Powers.--
``(1) Obtaining official data.--
``(A) In general.--The Commission may secure
directly from any department or agency of the United
States information necessary for the Commission to
carry the duties under this section.
``(B) Request of chair.--Upon request of the Chair,
the head of that department or agency shall furnish
that information to the Commission on an agreed upon
schedule.
``(2) Data collection.--In order to carry out the duties of
the Commission under this section, the Commission shall--
``(A) use existing information, both published and
unpublished, where possible, collected and assessed
either by the staff of the Commission or under other
arrangements made in accordance with this section;
``(B) carry out, or award grants or contracts for,
original research and experimentation, where existing
information is inadequate; and
``(C) adopt procedures allowing any interested
party to submit information for the Commission's use in
making reports and recommendations.
``(3) Access of gao to information.--The Comptroller
General shall have unrestricted access to all deliberations,
records, and nonproprietary data that pertains to the work of
the Commission, immediately upon request. The expense of
providing such information shall be borne by the General
Accounting Office.
``(4) Periodic audit.--The Commission shall be subject to
periodic audit by the Comptroller General.
``(f) Application of FACA.--Section 14 of the Federal Advisory
Committee Act (5 U.S.C. App.) does not apply to the Commission.
``(g) Authorization of Appropriations.--
``(1) Request for appropriations.--The Commission shall
submit requests for appropriations in the same manner as the
Comptroller General submits requests for appropriations, but
amounts appropriated for the Commission shall be separate from
amounts appropriated for the Comptroller General.
``(2) Authorization.--There are authorized to be
appropriated such sums as may be necessary to carry out the
provisions of this section.''.
(b) Effective Date.--The Comptroller General of the United States
shall appoint the initial members of the Safety Net Organizations and
Patient Advisory Commission established under subsection (a) not later
than June 1, 2004.

SEC. 625. URBAN HEALTH PROVIDER ADJUSTMENT.

(a) In General.--Beginning with fiscal year 2004, notwithstanding
section 1923(f) of the Social Security Act (42 U.S.C. 1396r-4(f)) and
subject to subsection (c), with respect to a State, payment adjustments
made under title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.) to a hospital described in subsection (b) shall be made without
regard to the DSH allotment limitation for the State determined under
section 1923(f) of that Act (42 U.S.C. 1396r-4(f)).
(b) Hospital Described.--A hospital is described in this subsection
if the hospital--
(1) is owned or operated by a State (as defined for
purposes of title XIX of the Social Security Act), or by an
instrumentality or a municipal governmental unit within a State
(as so defined) as of January 1, 2003; and
(2) is located in Marion County, Indiana.
(c) Limitation.--The payment adjustment described in subsection (a)
for fiscal year 2004 and each fiscal year thereafter shall not exceed
175 percent of the costs of furnishing hospital services described in
section 1923(g)(1)(A) of the Social Security Act (42 U.S.C. 1396r-
4(g)(1)(A)).

SEC. 626. COMMITTEE ON DRUG COMPOUNDING.

(a) Establishment.--The Secretary of Health and Human Services
shall establish an Committee on Drug Compounding (referred to in this
section as the ``Committee'') within the Food and Drug Administration
on drug compounding to ensure that patients are receiving necessary,
safe and accurate dosages of compounded drugs.
(b) Membership.--The membership of the Advisory Committee shall be
appointed by the Secretary of Health and Human Services and shall
include representatives of--
(1) the National Association of Boards of Pharmacy;
(2) pharmacy groups;
(3) physician groups;
(4) consumer and patient advocate groups;
(5) the United States Pharmacopoeia; and
(6) other individuals determined appropriate by the
Secretary.
(c) Report and Recommendations.--Not later than 1 year after the
date of enactment of this Act, the Committee shall submit to the
Secretary a report concerning the recommendations of the Committee to
improve and protect patient safety.
(d) Termination.--The Committee shall terminate on the date that is
1 year after the date of enactment of this Act.

SEC. 627. SENSE OF THE SENATE CONCERNING THE STRUCTURE OF MEDICARE
REFORM AND THE PRESCRIPTION DRUG BENEFIT.

(a) Findings.--The Senate makes the following findings:
(1) America's seniors deserve a fiscally-strong medicare
system that fulfills its promise to them and future retirees.
(2) The impending retirement of the ``baby boom''
generation will dramatically increase the costs of providing
medicare benefits. Medicare costs will double relative to the
size of the economy from 2 percent of GDP today to 4 percent in
2025 and double again to 8 percent of GDP in 2075. This growth
will accelerate substantially when Congress adds a necessary
prescription drug benefit.
(3) Medicare's current structure does not have the
flexibility to quickly adapt to rapid advances in modern health
care. Medicare lags far behind other insurers in providing
prescription drug coverage, disease management programs, and
host of other advances. Reforming medicare to create a more
self-adjusting, innovative structure is essential to improve
medicare's efficiency and the quality of the medical care it
provides.
(4) Private-sector choice for medicare beneficiaries would
provide two key benefits: It would be tailored to the needs of
America's seniors, not the Government, and would create a
powerful incentive for private-sector medicare plans to provide
the best quality health care to seniors at the most affordable
price.
(5) The method by which the national preferred provider
organizations in the Federal Employees Health Benefits Program
have been reimbursed has proven to be a reliable and successful
mechanism for providing Members of Congress and Federal
employees with excellent health care choices.
(6) Unlike the medicare payment system, which has had to be
changed by Congress every few years, the Federal Employees
Health Benefits Program has existed for 43 years with minimal
changes from Congress.
(b) Sense of the Senate.--It is the sense of the Senate that
medicare reform legislation should:
(1) Ensure that prescription drug coverage is directed to
those who need it most.
(2) Provide that Government contributions used to support
MedicareAdvantage plans are based on market principles
beginning in 2006 to ensure the long- and short-term viability
of such options for America's seniors.
(3) Develop a payment system for the MedicareAdvantage
preferred provider organizations similar to the payment system
used for the national preferred provider organizations in the
Federal Employees Health Benefits Program.
(4) Limit the addition of new unfunded obligations in the
medicare program so that the long-term solvency of this
important program is not further jeopardized.
(5) Incorporate private sector, market-based elements, that
do not rely on the inefficient medicare price control
structure.
(6) Keep the cost of structural changes and new benefits
within the $400,000,000,000 provided for under the current
Congressional Budget Resolution for implementing medicare
reform and providing a prescription drug benefit.
(7) Preserve the current employer-sponsored retiree health
plans and not design a benefit which has the unintended
consequences of supplanting private coverage.
(8) Incorporate regulatory reform proposals to eliminate
red tape and reduce costs.
(9) Restore the right of medicare beneficiaries and their
doctors to work together to provide services, allow private fee
for service plans to set their own premiums, and permit seniors
to add their own dollars beyond the Government contribution.

SEC. 628. SENSE OF THE SENATE REGARDING THE ESTABLISHMENT OF A
NATIONWIDE PERMANENT LIFESTYLE MODIFICATION PROGRAM FOR
MEDICARE BENEFICIARIES.

(a) Findings.--Congress finds that:
(1) Heart disease kills more than 500,000 Americans per
year.
(2) The number and costs of interventions for the treatment
of coronary disease are rising and currently cost the health
care system $58,000,000,000 annually.
(3) The Medicare Lifestyle Modification Program has been
operating throughout 12 States and has been demonstrated to
reduce the need for coronary procedures by 88 percent per year.
(4) The Medicare Lifestyle Modification Program is less
expensive to deliver than interventional cardiac procedures and
could reduce cardiovascular expenditures by $36,000,000,000
annually.
(5) Lifestyle choices such as diet and exercise affect
heart disease and heart disease outcomes by 50 percent or
greater.
(6) Intensive lifestyle interventions which include teams
of nurses, doctors, exercise physiologists, registered
dietitians, and behavioral health clinicians have been
demonstrated to reduce heart disease risk factors and enhance
heart disease outcomes dramatically.
(7) The National Institutes of Health estimates that
17,000,000 Americans have diabetes and the Centers for Disease
Control and Prevention estimates that the number of Americans
who have a diagnosis of diabetes increased 61 percent in the
last decade and is expected to more than double by 2050.
(8) Lifestyle modification programs are superior to
medication therapy for treating diabetes.
(9) Individuals with diabetes are now considered to have
coronary disease at the date of diagnosis of their diabetic
state.
(10) The Medicare Lifestyle Modification Program has been
an effective lifestyle program for the reversal and treatment
of heart disease.
(11) Men with prostate cancer have shown significant
improvement in prostate cancer markers using a similar approach
in lifestyle modification.
(12) These lifestyle changes are therefore likely to affect
other chronic disease states, in addition to heart disease.
(b) Sense of the Senate.--It is the sense of the Senate that--
(1) the Secretary of Health and Human Services should carry
out the demonstration project known as the Lifestyle
Modification Program Demonstration, as described in the Health
Care Financing Administration Memorandum of Understanding
entered into on November 13, 2000, on a permanent basis;
(2) the project should include as many Medicare
beneficiaries as would like to participate in the project on a
voluntary basis; and
(3) the project should be conducted on a national basis.

SEC. 629. SENSE OF THE SENATE ON PAYMENT REDUCTIONS UNDER MEDICARE
PHYSICIAN FEE SCHEDULE.

(a) Findings.--Congress finds that--
(1) the fees medicare pays physicians were reduced by 5.4
percent across-the-board in 2002;
(2) recent action by Congress narrowly averted another
across-the-board reduction of 4.4 percent for 2003;
(3) based on current projections, the Centers for Medicare
& Medicaid Services (CMS) estimates that, absent legislative or
administrative action, fees will be reduced across-the-board
once again in 2004 by 4.2 percent;
(4) the prospect of continued payment reductions under the
medicare physician fee schedule for the foreseeable future
threatens to destabilize an important element of the program,
namely physician participation and willingness to accept
medicare patients;
(5) the primary source of this instability is the
sustainable growth rate (SGR), a system of annual spending
targets for physicians' services under medicare;
(6) the SGR system has a number of defects that result in
unrealistically low spending targets, such as the use of the
increase in the gross domestic product (GDP) as a proxy for
increases in the volume and intensity of services provided by
physicians, no tolerance for variance between growth in
medicare beneficiary health care costs and our Nation's GDP,
and a requirement for immediate recoupment of the difference;
(7) both administrative and legislative action are needed
to return stability to the physician payment system;
(8) using the discretion given to it by medicare law, CMS
has included expenditures for prescription drugs and
biologicals administered incident to physicians' services under
the annual spending targets without making appropriate
adjustments to the targets to reflect price increases in these
drugs and biologicals or the growing reliance on such therapies
in the treatment of medicare patients;
(9) between 1996 and 2002, annual medicare spending on
these drugs grew from $1,800,000,000 to $6,200,000,000, or from
$55 per beneficiary to an estimated $187 per beneficiary;
(10) although physicians are responsible for prescribing
these drugs and biologicals, neither the price of the drugs and
biologicals, nor the standards of care that encourage their
use, are within the control of physicians; and
(11) SGR target adjustments have not been made for cost
increases due to new coverage decisions and new rules and
regulations.
(b) Sense of the Senate.--It is the sense of the Senate that--
(1) the Center for Medicare & Medicaid Services (CMS)
should use its discretion to exclude drugs and biologicals
administered incident to physician services from the
sustainable growth rate (SGR) system;
(2) CMS should use its discretion to make SGR target
adjustments for new coverage decisions and new rules and
regulations; and
(3) in order to provide ample time for Congress to consider
more fundamental changes to the SGR system, the conferees on
the Prescription Drug and Medicare Improvement Act of 2003
should include in the conference agreement a provision to
establish a minimum percentage update in physician fees for the
next 2 years and should consider adding provisions that would
mitigate the swings in payment, such as establishing multi-year
adjustments to recoup the variance and creating ``tolerance''
corridors for variations around the update target trend.

SEC. 630. TEMPORARY SUSPENSION OF OASIS REQUIREMENT FOR COLLECTION OF
DATA ON NON-MEDICARE AND NON-MEDICAID PATIENTS.

(a) In General.--During the period described in subsection (b), the
Secretary may not require, under section 4602(e) of the Balanced Budget
Act of 1997 or otherwise under OASIS, a home health agency to gather or
submit information that relates to an individual who is not eligible
for benefits under either title XVIII or title XIX of the Social
Security Act (such information in this section referred to as ``non-
medicare/medicaid OASIS information'').
(b) Period of Suspension.--The period described in this
subsection--
(1) begins on the date of the enactment of this Act; and
(2) ends on the last day of the 2nd month beginning after
the date as of which the Secretary has published final
regulations regarding the collection and use by the Centers for
Medicare & Medicaid Services of non-medicare/medicaid OASIS
information following the submission of the report required
under subsection (c).
(c) Report.--
(1) Study.--The Secretary shall conduct a study on how non-
medicare/medicaid OASIS information is and can be used by large
home health agencies. Such study shall examine--
(A) whether there are unique benefits from the
analysis of such information that cannot be derived
from other information available to, or collected by,
such agencies; and
(B) the value of collecting such information by
small home health agencies compared to the
administrative burden related to such collection.
In conducting the study the Secretary shall obtain
recommendations from quality assessment experts in the use of
such information and the necessity of small, as well as large,
home health agencies collecting such information.
(2) Report.--The Secretary shall submit to Congress a
report on the study conducted under paragraph (1) by not later
than 18 months after the date of the enactment of this Act.
(d) Construction.--Nothing in this section shall be construed as
preventing home health agencies from collecting non-medicare/medicaid
OASIS information for their own use.

SEC. 631. EMPLOYER FLEXIBILITY.

(a) Medicare.--Nothing in part D of title XVIII of the Social
Security Act, as added by section 101, shall be construed as--
(1) preventing employment-based retiree health coverage (as
defined in section 1860D-20(e)(4)(B) of such Act, as so added)
from providing coverage that is supplemental to the benefits
provided under a Medicare Prescription Drug plan under such
part or a MedicareAdvantage plan under part C of such title, as
amended by this Act; or
(2) requiring employment-based retiree health coverage (as
so defined) that provides medical benefits to retired
participants who are not eligible for medical benefits under
title XVIII of the Social Security Act or under a plan
maintained by a State or an agency thereof to provide medical
benefits, or the same medical benefits, to retired participants
who are so eligible.
(b) ADEA.--
(1) In General.--Section 4(l) of the Age Discrimination in
Employment Act of 1967 (29 U.S.C. 623(l)) is amended by adding
at the end the following:
``(4) An employee benefit plan (as defined in section 3(3)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1002(3))) shall not be treated as violating subsection
(a), (b), (c), or (e) solely because the plan provides medical
benefits to retired participants who are not eligible for
medical benefits under title XVIII of the Social Security Act
(42 U.S.C. 1395 et seq.) or under a plan maintained by a State
or an agency thereof, but does not provide medical benefits, or
the same medical benefits, to retired participants who are so
eligible.''
(2) Effective date.--The amendment made by this subsection
shall apply as of the date of the enactment of this Act.

SEC. 632. ONE HUNDRED PERCENT FMAP FOR MEDICAL ASSISTANCE PROVIDED TO A
NATIVE HAWAIIAN THROUGH A FEDERALLY-QUALIFIED HEALTH
CENTER OR A NATIVE HAWAIIAN HEALTH CARE SYSTEM UNDER THE
MEDICAID PROGRAM.

(a) Medicaid.--Section 1905(b) of the Social Security Act (42
U.S.C. 1396d(b)) is amended, in the third sentence, by inserting ``,
and with respect to medical assistance provided to a Native Hawaiian
(as defined in section 12 of the Native Hawaiian Health Care
Improvement Act) through a federally-qualified health center or a
Native Hawaiian health care system (as so defined) whether directly, by
referral, or under contract or other arrangement between a federally-
qualified health center or a Native Hawaiian health care system and
another health care provider'' before the period.
(b) Effective Date.--The amendment made by this section applies to
medical assistance provided on or after the date of enactment of this
Act.

SEC. 633. EXTENSION OF MORATORIUM.

(a) In General.--Section 6408(a)(3) of the Omnibus Budget
Reconciliation Act of 1989, as amended by section 13642 of the Omnibus
Budget Reconciliation Act of 1993 and section 4758 of the Balanced
Budget Act of 1997, is amended--
(1) by striking ``until December 31, 2002'', and
(2) by striking ``Kent Community Hospital Complex in
Michigan or.''
(b) Effective Dates.--
(1) Permanent extension.--The amendment made by subsection
(a)(1) shall take effect as if included in the amendment made
by section 4758 of the Balanced Budget Act of 1997.
(2) Modification.--The amendment made by subsection (a)(2)
shall take effect on the date of enactment of this Act.

SEC. 634. GAO STUDY OF PHARMACEUTICAL PRICE CONTROLS AND PATENT
PROTECTIONS IN THE G-7 COUNTRIES.

(a) Study.--The Comptroller General of the United States shall
conduct a study of price controls imposed on pharmaceuticals in France,
Germany, Italy, Japan, the United Kingdom and Canada to review the
impact such regulations have on consumers, including American
consumers, and on innovation in medicine. The study shall include the
following:
(1) The pharmaceutical price control structure in each
country for a wide range of pharmaceuticals, compared with
average pharmaceutical prices paid by Americans covered by
private sector health insurance.
(2) The proportion of the cost for innovation borne by
American consumers, compared with consumers in the other 6
countries.
(3) A review of how closely the observed prices in
regulated markets correspond to the prices that efficiently
distribute common costs of production (``Ramsey prices'').
(4) A review of any peer-reviewed literature that might
show the health consequences to patients in the listed
countries that result from the absence or delayed introduction
of medicines, including the cost of not having access to
medicines, in terms of lower life expectancy and lower quality
of health.
(5) The impact on American consumers, in terms of reduced
research into new or improved pharmaceuticals (including the
cost of delaying the introduction of a significant advance in
certain major diseases), if similar price controls were adopted
in the United States.
(6) The existing standards under international conventions,
including the World Trade Organization and the North American
Free Trade Agreement, regarding regulated pharmaceutical
prices, including any restrictions on anti-competitive laws
that might apply to price regulations and how economic harm
caused to consumers in markets without price regulations may be
remedied.
(7) In parallel trade regimes, how much of the price
difference between countries in the European Union is captured
by middlemen and how much goes to benefit patients and health
systems where parallel importing is significant.
(8) How much cost is imposed on the owner of a property
right from counterfeiting and from international violations of
intellectual property rights for prescription medicines.
(b) Report.--Not later than 1 year after the date of enactment of
this Act, the Comptroller General of the United States shall submit to
Congress a report on the study conducted under subsection (a).

SEC. 635. SAFETY NET ORGANIZATIONS AND PATIENT ADVISORY COMMISSION.

(a) In General.--Title XI (42 U.S.C. 1320 et seq.) is amended by
adding at the end the following new part:

``Part D--Safety Net Organizations and Patient Advisory Commission

``safety net organizations and patient advisory commission

``Sec. 1181. (a) Establishment.--There is hereby established the
Safety Net Organizations and Patient Advisory Commission (in this
section referred to as the `Commission').
``(b) Review of Health Care Safety Net Programs and Reporting
Requirements.--
``(1) Review.--The Commission shall conduct an ongoing
review of the health care safety net programs (as described in
paragraph (3)(C)) by--
``(A) monitoring each health care safety net
program to document and analyze the effects of changes
in these programs on the core health care safety net;
``(B) evaluating the impact of the Emergency
Medical Treatment and Labor Act, the Health Insurance
Portability and Accountability Act of 1996, the
Balanced Budget Act of 1997, the Medicare, Medicaid,
and SCHIP Balanced Budget Refinement Act of 1999, the
Medicare, Medicaid, and SCHIP Benefits Protection and
Improvement Act of 2000, Prescription Drug and Medicare
Improvement Act of 2003, and other forces on the
capacity of the core health care safety net to continue
their roles in the core health care safety net system
to care for uninsured individuals, medicaid
beneficiaries, and other vulnerable populations;
``(C) monitoring existing data sets to assess the
status of the core health care safety net and health
outcomes for vulnerable populations;
``(D) wherever possible, linking and integrating
existing data systems to enhance the ability of the
core health care safety net to track changes in the
status of the core health care safety net and health
outcomes for vulnerable populations;
``(E) supporting the development of new data
systems where existing data are insufficient or
inadequate;
``(F) developing criteria and indicators of
impending core health care safety net failure;
``(G) establishing an early-warning system to
identify impending failures of core health care safety
net systems and providers;
``(H) providing accurate and timely information to
Federal, State, and local policymakers on the
indicators that may lead to the failure of the core
health care safety net and an estimate of the projected
consequences of such failures and the impact of such a
failure on the community;
``(I) monitoring and providing oversight for the
transition of individuals receiving supplemental
security income benefits, medical assistance under
title XIX, or child health assistance under title XXI
who enroll with a managed care entity (as defined in
section 1932(a)(1)(B)), including the review of--
``(i) the degree to which health plans have
the capacity (including case management and
management information system infrastructure)
to provide quality managed care services to
such an individual;
``(ii) the degree to which these plans may
be overburdened by adverse selection; and
``(iii) the degree to which emergency
departments are used by enrollees of these
plans; and
``(J) identifying and disseminating the best
practices for more effective application of the lessons
that have been learned.
``(2) Reports.--
``(A) Annual reports.--Not later than June 1 of
each year (beginning with 2005), the Commission shall,
based on the review conducted under paragraph (1),
submit to the appropriate committees of Congress a
report on--
``(i) the health care needs of the
uninsured; and
``(ii) the financial and infrastructure
stability of the Nation's core health care
safety net.
``(B) Agenda and additional reviews.--
``(i) Agenda.--The Chair of the Commission
shall consult periodically with the
Chairpersons and Ranking Minority Members of
the appropriate committees of Congress
regarding the Commission's agenda and progress
toward achieving the agenda.
``(ii) Additional reviews.--The Commission
shall conduct additional reviews and submit
additional reports to the appropriate
committees of Congress on topics relating to
the health care safety net programs under the
following circumstances:
``(I) If requested by the
Chairpersons or Ranking Minority
Members of such committees.
``(II) If the Commission deems such
additional reviews and reports
appropriate.
``(C) Availability of reports.--The Commission
shall transmit to the Comptroller General and the
Secretary a copy of each report submitted under this
subsection and shall make such reports available to the
public.
``(3) Definitions.--In this section:
``(A) Appropriate committees of congress.--The term
`appropriate committees of Congress' means the
Committees on Ways and Means and Energy and Commerce of
the House of Representatives and the Committees on
Finance and Health, Education, Labor, and Pensions of
the Senate.
``(B) Core health care safety net.--The term `core
health care safety net' means any health care provider
that--
``(i) by legal mandate or explicitly
adopted mission, offers access to health care
services to patients, regardless of the ability
of the patient to pay for such services; and
``(ii) has a case mix that is substantially
comprised of patients who are uninsured,
covered under the medicaid program, covered
under any other public health care program, or
are otherwise vulnerable populations.
Such term includes disproportionate share hospitals,
Federally qualified health centers, other Federal,
State, and locally supported clinics, rural health
clinics, local health departments, and providers
covered under the Emergency Medical Treatment and Labor
Act.
``(C) Health care safety net programs.--The term
`health care safety net programs' includes the
following:
``(i) Medicaid.--The medicaid program under
title XIX.
``(ii) SCHIP.--The State children's health
insurance program under title XXI.
``(iii) Maternal and child health services
block grant program.--The maternal and child
health services block grant program under title
V.
``(iv) FQHC programs.--Each federally
funded program under which a health center (as
defined in section 330(1) of the Public Health
Service Act), a Federally qualified health
center (as defined in section 1861(aa)(4)), or
a Federally-qualified health center (as defined
in section 1905(l)(2)(B)) receives funds.
``(v) RHC programs.--Each federally funded
program under which a rural health clinic (as
defined in section 1861(aa)(4) or 1905(l)(1))
receives funds.
``(vi) DSH payment programs.--Each
federally funded program under which a
disproportionate share hospital receives funds.
``(vii) Emergency medical treatment and
active labor act.--All care provided under
section 1867 for the uninsured, underinsured,
beneficiaries under title XIX, and other
vulnerable individuals.
``(viii) Other health care safety net
programs.--Such term also includes any other
health care program that the Commission
determines to be appropriate.
``(D) Vulnerable populations.--The term `vulnerable
populations' includes uninsured and underinsured
individuals, low-income individuals, farm workers,
homeless individuals, individuals with disabilities,
individuals with HIV or AIDS, and such other
individuals as the Commission may designate.
``(c) Membership.--
``(1) Number and appointment.--The Commission shall be
composed of 13 members appointed by the Comptroller General of
the United States (in this section referred to as the
`Comptroller General'), in consultation with the appropriate
committees of Congress.
``(2) Qualifications.--
``(A) In general.--The membership of the Commission
shall include individuals with national recognition for
their expertise in health finance and economics, health
care safety net research and program management,
actuarial science, health facility management, health
plans and integrated delivery systems, reimbursement of
health facilities, allopathic and osteopathic medicine
(including emergency medicine), and other providers of
health services, and other related fields, who provide
a mix of different professionals, broad geographic
representation, and a balance between urban and rural
representatives.
``(B) Inclusion.--The membership of the Commission
shall include health professionals, employers, third-
party payers, individuals skilled in the conduct and
interpretation of biomedical, health services, and
health economics research and expertise in outcomes and
effectiveness research and technology assessment. Such
membership shall also include recipients of care from
core health care safety net and individuals who provide
and manage the delivery of care by the core health care
safety net.
``(C) Majority nonproviders.--Individuals who are
directly involved in the provision, or management of
the delivery, of items and services covered under the
health care safety net programs shall not constitute a
majority of the membership of the Commission.
``(D) Ethical disclosure.--The Comptroller General
shall establish a system for public disclosure by
members of the Commission of financial and other
potential conflicts of interest relating to such
members.
``(3) Terms.--
``(A) In general.--The terms of members of the
Commission shall be for 3 years except that of the
members first appointed, the Comptroller General shall
designate--
``(i) four to serve a term of 1 year;
``(ii) four to serve a term of 2 years; and
``(iii) five to serve a term of 3 years.
``(B) Vacancies.--
``(i) In general.--A vacancy in the
Commission shall be filled in the same manner
in which the original appointment was made.
``(ii) Appointment.--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.
``(iii) Terms.--A member may serve after
the expiration of that member's term until a
successor has taken office.
``(4) Compensation.--
``(A) Members.--While serving on the business of
the Commission (including travel time), a member of the
Commission--
``(i) shall be entitled to compensation at
the per diem equivalent of the rate provided
for level IV of the Executive Schedule under
section 5315 of title 5, United States Code;
and
``(ii) while so serving away from home and
the member's regular place of business, may be
allowed travel expenses, as authorized by the
Commission.
``(B) Treatment.--For purposes of pay (other than
pay of members of the Commission) and employment
benefits, rights, and privileges, all personnel of the
Commission shall be treated as if they were employees
of the United States Senate.
``(5) Chair; vice chair.--The Comptroller General shall
designate a member of the Commission, at the time of
appointment of the member as Chair and a member as Vice Chair
for that term of appointment, except that in the case of
vacancy of the Chair or Vice Chair, the Comptroller General may
designate another member for the remainder of that member's
term.
``(6) Meetings.--The Commission shall meet at the call of
the Chair or upon the written request of a majority of its
members.
``(d) Director and Staff; Experts and Consultants.--Subject to such
review as the Comptroller General determines necessary to ensure the
efficient administration of the Commission, the Commission may--
``(1) employ and fix the compensation of an Executive
Director (subject to the approval of the Comptroller General)
and such other personnel as may be necessary to carry out the
duties of the Commission under this section (without regard to
the provisions of title 5, United States Code, governing
appointments in the competitive service);
``(2) seek such assistance and support as may be required
in the performance of the duties of the Commission under this
section from appropriate Federal departments and agencies;
``(3) enter into contracts or make other arrangements, as
may be necessary for the conduct of the work of the Commission
(without regard to section 3709 of the Revised Statutes (41
U.S.C. 5));
``(4) make advance, progress, and other payments which
relate to the work of the Commission;
``(5) provide transportation and subsistence for persons
serving without compensation; and
``(6) prescribe such rules and regulations as it deems
necessary with respect to the internal organization and
operation of the Commission.
``(e) Powers.--
``(1) Obtaining official data.--
``(A) In general.--The Commission may secure
directly from any department or agency of the United
States information necessary for the Commission to
carry the duties under this section.
``(B) Request of chair.--Upon request of the Chair,
the head of that department or agency shall furnish
that information to the Commission on an agreed upon
schedule.
``(2) Data collection.--In order to carry out the duties of
the Commission under this section, the Commission shall--
``(A) use existing information, both published and
unpublished, where possible, collected and assessed
either by the staff of the Commission or under other
arrangements made in accordance with this section;
``(B) carry out, or award grants or contracts for,
original research and experimentation, where existing
information is inadequate; and
``(C) adopt procedures allowing any interested
party to submit information for the Commission's use in
making reports and recommendations.
``(3) Access of gao to information.--The Comptroller
General shall have unrestricted access to all deliberations,
records, and nonproprietary data that pertains to the work of
the Commission, immediately upon request. The expense of
providing such information shall be borne by the General
Accounting Office.
``(4) Periodic audit.--The Commission shall be subject to
periodic audit by the Comptroller General.
``(f) Application of FACA.--Section 14 of the Federal Advisory
Committee Act (5 U.S.C. App.) does not apply to the Commission.
``(g) Authorization of Appropriations.--
``(1) Request for appropriations.--The Commission shall
submit requests for appropriations in the same manner as the
Comptroller General submits requests for appropriations, but
amounts appropriated for the Commission shall be separate from
amounts appropriated for the Comptroller General.
``(2) Authorization.--There are authorized to be
appropriated such sums as may be necessary to carry out the
provisions of this section.''.
(b) Effective Date.--The Comptroller General of the United States
shall appoint the initial members of the Safety Net Organizations and
Patient Advisory Commission established under subsection (a) not later
than June 1, 2004.

SEC. 636. ESTABLISHMENT OF PROGRAM TO PREVENT ABUSE OF NURSING FACILITY
RESIDENTS.

(a) In General.--
(1) Screening of skilled nursing facility and nursing
facility provisional employees.--
(A) Medicare program.--Section 1819(b) (42 U.S.C.
1395i-3(b)) is amended by adding at the end the
following:
``(8) Screening of skilled nursing facility workers.--
``(A) Background checks of provisional employees.--
Subject to subparagraph (B)(ii), after a skilled
nursing facility selects an individual for a position
as a skilled nursing facility worker, the facility,
prior to employing such worker in a status other than a
provisional status to the extent permitted under
subparagraph (B)(ii), shall--
``(i) give such worker written notice that
the facility is required to perform background
checks with respect to provisional employees;
``(ii) require, as a condition of
employment, that such worker--
``(I) provide a written statement
disclosing any conviction for a
relevant crime or finding of patient or
resident abuse;
``(II) provide a statement signed
by the worker authorizing the facility
to request the search and exchange of
criminal records;
``(III) provide in person to the
facility a copy of the worker's
fingerprints or thumb print, depending
upon available technology; and
``(IV) provide any other
identification information the
Secretary may specify in regulation;
``(iii) initiate a check of the data
collection system established under section
1128E in accordance with regulations
promulgated by the Secretary to determine
whether such system contains any disqualifying
information with respect to such worker; and
``(iv) if that system does not contain any
such disqualifying information--
``(I) request through the
appropriate State agency that the State
initiate a State and national criminal
background check on such worker in
accordance with the provisions of
subsection (e)(6); and
``(II) submit to such State agency
the information described in subclauses
(II) through (IV) of clause (ii) not
more than 7 days (excluding Saturdays,
Sundays, and legal public holidays
under section 6103(a) of title 5,
United States Code) after completion of
the check against the system initiated
under clause (iii).
``(B) Prohibition on hiring of abusive workers.--
``(i) In general.--A skilled nursing
facility may not knowingly employ any skilled
nursing facility worker who has any conviction
for a relevant crime or with respect to whom a
finding of patient or resident abuse has been
made.
``(ii) Provisional employment.--After
complying with the requirements of clauses (i),
(ii), and (iii) of subparagraph (A), a skilled
nursing facility may provide for a provisional
period of employment for a skilled nursing
facility worker pending completion of the check
against the data collection system described
under subparagraph (A)(iii) and the background
check described under subparagraph (A)(iv).
Subject to clause (iii), such facility shall
maintain direct supervision of the covered
individual during the worker's provisional
period of employment.
``(iii) Exception for small rural skilled
nursing facilities.--In the case of a small
rural skilled nursing facility (as defined by
the Secretary), the Secretary shall provide, by
regulation after consultation with providers of
skilled nursing facility services and entities
representing beneficiaries of such services,
for an appropriate level of supervision with
respect to any provisional employees employed
by the facility in accordance with clause (ii).
Such regulation should encourage the provision
of direct supervision of such employees
whenever practicable with respect to such a
facility and if such supervision would not
impose an unreasonable cost or other burden on
the facility.
``(C) Reporting requirements.--A skilled nursing
facility shall report to the State any instance in
which the facility determines that a skilled nursing
facility worker has committed an act of resident
neglect or abuse or misappropriation of resident
property in the course of employment by the facility.
``(D) Use of information.--
``(i) In general.--A skilled nursing
facility that obtains information about a
skilled nursing facility worker pursuant to
clauses (iii) and (iv) of subparagraph (A) may
use such information only for the purpose of
determining the suitability of the worker for
employment.
``(ii) Immunity from liability.--A skilled
nursing facility that, in denying employment
for an individual selected for hiring as a
skilled nursing facility worker (including
during the period described in subparagraph
(B)(ii)), reasonably relies upon information
about such individual provided by the State
pursuant to subsection (e)(6) or section 1128E
shall not be liable in any action brought by
such individual based on the employment
determination resulting from the information.
``(iii) Criminal penalty.--Whoever
knowingly violates the provisions of clause (i)
shall be fined in accordance with title 18,
United States Code, imprisoned for not more
than 2 years, or both.
``(E) Civil penalty.--
``(i) In general.--A skilled nursing
facility that violates the provisions of this
paragraph shall be subject to a civil penalty
in an amount not to exceed--
``(I) for the first such violation,
$2,000; and
``(II) for the second and each
subsequent violation within any 5-year
period, $5,000.
``(ii) Knowing retention of worker.--In
addition to any civil penalty under clause (i),
a skilled nursing facility that--
``(I) knowingly continues to employ
a skilled nursing facility worker in
violation of subparagraph (A) or (B);
or
``(II) knowingly fails to report a
skilled nursing facility worker under
subparagraph (C),
shall be subject to a civil penalty in an
amount not to exceed $5,000 for the first such
violation, and $10,000 for the second and each
subsequent violation within any 5-year period.
``(F) Definitions.--In this paragraph:
``(i) Conviction for a relevant crime.--The
term `conviction for a relevant crime' means
any Federal or State criminal conviction for--
``(I) any offense described in
paragraphs (1) through (4) of section
1128(a); and
``(II) such other types of offenses
as the Secretary may specify in
regulations, taking into account the
severity and relevance of such
offenses, and after consultation with
representatives of long-term care
providers, representatives of long-term
care employees, consumer advocates, and
appropriate Federal and State
officials.
``(ii) Disqualifying information.--The term
`disqualifying information' means information
about a conviction for a relevant crime or a
finding of patient or resident abuse.
``(iii) Finding of patient or resident
abuse.--The term `finding of patient or
resident abuse' means any substantiated finding
by a State agency under subsection (g)(1)(C) or
a Federal agency that a skilled nursing
facility worker has committed--
``(I) an act of patient or resident
abuse or neglect or a misappropriation
of patient or resident property; or
``(II) such other types of acts as
the Secretary may specify in
regulations.
``(iv) Skilled nursing facility worker.--
The term `skilled nursing facility worker'
means any individual (other than a volunteer)
that has access to a patient of a skilled
nursing facility under an employment or other
contract, or both, with such facility. Such
term includes individuals who are licensed or
certified by the State to provide such
services, and nonlicensed individuals providing
such services, as defined by the Secretary,
including nurse assistants, nurse aides, home
health aides, and personal care workers and
attendants.''.
(B) Medicaid program.--Section 1919(b) (42 U.S.C.
1396r(b)) is amended by adding at the end the following
new paragraph:
``(8) Screening of nursing facility workers.--
``(A) Background checks on provisional employees.--
Subject to subparagraph (B)(ii), after a nursing
facility selects an individual for a position as a
nursing facility worker, the facility, prior to
employing such worker in a status other than a
provisional status to the extent permitted under
subparagraph (B)(ii), shall--
``(i) give the worker written notice that
the facility is required to perform background
checks with respect to provisional employees;
``(ii) require, as a condition of
employment, that such worker--
``(I) provide a written statement
disclosing any conviction for a
relevant crime or finding of patient or
resident abuse;
``(II) provide a statement signed
by the worker authorizing the facility
to request the search and exchange of
criminal records;
``(III) provide in person to the
facility a copy of the worker's
fingerprints or thumb print, depending
upon available technology; and
``(IV) provide any other
identification information the
Secretary may specify in regulation;
``(iii) initiate a check of the data
collection system established under section
1128E in accordance with regulations
promulgated by the Secretary to determine
whether such system contains any disqualifying
information with respect to such worker; and
``(iv) if that system does not contain any
such disqualifying information--
``(I) request through the
appropriate State agency that the State
initiate a State and national criminal
background check on such worker in
accordance with the provisions of
subsection (e)(8); and
``(II) submit to such State agency
the information described in subclauses
(II) through (IV) of clause (ii) not
more than 7 days (excluding Saturdays,
Sundays, and legal public holidays
under section 6103(a) of title 5,
United States Code) after completion of
the check against the system initiated
under clause (iii).
``(B) Prohibition on hiring of abusive workers.--
``(i) In general.--A nursing facility may
not knowingly employ any nursing facility
worker who has any conviction for a relevant
crime or with respect to whom a finding of
patient or resident abuse has been made.
``(ii) Provisional employment.--After
complying with the requirements of clauses (i),
(ii), and (iii) of subparagraph (A), a nursing
facility may provide for a provisional period
of employment for a nursing facility worker
pending completion of the check against the
data collection system described under
subparagraph (A)(iii) and the background check
described under subparagraph (A)(iv). Subject
to clause (iii), such facility shall maintain
direct supervision of the worker during the
worker's provisional period of employment.
``(iii) Exception for small rural nursing
facilities.--
``(I) In general.--In the case of a
small rural nursing facility (as
defined by the Secretary), the
Secretary shall provide, by regulation
after consultation with providers of
nursing facility services and entities
representing beneficiaries of such
services, for an appropriate level of
supervision with respect to any
provisional employees employed by the
facility in accordance with clause
(ii). Such regulation should encourage
the provision of direct supervision of
such employees whenever practicable
with respect to such a facility and if
such supervision would not impose an
unreasonable cost or other burden on
the facility.
``(C) Reporting requirements.--A nursing facility
shall report to the State any instance in which the
facility determines that a nursing facility worker has
committed an act of resident neglect or abuse or
misappropriation of resident property in the course of
employment by the facility.
``(D) Use of information.--
``(i) In general.--A nursing facility that
obtains information about a nursing facility
worker pursuant to clauses (iii) and (iv) of
subparagraph (A) may use such information only
for the purpose of determining the suitability
of the worker for employment.
``(ii) Immunity from liability.--A nursing
facility that, in denying employment for an
individual selected for hiring as a nursing
facility worker (including during the period
described in subparagraph (B)(ii)), reasonably
relies upon information about such individual
provided by the State pursuant to subsection
(e)(6) or section 1128E shall not be liable in
any action brought by such individual based on
the employment determination resulting from the
information.
``(iii) Criminal penalty.--Whoever
knowingly violates the provisions of clause (i)
shall be fined in accordance with title 18,
United States Code, imprisoned for not more
than 2 years, or both.
``(E) Civil penalty.--
``(i) In general.--A nursing facility that
violates the provisions of this paragraph shall
be subject to a civil penalty in an amount not
to exceed--
``(I) for the first such violation,
$2,000; and
``(II) for the second and each
subsequent violation within any 5-year
period, $5,000.
``(ii) Knowing retention of worker.--In
addition to any civil penalty under clause (i),
a nursing facility that--
``(I) knowingly continues to employ
a nursing facility worker in violation
of subparagraph (A) or (B); or
``(II) knowingly fails to report a
nursing facility worker under
subparagraph (C),
shall be subject to a civil penalty in an
amount not to exceed $5,000 for the first such
violation, and $10,000 for the second and each
subsequent violation within any 5-year period.
``(F) Definitions.--In this paragraph:
``(i) Conviction for a relevant crime.--The
term `conviction for a relevant crime' means
any Federal or State criminal conviction for--
``(I) any offense described in
paragraphs (1) through (4) of section
1128(a); and
``(II) such other types of offenses
as the Secretary may specify in
regulations, taking into account the
severity and relevance of such
offenses, and after consultation with
representatives of long-term care
providers, representatives of long-term
care employees, consumer advocates, and
appropriate Federal and State
officials.
``(ii) Disqualifying information.--The term
`disqualifying information' means information
about a conviction for a relevant crime or a
finding of patient or resident abuse.
``(iii) Finding of patient or resident
abuse.--The term `finding of patient or
resident abuse' means any substantiated finding
by a State agency under subsection (g)(1)(C) or
a Federal agency that a nursing facility worker
has committed--
``(I) an act of patient or resident
abuse or neglect or a misappropriation
of patient or resident property; or
``(II) such other types of acts as
the Secretary may specify in
regulations.
``(iv) Nursing facility worker.--The term
`nursing facility worker' means any individual
(other than a volunteer) that has access to a
patient of a nursing facility under an
employment or other contract, or both, with
such facility. Such term includes individuals
who are licensed or certified by the State to
provide such services, and nonlicensed
individuals providing such services, as defined
by the Secretary, including nurse assistants,
nurse aides, home health aides, and personal
care workers and attendants.''.
(2) Federal responsibilities.--
(A) Development of standard federal and state
background check form.--The Secretary of Health and
Human Services, in consultation with the Attorney
General and representatives of appropriate State
agencies, shall develop a model form that a provisional
employee at a nursing facility may complete and Federal
and State agencies may use to conduct the criminal
background checks required under sections 1819(b)(8)
and 1919(b)(8) of the Social Security Act (42 U.S.C.
1395i-3(b), 1396r(b)) (as added by this section).
(B) Periodic evaluation.--The Secretary of Health
and Human Services, in consultation with the Attorney
General, periodically shall evaluate the background
check system imposed under sections 1819(b)(8) and
1919(b)(8) of the Social Security Act (42 U.S.C. 1395i-
3(b), 1396r(b)) (as added by this section) and shall
implement changes, as necessary, based on available
technology, to make the background check system more
efficient and able to provide a more immediate response
to long-term care providers using the system.
(3) No preemption of stricter state laws.--Nothing in
section 1819(b)(8) or 1919(b)(8) of the Social Security Act (42
U.S.C. 1395i-3(b)(8), 1396r(b)(8)) (as so added) shall be
construed to supersede any provision of State law that--
(A) specifies a relevant crime for purposes of
prohibiting the employment of an individual at a long-
term care facility (as defined in section 1128E(g)(6)
of the Social Security Act (as added by subsection (e))
that is not included in the list of such crimes
specified in such sections or in regulations
promulgated by the Secretary of Health and Human
Services to carry out such sections; or
(B) requires a long-term care facility (as so
defined) to conduct a background check prior to
employing an individual in an employment position that
is not included in the positions for which a background
check is required under such sections.
(4) Technical amendments.--Effective as if included in the
enactment of section 941 of BIPA (114 Stat. 2763A-585),
sections 1819(b) and 1919(b) (42 U.S.C. 1395i-3(b), 1396r(b)),
as amended by such section 941 are each amended by
redesignating the paragraph (8) added by such section as
paragraph (9).
(b) Federal and State Requirements Concerning Background Checks.--
(1) Medicare.--Section 1819(e) (42 U.S.C. 1395i-3(e)) is
amended by adding at the end the following:
``(6) Federal and state requirements concerning criminal
background checks on skilled nursing facility employees.--
``(A) In general.--Upon receipt of a request by a
skilled nursing facility pursuant to subsection (b)(8)
that is accompanied by the information described in
subclauses (II) through (IV) of subsection
(b)(8)(A)(ii), a State, after checking appropriate
State records and finding no disqualifying information
(as defined in subsection (b)(8)(F)(ii)), shall
immediately submit such request and information to the
Attorney General and shall request the Attorney General
to conduct a search and exchange of records with
respect to the individual as described in subparagraph
(B).
``(B) Search and exchange of records by attorney
general.--Upon receipt of a submission pursuant to
subparagraph (A), the Attorney General shall direct a
search of the records of the Federal Bureau of
Investigation for any criminal history records
corresponding to the fingerprints and other positive
identification information submitted. The Attorney
General shall provide any corresponding information
resulting from the search to the State.
``(C) State reporting of information to skilled
nursing facility.--Upon receipt of the information
provided by the Attorney General pursuant to
subparagraph (B), the State shall--
``(i) review the information to determine
whether the individual has any conviction for a
relevant crime (as defined in subsection
(b)(8)(F)(i));
``(ii) immediately report to the skilled
nursing facility in writing the results of such
review; and
``(iii) in the case of an individual with a
conviction for a relevant crime, report the
existence of such conviction of such individual
to the database established under section
1128E.
``(D) Fees for performance of criminal background
checks.--
``(i) Authority to charge fees.--
``(I) Attorney general.--The
Attorney General may charge a fee to
any State requesting a search and
exchange of records pursuant to this
paragraph and subsection (b)(8) for
conducting the search and providing the
records. The amount of such fee shall
not exceed the lesser of the actual
cost of such activities or $50. Such
fees shall be available to the Attorney
General, or, in the Attorney General's
discretion, to the Federal Bureau of
Investigation until expended.
``(II) State.--A State may charge a
skilled nursing facility a fee for
initiating the criminal background
check under this paragraph and
subsection (b)(8), including fees
charged by the Attorney General, and
for performing the review and report
required by subparagraph (C). The
amount of such fee shall not exceed the
actual cost of such activities.
``(ii) Prohibition on charging.--An entity
may not impose on a provisional employee or an
employee any charges relating to the
performance of a background check under this
paragraph.
``(E) Regulations.--
``(i) In general.--In addition to the
Secretary's authority to promulgate regulations
under this title, the Attorney General, in
consultation with the Secretary, may promulgate
such regulations as are necessary to carry out
the Attorney General's responsibilities under
this paragraph and subsection (b)(9), including
regulations regarding the security
confidentiality, accuracy, use, destruction,
and dissemination of information, audits and
recordkeeping, and the imposition of fees.
``(ii) Appeal procedures.--The Attorney
General, in consultation with the Secretary,
shall promulgate such regulations as are
necessary to establish procedures by which a
provisional employee or an employee may appeal
or dispute the accuracy of the information
obtained in a background check conducted under
this paragraph. Appeals shall be limited to
instances in which a provisional employee or an
employee is incorrectly identified as the
subject of the background check, or when
information about the provisional employee or
employee has not been updated to reflect
changes in the provisional employee's or
employee's criminal record.
``(F) Report.--Not later than 2 years after the
date of enactment of this paragraph, the Attorney
General shall submit a report to Congress on--
``(i) the number of requests for searches
and exchanges of records made under this
section;
``(ii) the disposition of such requests;
and
``(iii) the cost of responding to such
requests.''.
(2) Medicaid.--Section 1919(e) (42 U.S.C. 1396r(e)) is
amended by adding at the end the following:
``(8) Federal and state requirements concerning criminal
background checks on nursing facility employees.--
``(A) In general.--Upon receipt of a request by a
nursing facility pursuant to subsection (b)(8) that is
accompanied by the information described in subclauses
(II) through (IV) of subsection (b)(8)(A)(ii), a State,
after checking appropriate State records and finding no
disqualifying information (as defined in subsection
(b)(8)(F)(ii)), shall immediately submit such request
and information to the Attorney General and shall
request the Attorney General to conduct a search and
exchange of records with respect to the individual as
described in subparagraph (B).
``(B) Search and exchange of records by attorney
general.--Upon receipt of a submission pursuant to
subparagraph (A), the Attorney General shall direct a
search of the records of the Federal Bureau of
Investigation for any criminal history records
corresponding to the fingerprints and other positive
identification information submitted. The Attorney
General shall provide any corresponding information
resulting from the search to the State.
``(C) State reporting of information to nursing
facility.--Upon receipt of the information provided by
the Attorney General pursuant to subparagraph (B), the
State shall--
``(i) review the information to determine
whether the individual has any conviction for a
relevant crime (as defined in subsection
(b)(8)(F)(i));
``(ii) immediately report to the nursing
facility in writing the results of such review;
and
``(iii) in the case of an individual with a
conviction for a relevant crime, report the
existence of such conviction of such individual
to the database established under section
1128E.
``(D) Fees for performance of criminal background
checks.--
``(i) Authority to charge fees.--
``(I) Attorney general.--The
Attorney General may charge a fee to
any State requesting a search and
exchange of records pursuant to this
paragraph and subsection (b)(8) for
conducting the search and providing the
records. The amount of such fee shall
not exceed the lesser of the actual
cost of such activities or $50. Such
fees shall be available to the Attorney
General, or, in the Attorney General's
discretion, to the Federal Bureau of
Investigation, until expended.
``(II) State.--A State may charge a
nursing facility a fee for initiating
the criminal background check under
this paragraph and subsection (b)(8),
including fees charged by the Attorney
General, and for performing the review
and report required by subparagraph
(C). The amount of such fee shall not
exceed the actual cost of such
activities.
``(ii) Prohibition on charging.--An entity
may not impose on a provisional employee or an
employee any charges relating to the
performance of a background check under this
paragraph.
``(E) Regulations.--
``(i) In general.--In addition to the
Secretary's authority to promulgate regulations
under this title, the Attorney General, in
consultation with the Secretary, may promulgate
such regulations as are necessary to carry out
the Attorney General's responsibilities under
this paragraph and subsection (b)(8), including
regulations regarding the security,
confidentiality, accuracy, use, destruction,
and dissemination of information, audits and
recordkeeping, and the imposition of fees.
``(ii) Appeal procedures.--The Attorney
General, in consultation with the Secretary,
shall promulgate such regulations as are
necessary to establish procedures by which a
provisional employee or an employee may appeal
or dispute the accuracy of the information
obtained in a background check conducted under
this paragraph. Appeals shall be limited to
instances in which a provisional employee or an
employee is incorrectly identified as the
subject of the background check, or when
information about the provisional employee or
employee has not been updated to reflect
changes in the provisional employee's or
employee's criminal record.
``(F) Report.--Not later than 2 years after the
date of enactment of this paragraph, the Attorney
General shall submit a report to Congress on--
``(i) the number of requests for searches
and exchanges of records made under this
section;
``(ii) the disposition of such requests;
and
``(iii) the cost of responding to such
requests.''.
(c) Application to Other Entities Providing Home Health or Long-
Term Care Services.--
(1) Medicare.--Part D of title XVIII (42 U.S.C. 1395x et
seq.) is amended by adding at the end the following:

``application of skilled nursing facility preventive abuse provisions
to any provider of services or other entity providing home health or
long-term care services

``Sec. 1897. (a) In General.--The requirements of subsections
(b)(8) and (e)(6) of section 1819 shall apply to any provider of
services or any other entity that is eligible to be paid under this
title for providing home health services, hospice care (including
routine home care and other services included in hospice care under
this title), or long-term care services to an individual entitled to
benefits under part A or enrolled under part B, including an individual
provided with a Medicare+Choice plan offered by a Medicare+Choice
organization under part C (in this section referred to as a `medicare
beneficiary').
``(b) Supervision of Provisional Employees.--
``(1) In general.--With respect to an entity that provides
home health services, such entity shall be considered to have
satisfied the requirements of section 1819(b)(8)(B)(ii) or
1919(b)(8)(B)(ii) if the entity meets such requirements for
supervision of provisional employees of the entity as the
Secretary shall, by regulation, specify in accordance with
paragraph (2).
``(2) Requirements.--The regulations required under
paragraph (1) shall provide the following:
``(A) Supervision of a provisional employee shall
consist of ongoing, good faith, verifiable efforts by
the supervisor of the provisional employee to conduct
monitoring and oversight activities to ensure the
safety of a medicare beneficiary.
``(B) For purposes of subparagraph (A), monitoring
and oversight activities may include (but are not
limited to) the following:
``(i) Follow-up telephone calls to the
medicare beneficiary.
``(ii) Unannounced visits to the medicare
beneficiary's home while the provisional
employee is serving the medicare beneficiary.
``(iii) To the extent practicable, limiting
the provisional employee's duties to serving
only those medicare beneficiaries in a home or
setting where another family member or resident
of the home or setting of the medicare
beneficiary is present.
``(C) In promulgating such regulations, the
Secretary shall take into account the staffing and
geographic issues faced by small rural entities (as
defined by the Secretary) that provide home health
services, hospice care (including routine home care and
other services included in hospice care under this
title), or other long-term care services. Such
regulations should encourage the provision of
monitoring and oversight activities whenever
practicable with respect to such an entity, and if such
activities would not impose an unreasonable cost or
other burden on the entity.''.
(2) Medicaid.--Section 1902(a) (42 U.S.C. 1396a), as
amended by section 104(a), is amended--
(A) in paragraph (65), by striking ``and'' at the
end;
(B) in paragraph (66), by striking the period and
inserting ``; and''; and
(C) by inserting after paragraph (66) the
following:
``(67) provide that any entity that is eligible to be paid
under the State plan for providing home health services,
hospice care (including routine home care and other services
included in hospice care under title XVIII), or long-term care
services for which medical assistance is available under the
State plan to individuals requiring long-term care complies
with the requirements of subsections (b)(8) and (e)(8) of
section 1919 and section 1897(b) (in the same manner as such
section applies to a medicare beneficiary).''.
(3) Expansion of State Nurse Aide Registry.--
(A) Medicare.--Section 1819 (42 U.S.C. 1395i-3) is
amended--
(i) in subsection (e)(2)--
(I) in the paragraph heading, by
striking ``Nurse aide registry'' and
inserting ``Employee registry'';
(II) in subparagraph (A)--
(aa) by striking ``By not
later than January 1, 1989,
the'' and inserting ``The'';
(bb) by striking ``a
registry of all individuals''
and inserting ``a registry of
(i) all individuals''; and
(cc) by inserting before
the period the following: ``,
(ii) all other skilled nursing
facility employees with respect
to whom the State has made a
finding described in
subparagraph (B), and (iii) any
employee of any provider of
services or any other entity
that is eligible to be paid
under this title for providing
home health services, hospice
care (including routine home
care and other services
included in hospice care under
this title), or long-term care
services and with respect to
whom the entity has reported to
the State a finding of patient
neglect or abuse or a
misappropriation of patient
property''; and
(III) in subparagraph (C), by
striking ``a nurse aide'' and inserting
``an individual''; and
(ii) in subsection (g)(1)--
(I) by striking the first sentence
of subparagraph (C) and inserting the
following: ``The State shall provide,
through the agency responsible for
surveys and certification of skilled
nursing facilities under this
subsection, for a process for the
receipt and timely review and
investigation of allegations of neglect
and abuse and misappropriation of
resident property by a nurse aide or a
skilled nursing facility employee of a
resident in a skilled nursing facility,
by another individual used by the
facility in providing services to such
a resident, or by an individual
described in subsection
(e)(2)(A)(iii).''; and
(II) in the fourth sentence of
subparagraph (C), by inserting ``or
described in subsection
(e)(2)(A)(iii)'' after ``used by the
facility''; and
(III) in subparagraph (D)--
(aa) in the subparagraph
heading, by striking ``nurse
aide''; and
(bb) in clause (i), in the
matter preceding subclause (I),
by striking ``a nurse aide''
and inserting ``an
individual''; and
(cc) in clause (i)(I), by
striking ``nurse aide'' and
inserting ``individual''.
(B) Medicaid.--Section 1919 (42 U.S.C. 1396r) is
amended--
(i) in subsection (e)(2)--
(I) in the paragraph heading, by
striking ``Nurse aide registry'' and
inserting ``Employee registry'';
(II) in subparagraph (A)--
(aa) by striking ``By not
later than January 1, 1989,
the'' and inserting ``The'';
(bb) by striking ``a
registry of all individuals''
and inserting ``a registry of
(i) all individuals''; and
(cc) by inserting before
the period the following: ``,
(ii) all other nursing facility
employees with respect to whom
the State has made a finding
described in subparagraph (B),
and (iii) any employee of an
entity that is eligible to be
paid under the State plan for
providing home health services,
hospice care (including routine
home care and other services
included in hospice care under
title XVIII), or long-term care
services and with respect to
whom the entity has reported to
the State a finding of patient
neglect or abuse or a
misappropriation of patient
property''; and
(III) in subparagraph (C), by
striking ``a nurse aide'' and inserting
``an individual''; and
(ii) in subsection (g)(1)--
(I) by striking the first sentence
of subparagraph (C) and inserting the
following: ``The State shall provide,
through the agency responsible for
surveys and certification of nursing
facilities under this subsection, for a
process for the receipt and timely
review and investigation of allegations
of neglect and abuse and
misappropriation of resident property
by a nurse aide or a nursing facility
employee of a resident in a nursing
facility, by another individual used by
the facility in providing services to
such a resident, or by an individual
described in subsection
(e)(2)(A)(iii).''; and
(II) in the fourth sentence of
subparagraph (C), by inserting ``or
described in subsection
(e)(2)(A)(iii)'' after ``used by the
facility''; and
(III) in subparagraph (D)--
(aa) in the subparagraph
heading, by striking ``nurse
aide''; and
(bb) in clause (i), in the
matter preceding subclause (I),
by striking ``a nurse aide''
and inserting ``an
individual''; and
(cc) in clause (i)(I), by
striking ``nurse aide'' and
inserting ``individual''.
(d) Reimbursement of Costs for Background Checks.--The Secretary of
Health and Human Services shall reimburse nursing facilities, skilled
nursing facilities, and other entities for costs incurred by the
facilities and entities in order to comply with the requirements
imposed under sections 1819(b)(8) and 1919(b)(8) of such Act (42 U.S.C.
1395i-3(b)(8), 1396r(b)(8)), as added by this section.
(e) Inclusion of Abusive Acts Within a Long-Term Care Facility or
Provider in the National Health Care Fraud and Abuse Data Collection
Program.--
(1) In general.--Section 1128E(g)(1)(A) (42 U.S.C. 1320a-
7e(g)(1)(A)) is amended--
(A) by redesignating clause (v) as clause (vi); and
(B) by inserting after clause (iv), the following:
``(v) A finding of abuse or neglect of a
patient or a resident of a long-term care
facility, or misappropriation of such a
patient's or resident's property.''.
(2) Coverage of long-term care facility or provider
employees.--Section 1128E(g)(2) (42 U.S.C. 1320a-7e(g)(2)) is
amended by inserting ``, and includes any individual of a long-
term care facility or provider (other than any volunteer) that
has access to a patient or resident of such a facility under an
employment or other contract, or both, with the facility or
provider (including individuals who are licensed or certified
by the State to provide services at the facility or through the
provider, and nonlicensed individuals, as defined by the
Secretary, providing services at the facility or through the
provider, including nurse assistants, nurse aides, home health
aides, individuals who provide home care, and personal care
workers and attendants)'' before the period.
(3) Reporting by long-Term care facilities or providers.--
(A) In general.--Section 1128E(b)(1) (42 U.S.C.
1320a-7e(b)(1)) is amended by striking ``and health
plan'' and inserting ``, health plan, and long-term
care facility or provider''.
(B) Correction of information.--Section 1128E(c)(2)
(42 U.S.C. 1320a-7e(c)(2)) is amended by striking ``and
health plan'' and inserting ``, health plan, and long-
term care facility or provider''.
(4) Access to reported information.--Section 1128E(d)(1)
(42 U.S.C. 1320a-7e(d)(1)) is amended by striking ``and health
plans'' and inserting ``, health plans, and long-term care
facilities or providers''.
(5) Mandatory check of database by long-term care
facilities or providers.--Section 1128E(d) (42 U.S.C. 1320a-
7e(d)) is amended by adding at the end the following:
``(3) Mandatory check of database by long-term care
facilities or providers.--A long-term care facility or provider
shall check the database maintained under this section prior to
hiring under an employment or other contract, or both, (other
than in a provisional status) any individual as an employee of
such a facility or provider who will have access to a patient
or resident of the facility or provider (including individuals
who are licensed or certified by the State to provide services
at the facility or through the provider, and nonlicensed
individuals, as defined by the Secretary, that will provide
services at the facility or through the provider, including
nurse assistants, nurse aides, home health aides, individuals
who provide home care, and personal care workers and
attendants).''.
(6) Definition of long-term care facility or provider.--
Section 1128E(g) (42 U.S.C. 1320a-7e(g)) is amended by adding
at the end the following:
``(6) Long-term care facility or provider.--The term `long-
term care facility or provider' means a skilled nursing
facility (as defined in section 1819(a)), a nursing facility
(as defined in section 1919(a)), a home health agency, a
provider of hospice care (as defined in section 1861(dd)(1)), a
long-term care hospital (as described in section
1886(d)(1)(B)(iv)), an intermediate care facility for the
mentally retarded (as defined in section 1905(d)), or any other
facility or entity that provides, or is a provider of, long-
term care services, home health services, or hospice care
(including routine home care and other services included in
hospice care under title XVIII), and receives payment for such
services under the medicare program under title XVIII or the
medicaid program under title XIX.''.
(7) Authorization of appropriations.--There is authorized
to be appropriated to carry out the amendments made by this
subsection, $10,200,000 for fiscal year 2004.
(f) Prevention and Training Demonstration Project.--
(1) Establishment.--The Secretary of Health and Human
Services shall establish a demonstration program to provide
grants to develop information on best practices in patient
abuse prevention training (including behavior training and
interventions) for managers and staff of hospital and health
care facilities.
(2) Eligibility.--To be eligible to receive a grant under
paragraph (1), an entity shall be a public or private nonprofit
entity and prepare and submit to the Secretary of Health and
Human Services an application at such time, in such manner, and
containing such information as the Secretary may require.
(3) Use of funds.--Amounts received under a grant under
this subsection shall be used to--
(A) examine ways to improve collaboration between
State health care survey and provider certification
agencies, long-term care ombudsman programs, the long-
term care industry, and local community members;
(B) examine patient care issues relating to
regulatory oversight, community involvement, and
facility staffing and management with a focus on staff
training, staff stress management, and staff
supervision;
(C) examine the use of patient abuse prevention
training programs by long-term care entities, including
the training program developed by the National
Association of Attorneys General, and the extent to
which such programs are used; and
(D) identify and disseminate best practices for
preventing and reducing patient abuse.
(4) Authorization of appropriations.--There is authorized
to be appropriated such sums as may be necessary to carry out
this subsection.
(g) Effective Date.--
(1) In general.--With respect to a skilled nursing facility
(as defined in section 1819(a) of the Social Security Act (42
U.S.C. 1395i-3(a)) or a nursing facility (as defined in section
1919(a) of the Social Security Act (42 U.S.C. 1396r(a)), this
section and the amendments made by this section shall take
effect on the date that is the earlier of--
(A) 6 months after the effective date of final
regulations promulgated to carry out this section and
such amendments; or
(B) January 1, 2006.
(2) Long-term care facilities and providers.--With respect
to a long-term care facility or provider (as defined in section
1128E(g)(6) of the Social Security Act (42 U.S.C. 1320a-
7e(g)(6)) (as added by subsection (e)), this section and the
amendments made by this section shall take effect on the date
that is the earlier of--
(A) 18 months after the effective date of final
regulations promulgated to carry out this section and
such amendments; or
(B) January 1, 2007.

SEC. 637. OFFICE OF RURAL HEALTH POLICY IMPROVEMENTS.

Section 711(b) (42 U.S.C. 912(b)) is amended--
(1) in paragraph (3), by striking ``and'' after the comma
at the end;
(2) in paragraph (4), by inserting ``and'' after the comma
at the end; and
(3) by inserting after paragraph (4) the following new
paragraph:
``(5) administer grants, cooperative agreements, and
contracts to provide technical assistance and other activities
as necessary to support activities related to improving health
care in rural areas.''.

TITLE VII--ACCESS TO AFFORDABLE PHARMACEUTICALS

SEC. 701. SHORT TITLE.

This title may be cited as the ``Greater Access to Affordable
Pharmaceuticals Act''.

SEC. 702. 30-MONTH STAY-OF-EFFECTIVENESS PERIOD.

(a) Abbreviated New Drug Applications.--Section 505(j) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) is amended--
(1) in paragraph (2), by striking subparagraph (B) and
inserting the following:
``(B) Notice of opinion that patent is invalid or will not be
infringed.--
``(i) Agreement to give notice.--An applicant that makes a
certification described in subparagraph (A)(vii)(IV) shall
include in the application a statement that the applicant will
give notice as required by this subparagraph.
``(ii) Timing of notice.--An applicant that makes a
certification described in subparagraph (A)(vii)(IV) shall give
notice as required under this subparagraph--
``(I) if the certification is in the application,
not later than 20 days after the date of the postmark
on the notice with which the Secretary informs the
applicant that the application has been filed; or
``(II) if the certification is in an amendment or
supplement to the application, at the time at which the
applicant submits the amendment or supplement,
regardless of whether the applicant has already given
notice with respect to another such certification
contained in the application or in an amendment or
supplement to the application.
``(iii) Recipients of notice.--An applicant required under
this subparagraph to give notice shall give notice to--
``(I) each owner of the patent that is the subject
of the certification (or a representative of the owner
designated to receive such a notice); and
``(II) the holder of the approved application under
subsection (b) for the drug that is claimed by the
patent or a use of which is claimed by the patent (or a
representative of the holder designated to receive such
a notice).
``(iv) Contents of notice.--A notice required under this
subparagraph shall--
``(I) state that an application that contains data
from bioavailability or bioequivalence studies has been
submitted under this subsection for the drug with
respect to which the certification is made to obtain
approval to engage in the commercial manufacture, use,
or sale of the drug before the expiration of the patent
referred to in the certification; and
``(II) include a detailed statement of the factual
and legal basis of the opinion of the applicant that
the patent is invalid or will not be infringed.''; and
(2) in paragraph (5)--
(A) in subparagraph (B)--
(i) by striking ``under the following'' and
inserting ``by applying the following to each
certification made under paragraph
(2)(A)(vii)''; and
(ii) in clause (iii)--
(I) in the first sentence, by
striking ``unless'' and all that
follows and inserting ``unless, before
the expiration of 45 days after the
date on which the notice described in
paragraph (2)(B) is received, an action
is brought for infringement of the
patent that is the subject of the
certification and for which information
was submitted to the Secretary under
subsection (b)(1) or (c)(2) before the
date on which the application
(excluding an amendment or supplement
to the application), which the
Secretary later determines to be
substantially complete, was
submitted.''; and
(II) in the second sentence--
(aa) by striking subclause
(I) and inserting the
following:
``(I) if before the expiration of such period the
district court decides that the patent is invalid or
not infringed (including any substantive determination
that there is no cause of action for patent
infringement or invalidity), the approval shall be made
effective on--
``(aa) the date on which the court enters
judgment reflecting the decision; or
``(bb) the date of a settlement order or
consent decree signed and entered by the court
stating that the patent that is the subject of
the certification is invalid or not
infringed;'';
(bb) by striking subclause
(II) and inserting the
following:
``(II) if before the expiration of such period the
district court decides that the patent has been
infringed--
``(aa) if the judgment of the district
court is appealed, the approval shall be made
effective on--
``(AA) the date on which the court
of appeals decides that the patent is
invalid or not infringed (including any
substantive determination that there is
no cause of action for patent
infringement or invalidity); or
``(BB) the date of a settlement
order or consent decree signed and
entered by the court of appeals stating
that the patent that is the subject of
the certification is invalid or not
infringed; or
``(bb) if the judgment of the district
court is not appealed or is affirmed, the
approval shall be made effective on the date
specified by the district court in a court
order under section 271(e)(4)(A) of title 35,
United States Code;'';
(cc) in subclause (III), by
striking ``on the date of such
court decision.'' and inserting
``as provided in subclause (I);
or''; and
(dd) by inserting after
subclause (III) the following:
``(IV) if before the expiration of such period the
court grants a preliminary injunction prohibiting the
applicant from engaging in the commercial manufacture
or sale of the drug until the court decides the issues
of patent validity and infringement and if the court
decides that such patent has been infringed, the
approval shall be made effective as provided in
subclause (II).'';
(B) by redesignating subparagraphs (C) and (D) as
subparagraphs (E) and (F), respectively; and
(C) by inserting after subparagraph (B) the
following:
``(C) Civil action to obtain patent certainty.--
``(i) Declaratory judgment absent
infringement action.--If an owner of the patent
or the holder of the approved application under
subsection (b) for the drug that is claimed by
the patent or a use of which is claimed by the
patent does not bring a civil action against
the applicant for infringement of the patent on
or before the date that is 45 days after the
date on which the notice given under paragraph
(2)(B) was received, the applicant may bring a
civil action against the owner or holder (but
not against any owner or holder that has
brought such a civil action against that
applicant, unless that civil action was
dismissed without prejudice) for a declaratory
judgment under section 2201 of title 28, United
States Code, that the patent is invalid or will
not be infringed by the drug for which the
applicant seeks approval.
``(ii) Counterclaim to infringement
action.--
``(I) In general.--If an owner of
the patent or the holder of the
approved application under subsection
(b) for the drug that is claimed by the
patent or a use of which is claimed by
the patent brings a patent infringement
action against the applicant, the
applicant may assert a counterclaim
seeking an order requiring the holder
to correct or delete the patent
information submitted by the holder
under subsection (b) or (c) on the
ground that the patent does not claim
either--
``(aa) the drug for which
the application was approved;
or
``(bb) an approved method
of using the drug.
``(II) No independent cause of
action.--Subclause (I) does not
authorize the assertion of a claim
described in subclause (I) in any civil
action or proceeding other than a
counterclaim described in subclause
(I).
``(iii) No damages.--An applicant shall not
be entitled to damages in a civil action under
subparagraph (i) or a counterclaim under
subparagraph (ii).''.
(b) Applications Generally.--Section 505 of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355) is amended--
(1) in subsection (b), by striking paragraph (3) and
inserting the following:
``(3) Notice of opinion that patent is invalid or will not be
infringed.--
``(A) Agreement to give notice.--An applicant that makes a
certification described in paragraph (2)(A)(iv) shall include
in the application a statement that the applicant will give
notice as required by this paragraph.
``(B) Timing of notice.--An applicant that makes a
certification described in paragraph (2)(A)(iv) shall give
notice as required under this paragraph--
``(i) if the certification is in the application,
not later than 20 days after the date of the postmark
on the notice with which the Secretary informs the
applicant that the application has been filed; or
``(ii) if the certification is in an amendment or
supplement to the application, at the time at which the
applicant submits the amendment or supplement,
regardless of whether the applicant has already given
notice with respect to another such certification
contained in the application or in an amendment or
supplement to the application.
``(C) Recipients of notice.--An applicant required under
this paragraph to give notice shall give notice to--
``(i) each owner of the patent that is the subject
of the certification (or a representative of the owner
designated to receive such a notice); and
``(ii) the holder of the approved application under
this subsection for the drug that is claimed by the
patent or a use of which is claimed by the patent (or a
representative of the holder designated to receive such
a notice).
``(D) Contents of notice.--A notice required under this
paragraph shall--
``(i) state that an application that contains data
from bioavailability or bioequivalence studies has been
submitted under this subsection for the drug with
respect to which the certification is made to obtain
approval to engage in the commercial manufacture, use,
or sale of the drug before the expiration of the patent
referred to in the certification; and
``(ii) include a detailed statement of the factual
and legal basis of the opinion of the applicant that
the patent is invalid or will not be infringed.''; and
(2) in subsection (c)(3)--
(A) in the first sentence, by striking ``under the
following'' and inserting ``by applying the following
to each certification made under subsection
(b)(2)(A)(iv)'';
(B) in subparagraph (C)--
(i) in the first sentence, by striking
``unless'' and all that follows and inserting
``unless, before the expiration of 45 days
after the date on which the notice described in
subsection (b)(3) is received, an action is
brought for infringement of the patent that is
the subject of the certification and for which
information was submitted to the Secretary
under paragraph (2) or subsection (b)(1) before
the date on which the application (excluding an
amendment or supplement to the application) was
submitted.'';
(ii) in the second sentence--
(I) by striking ``paragraph
(3)(B)'' and inserting ``subsection
(b)(3)'';
(II) by striking clause (i) and
inserting the following:
``(i) if before the expiration of such period the
district court decides that the patent is invalid or
not infringed (including any substantive determination
that there is no cause of action for patent
infringement or invalidity), the approval shall be made
effective on--
``(I) the date on which the court enters
judgment reflecting the decision; or
``(II) the date of a settlement order or
consent decree signed and entered by the court
stating that the patent that is the subject of
the certification is invalid or not
infringed;'';
(III) by striking clause (ii) and
inserting the following:
``(ii) if before the expiration of such period the
district court decides that the patent has been
infringed--
``(I) if the judgment of the district court
is appealed, the approval shall be made
effective on--
``(aa) the date on which the court
of appeals decides that the patent is
invalid or not infringed (including any
substantive determination that there is
no cause of action for patent
infringement or invalidity); or
``(bb) the date of a settlement
order or consent decree signed and
entered by the court of appeals stating
that the patent that is the subject of
the certification is invalid or not
infringed; or
``(II) if the judgment of the district
court is not appealed or is affirmed, the
approval shall be made effective on the date
specified by the district court in a court
order under section 271(e)(4)(A) of title 35,
United States Code;'';
(IV) in clause (iii), by striking
``on the date of such court decision.''
and inserting ``as provided in clause
(i); or''; and
(V) by inserting after clause
(iii), the following:
``(iv) if before the expiration of such period the
court grants a preliminary injunction prohibiting the
applicant from engaging in the commercial manufacture
or sale of the drug until the court decides the issues
of patent validity and infringement and if the court
decides that such patent has been infringed, the
approval shall be made effective as provided in clause
(ii).''; and
(iii) in the third sentence, by striking
``paragraph (3)(B)'' and inserting ``subsection
(b)(3)'';
(C) by redesignating subparagraph (D) as
subparagraph (E); and
(D) by inserting after subparagraph (C) the
following:
``(D) Civil action to obtain patent certainty.--
``(i) Declaratory judgment absent
infringement action.--If an owner of the patent
or the holder of the approved application under
subsection (b) for the drug that is claimed by
the patent or a use of which is claimed by the
patent does not bring a civil action against
the applicant for infringement of the patent on
or before the date that is 45 days after the
date on which the notice given under subsection
(b)(3) was received, the applicant may bring a
civil action against the owner or holder (but
not against any owner or holder that has
brought such a civil action against that
applicant, unless that civil action was
dismissed without prejudice) for a declaratory
judgment under section 2201 of title 28, United
States Code, that the patent is invalid or will
not be infringed by the drug for which the
applicant seeks approval.
``(ii) Counterclaim to infringement
action.--
``(I) In general.--If an owner of
the patent or the holder of the
approved application under subsection
(b) for the drug that is claimed by the
patent or a use of which is claimed by
the patent brings a patent infringement
action against the applicant, the
applicant may assert a counterclaim
seeking an order requiring the holder
to correct or delete the patent
information submitted by the holder
under subsection (b) or this subsection
on the ground that the patent does not
claim either--
``(aa) the drug for which
the application was approved;
or
``(bb) an approved method
of using the drug.
``(II) No independent cause of
action.--Subclause (I) does not
authorize the assertion of a claim
described in subclause (I) in any civil
action or proceeding other than a
counterclaim described in subclause
(I).
``(iii) No damages.--An applicant shall not
be entitled to damages in a civil action under
clause (i) or a counterclaim under clause
(ii).''.
(c) Infringement Actions.--Section 271(e) of title 35, United
States Code, is amended by adding at the end the following:
``(5) The filing of an application described in paragraph
(2) that includes a certification under subsection
(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355), and the
failure of the owner of the patent to bring an action for
infringement of a patent that is the subject of the
certification before the expiration of 45 days after the date
on which the notice given under subsection (b)(3) or (j)(2)(B)
of that section is received, shall establish an actual
controversy between the applicant and the patent owner
sufficient to confer subject matter jurisdiction in the courts
of the United States in any action brought by the applicant
under section 2201 of title 28 for a declaratory judgment that
any patent that is the subject of the certification is invalid
or not infringed.''.
(d) Applicability.--
(1) In general.--Except as provided in paragraphs (2) and
(3), the amendments made by subsections (a), (b), and (c) apply
to any proceeding under section 505 of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355) that is pending on or after
the date of enactment of this Act regardless of the date on
which the proceeding was commenced or is commenced.
(2) Notice of opinion that patent is invalid or will not be
infringed.--The amendments made by subsections (a)(1) and
(b)(1) apply with respect to any certification under subsection
(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) after the
date of enactment of this Act in an application filed under
subsection (b)(2) or (j) of that section or in an amendment or
supplement to an application filed under subsection (b)(2) or
(j) of that section.
(3) Effective date of approval.--The amendments made by
subsections (a)(2)(A)(ii)(I) and (b)(2)(B)(i) apply with
respect to any patent information submitted under subsection
(b)(1) or (c)(2) of section 505 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355) made after the date of enactment
of this Act.

SEC. 703. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.

(a) In General.--Section 505(j)(5) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355(j)(5)) (as amended by section 702) is
amended--
(1) in subparagraph (B), by striking clause (iv) and
inserting the following:
``(iv) 180-day exclusivity period.--
``(I) Definitions.--In this paragraph:
``(aa) 180-day exclusivity period.--The
term `180-day exclusivity period' means the
180-day period ending on the day before the
date on which an application submitted by an
applicant other than a first applicant could
become effective under this clause.
``(bb) First applicant.--The term `first
applicant' means an applicant that, on the
first day on which a substantially complete
application containing a certification
described in paragraph (2)(A)(vii)(IV) is
submitted for approval of a drug, submits a
substantially complete application containing a
certification described in paragraph
(2)(A)(vii)(IV) for the drug.
``(cc) Substantially complete
application.--As used in this subsection, the
term `substantially complete application' means
an application under this subsection that on
its face is sufficiently complete to permit a
substantive review and contains all the
information required by paragraph (2)(A).
``(dd) Tentative approval.--
``(AA) In general.--The term
`tentative approval' means notification
to an applicant by the Secretary that
an application under this subsection
meets the requirements of paragraph
(2)(A), but cannot receive effective
approval because the application does
not meet the requirements of this
subparagraph, there is a period of
exclusivity for the listed drug under
subparagraph (E) or section 505A, or
there is a 7-year period of exclusivity
for the listed drug under section 527.
``(BB) Limitation.--A drug that is
granted tentative approval by the
Secretary is not an approved drug and
shall not have an effective approval
until the Secretary issues an approval
after any necessary additional review
of the application.
``(II) Effectiveness of application.--Subject to
subparagraph (D), if the application contains a
certification described in paragraph (2)(A)(vii)(IV)
and is for a drug for which a first applicant has
submitted an application containing such a
certification, the application shall be made effective
on the date that is 180 days after the date of the
first commercial marketing of the drug (including the
commercial marketing of the listed drug) by any first
applicant.''; and
(2) by inserting after subparagraph (C) the following:
``(D) Forfeiture of 180-day exclusivity period.--
``(i) Definition of forfeiture event.--In
this subparagraph, the term `forfeiture event',
with respect to an application under this
subsection, means the occurrence of any of the
following:
``(I) Failure to market.--The first
applicant fails to market the drug by
the later of--
``(aa) the earlier of the
date that is--

``(AA) 75 days
after the date on which
the approval of the
application of the
first applicant is made
effective under
subparagraph (B)(iii);
or

``(BB) 30 months
after the date of
submission of the
application of the
first applicant; or

``(bb) with respect to the
first applicant or any other
applicant (which other
applicant has received
tentative approval), the date
that is 75 days after the date
as of which, as to each of the
patents with respect to which
the first applicant submitted a
certification qualifying the
first applicant for the 180-day
exclusivity period under
subparagraph (B)(iv), at least
1 of the following has
occurred:

``(AA) In an
infringement action
brought against that
applicant with respect
to the patent or in a
declaratory judgment
action brought by that
applicant with respect
to the patent, a court
enters a final decision
from which no appeal
(other than a petition
to the Supreme Court
for a writ of
certiorari) has been or
can be taken that the
patent is invalid or
not infringed.

``(BB) In an
infringement action or
a declaratory judgment
action described in
subitem (AA), a court
signs a settlement
order or consent decree
that enters a final
judgment that includes
a finding that the
patent is invalid or
not infringed.

``(CC) The patent
expires.

``(DD) The patent
is withdrawn by the
holder of the
application approved
under subsection (b).

``(II) Withdrawal of application.--
The first applicant withdraws the
application or the Secretary considers
the application to have been withdrawn
as a result of a determination by the
Secretary that the application does not
meet the requirements for approval
under paragraph (4).
``(III) Amendment of
certification.--The first applicant
amends or withdraws the certification
for all of the patents with respect to
which that applicant submitted a
certification qualifying the applicant
for the 180-day exclusivity period.
``(IV) Failure to obtain tentative
approval.--The first applicant fails to
obtain tentative approval of the
application within 30 months after the
date on which the application is filed,
unless the failure is caused by a
change in or a review of the
requirements for approval of the
application imposed after the date on
which the application is filed.
``(V) Agreement with another
applicant, the listed drug application
holder, or a patent owner.--The first
applicant enters into an agreement with
another applicant under this subsection
for the drug, the holder of the
application for the listed drug, or an
owner of the patent that is the subject
of the certification under paragraph
(2)(A)(vii)(IV), the Federal Trade
Commission or the Attorney General
files a complaint, and there is a final
decision of the Federal Trade
Commission or the court with regard to
the complaint from which no appeal
(other than a petition to the Supreme
Court for a writ of certiorari) has
been or can be taken that the agreement
has violated the antitrust laws (as
defined in section 1 of the Clayton Act
(15 U.S.C. 12), except that the term
includes section 5 of the Federal Trade
Commission Act (15 U.S.C. 45) to the
extent that that section applies to
unfair methods of competition).
``(VI) Expiration of all patents.--
All of the patents as to which the
applicant submitted a certification
qualifying it for the 180-day
exclusivity period have expired.
``(ii) Forfeiture.--The 180-day exclusivity
period described in subparagraph (B)(iv) shall
be forfeited by a first applicant if a
forfeiture event occurs with respect to that
first applicant.
``(iii) Subsequent applicant.--If all first
applicants forfeit the 180-day exclusivity
period under clause (ii)--
``(I) approval of any application
containing a certification described in
paragraph (2)(A)(vii)(IV) shall be made
effective in accordance with
subparagraph (B)(iii); and
``(II) no applicant shall be
eligible for a 180-day exclusivity
period.''.
(b) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendment made by subsection (a) shall be effective only with
respect to an application filed under section 505(j) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) after
the date of enactment of this Act for a listed drug for which
no certification under section 505(j)(2)(A)(vii)(IV) of that
Act was made before the date of enactment of this Act.
(2) Collusive agreements.--If a forfeiture event described
in section 505(j)(5)(D)(i)(V) of that Act occurs in the case of
an applicant, the applicant shall forfeit the 180-day period
under section 505(j)(5)(B)(iv) of that Act without regard to
when the first certification under section
505(j)(2)(A)(vii)(IV) of that Act for the listed drug was made.
(3) Decision of a court when the 180-day exclusivity period
has not been triggered.--With respect to an application filed
before, on, or after the date of enactment of this Act for a
listed drug for which a certification under section
505(j)(2)(A)(vii)(IV) of that Act was made before the date of
enactment of this Act and for which neither of the events
described in subclause (I) or (II) of section 505(j)(5)(B)(iv)
of that Act (as in effect on the day before the date of
enactment of this Act) has occurred on or before the date of
enactment of this Act, the term ``decision of a court'' as used
in clause (iv) of section 505(j)(5)(B) of that Act means a
final decision of a court from which no appeal (other than a
petition to the Supreme Court for a writ of certiorari) has
been or can be taken.

SEC. 704. BIOAVAILABILITY AND BIOEQUIVALENCE.

(a) In General.--Section 505(j)(8) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355(j)(8)) is amended--
(1) by striking subparagraph (A) and inserting the
following:
``(A)(i) The term `bioavailability' means the rate and
extent to which the active ingredient or therapeutic ingredient
is absorbed from a drug and becomes available at the site of
drug action.
``(ii) For a drug that is not intended to be absorbed into
the bloodstream, the Secretary may assess bioavailability by
scientifically valid measurements intended to reflect the rate
and extent to which the active ingredient or therapeutic
ingredient becomes available at the site of drug action.''; and
(2) by adding at the end the following:
``(C) For a drug that is not intended to be absorbed into
the bloodstream, the Secretary may establish alternative,
scientifically valid methods to show bioequivalence if the
alternative methods are expected to detect a significant
difference between the drug and the listed drug in safety and
therapeutic effect.''.
(b) Effect of Amendment.--The amendment made by subsection (a) does
not alter the standards for approval of drugs under section 505(j) of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)).

SEC. 705. REMEDIES FOR INFRINGEMENT.

Section 287 of title 35, United States Code, is amended by adding
at the end the following:
``(d) Consideration.--In making a determination with respect to
remedy brought for infringement of a patent that claims a drug or a
method or using a drug, the court shall consider whether information on
the patent was filed as required under 21 U.S.C. 355 (b) or (c), and,
if such information was required to be filed but was not, the court may
refuse to award treble damages under section 284.''.

SEC. 706. CONFORMING AMENDMENTS.

Section 505A of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
355a) is amended--
(1) in subsections (b)(1)(A)(i) and (c)(1)(A)(i), by
striking ``(j)(5)(D)(ii)'' each place it appears and inserting
``(j)(5)(F)(ii)'';
(2) in subsections (b)(1)(A)(ii) and (c)(1)(A)(ii), by
striking ``(j)(5)(D)'' each place it appears and inserting
``(j)(5)(F)''; and
(3) in subsections (e) and (l), by striking
``505(j)(5)(D)'' each place it appears and inserting
``505(j)(5)(F)''.

TITLE VIII--IMPORTATION OF PRESCRIPTION DRUGS

SEC. 801. IMPORTATION OF PRESCRIPTION DRUGS.

(a) In General.--Chapter VIII of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 381 et seq.) is amended by striking section 804
and inserting the following:

``SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS.

``(a) Definitions.--In this section:
``(1) Importer.--The term `importer' means a pharmacist or
wholesaler.
``(2) Pharmacist.--The term `pharmacist' means a person
licensed by a State to practice pharmacy, including the
dispensing and selling of prescription drugs.
``(3) Prescription drug.--The term `prescription drug'
means a drug subject to section 503(b), other than--
``(A) a controlled substance (as defined in section
102 of the Controlled Substances Act (21 U.S.C. 802));
``(B) a biological product (as defined in section
351 of the Public Health Service Act (42 U.S.C. 262));
``(C) an infused drug (including a peritoneal
dialysis solution);
``(D) an intravenously injected drug; or
``(E) a drug that is inhaled during surgery.
``(4) Qualifying laboratory.--The term `qualifying
laboratory' means a laboratory in the United States that has
been approved by the Secretary for the purposes of this
section.
``(5) Wholesaler.--
``(A) In general.--The term `wholesaler' means a
person licensed as a wholesaler or distributor of
prescription drugs in the United States under section
503(e)(2)(A).
``(B) Exclusion.--The term `wholesaler' does not
include a person authorized to import drugs under
section 801(d)(1).
``(b) Regulations.--The Secretary, after consultation with the
United States Trade Representative and the Commissioner of Customs,
shall promulgate regulations permitting pharmacists and wholesalers to
import prescription drugs from Canada into the United States.
``(c) Limitation.--The regulations under subsection (b) shall--
``(1) require that safeguards be in place to ensure that
each prescription drug imported under the regulations complies
with section 505 (including with respect to being safe and
effective for the intended use of the prescription drug), with
sections 501 and 502, and with other applicable requirements of
this Act;
``(2) require that an importer of a prescription drug under
the regulations comply with subsections (d)(1) and (e); and
``(3) contain any additional provisions determined by the
Secretary to be appropriate as a safeguard to protect the
public health or as a means to facilitate the importation of
prescription drugs.
``(d) Information and Records.--
``(1) In general.--The regulations under subsection (b)
shall require an importer of a prescription drug under
subsection (b) to submit to the Secretary the following
information and documentation:
``(A) The name and quantity of the active
ingredient of the prescription drug.
``(B) A description of the dosage form of the
prescription drug.
``(C) The date on which the prescription drug is
shipped.
``(D) The quantity of the prescription drug that is
shipped.
``(E) The point of origin and destination of the
prescription drug.
``(F) The price paid by the importer for the
prescription drug.
``(G) Documentation from the foreign seller
specifying--
``(i) the original source of the
prescription drug; and
``(ii) the quantity of each lot of the
prescription drug originally received by the
seller from that source.
``(H) The lot or control number assigned to the
prescription drug by the manufacturer of the
prescription drug.
``(I) The name, address, telephone number, and
professional license number (if any) of the importer.
``(J)(i) In the case of a prescription drug that is
shipped directly from the first foreign recipient of
the prescription drug from the manufacturer:
``(I) Documentation demonstrating that the
prescription drug was received by the recipient
from the manufacturer and subsequently shipped
by the first foreign recipient to the importer.
``(II) Documentation of the quantity of
each lot of the prescription drug received by
the first foreign recipient demonstrating that
the quantity being imported into the United
States is not more than the quantity that was
received by the first foreign recipient.
``(III)(aa) In the case of an initial
imported shipment, documentation demonstrating
that each batch of the prescription drug in the
shipment was statistically sampled and tested
for authenticity and degradation.
``(bb) In the case of any subsequent
shipment, documentation demonstrating that a
statistically valid sample of the shipment was
tested for authenticity and degradation.
``(ii) In the case of a prescription drug that is
not shipped directly from the first foreign recipient
of the prescription drug from the manufacturer,
documentation demonstrating that each batch in each
shipment offered for importation into the United States
was statistically sampled and tested for authenticity
and degradation.
``(K) Certification from the importer or
manufacturer of the prescription drug that the
prescription drug--
``(i) is approved for marketing in the
United States; and
``(ii) meets all labeling requirements
under this Act.
``(L) Laboratory records, including complete data
derived from all tests necessary to ensure that the
prescription drug is in compliance with established
specifications and standards.
``(M) Documentation demonstrating that the testing
required by subparagraphs (J) and (L) was conducted at
a qualifying laboratory.
``(N) Any other information that the Secretary
determines is necessary to ensure the protection of the
public health.
``(2) Maintenance by the secretary.--The Secretary shall
maintain information and documentation submitted under
paragraph (1) for such period of time as the Secretary
determines to be necessary.
``(e) Testing.--The regulations under subsection (b) shall
require--
``(1) that testing described in subparagraphs (J) and (L)
of subsection (d)(1) be conducted by the importer or by the
manufacturer of the prescription drug at a qualified
laboratory;
``(2) if the tests are conducted by the importer--
``(A) that information needed to--
``(i) authenticate the prescription drug
being tested; and
``(ii) confirm that the labeling of the
prescription drug complies with labeling
requirements under this Act;
be supplied by the manufacturer of the prescription
drug to the pharmacist or wholesaler; and
``(B) that the information supplied under
subparagraph (A) be kept in strict confidence and used
only for purposes of testing or otherwise complying
with this Act; and
``(3) may include such additional provisions as the
Secretary determines to be appropriate to provide for the
protection of trade secrets and commercial or financial
information that is privileged or confidential.
``(f) Registration of Foreign Sellers.--Any establishment within
Canada engaged in the distribution of a prescription drug that is
imported or offered for importation into the United States shall
register with the Secretary the name and place of business of the
establishment.
``(g) Suspension of Importation.--The Secretary shall require that
importations of a specific prescription drug or importations by a
specific importer under subsection (b) be immediately suspended on
discovery of a pattern of importation of that specific prescription
drug or by that specific importer of drugs that are counterfeit or in
violation of any requirement under this section, until an investigation
is completed and the Secretary determines that the public is adequately
protected from counterfeit and violative prescription drugs being
imported under subsection (b).
``(h) Approved Labeling.--The manufacturer of a prescription drug
shall provide an importer written authorization for the importer to
use, at no cost, the approved labeling for the prescription drug.
``(i) Prohibition of Discrimination.--
``(1) In general.--It shall be unlawful for a manufacturer
of a prescription drug to discriminate against, or cause any
other person to discriminate against, a pharmacist or
wholesaler that purchases or offers to purchase a prescription
drug from the manufacturer or from any person that distributes
a prescription drug manufactured by the drug manufacturer.
``(2) Discrimination.--For the purposes of paragraph (1), a
manufacturer of a prescription drug shall be considered to
discriminate against a pharmacist or wholesaler if the
manufacturer enters into a contract for sale of a prescription
drug, places a limit on supply, or employs any other measure,
that has the effect of--
``(A) providing pharmacists or wholesalers access
to prescription drugs on terms or conditions that are
less favorable than the terms or conditions provided to
a foreign purchaser (other than a charitable or
humanitarian organization) of the prescription drug; or
``(B) restricting the access of pharmacists or
wholesalers to a prescription drug that is permitted to
be imported into the United States under this section.
``(j) Charitable Contributions.--Notwithstanding any other
provision of this section, section 801(d)(1) continues to apply to a
prescription drug that is donated or otherwise supplied at no charge by
the manufacturer of the drug to a charitable or humanitarian
organization (including the United Nations and affiliates) or to a
government of a foreign country.
``(k) Waiver Authority for Importation by Individuals.--
``(1) Declarations.--Congress declares that in the
enforcement against individuals of the prohibition of
importation of prescription drugs and devices, the Secretary
should--
``(A) focus enforcement on cases in which the
importation by an individual poses a significant threat
to public health; and
``(B) exercise discretion to permit individuals to
make such importations in circumstances in which--
``(i) the importation is clearly for
personal use; and
``(ii) the prescription drug or device
imported does not appear to present an
unreasonable risk to the individual.
``(2) Waiver authority.--
``(A) In general.--The Secretary may grant to
individuals, by regulation or on a case-by-case basis,
a waiver of the prohibition of importation of a
prescription drug or device or class of prescription
drugs or devices, under such conditions as the
Secretary determines to be appropriate.
``(B) Guidance on case-by-case waivers.--The
Secretary shall publish, and update as necessary,
guidance that accurately describes circumstances in
which the Secretary will consistently grant waivers on
a case-by-case basis under subparagraph (A), so that
individuals may know with the greatest practicable
degree of certainty whether a particular importation
for personal use will be permitted.
``(3) Drugs imported from canada.--In particular, the
Secretary shall by regulation grant individuals a waiver to
permit individuals to import into the United States a
prescription drug that--
``(A) is imported from a licensed pharmacy for
personal use by an individual, not for resale, in
quantities that do not exceed a 90-day supply;
``(B) is accompanied by a copy of a valid
prescription;
``(C) is imported from Canada, from a seller
registered with the Secretary;
``(D) is a prescription drug approved by the
Secretary under chapter V;
``(E) is in the form of a final finished dosage
that was manufactured in an establishment registered
under section 510; and
``(F) is imported under such other conditions as
the Secretary determines to be necessary to ensure
public safety.
``(l) Studies; Reports.--
``(1) By the institute of medicine of the national academy
of sciences.--
``(A) Study.--
``(i) In general.--The Secretary shall
request that the Institute of Medicine of the
National Academy of Sciences conduct a study
of--
``(I) importations of prescription
drugs made under the regulations under
subsection (b); and
``(II) information and
documentation submitted under
subsection (d).
``(ii) Requirements.--In conducting the
study, the Institute of Medicine shall--
``(I) evaluate the compliance of
importers with the regulations under
subsection (b);
``(II) compare the number of
shipments under the regulations under
subsection (b) during the study period
that are determined to be counterfeit,
misbranded, or adulterated, and compare
that number with the number of
shipments made during the study period
within the United States that are
determined to be counterfeit,
misbranded, or adulterated; and
``(III) consult with the Secretary,
the United States Trade Representative,
and the Commissioner of Patents and
Trademarks to evaluate the effect of
importations under the regulations
under subsection (b) on trade and
patent rights under Federal law.
``(B) Report.--Not later than 2 years after the
effective date of the regulations under subsection (b),
the Institute of Medicine shall submit to Congress a
report describing the findings of the study under
subparagraph (A).
``(2) By the comptroller general.--
``(A) Study.--The Comptroller General of the United
States shall conduct a study to determine the effect of
this section on the price of prescription drugs sold to
consumers at retail.
``(B) Report.--Not later than 18 months after the
effective date of the regulations under subsection (b),
the Comptroller General of the United States shall
submit to Congress a report describing the findings of
the study under subparagraph (A).
``(m) Construction.--Nothing in this section limits the authority
of the Secretary relating to the importation of prescription drugs,
other than with respect to section 801(d)(1) as provided in this
section.
``(n) Effectiveness of Section.--
``(1) In general.--If, after the date that is 1 year after
the effective date of the regulations under subsection (b) and
before the date that is 18 months after the effective date, the
Secretary submits to Congress a certification that, in the
opinion of the Secretary, based on substantial evidence
obtained after the effective date, the benefits of
implementation of this section do not outweigh any detriment of
implementation of this section, this section shall cease to be
effective as of the date that is 30 days after the date on
which the Secretary submits the certification.
``(2) Procedure.--The Secretary shall not submit a
certification under paragraph (1) unless, after a hearing on
the record under sections 556 and 557 of title 5, United States
Code, the Secretary--
``(A)(i) determines that it is more likely than not
that implementation of this section would result in an
increase in the risk to the public health and safety;
``(ii) identifies specifically, in qualitative and
quantitative terms, the nature of the increased risk;
``(iii) identifies specifically the causes of the
increased risk; and
``(iv)(I) considers whether any measures can be
taken to avoid, reduce, or mitigate the increased risk;
and
``(II) if the Secretary determines that any
measures described in subclause (I) would require
additional statutory authority, submits to Congress a
report describing the legislation that would be
required;
``(B) identifies specifically, in qualitative and
quantitative terms, the benefits that would result from
implementation of this section (including the benefit
of reductions in the cost of covered products to
consumers in the United States, allowing consumers to
procure needed medication that consumers might not
otherwise be able to procure without foregoing other
necessities of life); and
``(C)(i) compares in specific terms the detriment
identified under subparagraph (A) with the benefits
identified under subparagraph (B); and
``(ii) determines that the benefits do not outweigh
the detriment.
``(o) Authorization of Appropriations.--There are authorized to be
appropriated such sums as are necessary to carry out this section.''.
(b) Conforming Amendments.--The Federal Food, Drug, and Cosmetic
Act is amended--
(1) in section 301(aa) (21 U.S.C. 331(aa)), by striking
``covered product in violation of section 804'' and inserting
``prescription drug in violation of section 804''; and
(2) in section 303(a)(6) (21 U.S.C. 333(a)(6), by striking
``covered product pursuant to section 804(a)'' and inserting
``prescription drug under section 804(b)''.
(c) Conditions.--This section shall become effective only if the
Secretary of Health and Human Services certifies to the Congress that
the implementation of this section will--
(1) pose no additional risk to the public's health and
safety; and
(2) result in a significant reduction in the cost of
covered products to the American consumer.

TITLE IX--DRUG COMPETITION ACT OF 2003

SEC. 901. SHORT TITLE.

This title may be cited as the ``Drug Competition Act of 2003''.

SEC. 902. FINDINGS.

Congress finds that--
(1) prescription drug prices are increasing at an alarming
rate and are a major worry of many senior citizens and American
families;
(2) there is a potential for companies with patent rights
regarding brand name drugs and companies which could
manufacture generic versions of such drugs to enter into
financial deals that could tend to restrain trade and greatly
reduce competition and increase prescription drug expenditures
for American citizens; and
(3) enhancing competition among these companies can
significantly reduce prescription drug expenditures for
Americans.

SEC. 903. PURPOSES.

The purposes of this title are--
(1) to provide timely notice to the Department of Justice
and the Federal Trade Commission regarding agreements between
companies with patent rights regarding brand name drugs and
companies which could manufacture generic versions of such
drugs; and
(2) by providing timely notice, to enhance the
effectiveness and efficiency of the enforcement of the
antitrust and competition laws of the United States.

SEC. 904. DEFINITIONS.

In this title:
(1) ANDA.--The term ``ANDA'' means an Abbreviated New Drug
Application, as defined under section 201(aa) of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 321(aa)).
(2) Assistant attorney general.--The term ``Assistant
Attorney General'' means the Assistant Attorney General in
charge of the Antitrust Division of the Department of Justice.
(3) Brand name drug.--The term ``brand name drug'' means a
drug approved under section 505(c) of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355(c)).
(4) Brand name drug company.--The term ``brand name drug
company'' means the party that received Food and Drug
Administration approval to market a brand name drug pursuant to
an NDA, where that drug is the subject of an ANDA, or a party
owning or controlling enforcement of any patent listed in the
Approved Drug Products With Therapeutic Equivalence Evaluations
of the Food and Drug Administration for that drug, under
section 505(b) of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 355(b)).
(5) Commission.--The term ``Commission'' means the Federal
Trade Commission.
(6) Generic drug.--The term ``generic drug'' means a
product that the Food and Drug Administration has approved
under section 505(j) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 355(j)).
(7) Generic drug applicant.--The term ``generic drug
applicant'' means a person who has filed or received approval
for an ANDA under section 505(j) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355(j)).
(8) NDA.--The term ``NDA'' means a New Drug Application, as
defined under section 505(b) et seq. of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355(b) et seq.)

SEC. 905. NOTIFICATION OF AGREEMENTS.

(a) In General.--
(1) Requirement.--A generic drug applicant that has
submitted an ANDA containing a certification under section
505(j)(2)(vii)(IV) of the Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 355(j)(2)(vii)(IV)) and a brand name drug company
that enter into an agreement described in paragraph (2), prior
to the generic drug that is the subject of the application
entering the market, shall each file the agreement as required by
subsection (b).
(2) Definition.--An agreement described in this paragraph
is an agreement regarding--
(A) the manufacture, marketing or sale of the brand
name drug that is the subject of the generic drug
applicant's ANDA;
(B) the manufacture, marketing or sale of the
generic drug that is the subject of the generic drug
applicant's ANDA; or
(C) the 180-day period referred to in section
505(j)(5)(B)(iv) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355(j)(5)(B)(iv)) as it applies
to such ANDA or to any other ANDA based on the same
brand name drug.
(b) Filing.--
(1) Agreement.--The generic drug applicant and the brand
name drug company entering into an agreement described in
subsection (a)(2) shall file with the Assistant Attorney
General and the Commission the text of any such agreement,
except that the generic drug applicant and the brand-name drug
company shall not be required to file an agreement that solely
concerns--
(A) purchase orders for raw material supplies;
(B) equipment and facility contracts;
(C) employment or consulting contracts; or
(D) packaging and labeling contracts.
(2) Other agreements.--The generic drug applicant and the
brand name drug company entering into an agreement described in
subsection (a)(2) shall file with the Assistant Attorney
General and the Commission the text of any other agreements not
described in subsection (a)(2) between the generic drug
applicant and the brand name drug company which are contingent
upon, provide a contingent condition for, or are otherwise
related to an agreement which must be filed under this title.
(3) Description.--In the event that any agreement required
to be filed by paragraph (1) or (2) has not been reduced to
text, both the generic drug applicant and the brand name drug
company shall file written descriptions of the non-textual
agreement or agreements that must be filed sufficient to reveal
all of the terms of the agreement or agreements.

SEC. 906. FILING DEADLINES.

Any filing required under section 5 shall be filed with the
Assistant Attorney General and the Commission not later than 10
business days after the date the agreements are executed.

SEC. 907. DISCLOSURE EXEMPTION.

Any information or documentary material filed with the Assistant
Attorney General or the Commission pursuant to this title shall be
exempt from disclosure under section 552 of title 5, and no such
information or documentary material may be made public, except as may
be relevant to any administrative or judicial action or proceeding.
Nothing in this section is intended to prevent disclosure to either
body of Congress or to any duly authorized committee or subcommittee of
the Congress.

SEC. 908. ENFORCEMENT.

(a) Civil Penalty.--Any brand name drug company or generic drug
applicant which fails to comply with any provision of this title shall
be liable for a civil penalty of not more than $11,000, for each day
during which such entity is in violation of this title. Such penalty
may be recovered in a civil action brought by the United States, or
brought by the Commission in accordance with the procedures established
in section 16(a)(1) of the Federal Trade Commission Act (15 U.S.C.
56(a)).
(b) Compliance and Equitable Relief.--If any brand name drug
company or generic drug applicant fails to comply with any provision of
this title, the United States district court may order compliance, and
may grant such other equitable relief as the court in its discretion
determines necessary or appropriate, upon application of the Assistant
Attorney General or the Commission.

SEC. 909. RULEMAKING.

The Commission, with the concurrence of the Assistant Attorney
General and by rule in accordance with section 553 of title 5 United
States Code, consistent with the purposes of this title--
(1) may define the terms used in this title;
(2) may exempt classes of persons or agreements from the
requirements of this title; and
(3) may prescribe such other rules as may be necessary and
appropriate to carry out the purposes of this title.

SEC. 910. SAVINGS CLAUSE.

Any action taken by the Assistant Attorney General or the
Commission, or any failure of the Assistant Attorney General or the
Commission to take action, under this title shall not bar any
proceeding or any action with respect to any agreement between a brand
name drug company and a generic drug applicant at any time under any
other provision of law, nor shall any filing under this title
constitute or create a presumption of any violation of any antitrust or
competition laws.

SEC. 911. EFFECTIVE DATE.

This title shall--
(1) take effect 30 days after the date of enactment of this
title; and
(2) shall apply to agreements described in section 905 that
are entered into 30 days after the date of enactment of this
title.

Passed the Senate June 27 (legislative day, June 26), 2003.

Attest:

Secretary.
108th CONGRESS

1st Session

S. 1

_______________________________________________________________________

AN ACT

To amend title XVIII of the Social Security Act to provide for a
voluntary prescription drug benefit under the medicare program and to
strengthen and improve the medicare program, and for other purposes.