Full Title: A bill 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.

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Last updated Jun 27, 2003.
1044 pages

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6/13/2003.

Title I - Medicare Prescription Drug Benefit

Subtitle A - Medicare Voluntary Prescription Drug Delivery Program

Section 101 -

Amends title XVIII (Medicare) of the Social Security Act (SSA) to add a new part D (Voluntary Prescription Drug Delivery Program). Establishes a new optional Medicare prescription drug benefit program augmenting with a comprehensive, flexible, and permanent voluntary prescription drug benefit program the limited coverage of certain outpatient prescription drugs, biologicals, and vaccines currently covered under the Medicare program under its original fee-for-service component under both Medicare parts A (Hospital Insurance) and B (Supplementary Medical Insurance) and under its managed care, medical savings account (MSA), and private fee-for-service component under Medicare part C (Medicare+Choice). Provides under this new prescription drug benefit program for offering eligible Medicare beneficiaries, regardless of income or health status, access to more coverage options, options which provide enhanced benefits, with cost-sharing, and additional beneficiary protections and assistance, such as access to negotiated prices, catastrophic coverage limits, and premium subsidies for certain low-income beneficiaries.

Provides for these options to be offered through both:

(1) a new Medicare part C MedicareAdvantage (MA) program that integrates basic medical coverage with added prescription drug coverage, including, for the first time, coverage through preferred provider organizations (PPOs) and restricted use of MSAs pursuant to an MA plan serving the geographic area in which the eligible Medicare beneficiary resides; and

(2) a new separate, stand-alone Medicare Prescription Drug plan (PDP) program under Medicare part D that relies on private plans to provide coverage and to bear a portion of the financial risk for drug costs.

Makes this new program effective January 1, 2006, and vests overall administrative responsibility for carrying it out in the Administrator of the Center for Medicare Choices established under title III (Centers for Medicare Choices) of this Act. Provides that until this new permanent prescription drug benefit program is effective, the Secretary of Health and Human Services (HHS) shall under subtitle B below provide eligible beneficiaries with the opportunity to enroll in an endorsed prescription drug discount card program and eligible low-income beneficiaries with the opportunity to enroll in a prescription drug assistance card program offered by a prescription drug card sponsor and receive discounts on prescription drugs and other assistance not later than January 1, 2004.

Continues prescription drug discounts and other assistance under such temporary programs until the first enrollment period under the new permanent prescription drug program ends.

Allows beneficiaries entitled to (or enrolled for) benefits under Medicare part A and enrolled under Medicare part B (eligible beneficiaries) to elect to enroll under new Medicare part D, and:

(1) keep their current Medicare fee-for-service coverage and receive qualified prescription drug coverage (as described below) through enrollment in Medicare part D in a new PDP that is offered in the geographic area in which the beneficiary resides; or

(2) enroll in the new Medicare part C MA program, give up their current Medicare fee-for-service coverage, and receive qualified prescription drug coverage along with basic and possibly enhanced medical coverage through health maintenance organization (HMO), revised MSA, or new PPO coverage options under the new MA program established by this Act under Medicare part C (and as otherwise provided under Medicare+Choice under Medicare part C as discussed more fully below under title II (MedicareAdvantage) of this Act). Provides an exception for:

(1) MA enrollees enrolled in MSA plans to receive coverage of prescription drugs through enrollment in a PDP; and

(2) MA enrollees enrolled in private-fee-for service plans to receive coverage of prescription drugs through such plans if the plan provides qualified prescription drug coverage (otherwise they shall enroll in a PDP). Directs the Administrator to establish an enrollment process similar to that for Medicare part B. Establishes an initial open enrollment period that, for individuals who are eligible beneficiaries as of November 1, 2005, is the six month period beginning on that date.

Provides that individuals becoming eligible beneficiaries after such date shall have the same initial seven month enrollment period as that established for Medicare part B. Directs the Administrator to establish a process through which an eligible beneficiary enrolled under Medicare part D but not enrolled in an MA plan (except for an MSA plan or a private fee-for-service plan that does not provide qualified prescription drug coverage) is:

(1) required to make an election to enroll in any PDP that is offered by an eligible entity and that serves the geographic area in which the beneficiary resides; and

(2) allowed to make an annual election to change such election.

Provides for automatic enrollment in any PDP designated by the Administrator in the area of any eligible beneficiary who is enrolled under Medicare part D but who fails to make an election of a PDP plan.

Requires an eligible beneficiary enrolled in an MA plan to receive access to prescription drug coverage through the plan and be subject to plan enrollment rules, except that persons enrolled in MSA plans or private fee-for-service plans not offering qualified prescription drug coverage shall be subject to Medicare part D enrollment rules.

Directs the Administrator to conduct activities designed to broadly disseminate information to eligible beneficiaries (and prospective eligible beneficiaries) regarding coverage under Medicare part D, including information comparing the plans offered by eligible entities under Medicare part D that are available to eligible beneficiaries in an area.

Requires eligible entities offering PDPs to disclose plan information comparable to that required for MA plans.

Requires an eligible entity to have in place a cost-effective drug utilization management program, quality assurance measures (including a described medication therapy management program), and a program to control fraud, abuse, and waste.

Requires the eligible entity offering a PDP plan to provide that each pharmacy or other dispenser inform the beneficiary at the time of purchase of the drug of any differential between the price of the prescribed drug and the price of the lowest cost generic drug covered under the plan that is therapeutically equivalent and bioequivalent.

Provides for:

(1) grievance mechanism, coverage determinations, and reconsiderations;

(2) appeals; and

(3) privacy, confidentiality, and accuracy of enrollee records.

Requires an eligible entity to ensure that the monthly plan premium for a PDP is the same for all eligible beneficiaries enrolled in the plan.

Divides qualified prescription drug coverage into either a standard coverage benefit package or an actuarially equivalent benefit package, both with access to negotiated drug prices.

Outlines the standard coverage package, which includes, for 2006, a $275 deductible, 50 percent cost-sharing for drug costs between $276 and the initial coverage limit of $4,500, then no coverage; except that the beneficiary shall have access to negotiated prices, regardless of the fact that no benefits may be payable under the coverage, until incurring out-of-pocket costs for covered drugs in a year equal $3,700, with cost-sharing thereafter of ten percent for the beneficiary and 90 percent for the Federal Government. Includes as negotiated prices all discounts, direct or indirect subsidies, rebates, or other price concessions or direct or indirect remuneration.

Increases these amounts in future years by the annual percentage increase in average per capita aggregate expenditures for covered drugs for the year ending the previous July. Includes among the out-of-pocket costs counting toward the annual $3,700 limit any costs paid by the individual (or by another individual such as a family member) under the Medicaid program or under a State pharmaceutical assistance program for which the individual (or other individual) is not reimbursed.

Allows a PDP or an MA plan to provide a different prescription drug benefit design from the standard prescription drug coverage as long as the Administrator approves of such benefit design.

Permits a variety of cost control mechanisms in the provision of qualified prescription drug coverage, including the use of formularies, tiered copayments, selective contracting with providers of prescription drugs, and mail order pharmacies.

Permits additional prescription drug coverage in excess of that required under such packages.

Prohibits an eligible entity from offering a PDP that provides such additional benefits in an area unless the eligible entity offering the plan also offers a PDP in the area that only provides the coverage of prescription drugs that is required.

Includes in qualified prescription drug coverage all therapeutic categories and classes of covered drugs (although not necessarily for all drugs within such categories and classes) which are defined to include:

(1) drugs, biological products, and insulin covered under Medicaid (SSA title XIX) and vaccines licensed under the Public Health Services Act (PHSA); and

(2) any use of a covered drug for a medically accepted indication.

Excludes from such coverage:

(1) drugs or classes of drugs, or their medical uses, which are excluded from coverage or otherwise restricted under Medicaid, except for smoking cessation agents;

(2) drugs currently covered under Medicare part A or part B to the extent payment is available under those parts;

(3) drugs prescribed for an individual that shall otherwise be a covered drug if the MA or PDP plan excluded the drug and the exclusion was not successfully resolved; and

(4) drugs which do not meet the Medicare definition of "reasonable and necessary" or which were not prescribed in accordance with the plan or part D. Requires an eligible entity offering a PDP to be 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 PDP. Requires entities to assume financial risk on a prospective basis for costs of benefits in excess of amounts received from premium payments and reinsurance payments.

Permits entities to obtain private reinsurance for the portion of the costs for which they are at risk.

Allows the Administrator to waive the requirement that the entity be licensed in the State, if the Administrator determines that grounds for approval of the application have been met.

Prohibits eligible beneficiaries from electing a PDP unless the Administrator has entered into a contract with the eligible entity offering the plan.

Allows a contract with an entity to cover more than one plan.

Directs the Administrator by January 1, 2005, to establish by regulation standards to implement new Medicare part D. Outlines specific provisions for the Administrator to establish and publish solvency standards for non-licensed entities.

Prohibits States from imposing a premium or similar tax with respect to premiums paid to the Administrator for PDPs and any payments made to eligible entities offering such a plan.

Requires the Administrator to establish by April 15, 2005, and periodically review, service areas in which the PDPs may offer benefits.

Directs the Administrator to establish service areas in a manner that maximizes the availability of PDPs to eligible beneficiaries and minimize the ability of eligible entities offering such plans to favorably select eligible beneficiaries.

Requires the Administrator, in establishing the service areas, to establish at least ten service areas, which must include at least one State. Prohibits the Administrator from dividing States so that portions of a State are in different service areas.

Requires, to the extent possible, the Administrator to include multistate MSAs in a single service area.

Allows the Administrator to divide MSAs where it is necessary to establish service areas of such size and geography as to maximize plan participation.

Allows the Administrator to conform service areas to those established for PPOs under MA. Directs the Administrator to establish an appropriate method for adjusting payments to plans to take into account variations in costs based on the differences in actuarial risk of different enrollees being served.

Allows the Administrator to take into account similar methodologies used to adjust payments for MA organizations.

Requires the Administrator to publish such risk adjusters not later than April 15 of each year (beginning in 2005) to be used for computing payments to plans for standard coverage.

Requires each eligible entity to submit bids to the Administrator on an annual basis for proposed PDPs. Requires the bid to contain information on proposed benefits, actuarial value of the qualified prescription drug coverage, the service area for the plan, and the monthly premium.

Requires entities to provide information on whether the entity planned to use any funds in the plan stabilization fund that were available to the entity for the purpose of stabilizing or reducing the monthly premium.

Requires service areas to be either the entire area of one of the service areas established by the Administrator or the entire area covered by Medicare. Permits entities to submit separate bids for multiple service areas as long as each bid is for a single service area.

Requires the Administrator to apply the Federal Employees Health Benefits Program (FEHBP) standard in determining whether or not to approve or disapprove the PDP, a standard that provides that each bid submitted by an entity for a qualified plan must reasonably and equitably reflect the cost of benefits provided under the plan.

Gives the Administrator the authority to:

(1) negotiate the terms and conditions of the proposed monthly premiums submitted and other terms and conditions of proposed plans;

(2) disapprove, or limit enrollment in, a proposed plan based on costs to beneficiaries, the quality of the coverage, and benefits under the plan; and

(3) the adequacy of the network under the plan, and other factors determined appropriate by the Administrator. Requires the Administrator to approve a PDP only if it provided the required benefits and was not designed to result in favorable selection of eligible beneficiaries.

Directs the Administrator to approve at least two contracts to offer a PDP in an area for the year.

Provides generally for such contracts to be awarded for a two year period.

Provides that not later than September 1 of each year, beginning in 2005, and for each area, the Administrator shall determine whether or not there were two approved bids, and if not, the Administrator shall enter into an annual contract with the entity to provide Part D enrollees in the area with standard coverage (including access to negotiated prices) for the following year.

Allows an entity to be awarded a contract for more than one of the areas for which the Administrator is required to enter into a contract, but the Administrator may enter into only one such contract in each such area.

Prohibits the Administrator from entering into such a contract if the Administrator received two or more qualified bids after exercise of the authority to reduce risk for entities.

Requires entities to meet beneficiary protection requirements.

Requires beneficiary premiums for a fallback plan to be set at a premium amount that shall apply if the plan premium equaled the applicable percent of the monthly national average premium for the year as adjusted for geographic differences in drug prices.

Directs the Administrator to establish an appropriate methodology for making this calculation which takes into account geographic differences in utilization and the results of the ongoing study on spending and utilization required under the Act. Requires the contract with the plan to provide for payment to the plan for the negotiated costs of covered drugs and payment of prescription management fees tied to performance requirements established by the Administrator. Prohibits entities that submitted bids to be qualified risk-bearing entities from submitting a bid to be a fallback plan.

Disallows the fallback plan from engaging in any marketing or branding.

Provides that in the case of an area with only one PDP approved for the year, the plan (at the plan's option) may be offered under the rules established for risk-bearing plans.

Allows eligible beneficiaries to enroll in such plan or with the fallback plan.

Requires the Administrator for each year, beginning with 2006, to compute a monthly standard prescription premium for each approved PDP plan and for each MA plan.

Requires such monthly premium to equal:

(1) in the case of a plan offered by an eligible entity or MA organization that provides standard prescription drug coverage or actuarially equivalent prescription drug coverage and does not provide additional prescription drug coverage, the monthly plan premium approved for the plan; and

(2) in the case of a plan offered by an eligible entity or MA organization that provides additional prescription drug coverage, an amount that reflects only the actuarial value of the standard prescription drug coverage offered under the plan, or if determined appropriate by the Administrator, the approved monthly plan premium for the year for the required qualified coverage plan offered by the entity.

Requires the Administrator, each year beginning in 2006, to compute a monthly national average premium equal to the average of the monthly standard coverage premium for each PDP and each MA plan.

Requires the monthly national average premium to be a weighted average based on the number of enrollees in the plan in the previous year.

Directs the Administrator to establish an appropriate methodology for making this calculation, taking into account geographic differences in prices.

Requires any adjustment to be budget neutral.

Requires the Administrator to establish procedures for making this calculation for 2005.

Requires the Administrator, each year beginning in 2006, to pay to each entity offering a PDP an amount equal to the full monthly approved premium, with appropriate risk adjusters.

Requires a portion of total payments to plans to be subject to risk.

Requires eligible entities to notify the Administrator for each year, beginning in 2007, of the total actual costs that the entity incurred in providing standard prescription drug coverage in the previous year and a breakdown of:

(1) each drug paid for by the plan;

(2) the negotiated price paid for each such drug,

(3) the number of prescriptions; and

(4) the average beneficiary coinsurance rate.

Excludes from such notification spending for administrative costs, amounts spent for coverage in excess of standard coverage, or amounts for which the entity subsequently received reinsurance payments.

Provides that no payment adjustment shall be made if allowable costs are not more than the first threshold upper limit or less than the first threshold lower limit for the year, if the plans were within the risk corridor.

Subjects a portion of any plan spending above or below these levels to risk corridor adjustment, so that if allowable costs exceeded the first threshold upper limit, then payments shall be increased; and if allowable costs were below the first threshold lower limit, payments shall be reduced.

Directs the Administrator for each year, beginning with 2006, to establish a risk corridor for each PDP that determines the amount of risk that the PDP shall be exposed to for drug spending, and the resultant adjustment in payment attributable to this risk, including a specified range above and below the target amount at which the plans shall be subject to full risk for drug spending.

Requires an eligible entity that offers a PDP that provides additional prescription drug coverage to be at full financial risk for the provision of such additional coverage.

Requires for each year for the Administrator to establish as specified the allowable costs for each PDP for the year, and bases the allowable costs on actual costs reported by the plan.

Requires the Administrator to adjust this amount in cases where actual costs for a covered drug exceeded the average negotiated price for such drug in a year.

Excludes from the target amount administrative expenses negotiated between the Administrator and the entity offering the plan.

Requires each contract to provide that:

(1) the entity offering a PDP shall provide the Administrator with such information as the Administrator determines is necessary to administer the benefit; and

(2) the Administrator shall have the right to inspect and audit any books and records of the eligible entity that pertains to the information regarding costs provided to the Administrator. Requires the Administrator to establish within the Prescription Drug Account a stabilization reserve fund.

Requires:

(1) amounts in this fund to be made available to eligible entities beginning with their 2008 contract year; and

(2) that eligible entities be permitted to use funds in the stabilization reserve fund to stabilize or reduce monthly plan premiums.

Directs the Administrator to establish procedures to adjust the portion of payments made to an entity that are attributable to administrative expenses to ensure that the entity meets applicable performance requirements.

Provides for the computation of the monthly beneficiary PDP premium according to a specified formula, geographically adjusted to take into account variations in input prices in different service areas.

Provides under such formula that:

(1) if the plan's monthly approved premium was equal to the monthly national weighted average premium for the year, the monthly beneficiary PDP premium for the year shall be the applicable percent (for the area) of the monthly national weighted average premium;

(2) if the plan's monthly approved premium was less than the monthly national weighted average premium for the year, the monthly beneficiary PDP premium for the year shall be the applicable percent for the area minus the amount by which the monthly national average premium exceeds the amount of the monthly approved plan premium; and

(3) if the plan's monthly approved premium exceeds the monthly national weighted average premium for the year, the monthly beneficiary PDP premium for the year shall be the applicable percentage (for the area) plus the amount by which the plan's monthly approved premium exceeds the amount of the monthly national weighted average premium.

Specifies the formula for determining the applicable percent for an area which factors in total reinsurance payments estimated to be made during the year.

Requires the adjustments to be budget neutral.

Provides for collection of the monthly beneficiary premiums in the same manner as Medicare part B premiums, with collections credited to the PDP. Requires the Administrator to:

(1) establish procedures whereby the sponsor of employment based retiree coverage may pay the premium; and

(2) transmit the information necessary for collection to the Commissioner of Social Security. Provides for premium and cost-sharing subsidies for low-income individuals.

Grants qualified Medicare beneficiaries and specified low income Medicare beneficiaries and qualifying individuals a full subsidy for premiums Directs the Administrator to provide for payment to a qualifying entity of the reinsurance payment amount 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 for the year.

Sets the reinsurance payment amount for a qualifying covered individual at 80 percent of the allowable costs exceeding the limit that are incurred by the qualifying entity with respect to the individual and year.

Requires allowable costs to be equal to actual costs above the limit, subject to an adjustment.

Requires the Administrator to reduce actual costs to the extent such amount was based on costs for specific covered drugs that are greater than the average cost for the covered drug for the year.

Requires each qualifying entity to notify the Administrator of the total actual costs (if any) incurred in providing prescription drug coverage for an individual after the individual exceeded the out-of-pocket threshold.

Requires the entity to provide a breakdown of:

(1) each covered drug paid by the plan over the limit;

(2) the negotiated price for each such drug;

(3) number of prescriptions; and

(4) the average beneficiary coinsurance rate.

Excludes administrative costs and costs for coverage in excess of the standard benefit.

Requires the Administrator to determine payment methods.

Allows reinsurance payments to be made to an eligible entity offering a PDP, organizations offering an MA plan, and sponsors of qualified retiree prescription drug plans.

Requires sponsors of the plan to attest annually that the coverage under the retiree plan met or exceeded the requirements for qualified coverage.

Requires the Administrator to provide for the payment to a sponsor of a qualified retiree prescription drug plan for each individual who is enrolled in the plan but who is not enrolled in Part D. Requires the amount of the payment to equal the direct subsidy percent of the monthly national average premium for the year, as adjusted by risk adjusters.

Requires the direct subsidy percent to be 100 percent minus the applicable percent.

Requires payments to be based on such a method as the Administer determines.

Requires payments to be made from the PDP. Makes:

(1) the costs of coverage through MA or PDP plans and of otherwise operating the new part D program payable from the Prescription Drug Account which is created by this Act within the Federal Supplementary Medical Insurance Trust Fund under Medicare part B; and

(2) fiscal year appropriations to the Account, out of any monies in the Treasury not otherwise appropriated, to cover program benefits and administrative costs.

Permits sponsors of employee based retiree coverage that offer a PDP to restrict enrollment in the plan to eligible beneficiaries enrolled in such coverage.

Prohibits sponsors from offering enrollment in the PDP based on the health status of eligible beneficiaries.

Allows entities offering a PDP or an MA organization offering a MA plan to enter into an agreement with a State pharmaceutical assistance program to coordinate coverage.

Section 102 -

Directs the Administrator of the Center for Medicare Choices to study and report to Congress on the need for rules relating to permitting individuals who are enrolled under Medicare part B (Supplementary Medical Insurance), but are not entitled to benefits under Medicare part A, to buy into the new Medicare prescription drug program.

Section 103 -

Outlines rules relating to Medicare supplemental health insurance (Medigap) policies that provide prescription drug coverage, such as rules prohibiting sale, issuance, and renewal of policies that provide prescription drug coverage to enrollees under the new program, and allowing for issuance of substitute policies if the policyholder obtains prescription drug coverage under the program.

Section 104 -

Amends SSA title XIX to require States, for purposes of the prescription drug assistance card program for eligible low-income beneficiaries, to submit an eligibility plan to the Secretary under which the State:

(1) establishes eligibility standards consistent with such program;

(2) establishes procedures for providing presumptive eligibility determinations (similar to that in which presumptive eligibility determinations are provided with respect to children and pregnant women under Medicaid);

(3) makes eligibility determinations; and

(4) communicates to the Secretary information on eligibility determinations or discontinuations.

Requires States, for purposes of premium and cost-sharing subsidies for low-income individuals under the new Medicare part D prescription drug benefit program, to:

(1) make eligibility determinations;

(2) establish procedures for providing presumptive eligibility determinations;

(3) inform the Administrator of the Center for Medicare Choices of cases where eligibility is established; and

(4) otherwise provide the Administrator with such information as may be required to carry out such program.

Requires States to enter into an agreement with the Commissioner of Social Security to use all Social Security field offices located in the State as informational and enrollment sites for making such eligibility determinations.

Requires the Federal Government to pay an enhanced match for FY 2004 through 2008 for administrative costs associated with making eligibility determinations.

Provides that beginning November 1, 2005, the rate is 100 percent for eligibility determinations for subsidy-eligible individuals under the new Medicare part D prescription drug program.

Entitles States to enhanced matching for 2004 through 2006 for the costs associated with designing, developing, acquiring, and installing improved eligibility determination systems, including hardware and software, for low-income subsidy programs.

Provides that beginning January 1, 2006, in the case of States that provide a drug benefit (meeting certain minimum standards) under new Medicare part D to their dual eligible population, the Secretary shall be responsible for paying 100 percent of the Medicare cost-sharing for qualified Medicare eligibles between 74 and 100 percent of the Federal poverty line.

Provides that beginning January 1, 2004, if a State on the enactment of this Act provided medical assistance to aged and disabled persons up to 100 percent of the Federal poverty level, the Secretary shall be responsible for paying 100 percent of the Medicare part A cost-sharing for that population for as long as the State maintained the expanded coverage.

Sets forth special rules for treatment of the territories whose residents shall not be eligible for low-income subsidies under the new Medicare part D drug benefit program.

Provides that if they choose to provide drug coverage assistance to their low-income residents they shall receive an increase in amounts otherwise paid to them under Medicaid. Exempts prices negotiated by PDP and other qualified plans offering Medicare prescription drug coverage from the calculation of "best price" under Medicaid. Extends Medicare cost-sharing for the Medicare part B premium for qualifying individuals through 2008, with total annual allocations of $400 million through FY 2008 and $100 million for the first quarter of FY 2009.

Expands outreach requirements for the Commissioner of Social Security to include outreach to low-income subsidy individuals.

Provides that not later than January 1, 2005, the Secretary shall report to Congress legislative recommendations for establishing a voluntary option for dual eligibles to enroll under Medicare part D for prescription drug coverage.

Section 105 -

Amends SSA title XVIII to:

(1) increase from 17 to 19 the number of members composing the Medicare Payment Advisory Commission (MEDPAC);

(2) include among the specified categories of individuals which may be MEDPAC members experts in the area of pharmacology and prescription drug benefit programs;

(3) provide for staggering the initial terms of MEDPAC members; and

(4) expand the area of MEDPAC review to cover, with respect to the voluntary prescription drug delivery program under new Medicare part D, competition among eligible entities offering PDP plans and beneficiary access to such plans and covered drugs, particularly in rural areas.

Section 106 -

Directs the Secretary to study and report to Congress on variations in spending and drug utilization under the new program for covered drugs to determine their impact on premiums imposed by eligible entities offering PDP plans.

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

Section 111 -

Amends SSA title XVIII to establish 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 meeting certain requirements; and

(2) make available information on endorsed programs to any individual who is entitled to, or enrolled for, benefits under Medicare part A and enrolled under Medicare part B (eligible beneficiaries).

Directs the Secretary to establish procedures for identifying eligible beneficiaries who may elect to enroll or disenroll in any prescription drug discount programs endorsed under this subtitle.

Restricts a beneficiary to enrollment in one prescription drug discount card program at any one time.

Allows card sponsors to charge annual enrollment fees, not to exceed $25.

Requires the fee to be uniform for all eligible Medicare beneficiaries enrolled in the program.

Directs the Secretary to provide for the dissemination of information which compares the costs and benefits of the endorsed prescription drug discount card programs in order to promote informed choice among such programs.

Requires each prescription drug card sponsor to make available to each eligible beneficiary (through the Internet and otherwise) information:

(1) that the Secretary identifies as being necessary to promote informed choice among endorsed prescription drug discount card programs by eligible beneficiaries; and

(2) on how any formulary used by such sponsor functions.

Directs the Secretary to 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 and prescription drug discount card programs endorsed under such programs.

Requires each endorsed prescription drug discount card program, and card sponsor, to meet specified beneficiary protection requirements.

Requires sponsors to secure the participation of a sufficient number of pharmacies that dispense drugs directly to patients to ensure convenient access for enrolled beneficiaries.

Prohibits:

(1) card sponsors from recommending switching an eligible beneficiary to a drug with a higher negotiated price, unless a licensed health professional recommended a switch based on a clinical indication; and

(2) negotiated prices from changing more than once every 60 days.

Requires card sponsors to provide enrolled eligible beneficiaries with access to negotiated prices used by the sponsor with respect to prescription drugs dispensed to eligible beneficiaries.

Provides that Medicaid best price rules shall not apply.

Requires each prescription drug discount card program to provide pharmaceutical support services, including services to prevent adverse drug interactions.

Outlines a process for sponsors seeking endorsement of a card program to submit the required application information to the Secretary for approval and endorsement.

Allows sponsors to use formularies.

Directs the Secretary to provide appropriate oversight to ensure compliance of endorsed programs with applicable requirements of this section, and authorizes the Secretary to revoke the endorsement of a program that the Secretary determines no longer meets the requirements of this subtitle and take other specified action to prevent fraud and abuse under card programs.

Establishes a program under which the Secretary shall award contracts to prescription drug card sponsors offering a prescription drug discount card through an endorsed program, including a prescription drug assistance card program for eligible low-income beneficiaries, which include qualified Medicare beneficiaries.

Waives enrollment fees, which shall be paid by the Secretary. Requires each sponsor offering a prescription drug assistance card program to permit the enrollment of any eligible low-income beneficiary residing in the geographic area it serves.

Provides that an eligible low-income beneficiary enrolled in the prescription drug assistance card program shall be simultaneously enrolled in the sponsor's prescription drug discount card program.

Grants eligible low-income enrollees access, through their prescription drug discount card, to $600 per year for prescription drug expenses, with any balance remaining on the card in a year to be carried forward.

Subjects enrollees to cost-sharing requirements which must be at least ten percent of the negotiated price for a drug.

Provides that cost-sharing charges shall not be counted against the $600.

Requires card sponsors to provide enrollees with a minimum 20 percent discount from the average wholesale price for each covered drug.

Establishes a mechanism to resolve grievances between sponsors and enrollees.

Requires the prescription drug card sponsor to notify each enrollee periodically of the amount of coverage remaining.

Prohibits the Secretary from determining that convenient access has been provided unless an appropriate arrangement was in place for eligible low-income beneficiaries in long-term care facilities to receive prescription drug benefits under the program.

Requires sponsors to require pharmacies to inform the low-income enrollee at the time of purchase of any difference between the price of the prescribed drug and the lowest cost generic drug that is therapeutically equivalent and bioequivalent and available at the pharmacy.

Applies to the prescription drug assistance card program the coverage determination, reconsideration, and appeals requirements of Medicare part C. Directs the Secretary to pay to each prescription drug card sponsor offering a prescription drug assistance card program an amount agreed to in their contract.

Makes the costs of providing benefits under this subtitle payable from the Medicare Federal Supplementary Medical Insurance Trust Fund. Makes necessary appropriations.

Excludes prescription drug assistance card costs from determination of the Medicare part B monthly premium.

Subtitle C - Standards for Electronic Prescribing

Section 121 -

Amends SSA title XI to:

(1) direct the Secretary to develop or adopt standards for transactions and data elements for such transactions to enable the electronic transmission of medication history, eligibility, benefit, and other prescription information among prescribing and dispensing professionals at the point of care; and

(2) require all individuals and entities that transmit or receive prescriptions electronically to comply with such standards.

Authorizes the Secretary to make grants to applicant health care providers for the purpose of assisting such entities to implement electronic prescription programs that comply with such standards.

Authorizes appropriations.

Subtitle D - Other Provisions

Section 131 -

Amends SSA title XVIII to direct the Board of Trustees of the Federal Hospital Insurance Trust Fund to submit an annual combined report to Congress on the operation and status of the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, including the Prescription Drug Account within such Trust Fund. Requires the report to include:

(1) 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, specifically for both Medicare benefits and administrative and other expenses not related to Medicare benefits;

(2) this information for each fiscal year beginning with the inception of Medicare;

(3) ten-year and 50-year projections of amounts required to be obligated for payment of covered benefits; and

(4) a comparison of the rates of growth for both benefits and administrative costs to the rates of growth in the gross domestic product, health insurance costs in the private sector, employment-based health insurance costs in the public and private sectors, and other areas as determined appropriate by the Board of Trustees. Expresses the sense of Congress that the committees of jurisdiction of Congress shall hold hearings on such reports.

Section 132 -

Requires the annual reports to Congress by the Boards of Trustees of the Federal Hospital Insurance Trust Fund and of the Federal Supplementary Medical Insurance Trust Fund for 2004 to include an analysis of the total amount of the unfunded obligations of the Medicare program. Requires the analysis to compare the long-term obligations of the Medicare program to the dedicated funding sources for that program (other than general revenues).

Title II - MedicareAdvantage

Subtitle A - MedicareAdvantage Competition

Section 201 -

Amends SSA title XVIII part C (Medicare+Choice) to replace the current Medicare+Choice program with the MedicareAdvantage (MA) program.

Entitles an individual entitled to (or enrolled for) benefits under Medicare part A and enrolled in both Medicare parts B and D to elect to receive Medicare benefits through:

(1) the original Medicare fee-for-service program under Medicare parts A and B and the voluntary prescription drug delivery program and Medicare PDP under Medicare part D; or

(2) enrollment in an MA plan under Medicare part C. Allows:

(1) individuals no longer residing in the plan service area to continue enrollment as long as the plan provides reasonable access within that geographic area to the full range of basic benefits; and

(2) individuals residing in a service area where the payment area of an MA plan has been eliminated to continue enrollment in an MA plan that allows such individuals to continue enrollment and receive the full range of basic benefits at designated facilities in the plan service area if there are no other MA plans offered in the area.

Allows an MA plan to be:

(1) (as under the current Medicare+Choice program) a coordinated care plan such as a health maintenance organization (HMO) plan or a provider-sponsored organization (PSO) plan;

(2) a medical savings account (MSA) plan, with a contribution into a medical savings account (MSA);

(3) a private fee-for-service plan (PFFS); or

(4) (an option not under the current Medicare+Choice program) a PPO plan (as discussed more fully below under

Subtitle B). Excludes - (1) from the MA program any individuals with end-stage renal disease (ESRD), except those who develop ESRD while enrolled; and (2) from the MSA component of the MA program any Federal civilian and military retirees 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 MSA plans will not result in increased expenditures for the Federal Government. Makes an individual eligible to elect an MA plan offered by an MA organization only if the plan serves the geographic area in which the individual resides. Makes a qualified Medicare beneficiary, a qualified disabled and working individual, or an individual otherwise entitled to Medicare cost-sharing under a State Medicaid plan ineligible to enroll in an MSA plan. Makes an individual ineligible to enroll in an MSA plan on or after January 1, 2004, unless the enrollment is a continuation on a demonstration basis in effect as of such date, or as of any date if the number of such individuals so enrolled as of such date has reached 390,000. Provides that under rules established by the Secretary, an individual is ineligible 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. Directs the Secretary to evaluate and report regularly to Congress on the impact of permitting enrollment in MSA plans on selection, use of preventive care, access to care, and the financial status of the Medicare trust funds. Directs the Secretary to establish a process through which an eligible individual makes or changes an election to receive Medicare prescription drug benefits through a Medicare PDP or an MA plan. Allows such elections only during specified coverage election periods starting in 2003. Provides that, beginning in 2007, the annual coordinated election period shall be the month of November. Directs the Secretary, beginning with 2006, in conjunction with the annual coordinated election period, to provide for a nationally coordinated educational and publicity campaign to inform MA-eligible individuals about MA plans and the election processes. Sets forth special rules governing elections for MSA plans. (Sec. 202) Requires each MA plan (except an MSA, and in the case of qualified prescription drug coverage, a private fee-for-service (PFFS) plan) to offer: (1) the Medicare part A and B benefits (except for hospice care) available to individuals residing in the area served by the plan; (2) qualified prescription drug coverage under Medicare part D to individuals residing in the area served by the plan; (3) a maximum limitation on out-of-pocket expenses and a unified deductible; and (4) any required additional benefits. Defines unified deductible as an annual deductible amount applied in lieu of the inpatient hospital deductible and the part B deductible. Provides that this shall not prevent an MA organization from requiring coinsurance or a copayment for inpatient hospital services, after the unified deductible is satisfied, subject to statutory limitations. Permits a PFFS plan to choose not to offer qualified prescription drug coverage under Medicare part D. Allows beneficiaries enrolling in a PFFS plan to enroll with an eligible entity under Medicare part D to receive their prescription drug coverage. Permits MA plans to choose to provide enrollees with enhanced medical benefits that the Secretary may approve. Requires the Secretary to approve any such enhanced benefits unless they shall substantially discourage enrollment by MA-eligible individuals within the organization. Prohibits the Secretary from approving any enhanced medical benefit that provides for the coverage of any prescription drug other than those relating to prescription drugs covered under the original Medicare fee-for-service program. Gives the Secretary the authority to disapprove any MA plan designed to attract a population that is healthier than the average population residing in the plan service area. Requires MA plans to provide, in addition to any currently required, information pertaining to: (1) the maximum limitation on out-of-pocket expenses and the unified deductible; (2) qualified prescription drug coverage under Medicare part D; and (3) enhanced medical benefits. Requires the quality assurance programs of an organization, in addition to current law requirements, to provide access to: (1) disease management and chronic care services; and (2) preventive benefits and related information. (Sec. 203) Directs the Secretary to pay each MA organization, with respect to an individual, and according to a specified formula, separate monthly payments for benefits under Medicare parts A and B, and for benefits under the voluntary prescription drug program under Medicare part D. Provides that: (1) beginning in 2005, the Secretary shall announce annually the bench mark amount for each MA payment area and the factors to be used under the comprehensive risk adjustment methodology; (2) for purposes of making payments before 2006, the payment shall be the same as under current law, the highest of the blend, minimum amount, or minimum percentage increase; and (3) beginning in 2006, MA plans shall be based on a new methodology under which each plan shall submit a bid including assumptions with respect to the enrollment capacity in relation to the plan and each payment area and the expected mix, by health status, of enrolled individuals. Prescribes a formula for determining payment amounts, incorporating a weighted service area benchmark amount for the benefits under the original Medicare fee-for-service program option. (Sec. 204) Requires each MA organization to submit information to the Secretary by the second Monday in September, including (1) notice of intent and information on the plan service area; (2) the plan type for each plan; (3) specified information for coordinated care and private fee-for-service plans with respect to each payment area, including information with respect to benefits under the original Medicare fee-for-service program; (4) the enrollment capacity (if any) in relation to the plan and each payment area; and (5) the expected mix, by health status, of enrolled individuals. Requires coordinated care and private fee-for-service plans to submit a plan bid (the total amount that the plan is willing to accept for providing benefits under the original Medicare fee-for-service program not taking into account the application of the comprehensive risk adjustment) and the assumptions used in preparing the plan bid with respect to the number of enrollees in each payment area and the mix, by health status, of such individuals. Requires any enhanced medical benefit package a plan offers to provide: (1) the adjusted community rate; (2) the portion of the actuarial value of such benefits package (if any) that shall be applied toward satisfying the requirement for additional benefits; (3) the MA monthly beneficiary premium for enhanced benefits; (4) a description of the cost-sharing; (5) whether the unified deductible has been lowered or the maximum out-of-pocket limitation has been decreased; and (6) such other information as the Secretary considers necessary. Allows the Secretary to disapprove a plan bid if the Secretary determines that the deductibles, coinsurance, or copayments discourage access to covered services or are likely to result in favorable selection of MA-eligible individuals. Requires each bid amount to reasonably and equitably reflect the cost of benefits provided under that plan. Requires the monthly amount of the premium, if any, charged to an MA enrollee to be the sum of any MA monthly basic beneficiary premium, any premium for enhanced medical benefits, and any obligation for qualified prescription drug coverage. Requires that the MA monthly basic beneficiary premium, the MA monthly beneficiary obligation for qualified prescription drug coverage, and the MA monthly beneficiary premium for enhanced medical benefits be uniform among individuals enrolled in the plan. Provides that if the Secretary determines that the weighted service area benchmark exceeds the plan bid, the Secretary shall require the plan to provide additional benefits; and if the Secretary determines that the plan bid exceeds the weighted service area benchmark, the amount of such excess shall be the MA monthly basic beneficiary premium. Requires the MA monthly basic beneficiary premium and the actuarial value of the deductibles, coinsurance, and copayments to equal the actuarial value of the deductibles, coinsurance, and copayments applicable on average to individuals who have elected to receive benefits under the original Medicare fee-for-service option if such individuals were not members of an MA organization (adjusted to account for geographic differences and for plan cost and utilization differences). Requires the sum of the MA monthly beneficiary premium for enhanced medical benefits (multiplied by 12), and the actuarial value of the deductible, coinsurance, and copayments for a year, to equal the adjusted community rate for such benefits for the year minus the actuarial value of required additional benefits. Requires the Secretary to study and report to Congress on the extent to which Medicare+Choice cost-sharing discourages access to covered services or discriminates based on the health status of Medicare+Choice eligible individuals. (Sec. 205) Establishes special rules for prescription drug benefits under the MA program. Provides that beginning on January 1, 2006, MA plans, other than private fee-for-service plans, shall be required to offer each enrollee qualified prescription drug coverage that meets the requirements for such coverage under the MA program and under part D of Medicare. Allows private fee-for-service plans to provide qualified prescription drug coverage under Medicare part D. Permits an MA plan to offer qualified prescription drug coverage that exceeds the coverage required under Medicare part D as long as it also offers an MA plan in the area that provides only the required coverage. Prohibits an MA plan that provides qualified prescription drug coverage from making 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. Establishes payments to each MA organization offering an MA plan that provides qualified prescription drug coverage. Directs the Secretary for each year, beginning with 2006, to pay such organization an amount equal to the full amount of the monthly premium for the year, as adjusted using the risk adjusters that apply to standard prescription drug coverage. Provides that payment to MA organizations shall be made from the Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund. (Sec. 206) Permits employers to sponsor a plan or pay premiums for qualified retirees who enroll in a PPO. (Sec. 207) Provides that beginning on January 1, 2006, the MA program shall be administered by the Center for Medicare Choices established under title III of this Act. (Sec. 209) Applies the amendments made by this title (except for MSA plans) to plan years beginning on or after January 1, 2006. Subtitle B: Preferred Provider Organizations

Section 211 -

Amends SSA title XVIII part C to establish, beginning January 1, 2006, a preferred provider program under which preferred provider organization (PPO) plans are offered to MA-eligible individuals in preferred provider regions.

Requires the PPO plan to:

(1) have a network of providers that have agreed to contractually specified reimbursement for covered benefits with the organization offering the plan; and

(2) provide for reimbursement for all covered benefits regardless of whether they are provided within such network of providers.

Establishes at least ten preferred provider regions.

Requires each region to include at least one State. Prohibits the Secretary from dividing States so that portions are in different regions.

Directs the Secretary, to the extent possible, to include multistate MSAs in a single region.

Permits the Secretary, however, to divide MSAs where it is necessary to establish regions of such size and geography as to maximize the participation of PPO plans.

Permits the Secretary to use the same regions established for the voluntary prescription drug benefit program under Medicare part D. Applies also to PPO plans MA program requirements concerning eligibility, election, and enrollment, and benefits and beneficiary protections that apply to coordinated care plans.

Requires the service area of a PPO plan to be a preferred provider region.

Allows the Secretary to disapprove any PPO believed to attract a population healthier than the average population of the region serviced by the plan.

Requires PPOs to establish a sufficient number and range of health care professionals and providers willing to provide services under the plan's terms.

Directs the Secretary to:

(1) make separate monthly payment with respect to benefits under the Medicare fee-for-service program and benefits under the voluntary prescription drug program under Medicare part D;

(2) establish separate rates of payment for individuals with ESRD;

(3) apply the comprehensive risk adjustment methodology to 100 percent of the plan payment; and

(4) establish a methodology for adjusting spending variations within a region, similar to the method for equalizing the Federal contribution with respect to payment to the MA organization for each enrollee.

Requires the Secretary, beginning in 2006, to calculate a benchmark amount for each preferred provider region.

Requires the Secretary to:

(1) review each plan bid submitted for benefits coverage under the original Medicare fee-for-service program option to ensure that such bids are based on the proper assumptions;

(2) calculate a regional benchmark amount for that plan equal to the regional benchmark adjusted for the number of enrollees assumed in the plan bid; and

(3) determine the difference between each adjusted plan bid and the plan's regional benchmark amount to determine the payment amount, the additional benefits required, and the MA monthly basic beneficiary premium.

Requires the payment to a PPO under this section to be made from the Medicare Trust Funds. Directs the Secretary to accept the three lowest-cost credible bids in a region that meet or exceed the quality and minimum standards.

Requires that the amount of the monthly premium charged to an individual enrolled in a PPO plan equal the sum of any MA monthly basic beneficiary premium, any MA monthly beneficiary premium for enhanced medical benefits, and any MA monthly obligation for qualified prescription drug coverage.

Prohibits premiums from varying among MA-eligibles in a region.

Bans price gouging by requiring each bid to reasonably and equitably reflect the cost of benefits provided.

Prohibits PPOs from segmenting a region.

Requires the Secretary to:

(1) review the adjusted community rates, the amounts of the MA monthly basic premium, and the MA monthly beneficiary premium for enhanced medical benefits and to approve or disapprove such rates and amounts; and

(2) review the actuarial assumptions and data used by the PPO with respect to such rates and amounts so submitted to determine the appropriateness of such assumptions and data.

Prescribes requirements for establishment of PPO plan risk corridors and payment calculations.

Places PPOs at full risk for all enhanced medical benefits.

Provides that an eligible beneficiary's obligation for payment of MA basic premiums shall not be affected by these risk corridors for a given year.

Requires a PPO to 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 PPO plan.

Subtitle C - Other Managed Care Reforms

Section 221 -

Amends SSA title XVIII to allow a reasonable cost contract to be extended or renewed until December 31, 2009.

Requires such contracts, beginning in 2004, to comply with certain requirements of the Medicare+Choice program (and beginning in 2006 with the MA program), including requirements relating to ongoing quality assurance programs, limitations on physician incentive plans, and requirements of uniform premium amounts for plan enrollees.

Requires the Secretary to approve a new application for an HMO to enter into a reasonable cost contract if, as of January 1, 2004, the HMO:

(1) provided at least 85 percent of the services of a physician which are provided as basic health services through a medical group (or groups); and

(2) met other applicable requirements for such entities.

Section 222 -

Amends SSA title XVIII part C to establish as a new Medicare+Choice option specialized Medicare+Choice plans for special needs beneficiaries.

Defines special needs beneficiaries as those Medicare+Choice eligible individuals who are institutionalized, entitled to Medicaid, or meet other requirements of the Secretary. Allows specialized Medicare+Choice plans to limit enrollment to special needs beneficiaries until January 1, 2008.

Requires the Secretary, not later than December 31, 2006, to report to Congress on the impact of specialized Medicare+Choice plans for special needs beneficiaries on the cost and quality of services provided to enrollees.

Section 223 -

Amends SSA title XVIII to apply limitations on balance billing to PACE (Program of All-Inclusive Care for the Elderly) providers, individuals enrolled with such PACE providers, and non-contract physicians and other entities.

Amends SSA title XIX with respect to services covered under the State Medicaid plan (but not under Medicare) that are furnished to a PACE enrollee by a Medicaid provider that does not have a contract with the PACE provider.

Prohibits such a Medicaid provider from requiring the PACE program to pay the Medicaid provider more than the amount otherwise payable for the service to the Medicaid provider under the Medicaid plan for the State where the PACE provider is located.

Section 224 -

Directs the Secretary to arrange with the Institute of Medicine of the National Academy of Sciences to evaluate leading health care performance measures and options to implement policies that align performance with payment under the Medicare program. Requires the Institute to report to the Secretary and specified congressional committees its findings and recommendations. Authorizes appropriations.

Section 225 -

Amends SSA title XI to expand the work of Medicare quality improvement organizations with respect to quality improvement assistance relating to prescription drug therapy provided to providers, practitioners, prescription drug card sponsors and eligible entities under Medicare part D, Medicare+Choice, and MA plans.

Title III - Centers for Medicare Choices

Section 301 -

Amends SSA title XVIII to direct the Secretary to establish within HHS the Center for Medicare Choices, which shall be separate from the Center for Medicare & Medicaid Services and be headed by an Administrator to carry out the MA and PDP programs, including negotiating, entering into, and enforcing, contracts with plans for the offering of MA plans under part C, as well as contracts with eligible entities for the offering of Medicare PDP plans under part D. Directs the Secretary to:

(1) establish within the Center for Medicare Choices an Office of Beneficiary Assistance to carry out functions relating to Medicare beneficiaries, including eligibility determinations and information dissemination; and

(2) appoint a Medicare Ombudsman within the Office of Beneficiary Assistance to receive complaints, grievances, and requests for information submitted by a Medicare beneficiary with respect to any aspect of the Medicare program, and to provide assistance with respect to such matters.

Authorizes appropriations.

Directs the Secretary to provide through the toll-free number 1-800-MEDICARE for a means by which individuals phoning for information about, or assistance with, Medicare programs are transferred without charge to appropriate entities for such information or assistance.

Title IV - Medicare Fee-For-Service Improvements

Subtitle A - Provisions Relating to Part A

Section 401 -

Amends SSA title XVIII part A to require Medicare, for discharges during the last three quarters of FY 2004, to pay hospitals in rural and small urban areas an increased operating standardized amount equal to half the difference between the amount paid to hospitals in large urban areas and the amount paid to hospitals in other areas.

Requires the Secretary, for FY 2005 and ensuing fiscal year discharges, to compute an operating standardized amount for hospitals in any area within the United States and within each region equal to the operating standardized amount computed for the previous year for hospitals in large urban areas (or, beginning with FY 2006, applicable for all hospitals in the previous fiscal year) increased by the applicable percentage increase for the fiscal year involved.

Section 402 -

Requires the Secretary, with respect to adjustment to the Medicare inpatient hospital prospective payment system (PPS) wage index, to decrease the labor-related share to 68 percent of the standardized amount for each hospital discharge adjusted by the area wage index only if such change results in higher total payments to the hospital for discharges occurring on or after October 1, 2004 (in order to increase Medicare payments to hospitals in areas with wage indices below one, and decrease Medicare payments to hospitals in areas with wage indices above one).

Section 403 -

Directs the Secretary to develop a graduated adjustment to Medicare's inpatient hospital payment rates to account for higher costs associated with low-volume hospitals.

Section 404 -

Provides that, for discharges on or after October 1, 2004, a hospital that qualifies for a disproportionate share hospital (DSH) payment adjustment when its DSH patient percentage exceeds the 15 percent DSH threshold, shall receive the DSH payments using the current formula that establishes the DSH adjustment for a large urban hospital.

Section 405 -

Permits critical access hospitals (CAHs) to operate up to 25 swing beds or acute care beds (thereby repealing the requirement that only 15 of the 25 beds be used for acute care at any time).

Eliminates the requirement that the CAH or the related entity owned or operated by a CAH be the only ambulance provider within 35 miles in order to receive the reasonable cost reimbursement for the ambulance services provided by them.

Extends reimbursement of on-call emergency room providers to include physician assistants, nurse practitioners, and clinical nurse specialists.

Provides that, with respect to payments for inpatient critical access facility services furnished on or after January 1, 2005, an eligible CAH shall be able to receive payments made on a periodic interim payment basis for inpatient services.

Requires the Secretary to exclude the wage levels of hospitals that have converted to CAHs from the PPS. Permits the Secretary to award grants under the Small Rural Hospital Improvement Program (SRHIP) to hospitals that have submitted applications to assist eligible small rural hospitals in meeting the costs of reducing medical errors, increasing patient privacy, and improving hospital quality and performance.

Authorizes $40 million each year from FY 2004 through 2008 for SRHIP.

Section 406 -

Permits a hospice program to enter into arrangements with another hospice program to provide core services in extraordinary circumstances and bill and be paid for the hospice care provided under such arrangements.

Section 407 -

Allows a beneficiary electing to receive hospice care to choose the attending physician, or a physician assistant, a nurse practitioner, or a clinical nurse specialist instead of the physician, 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.

Entitles such beneficiary to receive Medicare payment for services furnished by the attending physician or any of the other health care providers that are related to the treatment of their condition for which a diagnosis of terminal illness has been made.

Section 408 -

Authorizes Medicare reimbursement of its share of the costs of approved education activities of psychologists under allied health professional training provisions.

Section 409 -

Amends SSA title XVIII to provide that under the Medicare PPS for inpatient hospital services: (1) hospitals in Puerto Rico shall receive Medicare payments based on 100 percent of the Federal national amount for discharges on or after October 1, 2004 through September 30, 2009; and (2) for discharges occurring on or after October 1, 2009, the payment shall be based on a blended amount comprised of 50 percent of the Federal national amount and 50 percent of the Puerto Rico local amount.

Section 410 -

Grants the Secretary the authority to provide that geriatric training programs are eligible for two years of fellowship support for purposes of making payments for direct graduate medical education (DGME) and indirect medical education (IME) on or after October 1, 2004.

Section 411 -

Amends SSA title XVIII, with respect to the counting of residents for purposes of IME and DGME payments, to require the Secretary to reimburse teaching hospitals for residents in non-provider settings, when the hospital incurs all, or substantially all, the costs of training in that setting starting from the effective date of a written agreement between the hospital and the entity owning or operating the non-provider setting.

Requires the effective date to be determined in accordance with generally accepted accounting principles.

Defines all, or substantially all, of the costs for the training program in that setting as the residents' stipends and benefits and other costs, if any, as determined by the parties.

Excludes dental and pediatric residents from the three year rolling average resident calculation for cost reporting periods beginning during fiscal years beginning on or after October 1, 2004.

Section 412 -

Includes a limitation on charges for inpatient hospital contract health services provided to Indians by Medicare participating hospitals, and on charges for inpatient hospital services similarly provided 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.

Section 413 -

Directs the Comptroller General to study and report to Congress, using the most current data available, on the appropriateness of payments under the PPS for inpatient hospital services furnished by "subsection (d)" hospitals.

Subtitle B - Provisions Relating to Part B

Section 421 -

Amends SSA title XVIII part B to direct the Secretary, for physicians' services furnished during 2004, to increase the value of any work geographic index that is below .980 to .980.

Raises to 1.0 the work geographic index for services furnished during 2005 through 2007.

Requires the Secretary, for payment for services furnished between January 1, 2005, and December 31, 2007, after calculating the practice expense and malpractice geographic indices, to increase any such index to 1.00 for any locality for which such index is less than 1.00.

Section 422 -

Directs the Secretary to: (1) establish procedures for the Secretary, and not the physician furnishing the service, to determine when bonus payments under the Medicare incentive payment program should be made; and (2) establish an ongoing educational program for physicians on the incentive program. Requires the Comptroller General to conduct an ongoing study of the Medicare incentive payment program for annual reports to Congress.

Section 423 -

Increases the composite rate by 1.6 percent for renal dialysis services furnished in 2005 and 2006.

Section 424 -

Amends SSA title XVIII to apply to services provided in 2006 the current hold harmless provisions governing hospital outpatient department (OPD) reimbursement under the Medicare OPD PPS that are in effect for small rural hospitals for covered OPD services furnished before January 1, 2004. Includes temporary treatment for sole community hospitals (SCHs) under hold harmless provisions.

Section 425 -

Directs the Secretary to increase by five percent the Medicare OPD fee schedule amount for covered clinic or emergency room visits that are furnished by small rural hospitals and SCHs under the Medicare OPD PPS between January 1, 2005, and December 31, 2007.

Section 426 -

Amends SSA title XVIII to increase the payment rates by five percent for ground ambulance services originating in a rural area or in a rural census tract and furnished between January 1, 2005, and December 31, 2007.

Section 427 -

Requires the regulations governing ambulance services to ensure that air ambulance services be reimbursed at the air ambulance rate if the air ambulance service is medically necessary and complies with certain equipment and crew requirements.

Section 428 -

Requires reimbursements of SCHs that provide clinical diagnostic laboratory tests covered under Medicare part B in 2005 and 2006 for the reasonable costs of providing such test. Prohibits beneficiary cost-sharing with respect to such tests.

Section 429 -

Amends SSA title XVIII to: (1) increase the rural health clinic (RHC) upper payment to $80 per visit for 2005; and (2) use the Medicare Economic Index applicable to primary care services to increase such payment limit in a subsequent year.

Section 430 -

Excludes from the Medicare skilled nursing facility (SNF) PPS (and thereby eliminates consolidated billing for and requires separate payment under Medicare part B of):

(1) services provided by a RHC and a Federally qualified health center (FQHC) if such services would have been excluded if furnished by a physician or practitioner not affiliated with a RHC or a FQHC; and

(2) services provided by an entity that is completely owned as a joint venture by two Medicare-participating hospitals or CAHs if such services are beyond the general scope of SNF comprehensive care plans.

Applies such exclusion to services furnished on or after January 1, 2005.

Section 431 -

Amends SSA title XVIII to freeze durable medical equipment (DME) fee schedule amounts for 2004 through 2010, and, for a subsequent year, update the amounts by the CPI-U (for the 12-month period ending with June of the previous year) for the year involved (except for class III medical devices).

Provides for similar treatment with respect to payments for orthotic devices that have not been custom-fabricated.

Subjects DME providers to quality standards, including consumer services standards, developed by recognized independent accreditation organizations and implemented by the Secretary.

Section 432 -

Provides for payment of 80 percent of the applicable fee schedule amount with respect to all clinical diagnostic laboratory tests and uniform application of the Medicare part B deductible with respect to such tests furnished across all settings (thus imposing beneficiary cost-sharing for such tests).

Section 433 -

Prescribes requirements for the pricing of prescription drugs and biologicals, both those currently covered by Medicare part B under the limited coverage authorized for certain outpatient prescription drugs and biologicals, and those that are new, first available for Medicare payment after April 1, 2003.

Requires currently covered outpatient prescription drugs and biologicals furnished before January 1, 2004, and provided under Medicare part B, to be paid at 95 percent of the average wholesale price (AWP). Provides that payments for influenza virus, pneumococcal pneumonia, and Hepatitis B vaccines shall be equal to the AWP. Directs the Secretary to establish a process to determine whether the widely available market price (AMP) to physicians and suppliers for drugs and biologicals furnished in a year is different from the AWP amounts determined above for the year.

Specifies the information on which such determination is to be based, including any report on drug or biological market prices by the HHS Inspector General or the Comptroller General that is made available after December 31, 1999.

Provides that, if the Secretary determines that the AMP for a drug or biological determined through this process differs from the AWP amount, the AMP amount shall be substituted for the AWP amount when determining Medicare's payment for a drug or biological in 2004 and subsequently.

Allows the Secretary to make subsequent determinations with respect to the AMP for the drug or biological, and, if the Secretary does not do this, the prior AMP amount determination shall be considered as the basis for Medicare's payment amount for such an item.

Provides that, if the Secretary's determination resulting in the substitution of the AMP amount for the AWP amount when determining Medicare's payment amount for a drug or biological in 2004 and subsequently shall result in an AMP payment amount greater than 15 percent less than the AWP payment amount that shall have otherwise been made, the Secretary shall provide for an appropriate transition period to the AMP payment amount.

Requires the Secretary, in such instance, to reduce the AWP payment amount in annual increments equal to 15 percent of the AWP payment amount in the previous year, so at the end of the transition period the AMP amount (as determined) shall serve as the basis for Medicare's payment amount.

Makes the transition period inapplicable to a drug or biological whose generic version first enters the market on or after January 1, 2004 (even if the generic version is not marketed under the chemical name of such drug or biological).

Provides that new drugs and biologicals in the new comprehensive prescription drug benefit, which first become available for payment under Medicare part B after April 1, 2003, shall be subject to certain requirements in order for their manufacturer to obtain a code to report them and to receive Medicare payment for them.

Requires the manufacturer, during the first year the drug or biological is available for Medicare payment, to provide the Secretary with updated information on the actual market prices paid by physicians or suppliers.

Prescribes a formula for the payment amounts for such drugs or biologicals based on updated manufacturer information on the estimated prices for them to be paid by physicians or suppliers, and supplemented by other information that the Secretary determines appropriate.

Makes such payments, after the second year of availability, equal to the lesser of the AWP or the AMP payment amount for the drug or biological as determined by the Secretary. Prescribes a formula for the payment amounts if no AMP determination occurs in subsequent years.

Provides for adjustments to payment amounts for administration of drugs and biologicals.

Exempts the increase in expenditures attributable to such adjustments from budget neutrality requirements.

Requires the Secretary, in determining practice expense relative value units for the physician fee schedule in FY 2004, to utilize a physician specialty organization survey covering practice expenses for oncology administration services submitted to the Secretary as of January 1, 2003.

Directs the Secretary to review and appropriately modify Medicare's payment policy for the administration of more than one anticancer chemotherapy agent to an individual patient on a single day through the push technique.

Exempts the increase in expenditures resulting from such modification from budget neutrality requirements.

Requires the Secretary to adjust the non-physician work pool methodology so that the practice expense relative value units for these services are not disproportionately reduced as a result of adjustments in practice expense relative value units.

Provides that, in the case of clotting factors furnished on or after January 1, 2004, the Secretary shall, after reviewing a specified General Accounting Office report, provide for a separate payment for the administration of such factors in an appropriate amount, updated annually by the increase in the CPI for medical care for the previous year ending in June. Increases the composite rate for end stage renal disease (ESRD) services furnished during 2004 through 2007.

Prescribes formulae for the determination of the composite rate in each of such years.

Bars administrative or judicial review of determinations of payment amounts, methods, or adjustments under the Medicare appeals processes, by the Provider Reimbursement Review Board, or otherwise.

Allows the Secretary to make appropriate separate payments for infusion drugs and biologicals furnished through covered DME on or after January 1, 2004.

Permits the Secretary to increase payment for covered DME associated with inhalation drugs and biologicals and make appropriate separate payments for such drugs and biologicals furnished through covered DME on or after January 1, 2004.

Requires Medicare to pay a dispensing fee (less the applicable deductible and coinsurance amounts) to licensed approved pharmacies for drugs and biologicals, and including specifically covered immunosuppressive drugs, oral anti-cancer drugs, and oral anti-nausea drugs used as part of an anti-cancer chemotherapeutic regimen.

Allows the Secretary to compensate a physician for chemotherapy drugs purchased with a reasonable intent to administer to a Medicare beneficiary, but which cannot be administered despite the physician's reasonable efforts, by increasing the amount of payments for covered chemotherapy drugs or biologicals while limiting the total amount of the increase to one percent of the total payment for chemotherapy drugs or biologicals furnished in a year.

Prohibits the Secretary from implementing the revisions in payment amounts for a category of drug or biological under this subtitle unless the Secretary concurrently implements required adjustments to payment amounts for administration of such a category.

Bars administrative or judicial review of determinations under this section.

Directs:

(1) the Comptroller General to study and report to Congress on the impact of this subtitle on access by Medicare beneficiaries to covered drugs and biologicals; and

(2) the Inspector General of HHS to conduct one or more studies on the market prices of drugs and biologicals for a report.

Section 434 -

Sets the Medicare part B deductible at $100 through 2005, at $125 for 2006, and for 2007 and thereafter at the amount in effect for the previous year increased by the percentage increase in the CPI-U for the previous year ending in June.

Section 435 -

Revises reassignment requirements to allow physicians to reassign their right to receive Medicare payments to staffing companies (entities that retain physicians on a contractual basis) that may submit claims to Medicare for physician services provided under contractual arrangement between the company and the physician, if the arrangement meets appropriate program integrity and other safeguards.

Section 436 -

Amends the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) to extend to services furnished during 2005 the requirement that the Secretary pay according to a specified fee schedule for the technical component of physician pathology services provided by an independent laboratory to a fee-for-service beneficiary who is an inpatient or outpatient of a covered hospital.

Section 437 -

Directs the Secretary, for purposes of applying transitional pass-through payment under the Medicare OPD PPS for drugs and biologicals for 2004, to treat the amount that would have been determined for 2005 under Medicare part B for covered outpatient prescription drugs and biologicals (currently paid at 95 percent of the AWP) as if the drug pricing changes made above under Sec. 433 had not been enacted. (Thereby exempts OPD pass-through drugs and biologicals from AWP modifications.)

Section 438 -

Amends SSA title XVIII to prohibit the Secretary from publishing regulations that apply a functional equivalence standard to a drug or biological for transitional pass-through payments under the Medicare OPD PPS.

Section 439 -

Requires the Secretary to deem clinical trials conducted in accordance with an investigational device exemption approved under the Federal Food, Drug, and Cosmetic Act to be automatically qualified for coverage of routine costs of care for participating Medicare beneficiaries.

Section 440 -

Amends SSA title XVIII to waive the late enrollment penalty for certain military retirees who enrolled in Medicare part B during 2002, 2003, 2004, or 2005. Directs the Secretary to provide for a special enrollment period for these military retirees beginning one year after the enactment of this Act and ending on December 31, 2005.

Section 441 -

Requires the Secretary to establish a three-year demonstration program at six sites to evaluate the feasibility and advisability of covering additional chiropractic services under the Medicare program. Requires that such chiropractic services include, at a minimum, care for neuromusculoskeletal conditions typical among eligible beneficiaries and diagnostic and other services that a chiropractor is legally authorized to perform. Provides demonstration program funding.

Section 442 -

Amends SSA title XVIII to establish the Health Care Quality Demonstration Program under which the Secretary shall establish a five-year demonstration program examining health delivery factors that encourage the delivery of improved quality in patient care, including the provision of incentives to improve the safety of care provided to beneficiaries.

Section 443 -

Directs the Secretary to establish a three-year Medicare complex clinical care management payment demonstration program at six sites 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 relating to polypharmacy.

Section 444 -

Requires the Secretary to establish a five-year Medicare fee-for-service care coordination demonstration program at six sites 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 program. Provides demonstration program funding.

Section 445 -

Requires the Comptroller General to study and report to Congress on differences in payment amounts under the Medicare physician fee schedule for physicians' services in different geographic areas.

Subtitle C - Provisions Relating to Parts A and B

Section 451 -

Directs the Secretary to increase the payment amount by five percent for home health services furnished in a rural area during FY 2004 through 2006 without regard to certain budget-neutrality requirements. Prohibits the temporary additional payment from being considered when determining future home health payment amounts.

Section 452 -

Limits any reduction in the home health area wage adjustment factor for FY 2005 and 2006 to three percent less than the area wage adjustment factor applicable to home health services for the area for the previous year.

Section 453 -

Modifies the current whole hospital exception to the general prohibition against physicians referring Medicare patients to facilities in which they or their immediate family members have a financial interest.

Directs the Secretary to promulgate a regulation establishing guidelines for physician investments in hospitals designated by the Secretary as primarily or exclusively devoted to cardiac, orthopedic, surgical, or another specialty, and to make the whole hospital exception to these specialty hospitals apply only if the comprehensive spectrum of inpatient and outpatient services are provided by the hospital and the specialty and self-referrals of such a physician are insignificant in relation to the overall scope of services provided by the hospital.

Section 454 -

Directs the Secretary to establish a demonstration program at up to three sites to provide eligible Medicare beneficiaries with Medicare coverage of substitute adult day services furnished by an adult day services facility.

Title V - Medicare Appeals, Regulatory, and Contracting Improvements

Subtitle A - Regulatory Reform

Section 501 -

Amends SSA title XVIII to require the Secretary to publish a final regulation based on the previous publication of an interim final regulation within 12 months of publication of such interim regulation, or such interim final regulation will not continue in force.

Authorizes the Secretary, subject to appropriate notice, to extend this deadline for up to 12 additional months.

Directs the Secretary to publish a notice in the Federal Register providing the status of each interim final regulation for which no final regulation has been published and providing the date by which the final regulation is planned to be published.

Section 502 -

Bars retroactive application of any substantive changes in regulations, manual instructions, interpretative rules, statements of policy, or guidelines unless the Secretary determines that such retroactive application is necessary to comply with statutory requirements or is in the public interest.

Prohibits a substantive change from taking effect until 30 days after the change is issued or published unless the Secretary finds that the waiver of such 30-day period is necessary to comply with statutory changes or is in the public interest.

Section 503 -

Requires the Secretary to report to Congress at specified intervals on the administration of Medicare, areas of inconsistency or conflict among the various provisions under law and regulation, and recommendations for legislation or administrative action that the Secretary determines appropriate to further reduce such inconsistency or conflicts.

Subtitle B - Appeals Process Reform

Section 511 -

Requires the Commissioner of Social Security and the Secretary to develop and transmit to Congress and the Comptroller General for evaluation a plan for transferring the functions of administrative law judges (ALJs) responsible for hearing cases under Medicare from the Social Security Administration to HHS no later than April 1, 2004.

Requires the Comptroller General to report to Congress, the Commissioner of Social Security, and the Secretary on such evaluation.

Prohibits the Commissioner and the Secretary from implementing the plan developed until no earlier than six months after the Comptroller General's report.

Section 512 -

Amends SSA title XVIII to direct the Secretary to establish a process whereby a provider, supplier, or a beneficiary may obtain access to judicial review when a review entity determines, within 60 days of a complete written request, that the Departmental Appeals Board (DAB) does not have the authority to decide the question of law or regulation and where material issues of fact are not in dispute.

Makes such a determination a final decision not subject to review by the Secretary. Permits this expedited access to judicial review for cases where the Secretary does not enter into or renew provider agreements.

Directs the Comptroller General to study and report to Congress on the access of Medicare beneficiaries and health care providers to judicial review of actions of the Secretary and HHS after February 29, 2000 (the date of the decision of Shalala v.

Illinois Council on Long Term Care, Inc.).

Section 513 -

Amends SSA title XVIII to revise the Medicare appeals process, requiring the Secretary to develop and implement a process to expedite review for certain remedies imposed against SNFs, including termination of participation, immediate denial of payments, immediate imposition of temporary management, and suspension of nurse aide training programs.

Authorizes appropriations for FY 2004 and each subsequent fiscal year to:

(1) reduce by 50 percent the average time for administrative determinations on appeals;

(2) increase the number of ALJs and appellate staff at DAB; and

(3) educate such ALJs and staff on long-term care issues.

Section 514 -

Amends SSA title XVIII to further revise the Medicare appeals process:

(1) establishing a 90-day deadline to complete the record in a hearing before an ALJ or a review by DAB while allowing extensions for good cause;

(2) providing for the use of beneficiaries' medical records in qualified independent contractor (QIC) reconsiderations;

(3) requiring that notice of decisions or determinations, redeterminations, reconsiderations, and appeals be written in a manner understandable to a beneficiary, including, as appropriate, reasons for the determination or decision and the process for further appeal;

(4) specifying the eligibility requirements for QICs and their reviewer employees that relate to medical and legal expertise, independence, and prohibitions linked to decisions being rendered; and

(5) reducing the required number of QICs from 12 to four.

Section 515 -

Requires the Secretary to: (1) develop a process for providers and suppliers to appeal denials or non-renewals of Medicare enrollment agreements; and (2) consult with providers and suppliers before changing the provider enrollment forms.

Section 516 -

Directs the Secretary to permit a provider of services or supplier to appeal any determination of the Secretary relating to services rendered under Medicare to an individual who subsequently dies if there is no other party available to appeal such determination.

Section 517 -

Includes among parties with standing to appeal local coverage determinations any providers or suppliers adversely affected by the determination. Requires the Secretary to establish a process under which a provider or supplier may request a local coverage determination under certain circumstances. Authorizes appropriations. Directs the Secretary to study and report to Congress on the use of contractors to monitor Medicare appeals.

Subtitle C - Contracting Reform

Section 521 -

Amends SSA title XVIII to permit the Secretary to contract competitively with any eligible entity to serve as a Medicare contractor.

Eliminates the distinction between Medicare part A contractors (fiscal intermediaries) and Medicare part B contractors (carriers), and merges separate authorities for fiscal intermediaries and carriers into a single authority for the new contractor.

Authorizes these new contractors, called Medicare Administrative Contractors, to assume all the functions of the current fiscal intermediaries and carriers: determining payments; making payments; providing education and outreach to beneficiaries; communicating with providers and suppliers; and additional functions as are necessary.

Subtitle D - Education and Outreach Improvements

Section 531 -

Amends SSA title XVIII to require the Secretary to:

(1) coordinate the educational activities provided through Medicare administrative contractors to maximize the effectiveness of Federal education efforts for providers and suppliers; and

(2) develop and implement a methodology to measure the specific payment error rates in the processing or reviewing of Medicare claims to give such contractors an incentive to implement effective education and outreach programs for providers and suppliers.

Provides increased funding for the Medicare Integrity Program beginning with FY 2004 for increased provider and supplier education.

Requires a Medicare administrative contractor conducting education and training activities to take into consideration the special needs of small providers or suppliers, and permits the provision of technical assistance as part of such education and training activities.

Bars Medicare administrative contractors from using a record of attendance (or non-attendance) at educational activities to select or track providers or suppliers in conducting any type of audit or prepayment review.

Section 532 -

Directs the Secretary to develop a process for Medicare administrative contractors to communicate with Medicare beneficiaries, providers, and suppliers.

Requires Medicare administrative contractors to provide general written responses in a clear, concise, and accurate manner to inquiries by beneficiaries, providers, and suppliers concerning the Medicare programs within 45 business days.

Directs the Secretary to ensure that Medicare contractors provide a toll-free telephone number at which beneficiaries, providers, and suppliers may obtain information regarding billing, coding, claims, coverage, and other appropriate information under Medicare. Requires monitoring of contractor responses.

Section 533 -

Declares that if a provider or supplier follows written guidance provided by the Secretary or by a Medicare administrative contractor when furnishing items or services or submitting a claim, and the guidance is in error, the provider or supplier shall not be subject to any penalty or interest relating to items or services provided or claim submitted.

Section 534 -

Directs the Secretary to appoint a Medicare Provider Ombudsman to: (1) provide confidential assistance to entities and individuals providing items and services, including covered drugs under new Medicare part D; and (2) submit recommendations to the Secretary for improving the administration of Medicare. Authorizes appropriations.

Section 535 -

Requires the Secretary to establish a three-year demonstration program under which Medicare specialists shall provide advice and assistance to Medicare beneficiaries in at least six local Social Security Administration offices (at least two of which shall be located in rural areas) with a high volume of visits by Medicare beneficiaries.

Directs the Secretary to establish a demonstration project to test the administrative feasibility of providing a process for Medicare beneficiaries and entities and individuals furnishing them with items and services, where an advance beneficiary notice is issued, to request and receive a determination as to whether the item or service is covered under Medicare by reason of medical necessity.

Subtitle E - Review, Recovery, and Enforcement Reform

Section 541 -

Limits the conduct of random prepayment review by a Medicare administrative contractor only to those done in accordance with a standard protocol developed by the Secretary. Prohibits nonrandom prepayment reviews unless there is a likelihood of sustained or high level of payment error. Requires the Secretary to establish protocols or standards for terminating nonrandom prepayment reviews.

Section 542 -

Directs the Secretary to establish a repayment plan of between one and three years if the provider or supplier requests such a plan for repayment of an overpayment that shall otherwise impose a financial hardship, unless the Secretary believes the provider or supplier may declare bankruptcy or there is an indication of fraud or abuse committed against the program.

Requires interest to accrue on the balance through the period of repayment.

Provides for an immediate collection of the overpayment if the if the service provider, physician, practitioner, or supplier fails to make a payment according to the repayment plan.

Prohibits the Secretary, in the case of a provider or supplier that has received an overpayment and that seeks a reconsideration of such determination by a qualified independent contractor, from taking any action to recoup the overpayment until the decision on the reconsideration has been rendered.

Provides that interest shall be required to be paid to the provider if the appeal is successful, or to the Secretary if the appeal is unsuccessful (and if the overpayment was not paid to the Secretary). Sets forth procedures for Medicare administrative contractors to conduct post-payment audits of providers and suppliers.

Requires the Secretary to establish a process to provide notice to certain providers and suppliers where particular billing codes may be overutilized.

Permits the Secretary to use a consent settlement process to settle a projected overpayment under specified conditions.

Section 543 -

Directs the Secretary to establish a process so providers and suppliers may correct minor errors in claims that were submitted for payment.

Section 544 -

Allows the Secretary to waive a program exclusion at the request of an administrator of a Federal health care program (which includes State health care programs) who determines that the exclusion shall impose a hardship on beneficiaries of that program, after consulting with the HHS Inspector General.

Title VI - Other Provisions

Section 601 -

Amends SSA title XIX to extend the special DSH rule that raised DSH allotments, subject to the current law limit of 12 percent of spending for medical assistance, for FY 2004 and 2005. Sets forth formulae for the calculation of allotments for FY 2004 and 2005. Adds a separate calculation for the DSH allotment for the District of Columbia for FY 2004.

Section 602 -

Provides for an increase in the floor for treatment as an extremely low DSH State under the Medicaid program for FY 2004 and 2005. Prescribes formulae for increasing a State's DSH allotment from FY 2004 and 2005 if the total expenditures under the State plan (including Federal and State shares) for DSH adjustments for FY 2000 and 2001, respectively, are between zero and three percent of the State's total amount of Medicaid expenditures during the fiscal year.

Section 603 -

Imposes increased annual reporting requirements on States through the Secretary with respect to FY 2004 and each fiscal year thereafter to ensure the appropriateness of payment adjustments to DSH hospitals under the Medicaid program.

Section 604 -

Permits certain high-volume DSH safety net providers to negotiate with pharmaceutical companies and to receive discounts on the prices of inpatient drugs for the lowest price they can get.

(Currently such entities are only able to receive discounts on the prices of outpatient drugs because of a Center for Medicare and Medicaid Services interpretation of the best price exemption under the Medicaid drug rebate program).

Provides for the application of specified auditing and recordkeeping requirements with respect to such high-volume DSH hospital safety net providers.

Section 605 -

Lifts the five-year ban under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 to allow States the option to provide medical assistance to certain lawfully residing aliens under Medicaid or SCHIP for any of FY 2005 through 2007.

Section 606 -

Amends SSA title XVIII to establish a Consumer Ombudsman Account in the Medicare Trust Fund and appropriates $1 for every Medicare beneficiary to the account from the Trust Fund beginning with FY 2005 for the purpose of making grants to State Health Insurance Counseling Programs under the Omnibus Budget Reconciliation Act of 1990.

Section 607 -

Requires the Comptroller General to study and report to Congress on the extent to which drug utilization and access to covered drugs differs between:

(1) individuals who qualify for the transitional assistance prescription drug card program or for the premiums and cost-sharing subsidies applicable to certain low-income beneficiaries; and

(2) individuals who do not qualify for the transitional assistance prescription drug card program or for the premiums and cost-sharing subsidies applicable to certain low-income beneficiaries solely as a result of the application of an assets test to the individual.

Section 608 -

Amends SSA to add a new title XXII (Health Care Infrastructure Improvement) to establish a loan program to improve the cancer-related health care infrastructure in certain geographic areas in the United States.

Section 609 -

Amends the Public Health Service Act to permit the Secretary to make loans to any rural entity to acquire land, renovate buildings, purchase major moveable equipment, or other appropriate projects under a capital infrastructure revolving loan program under which the Secretary may also guarantee loans.

Limits the principal amount of a loan directly made or guaranteed under the program for a project for capital improvement.

Authorizes the Secretary as part of such program to make a grant to a rural entity for purposes of capital assessment and business planning.

Limits the cumulative total of grants awarded in a year.

Terminates this program after September 30, 2008.

Section 610 -

Appropriates for FY 2005 through 2008 specified funding out of any funds in the Treasury not otherwise appropriated for the purpose of reimbursing States for uncompensated emergency health services furnished to undocumented aliens.

Section 611 -

Amends SSA title XVIII to authorize increased appropriations to the Health Care Fraud and Abuse Control Account for FY 2004 through 2006, and for the HHS Office of Inspector General.

Section 612 -

Increases civil penalties under the False Claims Act for violations occurring on or after January 1, 2004.

Section 613 -

Amends SSA title XI to increase the civil monetary penalties for violations that occur on or after January 1, 2004.

Section 614 -

Amends the Consolidated Omnibus Budget Reconciliation Act of 1985 to extend the authority of the U.S. Customs Service to impose user fees for certain services through September 30, 2003.

House Republican Conference Summary

The summary below was written by the House Republican Conference, which is the caucus of Republicans in the House of Representatives.

No summary available.

House Democratic Caucus Summary

The House Democratic Caucus does not provide summaries of bills.

So, yes, we display the House Republican Conference’s summaries when available even if we do not have a Democratic summary available. That’s because we feel it is better to give you as much information as possible, even if we cannot provide every viewpoint.

We’ll be looking for a source of summaries from the other side in the meanwhile.

The bill contains the following citations to other parts of U.S. law:

Slip Laws

Slip laws refer to enacted bills and joint resolutions in their original form as enacted by Congress, that is, before other laws amend them. Slip laws are cited as “Public Law XXX-YYY”, where XXX is the number of the Congress in which the bill or resolution was introduced.

Public Law 98-369:
H.R. 4170 (98th): Deficit Reduction Act of 1984
Public Law 99-272:
H.R. 3128 (99th): Consolidated Omnibus Budget Reconciliation Act of 1985
Public Law 100-203:
H.R. 3545 (100th): Omnibus Budget Reconciliation Act of 1987
Public Law 103-329:
H.R. 4539 (103rd): Treasury, Postal Service and General Government Appropriations Act, 1995
Public Law 106-554:
H.R. 4577 (106th): Consolidated Appropriations Act, 2001

United States Code

The United States Code is the compilation of permanent laws enacted by Congress. Temporary and other non-permanent laws do not appear in the United States Code. (About half of the United States Code is the law itself, called positive law. The other half is merely a compilation of the laws but has no legal significance.)

Title 2: THE CONGRESS
Chapter 17A: CONGRESSIONAL BUDGET AND FISCAL OPERATIONS
Subchapter III: CREDIT REFORM
Section 661: Purposes
Title 5: GOVERNMENT ORGANIZATION AND EMPLOYEES
Part I: THE AGENCIES GENERALLY
Chapter 5: ADMINISTRATIVE PROCEDURE
Subchapter II: ADMINISTRATIVE PROCEDURE
Section 552: Public information; agency rules, opinions, orders, records, and proceedings
Section 553: Rule making
Section 556: Hearings; presiding employees; powers and duties; burden of proof; evidence; record as basis of decision
Section 557: Initial decisions; conclusiveness; review by agency; submissions by parties; contents of decisions; record
Part III: EMPLOYEES
Subpart B: Employment and Retention
Chapter 31: AUTHORITY FOR EMPLOYMENT
Subchapter I: EMPLOYMENT AUTHORITIES
Section 3109: Employment of experts and consultants; temporary or intermittent
Subchapter II: THE SENIOR EXECUTIVE SERVICE
Section 3132: Definitions and exclusions
Subpart D: Pay and Allowances
Chapter 53: PAY RATES AND SYSTEMS
Subchapter II: EXECUTIVE SCHEDULE PAY RATES
Section 5314: Positions at level III
Section 5315: Positions at level IV
Subchapter VIII: PAY FOR THE SENIOR EXECUTIVE SERVICE
Section 5382: Establishment of rates of pay for the Senior Executive Service
Chapter 57: TRAVEL, TRANSPORTATION, AND SUBSISTENCE
Subchapter I: TRAVEL AND SUBSISTENCE EXPENSES; MILEAGE ALLOWANCES
Section 5702: Per diem; employees traveling on official business
Section 5703: Per diem, travel, and transportation expenses; experts and consultants; individuals serving without pay
Subpart E: Attendance and Leave
Chapter 61: HOURS OF WORK
Subchapter I: GENERAL PROVISIONS
Section 6103: Holidays
Title 10: ARMED FORCES
Subtitle A: General Military Law
Part II: PERSONNEL
Chapter 55: MEDICAL AND DENTAL CARE
Section 1072: Definitions
Title 15: COMMERCE AND TRADE
Chapter 1: MONOPOLIES AND COMBINATIONS IN RESTRAINT OF TRADE
Section 12: Definitions; short title
Chapter 2: FEDERAL TRADE COMMISSION; PROMOTION OF EXPORT TRADE AND PREVENTION OF UNFAIR METHODS OF COMPETITION
Subchapter I: FEDERAL TRADE COMMISSION
Section 45: Unfair methods of competition unlawful; prevention by Commission
Section 56: Commencement, defense, intervention and supervision of litigation and appeal by Commission or Attorney General
Chapter 2A: SECURITIES AND TRUST INDENTURES
Subchapter I: DOMESTIC SECURITIES
Section 77a: Short title
Title 19: CUSTOMS DUTIES
Chapter 1: COLLECTION DISTRICTS, PORTS, AND OFFICERS
Section 58c: Fees for certain customs services
Title 20: EDUCATION
Chapter 28: HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
Subchapter IV: STUDENT ASSISTANCE
Part C: William D. Ford Federal Direct Loan Program
Section 1087a: Program authority
Title 21: FOOD AND DRUGS
Chapter 9: FEDERAL FOOD, DRUG, AND COSMETIC ACT
Subchapter II: DEFINITIONS
Section 321: Definitions; generally
Subchapter III: PROHIBITED ACTS AND PENALTIES
Section 331: Prohibited acts
Section 333: Penalties
Subchapter V: DRUGS AND DEVICES
Part A: Drugs and Devices
Section 355: New drugs
Section 355a: Pediatric studies of drugs
Section 360: Registration of producers of drugs or devices
Subchapter VIII: IMPORTS AND EXPORTS
Section 381: Imports and exports
Chapter 13: DRUG ABUSE PREVENTION AND CONTROL
Subchapter I: CONTROL AND ENFORCEMENT
Part A: Introductory Provisions
Section 802: Definitions
Title 23: HIGHWAYS
Chapter 1: FEDERAL-AID HIGHWAYS
Section 101: Definitions and declaration of policy
Title 25: INDIANS
Chapter 18: INDIAN HEALTH CARE
Heading: GENERAL PROVISIONS
Section 1603: Definitions
Title 28: JUDICIARY AND JUDICIAL PROCEDURE
Part VI: PARTICULAR PROCEEDINGS
Chapter 151: DECLARATORY JUDGMENTS
Section 2201: Creation of remedy
Title 29: LABOR
Chapter 14: AGE DISCRIMINATION IN EMPLOYMENT
Section 623: Prohibition of age discrimination
Chapter 16: VOCATIONAL REHABILITATION AND OTHER REHABILITATION SERVICES
Heading: GENERAL PROVISIONS
Section 701: Findings; purpose; policy
Chapter 18: EMPLOYEE RETIREMENT INCOME SECURITY PROGRAM
Subchapter I: PROTECTION OF EMPLOYEE BENEFIT RIGHTS
Subtitle A: General Provisions
Section 1002: Definitions
Title 31: MONEY AND FINANCE
Subtitle III: FINANCIAL MANAGEMENT
Chapter 37: CLAIMS
Subchapter III: CLAIMS AGAINST THE UNITED STATES GOVERNMENT
Section 3729: False claims
Section 3731: False claims procedure
Title 35: PATENTS
Part III: PATENTS AND PROTECTION OF PATENT RIGHTS
Chapter 28: INFRINGEMENT OF PATENTS
Section 271: Infringement of patent
Chapter 29: REMEDIES FOR INFRINGEMENT OF PATENT, AND OTHER ACTIONS
Section 287: Limitation on damages and other remedies; marking and notice
Title 39: POSTAL SERVICE
Part IV: MAIL MATTER
Chapter 32: PENALTY AND FRANKED MAIL
Section 3215: Lending or permitting use of frank unlawful
Title 42: THE PUBLIC HEALTH AND WELFARE
Chapter 6A: PUBLIC HEALTH SERVICE
Subchapter II: GENERAL POWERS AND DUTIES
Part D: Primary Health Care
Subpart ii: national health service corps program
Section 254e: Health professional shortage areas
Part F: Licensing of Biological Products and Clinical Laboratories
Subpart 1: biological products
Section 262: Regulation of biological products
Subchapter XIV: HEALTH RESOURCES DEVELOPMENT
Part A: Loans and Loan Guarantees
Section 300q: Loan and loan guarantee authority
Section 300q-2: General provisions
Part C: General Provisions
Section 300s-3: Definitions
Chapter 7: SOCIAL SECURITY
Subchapter VII: ADMINISTRATION
Section 912: Office of Rural Health Policy
Subchapter XI: GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE SIMPLIFICATION
Part A: General Provisions
Section 1301: Definitions
Section 1308: Additional grants to Puerto Rico, Virgin Islands, Guam, and American Samoa; limitation on total payments
Section 1320: Approval of certain projects
Section 1320a: Uniform reporting systems for health services facilities and organizations
Section 1320a-7a: Civil monetary penalties
Section 1320a-7b: Criminal penalties for acts involving Federal health care programs
Section 1320a-7e: Health care fraud and abuse data collection program
Section 1320b-14: Outreach efforts to increase awareness of the availability of medicare cost-sharing and subsidies for low-income individuals under subchapter XVIII
Part B: Peer Review of Utilization and Quality of Health Care Services
Section 1320c-3: Functions of quality improvement organizations
Part C: Administrative Simplification
Section 1320d-2: Standards for information transactions and data elements
Subchapter XVIII: HEALTH INSURANCE FOR AGED AND DISABLED
Section 1395: Prohibition against any Federal interference
Section 1395a: Free choice by patient guaranteed
Section 1395b: Option to individuals to obtain other health insurance protection
Section 1395b-1: Incentives for economy while maintaining or improving quality in provision of health services
Section 1395b-2: Notice of medicare benefits; medicare and medigap information
Section 1395b-4: Health insurance information, counseling, and assistance grants
Section 1395b-6: Medicare Payment Advisory Commission
Section 1395b-7: Explanation of medicare benefits
Part A: Hospital Insurance Benefits for Aged and Disabled
Section 1395c: Description of program
Section 1395d: Scope of benefits
Section 1395f: Conditions of and limitations on payment for services
Section 1395g: Payments to providers of services
Section 1395h: Provisions relating to the administration of part A
Section 1395i: Federal Hospital Insurance Trust Fund
Section 1395i-3: Requirements for, and assuring quality of care in, skilled nursing facilities
Section 1395i-4: Medicare rural hospital flexibility program
Part B: Supplementary Medical Insurance Benefits for Aged and Disabled
Section 1395j: Establishment of supplementary medical insurance program for aged and disabled
Section 1395k: Scope of benefits; definitions
Section 1395l: Payment of benefits
Section 1395m: Special payment rules for particular items and services
Section 1395n: Procedure for payment of claims of providers of services
Section 1395r: Amount of premiums for individuals enrolled under this part
Section 1395s: Payment of premiums
Section 1395t: Federal Supplementary Medical Insurance Trust Fund
Section 1395u: Provisions relating to the administration of part B
Section 1395w: Appropriations to cover Government contributions and contingency reserve
Section 1395w-4: Payment for physicians’ services
Part C: Medicare+Choice Program
Section 1395w-21: Eligibility, election, and enrollment
Section 1395w-22: Benefits and beneficiary protections
Section 1395w-23: Payments to Medicare+Choice organizations
Section 1395w-24: Premiums and bid amounts
Section 1395w-25: Organizational and financial requirements for Medicare+Choice organizations; provider-sponsored organizations
Section 1395w-27: Contracts with Medicare+Choice organizations
Section 1395w-28: Definitions; miscellaneous provisions
Part E: Miscellaneous Provisions
Section 1395x: Definitions
Section 1395y: Exclusions from coverage and medicare as secondary payer
Section 1395cc: Agreements with providers of services; enrollment processes
Section 1395ee: Practicing Physicians Advisory Council; Council for Technology and Innovation
Section 1395ff: Determinations; appeals
Section 1395gg: Overpayment on behalf of individuals and settlement of claims for benefits on behalf of deceased individuals
Section 1395hh: Regulations
Section 1395mm: Payments to health maintenance organizations and competitive medical plans
Section 1395nn: Limitation on certain physician referrals
Section 1395qq: Indian Health Service facilities
Section 1395rr: End stage renal disease program
Section 1395ss: Certification of medicare supplemental health insurance policies
Section 1395ww: Payments to hospitals for inpatient hospital services
Section 1395yy: Payment to skilled nursing facilities for routine service costs
Section 1395ddd: Medicare Integrity Program
Section 1395eee: Payments to, and coverage of benefits under, programs of all-inclusive care for elderly (PACE)
Section 1395fff: Prospective payment for home health services
Subchapter XIX: GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS
Section 1396: Medicaid and CHIP Payment and Access Commission
Section 1396a: State plans for medical assistance
Section 1396b: Payment to States
Section 1396d: Definitions
Section 1396r: Requirements for nursing facilities
Section 1396r-4: Adjustment in payment for inpatient hospital services furnished by disproportionate share hospitals
Section 1396r-8: Payment for covered outpatient drugs
Section 1396u-3: State coverage of medicare cost-sharing for additional low-income medicare beneficiaries
Section 1396u-4: Program of all-inclusive care for elderly (PACE)
Subchapter XXI: STATE CHILDREN'S HEALTH INSURANCE PROGRAM
Section 1397gg: Strategic objectives and performance goals; plan administration
Chapter 106: COMMUNITY SERVICES BLOCK GRANT PROGRAM
Section 9902: Definitions
Chapter 136: VIOLENT CRIME CONTROL AND LAW ENFORCEMENT
Subchapter III: VIOLENCE AGAINST WOMEN
Part B: Safe Homes for Women
Subpart 1: confidentiality for abused persons
Section 13951: Confidentiality of abused person's address
Other Citations
41 U.S.C. 403(5)
42 U.S.C. 139w
41 U.S.C. 5
42 U.S.C. 195ww(d)(1)(B)
42 U.S.C. 360j(g)

Statutes at Large

The United States Statutes at Large is the compilation of all laws enacted by Congress.

111 Stat. 458
114 Stat. 2763A-482
114 Stat. 2763A-486
114 Stat. 2763A-506
114 Stat. 2763A-534
114 Stat. 2763A-543
114 Stat. 2763A-551
114 Stat. 2763A-585

Other Citations

5 U.S.C. Chapter 89
10 U.S.C. Chapter 55
31 U.S.C. Chapter 31
38 U.S.C. Chapter 17
44 U.S.C. Chapter 35

S. 1 (108th): Prescription Drug and Medicare Improvement Act of 2003