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.
(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.
(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.