Order Code RL31496
Report for Congress
Received through the CRS Web
Medicare: Major Prescription
Drug Provisions of Selected Bills
Updated July 16, 2002
Jennifer O’Sullivan
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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Medicare: Major Prescription
Drug Provisions of Selected Bills
Summary
Medicare, the nationwide health insurance program for the aged and disabled,
does not cover most outpatient prescription drugs. The absence of an adequate
prescription drug benefit has been of concern to policymakers since the enactment
of Medicare in 1965. On several occasions, the Congress has considered providing
coverage for at least a portion of beneficiaries’ drug costs. The issue has again
received attention this year.
There are a number of issues driving the prescription drug debate. One of the
key concerns in designing a drug benefit is the potential cost and how costs would
increase over time. Another issue is the appropriate role of both the federal
government and the private sector in assuming the financial risk of coverage and
administering the benefit. Some observers suggest that a single uniform drug benefit
should be added directly to Medicare’s other benefits. Others recommend offering
benefits through private plans which could offer different benefit packages provided
certain minimum standards were met. A further consideration is whether a major
new benefit should be added until structural reforms are made to the Medicare
program as a whole.
On June 28, 2002, the House passed the Medicare Modernization and
Prescription Drug Act of 2002 (H.R. 4954). Under the bill, a new optional benefit
would be established, effective January 1, 2005. The program would rely on private
plans to provide drug coverage and to bear some of the financial risk for drug costs;
federal subsidies would be provided to encourage participation. Coverage would be
provided through prescription drug plans (PDPs) or Medicare+Choice (M+C) plans.
Beneficiaries could purchase either a standard plan or an actuarially equivalent plan.
Low-income subsidies would be provided for persons with incomes below 175% of
poverty. A new Medicare Benefits Administration (MBA) would be established
within the Department of Health and Human Services (HHS) to administer the
benefit and the M+C program. The House-passed bill is considerably different from
the “House Democratic bill” (H.R.5019). Under the later bill, a single new benefit
would be added directly to Medicare and be available nationwide. The benefit would
be administered by contractors with the federal government assuming full financial
risk, except for a small portion of the administrative payment.
The Senate begin consideration of drug legislation, including Medicare
prescription drug legislation, July 15, 2002. Any bill approved by the Senate is
expected to be substantially different from the House-passed bill. Two Medicare
measures are currently under discussion. The first is the Medicare Outpatient
Prescription Drug Act of 2002 (S. 2625, Graham et al.). This measure is similar in
overall approach, but different in a number of details, to the House Democratic bill.
The second measure (S. 2729, Grassley et al., sometimes referred to as the
“tripartisan bill”), is similar in some respects to the House-passed bill, including the
reliance on private entities for the provision of benefits. This report will be updated
to reflect any legislative action.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Overview of Major Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Private vs. Public Sector Responsibility . . . . . . . . . . . . . . . . . . . . . . . . 3
Scope of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Low-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Summary of Major Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Side-by-Side Comparison of Major Medicare Drug Provisions of Selected Bills 6
In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Program Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Administration; Financial Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Pricing; Cost Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Low-Income subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Relationship to Other Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Drug Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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Medicare: Major Prescription Drug
Provisions of Selected Bills
Introduction
Medicare, the nationwide health insurance program for the aged and disabled,
does not cover most outpatient prescription drugs. The absence of an adequate
prescription drug benefit has been of concern to policymakers since the enactment
of Medicare in 1965. On several occasions, the Congress has considered providing
coverage for at least a portion of beneficiaries’ drug costs.
The issue has again received attention this year. On June 28, 2002, the House
passed the Medicare Modernization and Prescription Drug Act of 2002 (H.R. 4954)
by a vote of 221-208. The Senate began consideration of drug legislation, including
Medicare prescription drug legislation, on July 15, 2002. Any bill approved by the
Senate is expected to be substantially different from the House-passed bill.
There are a number of issues driving the prescription drug debate. One of the
key concerns in designing a drug benefit is the potential cost and how costs would
increase over time. Another issue is the appropriate role of both the federal
government and the private sector in assuming the financial risk of coverage and
administering the benefit. Some observers suggest that a single uniform drug benefit
should be added directly to Medicare’s other benefits. Others recommend offering
benefits through private plans which could offer different benefit packages provided
certain minimum standards were met. A further consideration is whether a major
new benefit should be added until structural reforms are made to the Medicare
program as a whole.1
It is generally agreed that if Congress were to enact a drug benefit this year, it
would take several years before the program could actually be implemented. As an
interim measure, President Bush announced June 14, 2001, the creation of a
Medicare Prescription Drug Discount program. This program would provide for the
endorsement by Medicare of qualified privately-administered prescription drug
discount cards. Beneficiaries could obtain these cards either free or for a nominal
enrollment charge; the card would provide access to discounts on prescription drugs.
While this plan would not establish a Medicare drug benefit, it was intended to give
seniors access to similar kinds of discounts as are available to the under age 65
1 For a discussion of the major issues that would need to be addressed as Congress considers
policy options, see: CRS Report RL30819, Medicare Prescription Drug Coverage for
Beneficiaries: Background and Issues, by Jennifer O’Sullivan.

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CRS-2
population under private insurance plans. However, to date, implementation of the
card program has been held up by court action.2
Legislation
A number of bills have been introduced in the 107th Congress which would
establish a prescription drug benefit for Medicare beneficiaries. Some measures add
a new benefit to the Medicare program itself while others would provide the benefit
through private entities. Some other bills focus on the prices seniors pay for drugs.
As of this writing, a few measures are receiving the most attention. The first is
the House-passed bill, the Medicare Modernization and Prescription Drug Act of
2002 (H.R. 4954). The second bill is the Medicare Rx Drug Benefit and Discount
Act of 2002 (H.R.5019); this measure is commonly referred to as the House
Democratic bill. The rule governing debate on H.R. 4954 did not allow for
consideration of the Democratic bill. This was because the measure exceeded the
10-year (2003-2012) House-passed budget resolution figure of $350 billion for
prescription drugs and Medicare modernization.
On July 15, 2002 began consideration of drug legislation. As of this writing the
Senate is expected to use as the basis for the debate, the Greater Access to
Affordable Pharmaceuticals Act of 2001 (S. 812 Schumer et al), reported by the
Senate Committee on Health, Education, Labor and Pensions (HELP) Committee on
July 11, 2002. The Senate Finance Committee, which has jurisdiction over Medicare
legislation, has not reported a Medicare drug bill; however, at least 2 measures are
expected to be considered as amendments during the debate. The first is the
Medicare Outpatient Prescription Drug Act of 2002 (S. 2625 Graham et al.). The
second is the 21st Century Medicare Act (S. 2729, Grassley et al.), sometimes
referred to as the “tripartisan bill.”
Overview of Major Proposals
The major proposals under consideration contain a number of common themes.
In general, they would make coverage available to all Medicare beneficiaries on a
voluntary basis. They would have a limit on the amount of federal spending for the
new benefit. Beneficiaries would be expected to assume specified costs of the new
benefit in the form of premiums and cost-sharing charges. The bills generally would
pay most or all of these charges for the low-income Other individuals would have
a limit on out-of-pocket costs (a “catastrophic limit”) once they reached a certain
level of spending.
2 For a discussion of the card program, see: 1) CRS Report RL31316, President Bush’s
Proposed Medicare-Endorsed Drug Discount Card Program: Status and Issues, by M.
Angeles Villarreal; and 2) CRS Congressional Distribution Memorandum, Medicare-
Endorsed Prescription Drug Card Assistance Initiative – Summary of Proposed Regulations,
by Jennifer O’Sullivan, March 13, 2002.

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CRS-3
There are, however, a number of significant differences between the bills.
These include the degree of reliance and financial risk placed on the private sector
versus the public sector, the definition and scope of benefits, the federal
administrative structure, and implementation of low-income subsidies.
Private vs. Public Sector Responsibility. Virtually all proposals would
place some measure of responsibility on the private sector for administration of a
drug plan. It is the degree of reliance placed on the public versus the private sector
that is one of the key areas of difference among the various proposals.
The House-passed bill would provide access to a drug-only benefit through
private insurance companies and other entities who wished to offer the benefit. A
portion of the financial risk for the cost of covered benefits would be placed on the
entities administering the benefit. In general, the private plans would be at risk for
any costs in excess of federal subsidy payments and federal reinsurance payments.
(Reinsurance payments are made to cover a portion of the costs paid by plans for
individuals incurring high costs.) The Administrator of the new Medicare Benefits
Administration would administer the program in a manner such that eligible
individuals would be assured access to at least two plans. If necessary to ensure
access, the Administrator would be authorized to provide financial incentives in
addition to the federal subsidy and reinsurance payments. S. 2729 (Grassley et. al.)
would also rely on private entities to provide benefits and require plans to assume
some of the financial risk for the cost of covered benefits. In order to assure access,
the Administrator of the new Medicare Competitive Agency would be authorized to
provide financial incentives for an entity to establish a plan.
Under the House Democrat and Graham bills, the new benefit would be
administered at the federal level like other Medicare benefits and the federal
government would bear most of the financial risk of coverage. The actual operation
of the benefit would be through contracts with private entities such as pharmaceutical
benefit managers (PBMs). PBMs currently administer the drug benefit, including
negotiating price discounts, for many private insurance plans. Under both bills, a
portion of the administrative fees for these entities would be put at risk; specifically,
an adjustment would be made in administrative payments to ensure that entities
complied with requirements relating to performance goals.
Scope of Benefits. Another key difference among proposals is the scope of
benefits. Under the House Democrat and Graham bill there would be one specific
benefit available to all enrollees nationwide. Conversely, under the House-passed
bill and S. 2729 (Grassley et al.) there would be a minimum benefit level established.
Under the House-passed bill and S. 2729, the minimum benefit (referred to as
“qualified coverage”) would be either specified “standard coverage” or alternative
coverage, provided it was actuarially equivalent (i.e., had the same dollar value) to
standard coverage and had the same limit on out-of-pocket spending.
Administration. Medicare is currently administered by the Centers for
Medicare and Medicaid Services (CMS) within the Department of Health and

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CRS-4
Human Services (HHS).3 Two of the proposals under discussion in this report would
establish a new entity to administer the drug benefit at the federal level. Under the
House-passed plan, a new Medicare Benefits Administration (MBA) would be
established (outside of CMS, but within HHS) to administer the drug benefit and
Medicare+Choice. Under S. 2729, the benefit would be administered by the new
Medicare Competitive Agency (also outside of CMS, but within HHS). Under the
House Democratic and Graham bills, the benefit would be administered by CMS; an
advisory committee would be established to advise the Secretary on policies related
to the drug benefit.
Low-Income. Under current law, some low-income aged and disabled
Medicare beneficiaries are also eligible for drug coverage under Medicaid. Those
persons entitled to full Medicaid protection generally have prescription drug
coverage. Some groups receive more limited Medicaid benefits. Qualified Medicare
Beneficiaries (QMBs) are persons with incomes below poverty and resources below
$4,000; these persons receive Medicaid assistance for Medicare cost-sharing and
premium charges. Specified Low Income Beneficiaries (SLIMBs) meet the QMB
definition except that their income limit is above the QMB level; the SLIMB limit
is 120% of poverty. QMBs and SLIMBs only receive drug benefits if they are also
entitled to full Medicaid coverage. Under a temporary program, the SLIMB level
can be extended to certain persons under 135% of poverty who are not otherwise
eligible for Medicaid.
All of the major proposals discussed in this report would provide assistance to
persons below 150% of poverty – in terms of premiums that would have to be paid
for coverage and/or cost sharing once persons used benefits. As such, the bills would
pick up some of the costs now paid by Medicaid for the dual eligible population.
Both House plans would provide for no, or very limited, beneficiary liability for
covered services for this population group. S. 2729 would provide full premium
subsidies for those under 135% of poverty, and sliding scale subsidies for those
between 135% and 150% of poverty, provided these persons selected a plan with a
premium at or below the national weighted average, or if no such plan was available
in the area, with the lowest premium actually available. Under S. 2729, all persons
could be subject to some cost-sharing charges. The Graham bill would only provide
premium assistance for persons between 135% and 150% of poverty. Some of the
proposals would extend the low-income assistance protections to persons at slightly
higher income levels. The proposals differ in what portion of the costs of low-
income subsidies would be paid under the current federal-state Medicaid program
and what portion would be fully paid by the federal government.
3 Prior to June 14, 2001, this agency was known as the Health Care Financing Administration
(HCFA).

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CRS-5
Summary of Major Proposals
The following table is a side-by-side comparison of bills introduced in the 107th
Congress that have received the most attention to date. These are the House-passed
bill, the House Democratic bill, the Graham bill, and the so-called “tripartisan bill.”
The summary is limited to the Medicare prescription drug provisions. Both House
bills and the “tripartisan bill” contain additional Medicare provisions.4 The House
Democratic bill also contains drug-related amendments to the Federal Food Drug and
Cosmetic Act and the Public Health Service Act. The Graham bill is limited to
Medicare prescription drug provisions.
The summary highlights the major features of the bills. The first items provide
a broad overview (title and summary). This is followed by an overview of program
design (beginning date, benefits, premiums, eligibility, and relationship to
Medicare+Choice). The next section reviews administration and financial risk
(federal administration, administration of benefit, establishment of plan/benefit, plan
enrollment, federal payments to plans, assumption of financial risk, and access). The
next items relate to pricing and cost controls (drug pricing and payment, access to
negotiated prices, and cost controls/formularies). The next item discusses
beneficiary protections. Then the low-income subsidy provisions are reviewed. This
is followed by a discussion of the relationship between the new program and existing
programs which supplement Medicare benefits (Medicaid, private plans, and
Medigap). The last item discusses the drug card and the transitional low-income
assistance program in the House-passed bill.
4 For a summary of the provisions of the House-passed bill, see CRS Report RL31462,
Major Provisions of the Medicare Modernization and Prescription Drug Act of 2002, H.R.
4954, as Passed by the House, by Jennifer O’Sullivan, Hinda Ripps Chaikind, and Sibyl
Tilson.

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CRS-6
Side-by-Side Comparison of Major Medicare Drug Provisions of Selected Bills
In General
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Title
Medicare Modernization and
Medicare Rx Drug Benefit and
Medicare Outpatient Prescription
21st Century Medicare Act
Prescription Drug Act of 2002
Discount Act of 2002
Drug Act of 2002
Summary
Effective January 1, 2005, a new
Effective January 1, 2005, a new
Effective January 1, 2004, a new
Effective January 1, 2005, a new
optional benefit would be
optional benefit would be
optional benefit would be
optional benefit would be
established under a new Part D.
established under a new Part D.
established under a new Part D.
established under a new part D.
The program would rely on
The program would be
The program would be
The bill would rely on private
private plans to provide coverage
administered by the Secretary of
administered by the Secretary of
plans to provide coverage and to
and to bear some of the financial
Health and Human Services
Health and Human Services
bear some of the financial risk
risk for drug costs; federal
(HHS); the Secretary would enter
(HHS); the Secretary would enter
for drug costs. Coverage would
subsidies would be provided to
into contracts with pharmacy
into contracts with eligible
be provided through Medicare
e n c o u r a g e p a r ticipation .
c o n t r a c t o r s w h o w o u l d
entities, which could include
Prescription Drug Plans or
Coverage would be provided
administer the program on a
pharmacy benefit managers,
Medicare+Choice (M+C) plans.
through prescription drug plans
regional or national basis.
health plans, and retail pharmacy
Beneficiaries could purchase
(PDPs) or Medicare+Choice
Coverage would be provided
delivery systems. The eligible
either a standard plan or an
(M+C) plans. Beneficiaries
through M+C plans for M+C
entities would administer the
actuarially equivalent plan. Low
could purchase either a standard
enrollees. The federal
benefit on a regional basis.
income subsidies would be
plan or an actuarially equivalent
government would assume
Coverage would be provided
provided for persons with
plan. Low income subsidies
financial risk except that a
through M+C plans for M+C
incomes below 150% of poverty.
would be provided for persons
limited percentage of the
enrollees. The federal
A new Medicare Competitive
with incomes below 175% of
administrative payment would be
government would assume
Agency would be established
poverty. A new Medicare
adjusted to ensure that the
financial risk, but a percentage of
within the Department of Health
Benefits Administration (MBA)
contractor pursued performance
the management payments could
and Human Services (HHS) to
would be established within the
requirements. A single benefit
be tied to performance
administer Part D and the
Department of Health and
would be available nationwide.
requirements of the contracted
Medicare+Choice (M+C)
Human Services (HHS) to
Assistance would be provided for
entity. A single benefit would be
program.
administer the benefit and the
low-income persons with
available nationwide. Persons
M+C program.
incomes below 175% of poverty.
with incomes below 150% of
The Secretary would be required
poverty would receive assistance.
to negotiate contracts with drug
manufacturers that specified the
maximum prices that could be
charged to program enrollees.

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CRS-7
Program Design
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Beginning Date; ending Date
T h e p r o g r a m w o u l d b e g i n
The program would begin
The program would be
The program would begin
January 1, 2005.
January 1, 2005.
operational from January 1, 2004
January 1, 2005.
- December 31, 2010.
Benefits
“Qualified coverage” would be
There would be a single
There would be a single
“Qualified coverage” would be
either “standard coverage” or
nationwide benefit. In 2005,
nationwide benefit with no
either “standard coverage” or
“ a c t u a r i a l l y e q u i v a l e n t
there would be a $100
deductible. Cost-sharing would
“ a c t u a r i a l l y e q u i v a l e n t
coverage.” In 2005, “standard
deductible, 20% coinsurance and
be based on tiered copayments.
coverage.” In 2005, “standard
coverage” would be defined as
a limit on out-of-pocket spending
Each drug would fall into one of
coverage” would be defined as
having a $250 deductible, 20%
(including cost-sharing for drugs
four classes: generic, preferred
having a $250 deductible, 50%
cost-sharing for drug costs
covered under Part B) of $2,000.
brand name, non-preferred brand
cost-sharing for drug costs
between $251 and $1,000, 50%
In addition, once an enrollee met
name, and non-formulary. In
between $251 and the initial
cost-sharing for drug costs
the stop-loss limit, they would
2004, enrollees would pay $10
coverage limit of $3,450, then no
between $1,001 and the initial
not have to pay any cost-sharing
for each prescription filled with
coverage until the beneficiary
coverage limit of $2,000, and
for drugs covered under Part B.
a generic drug, $40 for each
had out-of-pocket costs of $3,700
then no coverage until the
These dollar amounts would be
prescription filled with a
($5,300 in total spending); and
beneficiary had out-of-pocket
increased in future years by the
preferred brand name drug, and
10% cost-sharing thereafter.
costs of $3,700 ($4,800 in total
percentage increase (projected in
$60 for each prescription filled
These amounts would be
spending); once the beneficiary
advance by the Secretary, for the
with a non-preferred brand name
increased in future years by the
reached the $3,700 catastrophic
year involved) in per capita
drug. For non-formulary drugs,
percentage increase in average
limit full coverage would be
p r o g r a m e x p e n d i t u r e s .
an entity could charge a
per capita expenditures for
provided. The dollar amounts
Coinsurance would be applied
copayment higher than $60.
covered drugs for the year ending
would be increased in future
differently for preferred and non-
Non-preferred and non-formulary
the previous July. Out-of-pocket
years by the percentage increase
preferred medicines. For
drugs deemed medically
costs counting toward the limit
in the average per capita
preferred medicines coinsurance
necessary would be treated as
would include costs paid by the
expenditures for covered drugs
would equal 20% or a lower
brand-name preferred drugs. An
individual (or by another
for the year ending the previous
percentage established to
enrollee would not pay for any
individual such as a family
July. Out-of-pocket costs
encourage appropriate use of
prescriptions once the enrollee
member), paid on behalf of a
counting toward the limit would
preferred medicines. For
incurred out-of-pocket costs for
low-income individual under the
include costs paid by the
nonpreferred medicines the
the year of $4,000 (regardless of
subsidy provisions, or paid under
individual (or by another
coinsurance would be 20% of the
who paid the costs). For each
Medicaid. Any costs for which
individual such as a family
price for the lowest cost
year after 2005, the copayments
the individual was reimbursed by
member), paid on behalf of a
preferred medicine within the
and out-of-pocket limit would be
insurance or otherwise could not
low-income individual under the
same therapeutic class plus an
increased by the annual increase
be counted. Entities could offer
subsidy provisions, or paid under
amount equal to the amount by
in prices (reflecting both price
more generous drug coverage, if
Medicaid. Any costs for which
which the price of the
inflation and changes in
approved by the Administrator,
the individual was reimbursed by
nonpreferred drug exceeded the
therapeutic mix) as determined
but only if they also offered a

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CRS-8
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
insurance or by another third-
lowest price preferred drug. The
by the Secretary for the year
plan providing required
party payment arrangement could
extra payments for nonpreferred
ending the previous July. An
coverage.
not be counted. Plans could offer
drugs would not be considered
eligible entity could charge lower
more generous drug coverage, if
countable cost-sharing for
copayments if such reduction
approved by the MBA
purposes of meeting the
was tied to performance
Administrator.
deductible or stop-loss limit.
requirements and would not
increase overall program costs.
For generic and preferred brand
name drugs, the enrollee would
pay the negotiated price minus
$5 if such amount was less than
the respective copayment. For
non-preferred drugs, the enrollee
would pay the negotiated price if
such amount was less than the
copayment.
Premiums
The plan sponsor would establish
Premiums would be set at $25
Premiums would be set at $25
Monthly premiums would be
the premium amount, subject to
per month for 2005. This
per month for 2004. This
uniform for all eligible
approval by the Administrator.
amount would be increased in
amount would be increased in
beneficiaries in a plan, except
The premium for a prescription
future years by the percentage
future years by the percentage
that persons delaying Part D
drug plan could not vary among
increase, (projected in advance
increase, (projected in advance
enrollment without other
individuals enrolled in the plan in
by the Secretary, for the year
by the Secretary, for the year
creditable drug coverage would
the same service area, unless the
involved) in per capita program
involved) in average per capita
be subject to higher premiums.
individuals were subject to
expenditures. Enrollees would
program expenditures. Enrollees
If the plan’s monthly approved
penalties for late enrollment.
p a y p r e m i u m s t h r o u g h
would pay premiums through
premium for standard coverage
Premiums would be paid to the
withholding from social security
withholding from social security
was equal to the national
plans. However, PDP sponsors
checks in the same manner Part
checks in the same manner Part
monthly weighted average
would be required to permit each
B premium payments are
B premium payments are
premium for such coverage, the
enrollee to pay premiums
withheld. Late enrollment
withheld. Late enrollment
beneficiary would pay: 1) 57% of
through withholding from social
penalties, calculated in the same
penalties, calculated in a similar
the monthly national average. If
security checks in the same
manner as such penalties are
manner as such penalties are
the plan’s monthly approved
manner Part B premium
calculated for Part B, would be
calculated for Part B, would be
premium was less than the
payments are withheld or through
applied to persons who did not
applied to premiums for persons
national average the beneficiary
an electronic funds transfer.
enroll during their initial
who did not enroll during their
would pay: 1) 57% of the
enrollment period or during a
initial enrollment period or
monthly national average, minus,
special enrollment period
during a special enrollment
2) the difference between the

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CRS-9
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
established due to involuntary
period established due to
national average and the plan’s
loss of other drug coverage.
involuntary loss of other drug
premium. If the plan’s monthly
coverage.
premium was greater than the
national average, the beneficiary
would pay: 1) 57% of the
monthly national average, plus 2)
the difference between the
national average and the plan’s
premium. Premiums would be
collected in the same manner as
Part B premiums.
Eligibility
All beneficiaries enrolled in
All beneficiaries enrolled in
All individuals enrolled in Part A
All beneficiaries enrolled in
Medicare Part A or Part B could
Medicare Part A or eligible to
or Part B could elect to enroll in
Medicare Parts A and B could
elect to enroll in Part D through
enroll in Part B could elect to
Part D. The Secretary would
elect to enroll in Part D. The
enrollment in a M+C plan with
enroll in Part D. An initial
establish an enrollment process.
Administrator would establish an
prescription drug coverage or in
enrollment period would be
An initial enrollment period
enrollment process which would
a PDP. The Administrator of the
established. For current
would be established. For
be similar to that for Part B. An
new MBA would establish an
beneficiaries this would be the 7-
current beneficiaries, this would
initial open enrollment period
enrollment process. An initial
month period beginning August
be a period of time determined
would be established. For current
election period would be
1, 2004; for future beneficiaries it
by the Secretary before January
beneficiaries, this would be the
established. For current
would be the same 7-month
1, 2004, so that Part D coverage
8-month period beginning April
beneficiaries this would be the 6-
period applicable for initial Part
was effective as of such date.
1, 2004. Eligible beneficiaries
month period beginning
B enrollment. Special
For future beneficiaries, the
with creditable drug coverage
November 2004; for future
enrollment periods would apply
enrollment procedures would be
could elect to continue to receive
beneficiaries it would be the
for persons who involuntarily
similar to those used for Part B.
such coverage, not enroll in Part
same 7-month period applicable
lost other drug coverage
Eligible beneficiaries with
D, and subsequently enroll in
for initial Part B enrollment.
(including coverage offered by
creditable drug coverage could
Part D without penalty if they
Special election periods would
former employers); these persons
elect to continue to receive such
involuntarily lost their other
apply for persons who
would not be subject to late
coverage, not enroll in Part D,
coverage; special enrollment
involuntarily lose other drug
enrollment penalties.
and subsequently enroll in Part D
periods would apply for this
coverage. Persons electing
without penalty if they
group.
coverage at the first opportunity
involuntarily lost their other
and maintaining continuous
coverage; special enrollment
coverage would be guaranteed
periods would apply for this
the protection of community
group.
rating; otherwise they could be

---

CRS-10
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
subject to late enrollment
penalties.
R e l a t i o n s h i p t o
An M+C enrollee would obtain
M+C organizations would be
M+C organizations would be
An M+C enrollee would obtain
Medicare+Choice
benefits through the M+C plan if
required offer plans with drug
required to offer Part D drug
benefits through the M+C plan if
the plan provided qualified drug
coverage that was at least
benefits. M+C enrollees would
the plan provided qualified drug
coverage. An M+C plan could
actuarially equivalent to Part D
receive coverage through their
coverage. An M+C plan offering
not offer drug coverage (other
benefits. An M+C enrollee
M+C plan.
drug coverage would have to
than that already required under
would be required to obtain Part
make a plan offering only
Medicare) unless the coverage
D drug benefits through the plan.
standard coverage available to
was at least qualified prescription
each Part D enrollee. An
drug coverage.
organization could also offer
additional qualified drug
coverage. Drug coverage could
not be offered to an enrollee
unless the enrollee was enrolled
in Part D.
Administration; Financial Risk
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Federal Administration
The new MBA, within HHS,
The Secretary (through CMS)
The Secretary (through CMS)
The Administrator of the new
would administer the new Part D
would administer the benefit. A
would administer the benefit. A
Medicare Competitive Agency,
drug benefit and the M+C
newly created Medicare
newly created Medicare
within HHS, would administer
program. (The Centers for
Prescription Medicine Advisory
Prescription Drug Advisory
Part D and the M+C program.
Medicare and Medicaid Services
Committee would advise the
Committee would advise the
( C M S , w o u l d r e t a i n
( C M S ) , w o u l d r e t a in
Secretary.
Secretary. The Secretary could
responsibility for the traditional
responsibility for the traditional
contract with Medicare
fee-for-service program.) A
fee-for-service program.) A
Consumer Coalitions (nonprofit
Medicare Competitive Policy
Medicare Policy Advisory Board
entities whose board members
Advisory Board would be
would be established within the
were primarily Medicare
established within the Agency.
MBA.
beneficiaries) to conduct
information activities.

---

CRS-11
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Administration of benefit
T h e b e n e f i t w o u l d b e
T h e b e n e f i t w o u l d b e
T h e b e n e f i t w o u l d b e
T h e b e n e f i t w o u l d b e
administered by a M+C plan or
administered by pharmacy
administered by M+C plans or by
administered by an M+C plan or
PDP. A PDP plan sponsor would
contractors serving on a regional
eligible entities serving on a
a Medicare Prescription Drug
be an entity certified under Part
or national basis. The benefit
regional basis. The benefit could
Plan offered by an entity in the
D as meeting the Part D
could be administered on a
be administered on a partial
geographic area. Entities eligible
standards and requirements. In
partial regional basis, if
regional basis, if determined
to offer plans would be entities
general, a PDP sponsor would
determined appropriate by the
appropriate by the Secretary. An
the Administrator deemed
have to be licensed under state
Secretary. The Secretary would
entity could submit a single bid
appropriate to provide benefits
law as a risk bearing entity
determine regions and assure that
to provide coverage in multiple
including a pharmaceutical
eligible to offer health benefits or
there were at least 10 in the U.S.
regions. The Secretary would
benefit management company,
health insurance coverage in
Coverage would be provided
determine regions and assure that
wholesaler or retail pharmacist
each state in which it offered a
through M+C plans for M+C
there were at least 10 in the U.S.
delivery system; an insurer,
prescription drug plan.
enrollees. Contractors would be
Entities would be required to
another entity, or any
required to meet Part D
meet Part D requirements. They
combination of entities. In
requirements. They would be
would be authorized to enter into
general, entities would have to be
authorized to enter into
participation agreements with
licensed under state law as risk
participation agreements with
pharmacies who comply with
bearing entities.
pharmacies who comply with
program requirements.
program requirements.
The Administrator would be
required to establish by April 15,
2004, and periodically review,
service areas in which plans
could offer benefits. The area
covered by a plan would be
either 1 entire service area
established by the Administrator
or the entire country. Plans
could submit multiple bids for
multiple service areas.
Submission of bids
Each PDP sponsor would be
The Secretary would enter into
The Secretary would enter into
The Administrator would enter
required to submit to the MBA
contracts with pharmacy
contracts with eligible entities to
into contracts with eligible
Administrator information on the
contractors to administer the
administer the benefit; entities
entities; contracts could cover
qualified drug coverage to be
benefit. The Secretary would
would include pharmacy benefit
more than one plan. Entities
provided including the premium.
accept competitive bids from
management companies, retail
would submit bids containing
The Administrator could not
entities. The bid would include:
pharmacy delivery systems,
information on the plan including
approve the premium unless it
a proposal for the estimated drug
health plans or insurers, states, or
the monthly premium. The
accurately reflected: 1) the value
prices and projected annual
any other entity or combination
Administrator could not approve

---

CRS-12
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
of benefits provided; and 2) the
increases in prices, a statement
of entities. The Secretary would
the premium unless it accurately
67% federal subsidy for standard
regarding what it would charge
accept competitive bids from
reflected the actuarial value of
benefits. PDP plan sponsors
the Secretary to administer the
entities. The bid would include:
the benefits and reinsurance
would be required to enter into a
benefit, a description of access to
a proposal for estimated drug
subsidies. The Administrator
contract with the Administrator;
pharmacy services, a detailed
prices and projected annual
would have the same authority to
the contract could cover more
description of performance
increases in prices, a statement
negotiate the terms and
t h a n o n e p l a n . T h e
requirements, and a detailed
regarding what it would charge
conditions of the plans as the
Administrator would have the
description standards the entity
the Secretary to administer the
Director of the Office of
same authority to negotiate the
would use in selecting preferred
benefit, a description of access to
Personnel Management has with
terms and conditions of the plans
medications. The Secretary
pharmacy services, a description
respect to Federal Employee
as the Director of the Office of
would award, on a competitive
of performance requirements,
Health Benefits (FEHB) plans.
Personnel Management has with
basis contracts for 2-5 year
and a description of standards the
The Administrator would
respect to Federal Employee
terms. At least two contracts
entity would use in modifying
approve at least 2 contracts to
Health Benefits (FEHB) plans.
would be awarded per area
the formulary. The Secretary
offer a Medicare prescription
unless only one entity submitted
would award, on a competitive
plan in an area. Contracts would
a bid meeting minimum
basis contracts for 2-5 year
be awarded for 1-year.
standards. The Secretary would
terms. At least two contracts
consider the comparative merits
would be awarded per area
of each bid.
unless only one entity submitted
a bid meeting minimum
standards. The Secretary would
consider the comparative merits
of each bid.
Plan enrollment
Beneficiaries would enroll a
Each individual would select
Eligible beneficiaries not
Eligible beneficiaries not
M+C plan with prescription drug
(and could change the selection
enrolled in a M+C plan would
enrolled in a Medicare+Choice
coverage or in a PDP.
on a periodic basis) the pharmacy
make an annual election to enroll
plan would make an election to
contractor to administer the
in a Medicare Prescription Drug
enroll in a Medicare Prescription
benefit for such individual.
Plan. A default option would be
Drug Plan and could make an
selected by the Secretary for
annual election to change plans.
enrollees that failed to select an
A Part D enrollee who failed to
entity.
enroll in a plan would be enrolled
in the plan with the lowest
monthly premium available in
the area.

---

CRS-13
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Federal payments to plans
The federal government would
The Secretary would pay each
The Secretary would pay each
The federal government would
pay direct subsidies and
pharmacy contractor for the
eligible entity for the
pay reinsurance payments to
reinsurance payments to PDPs,
administration of benefit and for
management of the benefit and
eligible entities, M+C plans, and
M+C plans, and qualified retiree
the negotiated prices (less cost-
for the negotiated cost (less cost
qualified retiree plans which
plans which would equal 67% of
sharing, plus a reasonable
sharing) of prescription drugs
would equal 30% of the value of
the value of standard coverage.
dispensing fee) for prescription
used by enrollees. A percentage
standard coverage. Reinsurance
Direct subsidies would be equal
drugs used by enrollees. The
of the management payment (as
payments would be provided for:
to 37% of the value of standard
Secretary would include in the
determined by the Secretary)
1) 50% of an individual’s
coverage provided under the
contract with a pharmacy
would be tied the entity’s
allowable drug costs between
plan. Reinsurance payments
contractor incentives for cost and
p e r f o r m a n c e , i n c l u d i n g
$2,001 and $3,450 (in 2005); and
would be equal to 30% of the
utilization management and
controlling costs, providing
2) 80% for costs over the out-of-
value of standard coverage.
quality improvement; the
quality clinical care, and
pocket limit ($3,700 in 2005).
Reinsurance payments would be
contract could provide financial
providing quality service. The
The Administrator would
provided for: 1) 30% of an
incentives to encourage greater
Secretary could reduce payments
proportionately adjust payments
individual’s allowable drug costs
program savings. The Secretary
to reflect rebates and price
so that total reinsurance
between $1,001 and $2,000 (in
would provide for performance
concessions obtained by the
payments for the year equaled
2005); and 2) 80% for costs over
standards for contractors which
entity from manufacturers.
30% of total payments by
the out-of-pocket limit ($3,700 in
could include monetary bonuses
Agreements between eligible
qualifying plans for standard
2005). The Administrator would
if the standards were met and
entities and participating
coverage during the year.
proportionately adjust payments
penalties if they were not met.
pharmacies would provide for
so that total reinsurance
payment of a reasonable
payments for the year equaled
dispensing fee.
30% of total payments by
qualifying plans for standard
coverage during the year. The
Administrator could adjust direct
subsidy payments in order to
avoid risk selection.
Assumption of financial risk
Plans would be required to
The federal government would
The federal government would
Entities would be required to
assume full financial risk on a
assume financial risk for the cost
assume financial risk for the cost
assume a portion of financial
prospective basis for covered
of benefits except that a limited
of benefits except that a
risk. Entities would be permitted
benefits except: 1) as covered by
percentage (to be determined by
percentage (to be determined by
to obtain reinsurance for the
federal direct subsidy payments
t h e S e c r e t a r y ) o f t h e
t h e S e c r e t a r y ) o f t h e
portion of costs for which they
or reinsurance payments for high
administrative payment would be
administrative payment would be
were at risk.
cost enrollees; or 2) as covered
adjusted to ensure that the
adjusted to ensure that the
by federal incentive payments to
contractor pursues performance
contractor pursued performance
encourage plans to expand
requirements; the Secretary could
requirements. The percentage

---

CRS-14
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
service areas for existing plans or
not establish a percentage that
could be up to 100%. The
establish new plans. The entity
would jeopardize the ability of
Secretary could not establish a
could obtain insurance or make
the contractor to administer the
percentage that would jeopardize
other arrangements for the cost
benefits in a quality manner.
the ability of the contractor to
of coverage provided to
administer the benefits in a
enrollees.
quality manner.
Access
The Administrator would assure
The Secretary would develop
The Secretary would develop
In order to assure access, the
that all eligible individuals
procedures for the provision of
procedures for the provision of
Administrator would be
residing in the U.S. would have a
Part D benefits to persons
Part D benefits to persons
authorized to provide financial
choice of enrollment in at least
residing in areas not covered by
residing in areas not covered by
incentives, including the partial
two qualifying plan options (at
a contract. The Secretary would
a contract. The Secretary would
underwriting of risk, for an entity
least one of which was a PDP) in
also develop procedures to assure
also develop procedures to assure
to establish a plan; the assistance
their area of residence. The
that beneficiaries residing in
that beneficiaries residing in
would be available only so long
requirement would not be
more than one area in a year
more than one area in a year
as, and to the extent necessary, to
satisfied if only one PDP sponsor
we r e p r o vided benefits
were p r o v i ded benefits
assure the guaranteed access.
or M+C organization offered all
throughout the year.
throughout the year.
However, the Administrator
the qualifying plans in the area.
could never provide for the full
If necessary to ensure such
underwriting of financial risk for
access, the Administrator would
any entity, nor could the
be authorized to provide financial
Administrator provide for any
incentives, including the partial
assumption of financial risk for a
underwriting of risk, for a PDP
public entity offering a
sponsor to expand its service area
n a t i o n w i d e d r u g p l a n .
under an existing prescription
Additionally, the Administrator
drug plan to adjoining or
would be directed to seek to
additional areas, or to establish
maximize the assumption of
such a plan, including offering
financial risk by the entity.
such plan on a regional or
nationwide basis. The assistance
would be available only so long
as, and to the extent necessary, to
assure the guaranteed access.
However, the Administrator
could never provide for the full
underwriting of financial risk for
any PDP sponsor, nor could the

---

CRS-15
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Administrator provide for any
assumption of financial risk for a
public PDP sponsor offering a
n a t i o n w i d e d r u g p l a n .
Additionally, the Administrator
would be directed to seek to
maximize the assumption of
financial risk by PDP sponsors
and M+C organizations.
Pricing; Cost Controls
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Drug pricing and payment
T h e P D P s p o n s o r w o u l d
The Secretary would be required
The contracting entity’s bid
The entity offering the drug plan
determine payments and would
to negotiate contracts with drug
would include a proposal for the
would determine payments and
be expected to negotiate
manufacturers that specify the
estimated prices for covered
would be expected to negotiate
discounts.
maximum prices that may be
drugs and projected annual
discounts.
charged to program enrollees.
increase in prices. The entity
The Secretary would be required
would be expected to negotiate
to take into account the goal of
prices.
developing breakthrough
medicines.
Access to negotiated prices
Both standard coverage and
The contract between the
Plans would provide that
Both standard coverage and
actuarially equivalent coverage
Secretary and the pharmacy
beneficiaries would have access
actuarially equivalent coverage
would have to provide
contractor would require the
to negotiated prices
would have to provide
beneficiaries access to negotiated
contractor to negotiate contracts
beneficiaries access to negotiated
prices (including applicable
with manufacturers that provide
prices (including applicable
discounts) even when no benefits
for maximum prices that are
discounts) even when no benefits
may be payable because the
lower than those negotiated by
may be payable because the
beneficiary had reached the
the Secretary, if applicable. The
beneficiary has reached the initial
initial coverage limit.
reduction would be passed on to
coverage limit.
beneficiaries and the Secretary
An entity offering a plan would
would hold the contractor
be required to issue a card to the
accountable for meeting
beneficiary to assure access to
performance requirements with
negotiated prices for which
respect to price reductions and
coverage is not otherwise
limiting price increases.
provided under the plan.

---

CRS-16
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Cost controls/formularies
Plans would be allowed to have
Preferred medicines (which
Entities would be required to use
Plans would be allowed to have
formularies restricting coverage
would have lower cost sharing)
cost control strategies that could
formularies restricting coverage
to certain drugs. Plans electing
would be designated by the
include alternative methods of
to certain drugs. Plans electing
to use a formulary would be
Secretary or the pharmacy
distribution, preferred pharmacy
to use a formulary would be
required to establish a
contractor for a therapeutic class.
networks, generic substitution,
required to establish a
pharmaceutical and therapeutic
Pharmacy contractors would be
therapeutic interchange, disease
pharmaceutical and therapeutic
committee (that included at least
required to have in place
m a n a g e m e n t p r o g r a m s ,
committee (that included at least
one practicing physician and one
procedures to treat, on a case-by-
medication therapy management,
one practicing physician and one
practicing pharmacist) to develop
case basis, non-preferred
and informing beneficiaries of
practicing pharmacist) to develop
and revise the formulary. The
medicines as preferred medicines
price differences between generic
and revise the formulary. The
formulary would be required to
if the preferred medicine was
and brand name drugs. Entities
formulary would be required to
include drugs within all
determined not to be as effective
would be required to establish
include drugs within all
therapeutic categories and classes
for, or to have significant adverse
formularies. The formulary
therapeutic categories and classes
of covered drugs (although not
effects on, the enrollee. The
would be developed by a
of covered drugs (although not
necessarily for all drugs within
procedures would require that
pharmacy and therapeutics
necessarily for all drugs within
such categories and classes).
determinations be based on
committee in accordance with
such categories and classes).
Plans could offer tiered cost-
professional medical judgment,
standards developed by the
Plans could offer tiered cost-
sharing for drugs included within
medical condition of the enrollee
Secretary in consultation with the
sharing for drugs included within
a formulary and lower cost-
and medical evidence.
Medicare Prescription Drug
a formulary and lower cost-
sharing for preferred drugs in the
Advisory Committee. All brand
sharing for preferred drugs in the
formulary. An enrollee would
The Secretary, directly or
name drugs in the formulary
formulary. An enrollee would
have the right to appeal to obtain
through contracts with pharmacy
would be designated preferred or
have the right to appeal to obtain
coverage for a drug not on the
contractors, would employ
non-preferred. The formulary
coverage for a drug not on the
formulary if the prescribing
mechanisms to provide services
would have to include: 1) all
formulary if the prescribing
physician determined that the
appropriately and efficiently;
generic covered drugs, 2) at least
physician determined that the
formulary drug was not as
mechanisms could include: 1)
one preferred brand name drug
formulary drug was not as
effective for the individual or had
price negotiations; 2) reduction
for each therapeutic class, and 3)
effective for the individual or had
adverse effects for the individual.
in coinsurance below 20% for
at least one non-preferred brand
adverse effects for the individual.
preferred medicines; 3) methods
name drug for each therapeutic
If a plan offered tiered cost-
to reduce medication errors and
class (if there is more than one
sharing for covered drugs, an
encourage appropriate use of
brand name drug available).
enrollee would have the right to
medications; and 4) permitting
Entities would have to have
request that a nonpreferred drug
pharmacy contractors, as
procedures to treat non-preferred
be treated on terms applicable for
approved by the Secretary, to
and non-formulary drugs as
a preferred drug if the
make exceptions to the cost-
preferred brand-name drugs if the
prescribing physician determined
s h a r i n g p r o v i s i o n s f o r
preferred drug was determined
that the preferred drug was not as
nonpreferred medicines, to
not to be as effective for the
effective for the individual or had

---

CRS-17
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
secure best prices for enrollees.
enrollee in preventing or slowing
adverse effects for the individual.
the deterioration of, or improving
Price negotiations would be
or maintaining the health of the
Eligible entities would be
conducted in such a manner so
enrollee or to have a significant
required to have a cost-effective
that: 1) there was at least one
adverse effect for the enrollee.
drug utilization management
contract for a medicine in each
program (including incentives to
therapeutic class; 2) if more than
reduce costs when appropriate).
one medicine was available in a
Entities could use other cost
class, there were contracts for at
control mechanisms customarily
least two medicines in the class
used in employer-sponsored
unless determined clinically
health plans.
inappropriate; and 3) if more
than two medicines were
available in a class, there were
contracts for at least two
medicines in a class and a
contract for a generic substitute,
unless determined clinically
inappropriate.
Requirements
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Beneficiary protections
Plans would be required to
The Secretary would establish
The Secretary could not award a
Eligible entities would be
comply with a number of
standards and programs for
contract to an entity unless the
required to: 1) disclose
beneficiary protection provisions
quality and other standards
entity: 1) met quality and
information to beneficiaries on
including those related to: 1)
including those related to: 1)
financial standards; 2) had in
the plan; 2) secure the
community-rated premiums; 2)
access (including 24-hour/7-day
place drug utilization review
participation in the network of a
n o n - d i s c r i m i n a t i o n ; 3 )
a week access, on-line review to
procedures to ensure appropriate
sufficient number of pharmacies
information disclosure; 4)
evaluate for medicine therapy
utilization of drugs and
that dispense drugs directly to
assuring the participation of a
problems, and adherence of any
avoidance of adverse drug
patients (other than by mail
sufficient number of pharmacies;
preferred pharmacy network to
reactions; 3) ensured 24hour/7-
order) to ensure convenient
5) issuance of a card so
minimum access standards);
day a week access to drugs; 4)
access for beneficiaries; 3) have
beneficiaries could assure access
2)assuring compliance of
ensured that pharmacies would
quality assurance measures,
to negotiated prices when
pharmacies with negotiated
not overcharge enrollees; 5) had
including a medication therapy
coverage is not otherwise
prices; 3) enrollee counseling; 4)
procedures for determining if
management program, to reduce
available under the plan; 6) a
education of providers,
non-formulary and non-preferred
medical errors and adverse drug

---

CRS-18
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
cost and drug utilization
pharmacists, and enrollees; and
drugs were medically necessary;
interactions; 4) assure that
management program including
5) provision of cost data to the
6) had an appeals process for
beneficiaries were informed at
medication therapy management
Secretary. Pharmacy contractors
enrollees; 7) had procedures to
the time of purchase of any
and an electronic prescription
would be required to have in
safeguard the privacy of medical
difference between the price of
drug program that provides for
place procedures to ensure timely
records; and 8) had procedures to
the prescribed drug and the lower
e l e c t r o n i c t r a n s f e r o f
procedures for internal and
deter medical errors and ensure
priced generic drug; 5) provide
prescriptions and provision of
external review of denials of
that contracted pharmacies have
procedures for resolving
information to the prescribing
coverage and other complaints.
such procedures.
grievances and handling appeals;
health professional; and 7)
and 6) assure confidentiality of
provisions for hearing and
enrollee records. Entities could
resolving grievances and
establish an optional point-of-
handling appeals.
service method of operation
under which the plan provided
access to any or all pharmacies
not participating in the network
and could charge beneficiaries,
t h r o u g h a djus tments in
copayments, additional costs
associated with this option.
Low-Income subsidies
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Subsidies
Low-income persons would
Persons meeting the definition of
Persons meeting the definition of
Persons with incomes below
receive a premium subsidy
qualified Medicare beneficiaries
qualified Medicare beneficiaries
135% of poverty and assets
(based on the value of standard
(QMBs, persons with incomes
(QMBs, i.e., persons with
below $4,000 would have a full
coverage). Individuals with
below 100% of poverty and
incomes below 100% of
premium subsidy, provided the
incomes at or below 150% of
assets below $4,000), and
poverty), and persons meeting
plan premium was at or below
poverty (and assets below
persons meeting the QMB
the QMB definition except that
the national weighted average
$4,000) would have a subsidy
definition except that their
their incomes were between
premium. If no such plan was
equal to 100% of the value of
incomes were between 100% and
100% and 135% of poverty,
available in the area, the subsidy
standard drug coverage provided
150% of poverty, would have
would have their Part D
would equal the premium for the
under the plan. Individuals with
their Part D premiums,
premiums and copayments paid
lowest cost plan. In addition,
incomes between 150% and
deductibles, and countable cost
by Medicaid. Enrollees between
these persons would have: 1) a
175% of poverty would have a
sharing paid by Medicaid.
135% and 150% of poverty
deductible equal to 5% of the
sliding scale premium subsidy
Persons meeting the QMB
would pay a reduced Part D
amount otherwise applicable; 2)
ranging from 100% of such value
definition except that their
premium, calculated on a sliding
cost-sharing of 2.5% rather than

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CRS-19
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
at 150% of poverty to 0% of such
incomes were between 150% and
scale basis. In determining QMB
50% for costs below the initial
value at 175% of poverty. For
175% of poverty would have
qualification for payment of Part
coverage limit; 3) 50% cost-
both groups, beneficiary cost-
their Part D deductibles and
D premiums and copayments,
sharing for costs above the initial
sharing for spending up to the
countable cost-sharing paid by
asset requirements would not
coverage limit and below the
initial coverage limit ($2,000 in
Medicaid; their Part D premiums
apply.
annual out-of-pocket limit; and
2005) would be reduced to an
would be reduced on a sliding
4) zero cost sharing for costs
amount not to exceed $2 for a
scale basis ranging from 100% of
above the out-of-pocket limit.
multiple source or generic drug
the premium at 150% of poverty
Persons with incomes above
and $5 for a non-preferred drug.
to 0% at 175% of poverty.
135% and below 150% of
PDPs could not charge
poverty would have a sliding
individuals receiving cost-
scale premium ranging from
sharing subsidies more than $5
100% of the premium at 135% of
per prescription. PDPs could
poverty to 57% of poverty with
reduce to zero the cost-sharing
no additional premium costs
otherwise applicable for generic
provided the plan premium was
drugs.
at or below the national weighted
average premium (or the lowest
premium in the area if none was
below the national weighted
average). They would also have
50% cost-sharing for costs
between the initial coverage limit
and the annual out-of-pocket
limit. Plans could waive or
reduce otherwise applicable cost-
sharing.

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CRS-20
Relationship to Other Coverage
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Relationship to Medicaid
States would be required to make
Medicaid costs associated with
The current federal-state
States would be required to make
eligibility determinations for
paying Part D cost-sharing
matching rate would apply for
eligibility determinations for
low-income subsidies; there
charges for persons with incomes
Medicaid costs associated with
low-income subsidies; there
would be a phase-in of the
above 100% of poverty would be
paying Part D premiums and
would be a phase-in of federal
federal assumption of associated
paid by the federal government.
cost-sharing for those below
assumption of associated
a d m i n i s t r a t i v e c o s t s .
120% of poverty. The federal
administrative costs. There
(Alternatively, the eligibility
matching rate would be 100% for
would also be a federal phase-in
determinations could be made by
those between 120% and 150%
of a portion of the costs of
t h e S o c i a l S e c u r i t y
of poverty.
premiums and cost-sharing
Administration.) There would
subsidies for dual eligibles.
also be a federal phase-in of the
Medicaid coverage would wrap
costs of premiums and cost-
around Part D benefits; states
sharing subsidies for dual
could require that these persons
eligibles. States would be
elect Part D drug coverage.
required to maintain Medicaid
benefits as a wrap around to
Medicare benefits for dual
eligibles; states could require that
these persons elect Part D drug
coverage.
The bill would also exempt any
prices negotiated by a PDP,
Medicare+Choice plan, or
qualified retiree program from
Medicaid’s determination of
“best price” for purposes of the
Medicaid drug rebate program.

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CRS-21
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Relationship to private plans
Qualified prescription drug plans
The Secretary would make
The Secretary would make
Qualified prescription drug plans
offered by employers to retirees
payments to retiree health plans
payments to retiree health plans
offered by employers to retirees
would be eligible for direct
offering coverage that was not
offering coverage that was not
would be eligible for reinsurance
subsidies and reinsurance
less than Part D coverage.
less than Part D coverage.
payments. At a minimum,
payments. At a minimum,
Payments would equal two-thirds
Payments would equal two-thirds
qualified retiree coverage would
qualified retiree coverage would
of the estimated average per
of the estimated average per
have to meet the requirements for
have to meet the requirements for
capita government contribution
capita government contribution
qualified prescription drug
qualified prescription drug
for Part D enrollees.
for Part D enrollees.
coverage.
coverage.
Relationship to Medigap
Effective January 1, 2005, the
The bill would modify current
The three of the 10 standardized
Effective January 1, 2005, no
issuance of new Medigap
requirements for standardized
Medigap plans offering drug
Medigap policy with drug
policies with prescription drug
Medigap policies. Effective
coverage would have to be
coverage could be sold, issued,
coverage would be prohibited
January 1, 2005, an appropriate
revised to complement, not
or renewed to a Part D enrollee.
unless 1) the policies replaced
number of such polices would
duplicate, Part D. The revised
Beneficiaries could obtain
another policy with drug
have to provide coverage for
drug packages could not offer
Medigap coverage under new
coverage; or 2) policies met
medicines which complemented,
coverage for more than 90% of
standardized policies designed to
requirements for two new
but did not duplicate, Part D
the Part D copayments. Effective
supplement the new enhanced
standardized policies for all
benefits.
January 1, 2004, the issuance of
fee-for-service coverage option
Medicare services. The first new
any of the old standardized
under the bill; these policies
policy would have the following
policies with drug coverage
could not offer coverage for drug
benefits (notwithstanding other
would be prohibited. The bill
costs.
provisions of law relating to core
would guarantee issuance, during
benefits): 1) coverage of 50% of
the period established by the
the cost-sharing otherwise
Secretary for Part D enrollment,
applicable (except coverage of
of the benefit package the
100% cost-sharing applicable for
Secretary determined most
preventive benefits); 2) no
comparable to the old
coverage of the Part B
standardized drug policy held by
deductible; 3) coverage of all
the policyholder.
hospital coinsurance for long
stays (as in current core
package); and 4) a limitation on
annual out-of-pocket costs of
$4,000 in 2005 (increased in
future years by an appropriate
inflation adjustment as specified
by the Secretary). The second

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CRS-22
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
new policy would have the same
benefit structure as the first new
policy, except that: 1) coverage
would be provided for 75%,
rather than 50%, of cost-sharing
otherwise applicable; and 2) the
limitation on out-of-pocket costs
would be $2,000, rather than
$4,000. Both policies could
provide for coverage of Part D
cost-sharing; however, neither
policy could cover the Part D
deductible. The bill would
require plans to sell any of the
Plans A through Plan G to
individuals who enroll in Part D
within 63 days and who were
covered until then by Medigap
policy H, I, or J.
Drug Card
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
Discount Drug Card Program
The provision would require the
No provision
No provision
No provision
Secretary to endorse prescription
drug discount programs meeting
certain requirements and to make
available information on such
programs to beneficiaries. The
program: 1) would have to pass
on to enrollees discounts on
drugs, including discounts
negotiated with manufacturers;
2)could not be limited to mail
order drugs; 3) would have to
provide pharmaceutical support
services, such as education and

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CRS-23
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
counseling, and services to
p r e v e n t a d v e r s e d r u g
interactions; 4) would have to
provide information to enrollees
that the Secretary identified as
being necessary to provide for
informed choice by beneficiaries
among endorsed programs; 5)
would have to safeguard
indiv i dually identifiable
information in accordance with
the Health Insurance Portability
and accountability Act (HIPAA);
and 6) would have to meet
requirements the Secretary found
necessary to participate in the
t r a n s i t i o n a l l o w - i n c o m e
assistance program (see below).
A beneficiary could only be
enrolled in one endorsed program
at a time. Annual enrollment
fees could not exceed $25.
Transitional Low-Income
The bill would provide for the
No provision
Assistance Program
implementation of a transitional
prescription drug assistance
program, until the Part D
program was implemented, for
Medicare beneficiaries with
incomes under 175% of poverty
who did not have drug coverage
under Medicaid, Medigap, group
health insurance, or federally-
supported health care programs
under the Department of
D e f e n s e , V e t e r a n s
A d m i n i s t r a t i o n , F e d e r a l
Employees Health Benefits

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CRS-24
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2625 (Graham et al.)
S. 2729 (Grassley et al.)
program, or the Indian Health
Care Improvement Act.
Individuals eligible for assistance
would have to be enrolled under
a prescription drug discount card
program (or an alternative state
program approved by the
Secretary). Appropriations
totaling $300 million in FY2003,
$2.1 billion in FY2004, and $500
million in FY2005 would be
available. Funds would be
allotted among the states based
on the proportion of Medicare
beneficiaries with incomes below
175% of poverty. The assistance
would be in the form of a
discount in addition to that
available under the discount card
program. States could continue
to provide assistance under their
own pharmaceutical assistance
programs.

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