Medicare: Major Prescription Drug Provisions of Selected Bills

Order Code RL31496
Report for Congress
Received through the CRS Web
Medicare: Major Prescription
Drug Provisions of Selected Bills
Updated August 14, 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.
In July 2002, the Senate considered and passed the Greater Access to Affordable
Pharmaceuticals Act (S. 812, Schumer et al). Most of the debate on that measure was
devoted to consideration of several Medicare prescription drug amendments;
however, none of these amendments was able to garner the necessary votes. Several
key issues drove the debate. These included whether the benefit should be
administered as part of the current Medicare program or by private entities, the
degree of financial risk that should be assumed by the federal government, and what
the benefit structure should look like and whether it should be the same nationwide.
A number of Senators have indicated their interest in revisiting the prescription drug
issue when the Congress reconvenes in September. This report will be updated to
reflect any further legislative action.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Overview of Major Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Scope of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Private vs. Public Sector Responsibility . . . . . . . . . . . . . . . . . . . . . . . . 3
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Low-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Summary of Major Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Side-by-Side Comparison of Major Medicare Drug Provisions of Selected Bills . 7
In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Program Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Administration; Financial Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Pricing; Cost Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Low-Income Subsidies for Part D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Relationship to Other Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Drug Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

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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. In July 2002, the Senate considered and passed the Greater
Access to Affordable Pharmaceuticals Act (S. 812, Schumer et al). Most of the
debate on that measure was devoted to consideration of several Medicare prescription
drug amendments; however none of these amendments was able to garner the
necessary votes.
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, the Senate began consideration of drug legislation. The Senate
used 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, had not
reported a Medicare drug bill; however, several Medicare measures were considered
as amendments during the debate. These included the Medicare Outpatient
Prescription Drug Act of 2002 (S.Amdt. 4309 to S. 812, Graham et al.), the Medicare
Prescription Drug Cost Protection Act of 2002 (S.Amdt. 4345, also known as the
Graham-Smith amendment), and the 21st Century Medicare Act (S. 2729, Grassley
et al.), sometimes referred to as the “tripartisan bill.” The “tripartisan bill” has also
been introduced as S. 2 and S.Amdt. 4310 to S. 812. All of the measures failed to
garner the necessary 60 votes to override a budget point-of-order.
There are major differences among the House and Senate bills in the scope of
benefits, how the benefit would be administered, the degree of financial risk assumed
by the federal government, and the portion of the Medicare population eligible for
low-income assistance. These differences are outlined in the following section.
Further details are provided in the side-by-side comparison.
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
Overview of Major Proposals
The major proposals under consideration contain a number of common themes.
They all establish a new voluntary benefit for Medicare beneficiaries under a new
Part D. 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 or premiums (or enrollment fees) 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.
There are, however, a number of significant differences among the bills. These
include the definition and scope of benefits, the degree of reliance and financial risk
placed on the private sector versus the public sector, the federal administrative
structure, and implementation of low-income subsidies.
Scope of Benefits. A key difference among proposals is the scope of
benefits for the population not eligible for low-income assistance. (See low-income
discussion, below.) Under the House Democratic bill, Graham amendment, and
Graham-Smith amendment there would be one specific benefit available to all
enrollees nationwide. Conversely, under the House-passed bill and the “tripartisan
bill” there would be a minimum benefit level established. Under the House-passed
bill and the “tripartisan bill”, the minimum benefit (referred to as “qualified
coverage”) would be either specified “standard coverage” or alternative coverage,
provided it was actuarially equivalent to standard coverage (i.e., had the same dollar
value) and had the same limit on out-of-pocket spending.
The scope of coverage offered under either a nationwide plan or “standard
coverage” differs substantially by proposal. Under both the House-passed bill and
the “tripartisan” bill, coverage would be provided for a portion of beneficiary costs
after they met a deductible; once costs reached a certain threshold, no coverage
would be provided until spending reached an out-of-pocket limit. This coverage gap
has been labeled a “doughnut” by some. Under the House Democratic bill there
would be no coverage gap. Under the Graham amendment, there would be no
coverage gap; however, beneficiaries would pay the full negotiated price for drugs
not on a plan’s formulary. The Graham-Smith amendment would provide primarily
catastrophic protection for persons not eligible for low-income protection, though all
beneficiaries would have a payment made in their behalf equal to 5% of negotiated
prices for all formulary drugs up to the catastrophic limit.
All of the proposals would expect the entities administering the benefit to
negotiate prices for drugs. These negotiated prices would be available to
beneficiaries, even if no payment was made under the new Part D.
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.

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CRS-4
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. The “tripartisan bill”
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 Democratic bill, Graham amendment, and Graham-Smith
amendment 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 these 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.
Administration. Medicare is currently administered by the Centers for
Medicare and Medicaid Services (CMS) within the Department of Health and 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 bill, Graham amendment, and Graham-Smith amendment 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
3 Prior to June 14, 2001, this agency was known as the Health Care Financing
Administration (HCFA).

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CRS-5
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. Both House plans
would provide for no, or very limited, beneficiary liability for covered services for
this population group. The “tripartisan bill” 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 the “tripartisan bill” all persons
could be subject to some cost-sharing charges. The Graham amendment would only
provide premium assistance for persons between 135% and 150% of poverty. The
Graham-Smith amendment would provide full coverage for persons below 200% of
poverty. No assets tests would be imposed under either the Graham amendment or
the Graham-Smith amendment.
All of the bills would pick up some of the costs now paid by the states under
Medicaid. 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.

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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 “tripartisan bill,” the Graham amendment, and
the Graham-Smith amendment. 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 amendment and the Graham-Smith amendment are 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-7
Side-by-Side Comparison of Major Medicare Drug Provisions of Selected Bills
In General
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Title
Medicare Modernization
Medicare Rx Drug Benefit
21st Century Medicare Act
M e d i c a r e O u t p a t i e n t
Medicare Prescription
and Prescription Drug Act
and Discount Act of 2002
Prescription Drug Act of
Drug Cost Protection Act
of 2002
2002
of 2002
Summary
Effective January 1, 2005,
Effective January 1, 2005,
Effective January 1, 2005,
Effective January 1, 2005,
Effective January 1, 2005,
a new optional benefit
a new optional benefit
a new optional benefit
a new optional benefit
a new optional benefit
would be established
would be established
would be established under
would be established under
would be established under
under a new Part D.
under a new Part D. A
a new part D. Beneficiaries
a new Part D. A single
a new Part D. A single
B e n e f i c i a r i e s c o u l d
single benefit would be
could purchase either
benefit would be available
benefit would be available
purchase either a “standard
available nationwide. In
“standard coverage” or
natio nwid e with no
nationwide. All enrollees
coverage” or an actuarially
2005, there would be a
actuarially equivalent
deductible. In 2005,
would have catastrophic
equivalent coverage. In
$100 deductible, 20%
c o v e r a g e . In 2 0 0 5 ,
enrollees would pay $10
coverage and access to
2005, the “standard plan”
coinsurance and a limit on
“standard coverage” would
for generic drugs, $40 for
negotiated prices, with the
would have a $250
out-of-pocket spending of
have a $250 deductible,
preferred brand name
f e d e r a l g o v e r n m e n t
deductible, 20%cost-
$2,000 ($9,600 in total
50% cost-sharing for costs
drugs, and the negotiated
assuming 5% of the
sharing for costs between
spending). Assistance
between $251 and $3,450,
price for non-formulary
negotiated prices for drugs
$251 and $1,000, 50%
would be provided for
then no coverage until the
drugs. There would be a
on the plan’s formulary.
cost-sharing for costs
low-income persons with
beneficiary had out-of-
$4,000 limit on out-of-
Once the beneficiary
between $1,000 and
incomes below 175% of
pocket costs of $3,700
pocket costs. Persons with
incurred costs equal to the
$2,000, then no coverage
poverty.
($5,300 in total spending);
incomes below 150% of
catastrophic limit ($3,300
until the beneficiary had
The program would be
and 10% cost-sharing
poverty would receive
in 2005) they would pay
out-of-pocket costs of
administered by the
thereafter.
assistance.
the lesser of $10 or the
$3,700 ($4,800 in total
Secretary of Health and
The bill would rely on
The program would be
negotiated price. Persons
spending) when full
Human Services (HHS);
private plans to provide
administered by the
with incomes below 200%
c o ve r a ge wo ul d b e
the Secretary would enter
coverage and to bear some
Secretary of Health and
of poverty would have
provided. Low income
i n t o co ntra c t s wi t h
of the financial risk for
Human Services (HHS);
their costs paid in full,
sub sid i e s wo uld b e
pharmacy contractors who
drug costs. Coverage
the Secretary would enter
e x cept fo r no mi na l
provided for persons with
would administer the
would be provided through
into contracts with eligible
copayment amounts.
incomes below 175% of
program on a regional or
Medicare Prescription
entities, which could
The program would be
poverty.
national basis. Coverage
D r u g P l a n s o r
include pharmacy benefit
administered by the
Co verage wo uld b e
would be provided through
Medicare+Choice (M+C)
managers, health plans,
Secretary of Health and
p r o v i d e d t h r o u g h
M+C plans for M+C
p l a n s . Lo w inco me
and retail pharmacy
Human Services (HHS);

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CRS-8
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
prescription drug plans
enrollees. The federal
sub sid i e s wo uld b e
delivery systems. The
the Secretary would enter
( P D P s ) o r
government would assume
provided for persons with
eligible entities would
into contracts with eligible
Medicare+Choice (M+C)
financial risk except that a
incomes below 150% of
administer the benefit on a
entities, which could
plans. The program would
limited percentage of the
poverty.
regional basis. Coverage
include pharmacy benefit
rely on private plans to
administrative payment
A n e w M e d i c a r e
would be provided through
managers, health plans,
provide coverage and to
would be adjusted to
C o mp e t i tive Ag e n c y
M+C plans for M+C
and retail pharmacy
bear some of the financial
ensure that the contractor
would be established
enrollees. The federal
delivery systems. The
risk for drug costs; federal
pursued p erfo rmance
within the Department of
government would assume
eligible entities would
sub si d i e s wo uld b e
r e q u i r e ments. T h e
H e a l t h a n d H u ma n
financial risk, but a
administer the benefit on a
provided to encourage
Secretary wo uld be
S e r v i c e s ( H H S ) t o
p e r c e n t a g e o f t h e
regional basis. Coverage
participation. A new
required to negotiate
administer Part D and the
management payments
would be provided through
M e d i c a r e B e n e f i t s
contracts with drug
Medicare+Choice (M+C)
c o u l d b e t i e d t o
M+C plans for M+C
Administration (MBA)
m a n u f a c t u r e r s t h a t
program.
performance requirements
enrollees. The federal
would be established
specified the maximum
of the contracted entity.
government would assume
within the Department of
prices that could be
financial risk, but a
H e a l t h a n d H u ma n
charged to program
p e r c e n t a g e o f t h e
S e r v i c e s ( H H S ) t o
enrollees.
management payments
administer the benefit and
c o u l d b e t i e d t o
the M+C program.
performance requirements
of the contracted entity.
Program Design
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Beginning Date; ending
The program would begin
The program would begin
The program would begin
The program would be
The program would begin
Date
January 1, 2005.
January 1, 2005.
January 1, 2005.
operational from January
January 1, 2005.
1, 2005-December 31,
2010. The program would
continue after that date, if
legislation was enacted
prior to January 1, 2011,
which stated that savings
were achieved equal to or
greater than the difference
between the full cost of

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CRS-9
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
this Act over the October
1, 2004-September 30,
2012, period and the full
cost of this Act over this
period with the December
31, 2010 termination date.
Benefits
“Qualified coverage”
There would be a single
“Qualified coverage”
There would be a single
There would be a single
would be either “standard
nationwide benefit. In
would be either “standard
nationwide benefit with no
nationwide benefit. Until
coverage” or “actuarially
2005, there would be a
coverage” or “actuarially
deductible. Each drug
beneficiaries reached the
equivalent coverage.” In
$100 deductible, 20%
equivalent coverage.” In
would fall into one of three
catastrophic limit they
2005, “standard coverage”
coinsurance and a limit on
2005, “standard coverage”
classes: generic, preferred
would pay coinsurance
would be defined as
out-of-pocket spending
would be defined as
brand name, and non-
equal to: 1) 95% of the
having a $250 deductible,
(including cost-sharing for
having a $250 deductible,
formulary. In 2005,
negotiated price for
20% cost-sharing for drug
drugs covered under Part
50% cost-sharing for drug
enrollees would pay $10
formulary drugs; and 2)
costs between $251 and
B) of $2,000 ($9,600 in
costs between $251 and
for each prescription filled
the negotiated price for
$1,000, 50% cost-sharing
t o t a l s p e n d i n g ) . I n
the initial coverage limit
with a generic drug and
non-fo rmulary drugs.
for drug costs between
addition, once an enrollee
of $3,450, then no
$40 for each prescription
No n-fo rmulary d rugs
$1,001 and the initial
met the stop-loss limit,
c o v e r a g e u n t i l t h e
filled with a preferred
d e e m e d m e d i c a l l y
coverage limit of $2,000,
they would not have to pay
beneficiary had out-of-
b r a n d n a m e d r u g .
necessary would be treated
and then no coverage until
any cost-sharing for drugs
pocket costs of $3,700
Beneficiaries would pay
as brand name drugs on the
the beneficiary had out-of-
covered under Part B.
($5,300 in total spending);
the negotiated price for
formulary. Once the
pocket costs of $3,700
These dollar amounts
and 10% cost-sharing
no n-fo rmulary drugs,
beneficiary reached the
($4,800 in total spending);
would be increased in
thereafter. These amounts
except that non-formulary
catastrophic limit ($3,300
once the beneficiary
future years by the
would be increased in
drugs deemed medically
in 2005) they would pay
reached the $3,700
p e r c e n t a g e i n c r e a s e
future years by the
necessary would be treated
the lesser of $10 or the
catastrophic limit full
(projected in advance by
percentage increase in
as preferred brand-name
negotiated price for each
c o v e r age wo u l d b e
the Secretary, for the year
av e r a g e p e r c a p ita
drugs. An enrollee would
prescription whether or not
provided. The dollar
involved) in per capita
expenditures for covered
n o t p a y f o r a n y
it was on the formulary.
a m o u n t s wo u l d b e
program expenditures.
drugs for the year ending
prescriptions once the
Costs counting toward the
increased in future years
Coinsurance would be
the previous July. Out-of-
enrollee incurred out-of-
catastrophic limit would
by the percentage increase
applied differently for
pocket costs counting
pocket costs for the year of
include only coinsurance
in the average per capita
p r e fe r r e d a n d no n -
toward the limit would
$4,000 (regardless of who
charges paid by the
expenditures for covered
preferred medicines. For
include costs paid by the
paid the costs). For each
individual (or by another
drugs for the year ending
p r e f e r r e d me d i c i n e s
individual (or by another
year after 2005, the
individual such as a family
the previous July. Out-of-
coinsurance would equal
individual such as a
copayments would be
member on behalf of the
pocket costs counting
20% or a lower percentage
family member), paid on
increased by the annual
individual), Medicaid, or a
toward the limit would
established to encourage
behalf of a low-income
i n c r e a s e i n p r i c e s
state pharmacy assistance
include costs paid by the
a p p r o p r i a t e u s e o f
individual under the
(reflecting both price
program. Any costs for

---

CRS-10
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
individual (or by another
preferred medicines. For
subsidy provisions, or
inflation and changes in
which the individual was
individual such as a family
nonpreferred medicines
paid under Medicaid. Any
therapeutic mi x) as
reimbursed by insurance or
member), paid on behalf
the coinsurance would be
costs for which the
d e t e r m i n e d b y t h e
otherwise could not be
of a low-income individual
20% of the price for the
individual was reimbursed
Secretary for the year
counted. For each year
u n d e r t h e s u b s i d y
lowest cost preferred
by insurance or otherwise
ending the previous July;
after 2005, the out-of-
provisions, or paid under
medicine within the same
could not be counted.
this amount would be
pocket limit and the
Medicaid. Any costs for
therapeutic class plus an
Entities could offer more
further adjusted to reflect
copayment amount would
which the individual was
amount equal to the
generous drug coverage, if
relative changes in the
be increased by the
reimbursed by insurance
amount by which the price
a p p r o v e d b y t h e
composition of drug
percentage increase in
or by another third-party
of the nonpreferred drug
Administrator, but only if
spending among generic
average per capita program
payment arrangement
exceeded the lowest price
they also offered a plan
and preferred brand name
expenditures for the year
could not be counted.
preferred drug. The extra
p r o v i d i n g r e q u i r e d
drugs to ensure that the
ending the previous July.
Plans could offer more
payments for nonpreferred
coverage.
percentage beneficiaries
An entity could reduce the
generous drug coverage, if
drugs would not be
were required to pay was
coinsurance or copayment
approved by the MBA
considered countable cost-
the same as the percentage
required if such reduction
Administrator.
sharing for purposes of
required the preceding
was tied to performance
meeting the deductible or
year. For each year after
requirements and would
stop-loss limit.
2005, the out-of-pocket
not increase overall
limit would be increased
program costs.
by the percentage increase
in average per capita
program expenditures for
the year ending the
previous July. An eligible
entity could charge lower
c o p a yme nts if suc h
reduction was tied to
performance requirements
and would not increase
overall program costs. For
formulary drugs (generic
and preferred brand name
drugs), the enrollee would
pay the negotiated price
minus $5 if such amount
was less than the respective
copayment.

---

CRS-11
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Premiums
The plan sponsor would
Premiums would be set at
Monthly premiums would
Premiums would be set at
There would be no
establish the premium
$25 per month for 2005.
be uniform for all eligible
$25 per month for 2005.
premiums. There would be
a mo u n t , s u b j e c t t o
This amount would be
beneficiaries in a plan,
This amount would be
an annual enrollment fee.
a p p r o v a l b y t h e
increased in future years
except that persons
increased in future years by
In 2005 it would be $25;
Administrator. The
by the percentage increase,
d e l a y i n g P a r t D
the percentage increase,
this amount would be
premium for a prescription
(projected in advance by
enrollment without other
(projected in advance by
increased in future years by
drug plan could not vary
the Secretary, for the year
creditable drug coverage
the Secretary, for the year
the percentage increase in
a m o n g i n d i v i d u a l s
involved) in per capita
would be subject to higher
involved) in average per
average per capita program
enrolled in the plan in the
program expenditures.
premiums. If the plan’s
c a p i t a p r o g r a m
payments for the year
same service area, unless
Enrollees would pay
m o n t h l y a p p r o v e d
expenditures. Enrollees
ending the previous July.
the individuals were
p r e m i u m s t h r o u g h
premium for standard
would pay premiums
Unless they elected direct
subject to penalties for late
withholding from social
coverage was equal to the
through withholding from
payment, enrollees would
enrollment. Premiums
security checks in the
national monthly weighted
social security checks in
pay enrollment fees
would be paid to the plans.
same manner Part B
average premium for such
the same manner Part B
through withholding from
However, PDP sponsors
premium payments are
coverage, the beneficiary
premium payments are
social security checks in
would be required to
withheld. Late enrollment
would pay: 1) 57% of the
withheld. Late enrollment
the same manner Part B
permit each enrollee to
penalties, calculated in the
monthly national average.
penalties would be applied
premium payments are
pay premiums through
same manner as such
If the plan’s monthly
to premiums for persons
withheld.
withholding from social
penalties are calculated for
approved premium was
who did not enroll during
security checks in the
Part B, would be applied
less than the national
their initial enrollment
same manner Part B
to persons who did not
average the beneficiary
period or during a special
premium payments are
enroll during their initial
would pay: 1) 57% of the
e n r o l l m e n t p e r i o d
withheld or through an
enrollment period or
monthly national average,
e s t a b l i s h e d d u e t o
electronic funds transfer.
d u r i n g a s p e c i a l
minus, 2) the difference
involuntary loss of other
e n r o l l m e n t p e r i o d
between the national
drug coverage.
e s t a b l i s h e d d u e t o
average and the plan’s
involuntary loss of other
premium. If the plan’s
drug coverage.
monthly 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
p r e mi u m. P r e mi u ms

---

CRS-12
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
would be collected in the
same manner as Part B
premiums.
Eligibility
All beneficiaries enrolled
All beneficiaries enrolled
All beneficiaries enrolled
All individuals enrolled in
All individuals enrolled in
in Medicare Part A or Part
in Medicare Part A or
in Medicare Parts A and B
Part A or Part B could elect
Part A or Part B could elect
B could elect to enroll in
eligible to enroll in Part B
could elect to enroll in
to enroll in Part D. The
to enroll in Part D. The
Part D through enrollment
could elect to enroll in Part
Part D. The Administrator
Secretary would establish
Secretary would establish a
in a M+C plan with
D. An initial enrollment
wo uld e s t ab lish an
an enrollment process. An
process through which an
prescription drug coverage
p e r i o d w o u l d b e
enrollment process which
initial enrollment period
eligible beneficiary could
or in a PDP. The
established. For current
would be similar to that
would be established. For
elect to enroll at any time,
Administrator of the new
beneficiaries this would be
for Part B. An initial open
current beneficiaries, this
terminate enrollment at any
MBA would establish an
the 7 -mo nth perio d
enrollment period would
would be a period of time
time and reenroll at any
enrollment process. An
beginning August 1, 2004;
be established. For current
d e t e r m i n e d b y t h e
time. The Secretary would
initial election period
for future beneficiaries it
beneficiaries, this would
Secretary before January 1,
e s t a b l i s h a n o p e n
would be established. For
would be the same 7-
be the 8-month period
2005, so that Part D
enrollment period of at
current beneficiaries this
month period applicable
beginning April 1, 2004.
coverage was effective as
least 5 months so indivuals
would be the 6-month
fo r i n i t i a l P a r t B
Eligible beneficiaries with
of such date. For future
who are or will be eligible
p e r i o d b e g i n n i n g
enrollment. Special
creditable drug coverage
b e n e f i c i a r i e s , t h e
by January 1, 2005, would
November 2004; for future
enrollment periods would
could elect to continue to
enrollment procedures
be permitted to enroll prior
beneficiaries it would be
apply for persons who
receive such coverage, not
would be similar to those
to that date and have
the same 7-month period
involuntarily lost other
enroll in Part D, and
used for Part B. Eligible
coverage begin on that
applicable for initial Part B
drug coverage (including
subsequently enroll in Part
b e n e f i c i a r i e s w i t h
date.
enrollment. Special
coverage offered by
D without penalty if they
creditable drug coverage
election periods would
former employers); these
involuntarily lost their
could elect to continue to
apply for persons who
persons would not be
other coverage; special
receive such coverage, not
involuntarily lose other
subject to late enrollment
enrollment periods would
enroll in Part D, and
drug coverage. Persons
penalties.
apply for this group.
subsequently enroll in Part
electing coverage at the
D without penalty if they
first opportunity and
involuntarily lost their
maintaining continuous
other coverage; special
c o v e r a g e wo ul d b e
enrollment periods would
guaranteed the protection
apply for this group.
of community rating;
otherwise they could be
subject to late enrollment
penalties.

---

CRS-13
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
R e l a t i o n s h i p t o
An M+C enrollee would
M+C organizations would
An M+C enrollee would
M+C organizations would
M+C organizations would
Medicare+Choice
obtain benefits through the
be required offer plans
obtain benefits through
be required to offer Part D
be required to offer Part D
M+C plan if the plan
with drug coverage that
the M+C plan if the plan
drug benefits. M+C
drug benefits. M+C
provided qualified drug
was at least actuarially
provided qualified drug
enrollees would receive
enrollees would receive
coverage. An M+C plan
equivalent to Part D
coverage. An M+C plan
coverage through their
coverage through their
could not offer drug
benefits. An M+C
offering drug coverage
M+C plan.
M+C plan.
coverage (other than that
enrollee would be required
would have to make a
already required under
to obtain Part D drug
p l a n o ffe r i n g o n l y
Medicare) unless the
benefits through the plan.
s t a n d a r d c o v e r a g e
coverage was at least
available to each Part D
qualified prescription drug
enrollee. An organization
coverage.
could also offer additional
qualified drug coverage.
Drug coverage could not
be offered to an enrollee
unless the enrollee was
enrolled in Part D.

---

CRS-14
Administration; Financial Risk
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Federal Administration
The new MBA,
within
The Secretary (through
The Administrator of the
The Secretary (through
The Secretary (through
HHS, would administer the
CMS) would administer
new Medicare Competitive
CMS) would administer
CMS) would administer
new Part D drug benefit
the benefit. A newly
Agency, within HHS,
the benefit. A newly
the benefit. A newly
and the M+C program.
c r e a t e d M e d i c a r e
would administer Part D
c r e a t e d M e d i c a r e
c r e a t e d M e d i c a r e
(The Centers for Medicare
Prescription Medicine
and the M+C program.
P r e s c r i p t i o n D r u g
P r e s c r i p t i o n D r u g
and Medicaid Services
Ad viso ry C o mmittee
(CMS, would retain
Ad viso ry Co mmi ttee
Ad v i s o r y Co mmittee
(CMS), would retain
w o u l d a d v i s e t h e
responsibility for the
w o u l d a d v i s e t h e
w o u l d a d v i s e t h e
responsibility for the
Secretary.
traditional fee-for-service
Secretary. The Secretary
Secretary. The Secretary
traditional fee-for-service
program.) A Medicare
could contract with
could co ntract with
program.) A Medicare
C o m p e t i t i v e P o l i c y
M e d i c a r e C o n s u me r
M e d i c a r e C o n s u me r
Policy Advisory Board
Advisory Board would be
Coalitions (nonprofit
Coalitions (nonprofit
would be established
established within the
entities whose board
entities whose board
within the MBA.
Agency.
members were primarily
members were primarily
Medicare beneficiaries) to
Medicare beneficiaries) to
c o n d u c t i nfo r ma t i o n
c o nd u c t i n fo r ma t i o n
activities.
activities.
Administration of benefit
The benefit would be
The benefit would be
The benefit would be
The benefit would be
The benefit would be
administered by a M+C
administered by pharmacy
administered by an M+C
administered by M+C
administered by M+C
plan or PDP. A PDP plan
contractors serving on a
plan or a Medicare
plans or by eligible entities
plans or by eligible entities
sponsor would be an entity
regional or national basis.
Prescription Drug Plan
serving on a regional basis.
serving on a regional basis.
certified under Part D as
The benefit could be
offered by an entity in the
The benefit could be
The benefit could be
meeting the Part D
administered on a partial
geographic area. Entities
administered on a partial
administered on a partial
s t a n d a r d s a n d
r e g i o n a l b a s i s , i f
eligible to offer plans
r e g i o n a l b a s i s , i f
r e g i o n a l b a s i s , i f
requirements. In general,
determined appropriate by
would be entities the
determined appropriate by
determined appropriate by
a PDP sponsor would have
the Secretary. The
Administrator deemed
the Secretary; however the
the Secretary; however the
to be licensed under state
Secretary would determine
appropriate to provide
area could never be
area could never be
law as a risk bearing entity
regions and assure that
benefits including a
smaller than a state. An
smaller than a state. An
eligible to offer health
there were at least 10 in
pharmaceutical benefit
entity could submit a
entity could submit a
b e n e f i t s o r h e a l t h
the U.S. Coverage would
management company,
single bid to provide
single bid to provide
insurance coverage in each
be provided through M+C
wholesaler or retail
coverage in multiple
coverage in multiple
state in which it offered a
plans for M+C enrollees.
p h a r ma c i s t d e l i v e r y
regions. The Secretary
regions. The Secretary
prescription drug plan.
Contractors would be
system; an insurer, another
would determine regions
would establish regions
required to meet Part D
entity, or any combination
and assure that there were
and assure that there were
requirements. They would
of entities. In general,
at least 10 in the U.S.
at least 10 in the U.S.

---

CRS-15
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
be authorized to enter into
entities would have to be
Entities would be required
Entities would be required
participation agreements
licensed under state law as
t o m e e t P a r t D
t o m e e t P a r t D
with pharmacies that
risk bearing entities.
requirements. They would
requirements. They would
comply with program
be authorized to enter into
be authorized to negotiate
requirements.
The Administrator would
participation agreements
and enter into participation
be required to establish by
with pharmacies that
a g r e e m e n t s w i t h
April 15, 2004, and
comply with program
pharmacies that comply
p e r i o d i c a l l y r e v i e w,
requirements.
w i t h p r o g r a m
service areas in which
requirements.
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
The Secretary would enter
The Administrator would
The Secretary would enter
The Secretary would enter
be required to submit to
i n t o c o ntract s wi t h
enter into contracts with
into contracts with eligible
into contracts with eligible
the MBA Administrator
pharmacy contractors to
eligible entities; contracts
entities to administer the
entities to administer the
i n f o r ma t i o n o n t h e
administer the benefit.
could cover more than one
benefit; entities would
benefit; entities would
qualified drug coverage to
The Secretary would
plan. Entities would
include pharmacy benefit
include pharmacy benefit
be provided including the
accept competitive bids
submit bids containing
management companies,
management companies,
p r e m i u m . T h e
from entities. The bid
information on the plan
retail pharmacy delivery
retail pharmacy delivery
Administrator could not
would include: a proposal
including the monthly
systems, health plans or
systems, health plans or
approve the premium
for the estimated drug
p r e m i u m . T h e
insurers, states, or any
insurers, states, or any
unless it accurately
prices and projected
Administrator could not
other entity or combination
other entity or combination
reflected: 1) the value of
annual increases in prices,
approve the premium
of entities. The Secretary
of entities. The Secretary
benefits provided; and 2)
a statement regarding what
unless it accurately
would accept competitive
would accept competitive
the 67% federal subsidy
it would charge the
reflected the actuarial
bids from entities. The bid
bids from entities. The bid
for standard benefits. PDP
Secretary to administer the
value of the benefits and
would include: a proposal
would include: a proposal
plan sponsors would be
benefit, a description of
reinsurance subsidies. The
for estimated drug prices
for estimated negotiated
required to enter into a
access to pharmacy
Administrator would have
and projected annual
drug prices and projected
c o n t r a c t w i t h t h e
services, a d etailed
the same authority to
increases in prices, a
annual increases in prices,
Administrator; the contract
description of performance
negotiate the terms and
statement regarding what it
a statement regarding what

---

CRS-16
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
could cover more than one
requirements, and a
conditions of the plans as
would charge the Secretary
it would charge the
plan. The Administrator
d e t a i l e d d e s c r i p t i o n
the Director of the Office
to administer the benefit, a
Secretary to administer the
would have the same
standards the entity would
of Personnel Management
description of access to
benefit, a description of
authority to negotiate the
use in selecting preferred
has with respect to Federal
pharmacy services, a
access to p harmacy
terms and conditions of the
m e d i c a t i o n s . T h e
Employee Health Benefits
description of performance
services, a description of
plans as the Director of the
Secretary would award, on
(FEHB) plans. The
requirements, and a
performance requirements,
Office of Personnel
a competitive b asis
Ad ministrato r wo uld
description of standards
and a description of
Management has with
contracts for 2-5 year
approve at least two
the entity would use in
standards the entity would
r e s p e c t t o F e d e r a l
terms. At least two
contracts to offer a
modifying the formulary.
use in modifying the
Employee Health Benefits
c o n t r a c t s wo uld b e
Medicare prescription plan
The Secretary would
formulary. The Secretary
(FEHB) plans.
awarded per area unless
in an area. Contracts
award, on a competitive
would award, on a
only one entity submitted a
would be awarded for 1-
basis contracts for 2-5
c o m p e t i t i v e b a s i s
bid meeting minimum
year.
year terms. At least two
contracts for 2-5 year
standards. The Secretary
co nt r a c t s wo uld b e
terms. At least two
wo uld c o nsid er the
awarded per area unless
c o n t r a c ts wo uld b e
comparative merits of each
only one entity submitted a
awarded per area unless
bid.
bid meeting minimum
only one entity submitted a
standards. The Secretary
bid meeting minimum
wo uld co nsi d er the
standards. The Secretary
comparative merits of each
wo uld c o nsid er the
bid.
comparative merits of each
bid.
Plan enrollment
Beneficiaries would enroll
Each individual would
Eligible beneficiaries not
Eligible beneficiaries not
Eligible beneficiaries not
a M + C p l a n w i t h
select (and could change
e n r o l l e d i n a
enrolled in a M+C plan
enrolled in a M+C plan
prescription drug coverage
the selection on a periodic
Medicare+Choice plan
would make an annual
would make an annual
or in a PDP.
basis) the pharmacy
would make an election to
election to enroll in a
election to enroll in a
contractor to administer
enroll in a Medicare
Medicare Prescription
Medicare Prescription
the benefit for such
Prescription Drug Plan and
Drug Plan. A default
Drug Plan. A default
individual.
could make an annual
option would be selected
option would be selected
election to change plans. A
by the Secretary for
by the Secretary for
Part D enrollee who failed
enrollees that failed to
enrollees that failed to
to enroll in a plan would
select an entity.
select an entity.
be enrolled in the plan
with the lowest monthly
premium available in the
area.

---

CRS-17
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Federal payments to plans
The federal government
The Secretary would pay
The federal government
The Secretary would pay
The Secretary would pay
would pay direct subsidies
each pharmacy contractor
would pay reinsurance
each eligible entity for the
each eligible entity for the
and reinsurance payments
for the administration of
payments to eligible
management of the benefit
management of the benefit
to PDPs, M+C plans, and
benefit and for the
entities, M+C plans, and
and for the negotiated
and for the negotiated
qualified retiree plans
negotiated prices (less
qualified retiree plans
price (less cost sharing) of
price (less cost sharing) of
which would equal 67% of
cost-sharing, plus a
which would equal 30% of
prescription drugs used by
prescription drugs used by
the value of standard
reasonable dispensing fee)
the value of standard
enrollees. A percentage of
enrollees. A percentage of
coverage. Direct subsidies
for prescription drugs used
coverage. Reinsurance
the management payment
the management payment
would be equal to 37% of
by enrollees. The
payments wo uld be
(as determined by the
(as determined by the
the value of standard
Secretary would include in
provided for: 1) 50% of an
Secretary) would be tied to
Secretary) would be tied to
coverage provided under
the contract with a
individual’s allowable
the entity’s performance,
the entity’s performance,
the plan. Reinsurance
pharmac y c o nt ractor
drug costs between $2,001
including controlling costs,
including controlling costs,
payments would be equal
incentives for cost and
and $3,450 (in 2005); and
providing quality clinical
providing quality clinical
to 30% of the value of
utilization management
2) 80% for costs over the
care, and providing quality
care, and providing quality
s t a n d a r d c o v e r a g e .
and quality improvement;
out-of-pocket limit ($3,700
service. The Secretary
service. The Secretary
Reinsurance payments
the contract could provide
i n 2 0 0 5 ) . T h e
could reduce payments to
could reduce payments to
would be provided for: 1)
financial incentives to
Ad ministrato r wo uld
reflect rebates and price
reflect rebates and price
30% of an individual’s
encourage greater program
proportionately adjust
concessions obtained by
concessions obtained by
allowable drug costs
savings. The Secretary
payments so that total
t h e e n t i t y f r o m
t h e e n t i t y f r o m
between $1,001 and
w o u l d p r o v i d e f o r
reinsurance payments for
m a n u f a c t u r e r s .
m a n u f a c t u r e r s .
$2,000 (in 2005); and 2)
performance standards for
the year equaled 30% of
Agr eements betwee n
Agreement s b etween
80% for costs over the out-
contractors which could
t o t a l p a y m e n t s b y
eligible entities and
eligible entities and
of-pocket limit ($3,700 in
include monetary bonuses
qualifying plans for
participating pharmacies
participating pharmacies
2005). The Administrator
if the standards were met
standard coverage during
would provide for payment
would provide for payment
would proportionately
and penalties if they were
the year.
of a reasonable dispensing
of a reasonable dispensing
adjust payments so that
not met.
fee.
fee.
total reinsurance payments
for the year equaled 30%
of total payments by
qualifying plans for
standard coverage during
t h e y e a r . T h e
Administrator could adjust
direct subsidy payments in
order to avoid risk
selection.

---

CRS-18
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Assumption of financial
Plans would be required to
The federal government
Entities would be required
The federal government
The federal government
risk
assume full financial risk
would assume financial
to assume a portion of
would assume financial
would assume financial
on a prospective basis for
risk for the cost of benefits
financial risk. Entities
risk for the cost of benefits
risk for the cost of benefits
covered benefits except:
except that a limited
would be permitted to
except that a percentage
except that a percentage
1) as covered by federal
p e r c e n t a g e ( t o b e
obtain reinsurance for the
(to be determined by the
(to be determined by the
direct subsidy payments or
d e t e r m i n e d b y t h e
portion of costs for which
S e c r e t a r y ) o f t h e
S e c r e t a r y ) o f t h e
reinsurance payments for
S e c r e t a r y ) o f t h e
they were at risk.
administrative payment
administrative payment
high cost enrollees; or 2)
administrative payment
would be adjusted to
would be adjusted to
as covered by federal
would be adjusted to
ensure that the contractor
ensure that the contractor
incentive payments to
ensure that the contractor
pursued perfo rmance
pursued performance
encourage plans to expand
pursues performance
requireme n t s . T h e
r e q u i r e me nts. T he
service areas for existing
r e q u i r e m e n t s ; t h e
percentage could be up to
percentage could be up to
plans or establish new
Secretary could not
100%. The Secretary
100%. The Secretary
plans. The entity could
establish a percentage that
could not establish a
could not establish a
obtain insurance or make
would jeopardize the
percentage that would
percentage that would
other arrangements for the
ability of the contractor to
jeopardize the ability of
jeopardize the ability of
cost of coverage provided
administer the benefits in a
t h e c o n t r a c t o r t o
t h e c o n t r a c t o r t o
to enrollees.
quality manner.
administer the benefits in a
administer the benefits in a
quality manner.
quality manner.
Access
The Administrator would
The Secretary would
In order to assure access,
The Secretary would
The Secretary would
assure that all eligible
develop procedures for the
the Administrator would
develop procedures for the
develop procedures for the
individuals residing in the
provision of Part D
be authorized to provide
provision of Part D
provision of Part D
U.S. would have a choice
b enefits to p e r s o ns
fina n c i a l i n c e ntives,
b e n efits to p erso n s
benefits t o p e rsons
of enrollment in at least
residing in areas not
including the partial
residing in areas not
residing in areas not
two qualifying plan
covered by a contract. The
underwriting of risk, for an
covered by a contract. The
covered by a contract. The
options (at least one of
Secretary would also
entity to establish a plan;
Secretary would also
Secretary would also
which was a PDP) in their
develop procedures to
the assistance would be
develop procedures to
develop procedures to
area of residence. The
assure that beneficiaries
available only so long as,
assure that beneficiaries
assure that beneficiaries
requirement would not be
residing in more than one
a n d t o t h e e x t e n t
residing in more than one
residing in more than one
satisfied if only one PDP
area in a year were
necessary, to assure the
area in a year were
area in a year were
s p o n s o r o r M + C
p r o v i d e d b e n e f i t s
g u a r a n t e e d a c c e s s .
p r o v i d e d b e n e f i t s
p r o v i d e d b e n e f i t s
organization offered all the
throughout the year.
H o w e v e r , t h e
throughout the year.
throughout the year.
qualifying plans in the
Administrator could never
area. If necessary to
provide for the full
ensure such access, the
underwriting of financial
Administrator would be
risk for any entity, nor

---

CRS-19
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
authorized to provide
could the Administrator
fi n a n c i a l i ncentives,
p r o v i d e f o r a n y
including the partial
assumption of financial
underwriting of risk, for a
risk for a public entity
PDP sponsor to expand its
offering a nationwide drug
service area under an
plan. Additionally, the
existing prescription drug
Administrator would be
plan to adjoining or
directed to seek to
additional areas, or to
maximize the assumption
establish such a plan,
of financial risk by the
including offering such
entity.
plan on a regional or
nationwide basis. The
assistance would be
available only so long as,
a n d t o t h e e x t e n t
necessary, to assure the
g u a r a n t e e d a c c e s s .
H o w e v e r , t h e
Administrator could never
provide for the full
underwriting of financial
risk for any PDP sponsor,
n o r c o u l d t h e
Administrator provide for
a n y a s s u m p t i o n o f
financial risk for a public
PDP sponsor offering a
nationwide drug plan.
A d d i t i o n a l l y , t h e
Administrator would be
directed to seek to
maximize the assumption
of financial risk by PDP
s p o n s o r s a n d M + C
organizations.

---

CRS-20
Pricing; Cost Controls
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Drug pricing and payment
The PDP sponsor would
The Secretary would be
The entity offering the
The contracting entity’s
The contracting entity’s
determine payments and
required to negotiate
drug plan would determine
bid would include a
bid would include a
would be expected to
contracts with d rug
payments and would be
proposal for the estimated
proposal for the estimated
negotiate discounts.
manufacturers that specify
expected to negotiate
prices for covered drugs
negotiated prices for
the maximum prices that
discounts.
and projected annual
c o v e r e d d r u g s a n d
may be charged to
increase in prices. The
projected annual increase
program enrollees. The
entity would be expected
in prices. The entity
Secretary would be
to negotiate prices.
would be expected to
required to take into
negotiate prices.
account the goal of
developing breakthrough
medicines.
Access to negotiated prices
Both standard coverage
The contract between the
Both standard coverage
Plans would provide that
Plans would have to
and actuarially equivalent
S e c r e t a r y a n d t h e
and actuarially equivalent
beneficiaries would have
provide beneficiaries
coverage would have to
p h a r macy contrac t o r
coverage would have to
access to negotiated prices
access to negotiated prices
provide beneficiaries
w o u l d r e q u i r e t h e
provide beneficiaries
(including applicable
access to negotiated prices
contractor to negotiate
access to negotiated prices
discounts) even when no
(including applicable
c o n t r a c t s w i t h
(including applicable
benefits may be payable
discounts) even when no
manufacturers that provide
discounts) even when no
benefits may be payable
for maximum prices that
benefits may be payable
because the beneficiary
are lower than those
because the beneficiary
had reached the initial
n e g o t i a t e d b y t h e
has reached the initial
coverage limit.
Secretary, if applicable.
coverage limit.
The reduction would be
An entity offering a plan
passed on to beneficiaries
would be required to issue
and the Secretary would
a card to the beneficiary to
ho ld the contractor
assure access to negotiated
accountable for meeting
prices for which coverage
performance requirements
is not otherwise provided
with respect to price
under the plan.
reductions and limiting
price increases.

---

CRS-21
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Cost controls/formularies
Plans would be allowed to
P r e fe r r e d me d i c i n e s
Plans would be allowed to
Entities would be required
Entities would be required
h a v e f o r m u l a r i e s
(which would have lower
h a v e f o r m u l a r i e s
to use cost control
to use cost control
restricting coverage to
cost sharing) would be
restricting coverage to
strategies that could
strategies that could
certain drugs. Plans
d e s i g n a t e d b y t h e
certain drugs. Plans
i n c l u d e a l t e r n a t i v e
i n c l u d e a l t e r n a t i v e
electing to use a formulary
Secretary or the pharmacy
electing to use a formulary
methods of distribution
methods of distribution
would be required to
contractor for a therapeutic
would be required to
(though beneficiaries
(though beneficiaries
establish a pharmaceutical
c l a s s . P h a r m a c y
establish a pharmaceutical
would not be required to
would not be required to
and therapeutic committee
contractors would be
and therapeutic committee
use such alternative
use such alternative
(that included at least one
required to have in place
(that included at least one
me t h o d s ) , p r e f e r r e d
me t h o d s ) , p r e f e r r e d
practicing physician and
procedures to treat, on a
practicing physician and
p h a r ma c y n e t wo r k s ,
p h a r ma c y n e t wo r k s ,
one practicing pharmacist)
case-by-case basis, non-
one practicing pharmacist)
generic s u b s titutio n,
g e n e ric sub stitutio n,
to develop and revise the
preferred medicines as
to develop and revise the
therapeutic interchange,
therapeutic interchange,
formulary. The formulary
preferred medicines if the
formulary. The formulary
d i s e a s e ma n a g e me n t
d i s e a s e ma n a g e me n t
would be required to
preferred medicine was
would be required to
programs, medication
programs, medication
include drugs within all
determined not to be as
include drugs within all
therapy management, and
therapy management, and
therapeutic categories and
effective for, or to have
therapeutic categories and
informing beneficiaries of
informing beneficiaries of
classes of covered drugs
significant adverse effects
classes of covered drugs
price differences between
price differences between
(although not necessarily
on, the enrollee. The
(although not necessarily
generic and brand name
generic and brand name
for all drugs within such
procedures would require
for all drugs within such
drugs.
drugs.
categories and classes).
that determinations be
categories and classes).
Plans could offer tiered
based on professional
Plans could offer tiered
Entities would be required
Entities would be required
cost-sharing for drugs
medical judgment, medical
cost-sharing for drugs
to establish formularies.
to establish formularies.
i n c l u d e d w i t h i n a
condition of the enrollee
i n c l u d e d w i t h i n a
There could not be a
There could not be a
formulary and lower cost-
and medical evidence.
formulary and lower cost-
national formulary, nor
national formulary, nor
sharing for preferred drugs
sharing for preferred drugs
could the Secretary require
could the Secretary require
in the formulary. An
The Secretary, directly or
in the formulary. An
an entity to exclude a
an entity to exclude a
enrollee would have the
through contracts with
enrollee would have the
particular drug from the
particular drug from the
right to appeal to obtain
pharmacy contractors,
right to appeal to obtain
formulary. The formulary
formulary. The formulary
coverage for a drug not on
would employ mechanisms
coverage for a drug not on
would be developed by a
would be developed by a
the formulary if the
to provide services
the formulary if the
pharmacy and therapeutics
pharmacy and therapeutics
prescribing physician
a p p r o p r i a t e l y a n d
prescribing physician
committee in accordance
committee in accordance
determined that the
efficiently; mechanisms
determined that the
with standards developed
with standards developed
formulary drug was not as
could include: 1) price
formulary drug was not as
by the Secretary in
by the Secretary in
effective for the individual
negotiations; 2) reduction
effective for the individual
consultation with the
consultation with the
or had adverse effects for
in coinsurance below 20%
or had adverse effects for
Medicare Prescription
Medicare Prescription
the individual.
for preferred medicines; 3)
the individual. If a plan
D r u g A d v i s o r y
D r u g A d v i s o r y

---

CRS-22
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
me t h o d s t o r e d u c e
offered tiered cost-sharing
C o m m i t t e e . T h e
C o m m i t t e e . T h e
medication errors and
for covered drugs, an
formulary would have to
formulary would have to
encourage appropriate use
enrollee would have the
include: 1) all generic
include: 1) all generic
of medications; and 4)
right to request that a
covered drugs, and 2) at
covered drugs, and 2)
permitting pharmacy
nonpreferred drug be
least one but no more than
drugs for each therapeutic
contractors, as approved
treated on terms applicable
two brand name drugs for
category and class though
by the Secretary, to make
for a preferred drug if the
each therapeutic class,
not necessarily all drugs in
exceptions to the cost-
prescribing physician
unless the Secretary
each category or class.
sharing provisions for
d etermined that the
determined the limitation
nonpreferred medicines, to
preferred drug was not as
w a s c l i n i c a l l y
Entities would have to
secure best prices for
effective for the individual
inappropriate for a given
have procedures to treat
enrollees.
or had adverse effects for
therapeutic class.
non-formulary drugs as
the individual.
brand-name drugs on the
Price negotiations would
Entities would have to
formulary if the formulary
be conducted in such a
Eligible entities would be
have procedures to treat
drug was determined not
manner so that: 1) there
required to have a cost-
non-formulary drugs as
to be as effective for the
was at least one contract
effective drug utilization
preferred brand-name
enrollee in preventing or
for a medicine in each
management program
drugs if the preferred drug
slowing the deterioration
therapeutic class; 2) if
(including incentives to
was determined not to be
of, or improving or
more than one medicine
r e d u c e c o s t s w h e n
as effective for the enrollee
maintaining the health of
was available in a class,
appropriate). Entities
in preventing or slowing
the enrollee or to have a
there were contracts for at
could use other cost
the deterioration of, or
significant adverse effect
least two medicines in the
c o n t r o l me c h a n i s ms
improving or maintaining
for the enrollee.
class unless determined
customarily used in
the health of the enrollee
clinically inappropriate;
employer-sponsored health
or to have a significant
The Secretary could
and 3) if more than two
plans.
adverse effect for the
establish and provide
medicines were available
enrollee.
incentives for pharmacies
in a class, there were
to participate in cost and
contracts for at least two
d r u g u t i l i z a t i o n
medicines in a class and a
management programs and
contract for a generic
quality assurance measures
s u b s t i t u t e , u n l e s s
and systems.
determined clinically
inappropriate.

---

CRS-23
Requirements
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Beneficiary protections
Plans would be required to
The Secretary would
Eligible entities would be
The Secretary could not
The Secretary could not
comply with a number of
establish standards and
required to: 1) disclose
award a contract to an
award a contract to an
beneficiary protection
programs for quality and
i n f o r m a t i o n t o
entity unless the entity: 1)
entity unless the entity: 1)
provisions including those
other standards including
beneficiaries on the plan;
met quality and financial
met quality and financial
related to: 1) community-
those related to: 1) access
2) secure the participation
standards; 2) had in place
standards; 2) had in place
rated premiums; 2) non-
(including 24-hour/7-day a
in the network of a
drug utilization review
drug utilization review
d i s c r i m i n a t i o n ; 3 )
week access, on-line
sufficient number of
procedures to ensure
procedures to ensure
information disclosure; 4)
review to evaluate for
pharmacies that dispense
appropriate utilization of
appropriate utilization of
assuring the participation
m e d i c i n e t h e r a p y
drugs directly to patients
drugs and avoidance of
drugs and avoidance of
of a sufficient number of
problems, and adherence
(other than by mail order)
adverse drug reactions; 3)
adverse drug reactions; 3)
pharmacies; 5) issuance of
of any preferred pharmacy
to ensure convenient
had in place, effective with
had in place, effective with
a card so beneficiaries
network to minimum
access for beneficiaries; 3)
2 0 06, an electro nic
2006, an electronic
could assure access to
a c c e s s s t a n d a r d s ) ;
have quality assurance
prescription program that
prescription program that
negotiated prices when
2)assuring compliance of
measures, including a
provided for electronic
provided for electronic
coverage is not otherwise
p h a r m a c i e s w i t h
m e d i c a t i o n t h e r a p y
transfer of prescriptions
transfer of prescriptions
available under the plan;
negotiated prices; 3)
management program, to
a n d p r o v i s i o n o f
a n d p r o v i s i o n o f
6) a cost and drug
enrollee counseling; 4)
reduce medical errors and
i n f o r ma t i o n t o t h e
i n f o r ma t i o n t o t h e
utilization management
education of providers,
adverse drug interactions;
p r e s c r i b i n g h e a l t h
p r e s c r i b i n g h e a l t h
p r o g r a m i n c l u d i n g
pharmacists, and enrollees;
4) assure that beneficiaries
professional; 4) ensured 24
professional; 4) ensured 24
m e d i c a t i o n t h e r a p y
and 5) provision of cost
were informed at the time
hour/7-day a week access
hour/7-day a week access
management and an
data to the Secretary.
of purchase of any
to drugs in emergencies; 5)
to drugs in emergencies; 5)
electronic prescription
Pharmacy contractors
difference between the
ensured that pharmacies
ensured that pharmacies
drug program that provides
would be required to have
price of the prescribed
would not overcharge
would not overcharge
for electronic transfer of
in place procedures to
drug and the lower priced
e n r o l l e e s ; 6 ) h a d
e n r o l l e e s ; 6 ) h a d
prescriptions and provision
ensure timely procedures
generic drug; 5) provide
procedures for determining
procedures for determining
of information to the
for internal and external
procedures for resolving
if non-formulary drugs
if non-formulary drugs
p r e s c r i b i n g h e a l t h
review of denials of
grievances and handling
were medically necessary;
were medically necessary;
professional; and 7)
c o verage and o ther
appeals; and 6) assure
7) had an appeals process
7) had an appeals process
provisions for hearing and
complaints.
confidentiality of enrollee
for enrollees; 8) had
for enrollees; 8) had
resolving grievances and
records. Entities could
procedures to safeguard
procedures to safeguard
handling appeals.
establish an optional point-
the privacy of medical
the privacy of medical
of-service method of
records; and 9) had
records; and 9) had
operation under which the
pro ced ures to deter
p rocedures to d eter
plan provided access to
medical errors and ensure
medical errors and ensure

---

CRS-24
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
any or all pharmacies not
that contracted pharmacies
that contracted pharmacies
particip ating in the
had such procedures.
had such procedures.
network and could charge
beneficiaries, through
a d j u s t m e n t s i n
copayments, additional
costs associated with this
option.
Low-Income Subsidies for Part D
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Subsidies for Part D
L o w - i n c o m e p e r s o n s
Persons meeting the
Persons with incomes
Persons meeting the
Persons whose income , as
would receive a premium
definition of qualified
below 135% of poverty
definition of qualified
defined under the QMB
subsidy (based on the
Medicare beneficiaries
and assets below $4,000
Medicare beneficiaries
program, was below 200%
v a l u e o f s t a n d a r d
(QMBs, persons with
would have a full premium
(QMBs, i.e., persons with
of poverty would have
coverage). Individuals
incomes below 100% of
subsidy, provided the plan
incomes below 100% of
their Part D cost-sharing
with incomes at or below
poverty and assets below
premium was at or below
poverty), and persons
and enrollment fees paid
150% of poverty (and
$4,000), and persons
the national weighted
m e e t i n g t h e Q M B
by Medicaid. No assets
assets below $4,000)
m e e t i n g t h e Q M B
average premium. If no
definition except that their
requirements would be
would have a subsidy
definition except that their
such plan was available in
incomes were between
imposed. Beneficiaries
equal to 100% of the value
incomes were between
the area, the subsidy would
100% and 135% of
would be subject to cost-
of standard drug coverage
100% and 150% of
equal the premium for the
poverty, would have their
sharing charges of $2 for
provided under the plan.
poverty, would have their
lowest cost plan. In
Part D premiums and
generic drugs and $5 for
Individuals with incomes
P a r t D p r e m i u m s ,
addition, these persons
copayments paid by
brand name drugs. The
between 150% and 175%
deductibles, and countable
wo u l d h a v e : 1 ) a
Medicaid. Enrollees
cost-sharing charges for
of poverty would have a
cost sharing paid by
deductible equal to 5% of
between 135% and 150%
years after 2005 would be
sliding scale premium
Medicaid. Persons
the amount otherwise
of poverty would pay a
i n c r e a s e d b y t h e
subsidy ranging from
m e e t i n g t h e Q M B
applicable; 2) cost-sharing
reduced Part D premium,
percentage increase in
100% of such value at
definition except that their
of 2.5% rather than 50%
calculated on a sliding
average per capita program
150% of poverty to 0% of
incomes were between
for costs below the initial
scale basis. In determining
expenditures for the year
such value at 175% of
150% and 175% of
coverage limit; 3) 50%
QMB qualification for
ending the previous July.
poverty. For both groups,
poverty would have their
cost-sharing for costs
payment of Part D
beneficiary cost-sharing
Part D deductibles and
above the initial coverage
p r e m i u m s a n d
for spending up to the
countable cost-sharing
limit and below the annual
c o p a y m e n t s , a s s e t

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CRS-25
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
initial coverage limit
paid by Medicaid; their
out-of-pocket limit; and 4)
requirements would not
($2,000 in 2005) would be
Part D premiums would be
zero cost sharing for costs
apply.
reduced to an amount not
reduced on a sliding scale
above the out-of-pocket
to exceed $2 for a multiple
basis ranging from 100%
limit. Persons with
source or generic drug and
of the premium at 150% of
incomes above 135% and
$5 for a non-preferred
poverty to 0% at 175% of
below 150% of poverty
drug. No deductible would
poverty.
would have a sliding scale
be imposed. PDPs could
premium ranging from
not charge individuals
100% of the premium at
receiving cost-sharing
135% of poverty to 57% of
subsidies more than $5 per
poverty with no additional
prescription. PDPs could
premium costs provided
reduce to zero the cost-
the plan premium was at or
s h a r i n g o t h e r w i s e
b e l o w t h e n a t i o n a l
applicable for generic
weighted average premium
drugs.
(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
r e d u c e o t h e r w i s e
applicable cost-sharing.

---

CRS-26
Relationship to Other Coverage
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Relationship to Medicaid
States would be required to
Medicaid costs associated
States would be required to
The current federal-state
The current federal-state
m a k e e l i g i b i l i t y
with paying Part D cost-
m a k e e l i g i b i l i t y
matching rate would apply
matching rate would apply
determinations for low-
sharing charges fo r
determinations for low-
fo r M e d i c a i d co s t s
fo r M ed i c a i d c o s t s
income subsidies; there
persons with incomes
income subsidies; there
associated with paying
associated with paying
would be a phase-in of the
above 100% of poverty
would be a phase-in of
Part D premiums and cost-
Part D cost-sharing and
federal assumption of
would be paid by the
federal assumption of
sharing for those below
enrollment fees for those
associated administrative
federal government.
associated administrative
120% of poverty. The
below 120% of poverty.
costs. (Alternatively, the
costs. There would also be
federal matching rate
An enhanced matching
eligibility determinations
a federal phase-in of a
would be 100% for those
rate would apply for
could be made by the
portion of the costs of
between 120% and 150%
persons with incomes
S o c i a l S e c u r i t y
premiums and cost-sharing
of poverty.
between 120% and 150%
Administration.) There
subsidies for dual eligibles.
of poverty. This rate would
would also be a federal
Medicaid coverage would
If a state elected to use
be defined as the federal
phase-in of the costs of
wrap around Part D
negotiated prices for a
matching rate for the
premiums and cost-sharing
benefits; states could
drug under its Medicaid
state’s Medicaid program
subsidies for dual eligibles.
require that these persons
program, the Medicaid
plus 30% of the percentage
States would be required to
elect Part D drug coverage.
rebate requirements would
point difference between
maintain Medicaid benefits
not apply for that drug.
this rate and 100%; in no
as a wrap around to
If a state elected to use
Further, the bill would
case could the rate exceed
Medicare benefits for dual
negotiated prices for a
e x e mp t a n y p r i c e s
8 5 % . T h e f e d e r a l
eligibles; states could
drug under its Medicaid
n e g o t i a t e d b y a
government would pay
require that these persons
program, the Medicaid
prescription drug plan,
100% of costs for persons
elect Part D drug coverage.
rebate requirements would
Medicare+Choice plan, or
between 150% and 200%
not apply for that drug.
qualified retiree program
of poverty. States would
If a state elected to use
Further, the bill would
f r o m M e d i c a i d ’ s
be required to make the
negotiated prices for a
e x e m p t a n y p r i c e s
determination of “best
eligibility determinations.
drug under its Medicaid
n e g o t i a t e d b y a
price” for purposes of the
program, the Medicaid
prescription drug plan,
Medicaid rebate program.
If a state elected to use
rebate requirements would
Medicare+Choice plan, or
negotiated prices for a
not apply for that drug.
qualified retiree program
drug under its Medicaid
Further, the bill would
f r o m M e d i c a i d ’ s
program, the Medicaid
e x e mp t a n y p r i c e s
determination of “best
rebate requirements would
negotiated by a PDP,
price” for purposes of the
not apply for that drug.
Medicare+Choice plan, or
Further, the bill would

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CRS-27
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
qualified retiree program
Medicaid drug rebate
e x e mp t a n y p r i c e s
f r o m M e d i c a i d ’ s
program.
n e g o t i a t e d b y a
determination of “best
prescription drug plan,
price” for purposes of the
Medicare+Choice plan, or
Medicaid drug rebate
qualified retiree program
program.
f r o m M e d i c a i d ’ s
determination of “best
price” for purposes of the
Medicaid rebate program.
Relationship to private
Qualified prescription drug
The Secretary would make
Qualified prescription drug
The Secretary would make
The Secretary would make
plans
plans offered by employers
payments to retiree health
plans offered by employers
payments to retiree health
payments to retiree health
to retirees would be
plans offering coverage
to retirees would be
plans offering coverage
plans offering coverage
eligible for direct subsidies
that was not less than Part
eligible for reinsurance
that was not less than Part
that was not less than Part
and reinsurance payments.
D coverage. Payments
payments. At a minimum,
D coverage. Payments
D coverage. Payments
At a minimum, qualified
would equal two-thirds of
qualified retiree coverage
would equal two-thirds of
would equal three-fourths
retiree coverage would
the estimated average per
would have to meet the
the estimated average per
of the estimated average
h a v e t o m e e t t h e
c a p i t a g o v e r n m e n t
requirements for qualified
c a p i t a g o v e r n m e n t
per capita government
requirements for qualified
contribution for Part D
p r e s c r i p t i o n d r u g
contribution for Part D
contribution for Part D
p r e s c r i p t i o n d r u g
enrollees.
coverage.
enrollees.
enrollees.
coverage.
Relationship to Medigap
Effective January 1, 2005,
The bill would modify
Effective January 1, 2005,
The three of the 10
The three of the 10
the issuance of new
current requirements for
no Medigap policy with
standardized Medigap
standardized Medigap
Medigap policies with
standardized Medigap
drug coverage could be
plans offering d rug
p lans o ffering drug
prescription drug coverage
policies. Effective January
sold, issued, or renewed to
coverage would have to be
coverage would have to be
would be prohibited unless
1, 2005, an appropriate
a Part D enro llee.
revised to complement, not
revised to complement, not
1) the policies replaced
number of such polices
Beneficiaries could obtain
duplicate, Part D. The
duplicate, Part D. The
another policy with drug
would have to provide
Medigap coverage under
revised drug packages
revised drug packages
coverage; or 2) policies
coverage for medicines
new standardized policies
could not offer coverage
could not offer coverage
met requirements for two
which complemented, but
designed to supplement the
for more than 90% of the
for more than 90% of the
new standardized policies
did not duplicate, Part D
new enhanced fee-for-
Part D cost-sharing.
Part D cost-sharing.
for all Medicare services.
benefits.
service coverage option
Effective January 1, 2005,
Effective January 1, 2005,
The first new policy would
under the bill; these
the issuance of any of the
the issuance of any of the
have the following benefits
policies could not offer
old standardized policies
old standardized policies
(notwithstanding other
coverage for drug costs.
with drug coverage would
with drug coverage would
provisions of law relating
be prohibited. The bill
be prohibited. The bill

---

CRS-28
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
to core benefits): 1)
would guarantee issuance,
would guarantee issuance,
coverage of 50% of the
d u r i n g t h e p e r i o d
d u r i n g t h e p e r i o d
cost-sharing otherwise
e s t a b l i s h e d b y t h e
e s t a b l i s h e d b y t h e
a p p l i c a b l e ( e x c e p t
Secretary for Part D
Secretary for Part D
coverage of 100% cost-
enrollment, of the benefit
enrollment, of the benefit
sharing applicable for
package the Secretary
package the Secretary
preventive benefits); 2) no
d e t e r m i n e d m o s t
d e t e r m i n e d m o s t
coverage of the Part B
comparable to the old
comparable to the old
deductible; 3) coverage of
standardized drug policy
standardized drug policy
all hospital coinsurance for
held by the policyholder.
held by the policyholder.
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 inflatio n
adjustment as specified by
the Secretary). The second
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

---

CRS-29
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
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
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Discount Drug Card
The provision would
No provision
No provision
No provision
No provision
Program
require the Secretary to
endorse prescription drug
discount programs meeting
certain requirements and to
m a k e a v a i l a b l e
information on such
programs to beneficiaries.
The program: 1) would
have to pass on to
enrollees discounts on
drugs, including discounts
n e g o t i a t e d w i t h
manufacturers; 2)could not
be limited to mail order
drugs; 3) would have to
provide pharmaceutical
support services, such as
education and counseling,
and services to prevent
adverse drug interactions;
4) would have to provide
information to enrollees
t h a t t h e S e c r e t a r y
i d ent i fi e d a s b e i n g

---

CRS-30
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
necessary to provide for
informed choice by
b e n e fi c i a r i e s a mo n g
endorsed programs; 5)
would have to safeguard
individually identifiable
information in accordance
with the Health Insurance
P o r t a b i l i t y a n d
a c c o u n t a b i l i t y A c t
(HIPAA); and 6) would
have to meet requirements
the Secretary found
necessary to participate in
the transitional low-
income 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
No provision
No provision
No provision
No provision
Assistance Program
the 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 Defense,

---

CRS-31
S.Amdt. 4309
S.Amdt. 4345
Provisions
H. R. 4954
H.R. 5019 (Rangel et al.)
S. 2729 (Grassley et al.)
(Graham et al.)
(Graham-Smith et al.)
Veterans Administration,
Federal Employees Health
Benefits program, or the
I n d ian Health Care
I m p r o v e m e n t A c t .
Individuals eligible for
assistance would have to
be enrolled under a
prescription drug discount
card program (or an
alternative state program
a p p r o v e d b y t h e
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 und er the
discount card program.
States could continue to
provide assistance under
their own pharmaceutical
assistance programs.

---