Medicare Prescription Drug Provisions of S.1, as Passed by the Senate, and H.R. 1, as Passed by the House

Medicare Prescription Drug Provisions of S.1, as Passed by the Senate, and H.R. 1, as Passed by the House

Order Code RL31992
CRS Report for Congress
Received through the CRS Web
Medicare Prescription Drug Provisions of S. 1,
as Passed by the Senate, and H.R. 1,
as Passed by the House
Updated July 11, 2003
Jennifer O’Sullivan
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

Medicare Prescription Drug Provisions of S. 1,
as Passed by the Senate, and H.R. 1,
as Passed by the House
Summary
On June 27, 2003, the Senate passed the Prescription Drug and Medicare
Improvement Act of 2003 (S. 1) by a vote of 76-21. Later that same evening, the
House passed the Medicare Modernization and Prescription Drug Act of 2003 (H.R.
1) by a recorded vote of 216 - 215 with 1 voting present.
Title I of both bills would add, effective January 1, 2006, a new prescription
drug benefit for Medicare beneficiaries under a new Medicare Part D. Both bills
would rely on private plans to provide the benefit and assume some of the financial
risk. Both measures would be designed to assure access to plans in all areas;
increased federal assistance would be authorized where necessary to encourage
participation. The Senate bill, but not the House bill, would include a fallback
mechanism in areas where private plans were not available. Under the fallback
mechanism, Medicare would contract with a private plan to provide the benefit in the
area; the plan would not be at financial risk, except for a small portion of
management fees tied to performance.
Both S. 1 and H.R. 1 would require plans to provide “standard coverage” or
“actuarially equivalent coverage” (i.e., a package with the same dollar value);
however, the definition of standard coverage is quite different between the two. Both
measures would provide additional assistance to the low-income. In addition, both
bills would establish a temporary drug discount card endorsement program under
which the Secretary would endorse card programs offered by prescription drug card
sponsors meeting certain requirements; these programs would be discontinued after
Part D was implemented.
There are considerable differences in the specifics of the prescription drug
provisions in S. 1 and H.R. 1. These differences are at issue in a pending conference
between the two Houses.
This report provides a side-by-side comparison of the Title I provisions of both
bills. It will be updated as events warrant.

Contents
In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Program Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Beginning date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Income-Related Catastrophic Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Covered drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Eligibility; Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Relationship to new Medicare options . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Eligibility; enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Plan enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Administration; Financial Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Federal administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Noninterference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Administration of benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Relationship to state laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Service areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Risk adjusters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Submission of bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Federal payments to plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Assumption of financial risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Stabilization fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Fallback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Pharmacies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Requirements for MA and EFFS Organizations . . . . . . . . . . . . . . . . . . . . . 14
Organization requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Requirements for fee-for-service plans . . . . . . . . . . . . . . . . . . . . . . . . 15
Pricing; Cost-Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Drug pricing and payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Access to negotiated prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Cost-controls; formularies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Beneficiary protections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Standards for electronic prescribing; Electronic Prescription
Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Low-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Persons eligible for subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Subsidy benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Administration of subsidy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Relationship to Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Matching payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Part B premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Part A cost-sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Territories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
QI-1 program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cost-sharing for persons with specified diseases . . . . . . . . . . . . . . . . . 23
Relationship to Retiree Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Payments toward out-of-pocket limit . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Relationship to State Pharmaceutical Assistance Programs . . . . . . . . . . . . 24
Payments toward out-of-pocket limit . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Coordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Relationship to Medigap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Relationship to Medigap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Temporary Drug Discount Card Endorsement Program . . . . . . . . . . . . . . . 26
Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Selection of entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Beneficiary protections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Negotiated prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Formularies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Accounts; low-income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Recommendations for technical corrections . . . . . . . . . . . . . . . . . . . . 31
Part B only individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Medicare Payment Advisory Commission (MEDPAC) . . . . . . . . . . . 32
Study on variations in drug spending and utilization . . . . . . . . . . . . . . 32
Limitation on prescription drug benefits of Members of Congress . . . 32
Standards of practice in nursing facilities . . . . . . . . . . . . . . . . . . . . . . 32
Medication therapy management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Reporting requirements for trustees reports . . . . . . . . . . . . . . . . . . . . . 33
Trustees’ report on Medicare’s unfunded obligations . . . . . . . . . . . . . 33
Pharmacy benefit managers transparency requirements . . . . . . . . . . . 34
Office of the Medicare beneficiary advocate . . . . . . . . . . . . . . . . . . . . 34
Transitioning Part B coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Information disclosure to carry out Medicare Catastrophic
Prescription Drug Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
State Pharmaceutical Assistance Programs . . . . . . . . . . . . . . . . . . . . . . . . . 35
Transition commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Medicare Prescription Drug Provisions of
S. 1, as Passed by the Senate, and
H.R. 1, as Passed by the House
On June 27, 2003, the Senate passed the Prescription Drug and Medicare
Improvement Act of 2003 (S. 1, Frist, et al.) by a vote of 76-21. Later that same
evening, the House passed the Medicare Modernization and Prescription Drug Act of
2003 (H.R. 1, Hastert, et al.) by a recorded vote of 216-215 with one voting present.
Title I of both bills would add, effective January 1, 2006, a new prescription
drug benefit for Medicare beneficiaries under a new Medicare Part D. Both measures
would be designed to assure access to plans in all areas; increased federal assistance
would be authorized where necessary to encourage participation. The Senate bill, but
not the House bill, would include a fallback mechanism in areas where private plans
were not available. Under the fallback mechanism, Medicare would contract with a
private plan to provide the benefit in the area; the plan would not be at financial risk,
except for a small portion of management fees tied to performance.
Both S. 1 and H.R. 1 would require plans to provide “standard coverage” or
“actuarially equivalent coverage” (i.e., a package with the same dollar value);
however, the definition of standard coverage is quite different between the two. Both
measures would provide additional assistance to the low-income. In addition, both
bills would establish a temporary drug discount card endorsement program under
which the Secretary would endorse card programs offered by prescription drug card
sponsors meeting certain requirements; these programs would be discontinued after
Part D was implemented.
There are considerable differences in the specifics of the prescription drug
provisions in S. 1 and H.R. 1. These differences are at issue in a pending conference
between the two Houses.
This report provides a side-by-side comparison of the Title I provisions of both
bills.

CRS-2
In General
Provision
S. 1
H.R. 1
Title
Prescription Drug and Medicare Improvement Act of 2003.
Medicare Modernization and Prescription Drug Act of 2003
Summary
Effective January 1, 2006, a new optional benefit would be established
Effective January 1, 2006, a new optional benefit would be established under a
under a new Part D. Beneficiaries could purchase either “standard coverage”
new Medicare Part D. Beneficiaries could purchase either “standard coverage”
or “actuarially equivalent coverage.” In 2006, “standard coverage” would
or “actuarially equivalent coverage”. In 2006, “standard coverage” would have
have a $275 deductible, 50% cost-sharing for costs between $276 and
a $250 deductible, 20% cost-sharing for costs between $251 and $2,000, then no
$4,500, then no coverage until the beneficiary had out-of-pocket costs of
coverage until the beneficiary had out-of-pocket costs of $3,500 ($4,900 in total
$3,700 ($5,813 in total spending); and 10% cost-sharing thereafter.
spending) when full coverage would be provided. (A higher catastrophic limit
Individuals with incomes below 160% of poverty, who were not eligible for
would apply for high-income beneficiaries). Low income subsidies would be
drug coverage under Medicaid, would receive assistance for a portion of the
provided for persons with incomes below 150% of poverty. Medicare Advantage
Part D premium and cost-sharing charges. (Medicaid enrollees with drug
(MA) organizations and Enhanced Fee-for-Service (EFFS) organizations (as
coverage would continue to receive drug benefits through Medicaid.) The
established under Title II of the bill) would be required to offer plans that
bill would rely on private plans to provide coverage and to bear some of the
included qualified prescription drug coverage. An individual not enrolled in an
financial risk for drug costs; federal subsidies would be provided to
MA or EFFS plan could enroll in a new prescription drug plan (PDP). The
encourage participation. (A fallback mechanism would be provided in areas
program would rely on these private plans to provide coverage and to bear some
where private risk bearing plans were not available. Under the fallback
of the financial risk for drug costs; federal subsidies would be provided to
mechanism, Medicare would contract with a private plan to provide the
encourage participation.
Plans would determine payments and would be
benefit in the area; the plan would not be at financial risk, except for a small
expected to negotiate prices. A new Medicare Benefits Administration (MBA)
portion of management fees tied to performance.) Coverage would be
would be established within the Department of Health and Human Services
provided
through
Medicare
Prescription
Drug
Plans
(PDPs)
or
(HHS) to administer the Part D benefit and the new MA program (which would
MedicareAdvantage plans (MAs, as established under Title II of the bill).
replace the existing Medicare+Choice program) and the new EFFS program. New
Plans would determine payments and would be expected to negotiate prices.
Sections 1860D-1 — 1860D-10 as added by Section 101 of the bill.
A new Center for Medicare Choices (CMC) would be established within the
Department of Health and Human Services (HHS) to administer the Part D
benefit and the new MA program (which would replace the existing
Medicare+Choice program). New Sections 1860D - 1860D-26 as added by
Section 101 of the bill.

CRS-3
Program Design
Provision
S. 1
H.R. 1
Beginning date
January 1, 2006. New Section 1860D-1(a).
January 1, 2006. New Section 1860D-1.
Benefits
“Qualified coverage” would be either “standard coverage” or “actuarially
“Qualified coverage” would be either “standard coverage” or “actuarially
equivalent coverage.” Both would require access to negotiated prices. In
equivalent coverage.” In both cases, access would be provided to negotiated
2006, “standard coverage” would be defined as having a $275 deductible,
prices. In 2006, “standard coverage” would be defined as having a $250
50% cost-sharing for drug costs between $276 and the initial coverage limit
deductible, 20% coinsurance for drug costs between $251 and $2,000
of $4,500, then no coverage until the beneficiary had out-of-pocket costs of
(accounting for $600 in total out-of-pocket costs, and then no coverage until
$3,700 ($5,813 in total spending); and 10% cost-sharing thereafter. These
the beneficiary had out-of-pocket costs of $3,500 ($4,900 in total spending);
amounts would be increased in future years by the percentage increase in
once the beneficiary reached the $3,500 catastrophic limit (with higher
average per capita expenditures for covered drugs for the year ending the
amounts for higher income beneficiaries) full coverage would be provided.
previous July. Out-of-pocket costs counting toward the limit would include
The dollar amounts would be increased in future years by the percentage
costs paid by the individual (or by another individual such as a family
increase in the average per capita expenditures for covered drugs for the year
member), paid on behalf of a low-income individual under the low-income
ending the previous July. Out-of-pocket costs counting toward the limit would
provisions (but only with respect to the percentage of costs the individual is
include costs paid by the individual (or by another individual such as a family
responsible for under such provisions), paid under Medicaid, or paid under
member), paid on behalf of a low-income individual under the subsidy
a state pharmaceutical assistance program. Any costs for which the individual
provisions, or paid under Medicaid or under a state pharmaceutical assistance
was reimbursed by insurance or otherwise could not be counted. Entities
program. Any costs for which the individual was reimbursed by insurance or
could offer more generous drug coverage, if approved by the Administrator,
by another third-party payment arrangement could not be counted. Plans could
but only if they also offered a plan providing required coverage. New
offer more generous drug coverage, if approved by the MBA Administrator.
Section 1860D-6.
Section 1860D-2(a-c, and e).
Income-
No provision
The annual out-of-pocket threshold would be increased for each enrollee
Related
whose adjusted gross income (AGI) exceeded a specified income threshold.
Catastrophic
(Individuals filing joint returns would each be treated separately with each
Limit
person considered to have an AGI equal to one-half of the total.) The portion
of income exceeding this income threshold ($60,000 in 2006), but below an
income threshold limit ($200,000 in 2006), would be considered in making this
calculation. The increase would be calculated as follows. First, the ratio of the
annual out-of-pocket limit to the income limit would be calculated and
expressed as a percent. For 2006, this would be $3,500 divided by $60,000
equaling 5.8%. This percentage would be multiplied by any excess income
over $60,000, but not over $200,000, and added to the catastrophic limit.
Thus, the catastrophic out-of-pocket limit would be $5,820 for an enrollee with
an income of $100,000 and $11,620 for persons with incomes at $200,000 or
above. New Section 1860D-2(b)(4).

CRS-4
Provision
S. 1
H.R. 1
Premiums
The plan sponsor would establish the premium amount, subject to approval
The plan sponsor would establish the premium amount, subject to approval by
by the Administrator. Monthly premiums would be uniform for all eligible
the Administrator. The premium for a prescription drug plan could not vary
beneficiaries in a plan, except that persons delaying Part D enrollment without
among individuals enrolled in the plan in the same service area, unless the
other creditable drug coverage would be subject to higher premiums. The
individuals were subject to penalties for late enrollment. PDP sponsors would
Administrator would calculate a monthly prescription drug coverage premium
be required to permit each enrollee to pay premiums through withholding from
for each plan (including MA plans) and a monthly national weighted average
social security checks in the same manner Part B premium payments are
premium. If the plan’s monthly approved premium for standard coverage was
withheld or through an electronic funds transfer mechanism or otherwise.
equal to the national monthly weighted average premium for such coverage,
Reductions in Part B premiums attributable to enrollment in MA or EFFS plans
the beneficiary would pay the applicable percentage of the monthly national
could be used to reduce the premium otherwise applicable. New Section
average. If the plan’s monthly approved premium was less than the national
1860D-6(c).
average the beneficiary would pay: (1) the applicable percentage of the
monthly national average, minus, (2) the difference between the national
average and the plan’s premium. If the plan’s monthly premium was greater
than the national average, the beneficiary would pay: (1) the applicable
percentage of the monthly national average, plus (2) the difference between
the national average and the plan’s premium. The applicable percentage for
an area would be 30% divided by 100% minus a percentage equal to: total
reinsurance payments that will be made in a year (including such payments
to qualified retiree plans) divided by such reinsurance payments plus total
payments that would be made to plans, including MA plans, in the year for
standard coverage (or actuarially equivalent coverage). Premiums would be
collected in the same manner as Part B premiums. The Administrator would
establish procedures whereby the sponsor of employment-based retiree
coverage could pay the premium. Premiums for a plan would not vary within
a region. However, this requirement would not apply to enrollees who were
enrolled in a plan pursuant to a contract between the plan and the employer
or other group plan that provided employment-based retiree health coverage,
if the premium amount was the same for all such enrollees under such
agreement. New Sections 1860D-5(g), 1860D-14, 1860D-15, and 1860D-17,
and 1860D-18.
Covered drugs
Covered outpatient drugs would include prescription drugs and biologicals
Similar provision except: ( 1) does not specifically mention syringes; (2) does
covered under Medicaid, insulin (including syringes, and necessary medical
not specify that if coverage were exhausted under Part B, payment could be
supplies associated with the administration of insulin, as defined by the
made under Part D. New Section 1860D-2(f).
Administrator) and vaccines licensed under Section 351 of the Public Health
Service Act. Drugs excluded from Medicaid coverage would be excluded
from the definition except for smoking cessation drugs. The definition would

CRS-5
Provision
S. 1
H.R. 1
include any use of a covered outpatient drug for a medically accepted
indication. Drugs which could be paid for under Medicare Part B would not
be covered under Part D, except if Part B benefits were exhausted. A plan
could elect to exclude a drug which would otherwise be covered, if the drug
was excluded under the formulary and the exclusion was not successfully
appealed. A PDP or MA plan could exclude from coverage, subject to
reconsideration and appeals provisions, any drug which would not meet
Medicare’s definition of medically necessary or was not prescribed in
accordance with the plan or Part D. New Section 1860D(a)(2).
Eligibility; Enrollment
Provision
S. 1
H.R. 1
Relationship to
In general, MA enrollees would obtain drug benefits through their MA plan.
The new MA organizations and EFFS organizations would be required to offer
new
Medicare
Other Part D enrollees would receive their drug coverage through enrollment
plans that included qualified prescription drug coverage.
An individual
options
in a PDP offered in the geographic area in which the beneficiary resided. MA
enrolled in a MA Rx plan or EFFS Rx plan would obtain their drug coverage
enrollees in MSA plans would also receive drug coverage through enrollment
through the plan. An individual not enrolled in either an MA or EFFS plan
in a PDP plan. MA enrollees in private fee-for-service plans would receive
could enroll in a new prescription drug plan (PDP). New Section 1860D-1(a)
drug benefits through such plan if the plan provided qualified prescription
drug coverage; otherwise they would enroll in a PDP. New Section 1860D-
1(a)
Eligibility;
All individuals entitled to or enrolled in Part A and enrolled under Part B
All beneficiaries entitled to Medicare Part A or enrolled in Medicare Part B
enrollment
could elect to enroll in Part D, except for persons eligible for drug coverage
could elect to enroll in Part D through enrollment in an MA Rx plan or EFFS
under Medicaid. The Administrator of the new CMC would establish an
Rx plan, or in a PDP. The Administrator of the new MBA would establish an
enrollment process which would be similar to that for Part B. An initial open
enrollment process. An initial election period would be established. For
enrollment period would be established. For beneficiaries eligible as of
current beneficiaries this would be the 6-month period beginning October
November 1, 2005, this would be the 6-month period beginning November
2005; for future beneficiaries it would be the same 7-month period applicable
1, 2005. Persons becoming eligible after this date would have an initial 7-
for initial Part B enrollment. Special election periods would apply for persons
month enrollment period similar to that established for Part B. Persons
who involuntarily lost other drug coverage. Persons electing coverage at the
enrolling in Part D after their initial enrollment period would be subject to
first opportunity and maintaining continuous coverage would be guaranteed the
delayed enrollment penalties. Eligible beneficiaries with creditable drug
protection of community rating; otherwise they could be subject to late
coverage could elect to continue to receive such coverage, not enroll in Part
enrollment penalties.
An individual would be considered to have had
D, and subsequently enroll in Part D without penalty if they involuntarily lost
continuous prescription drug coverage if the individual established that he or
the other coverage. Creditable drug coverage would have to equal or exceed
she had coverage under one of the following (and coverage in one plan
the value of standard coverage.
It would include, subject to certain
occurred no more than 63 days after termination of coverage in another plan):

CRS-6
Provision
S. 1
H.R. 1
conditions, drug coverage provided through a group health plan, state
(1) qualified prescription drug coverage under a PDP or MA Rx or EFFS Rx
pharmaceutical assistance program, veterans programs, Medigap, and drug-
plan; (2) Medicaid prescription drug coverage; (3) prescription drug coverage
only coverage through Medicaid for persons who were not dual eligibles.
under a group health plan, but only if benefits were at least equivalent to
Special enrollment period would apply for persons losing creditable coverage.
benefits under a qualified PDP; (4) prescription drug coverage under a
New Sections 1860D(a)(3) and 1860D-2
Medigap plan, but only if the policy was in effect on January 1, 2006, and
only if the benefits were at least equivalent to benefits under a qualified PDP;
(5) state pharmaceutical assistance program, but only if benefits were at least
equivalent to benefits under a qualified PDP; and (6) veterans coverage for
prescription drugs, but only if benefits were at least equivalent to benefits
under a qualified PDP. Individuals could apply to the Administrator to waive
the requirement that such coverage be at least equivalent to benefits under a
qualified prescription drug plan. They could make such application if they
could establish that they were not adequately informed that the coverage did
not provide such level of coverage. New Section 1860D-1.
Plan
The Administrator would establish a process through which an eligible
Beneficiaries would enroll in an MA Rx plan, EFFS Rx plan or in a PDP. The
enrollment
beneficiary who was not enrolled in an MA plan (except for an MSA plan or
Administrator would establish a process for the selection of a plan. The
private-fee-for-service plan not offering qualified drug coverage) could enroll
process would include: (1) conduct of annual coordinated election periods; (2)
in a PDP serving the geographic area where the beneficiary resided. The
active dissemination of information to promote an informed selection among
beneficiary could make an annual election to change enrollment to another
qualifying plans (in a manner consistent with and in coordination with the
plan. A beneficiary in Part D who failed to enroll in a plan would be enrolled
dissemination of information under MA; (3) coordination of elections through
in a plan designated by the Administrator. The Administrator would use rules
filing with an entity or sponsor in a manner consistent with that provided under
similar to the rules established for enrollment, disenrollment and termination
MA; and (4) informing each enrollee at the beginning of the year of the
of enrollment with MA plans. Included would be requirements relating to
enrollee’s annual out-of-pocket threshold. An MA Rx or EFFS Rx enrollee
establishment of special election periods and application of the guaranteed
could only elect to receive drug coverage through the plan.
Individuals
issue and renewal provisions. The enrollment process established by the
electing qualified prescription drug coverage under a PDP plan or MA Rx or
Administrator would ensure that beneficiaries who enrolled in the first open
EFFS Rx plan could not be denied enrollment based on health status or other
enrollment period (beginning November 2005) would be permitted to elect
factors. MA provisions relating to priority enrollment (where capacity limits
an eligible entity prior to January 1, 2006, in order to assure coverage was
have been reached) and limitations on terminations of elections would apply
effective on that date. In general, persons enrolled in MA plans would
to PDP sponsors. Elections would take effect at the same time that elections
receive drug coverage through their MA plans and be subject to their
take effect for MA plans. However, no election could take effect before
enrollment rules. Persons enrolled in MSA plans or private-fee-for-service
January 1, 2006. New Sections 1860D-1(c) and 1860D-5(a-c)
plans not offering qualified drug coverage would be subject to Part D
enrollment rules. New Section 1860D-3

CRS-7
Provision
S. 1
H.R. 1
Information
The Administrator would be required to broadly disseminate information to
The Administrator would be required to provide for the active dissemination
beneficiaries regarding Part D coverage. Information activities would be
of information to promote an informed selection among qualifying plans
similar to those performed for MA and be coordinated with such activities.
(based on price, quality, and other features) in a manner consistent with and in
Comparative plan information would include a comparison of benefits,
coordination with the dissemination of information under MA. Plans would
monthly beneficiary obligation, quality and performance, beneficiary cost-
have to inform each enrollee at the beginning of the year of the enrollee’s
sharing, consumer satisfaction surveys, and other information specified by the
annual out-of-pocket threshold. New Section 1860D-5(b).
Secretary. New Section 1860D-4
Administration; Financial Risk
Provision
S. 1
H.R. 1
Federal
The new CMC would administer the new Part D drug benefit and the new MA
The new MBA would administer the new Part D drug benefit and the new
administration
program. (The Centers for Medicare and Medicaid Services (CMS) would retain
MA and EFFS programs.
(CMS would retain responsibility for the
responsibility for the traditional fee-for-service program.)
A Medicare
traditional fee-for-service program.) A Medicare Policy Advisory Board
Competitive Policy Advisory Board would be established within the Center. The
would be established within the MBA. The Administrator of the MBA
Administrator of the Center would: (1) establish a process for beneficiaries to
would: (1) establish processes for beneficiaries to make Part D elections
enroll in Part D and a process for beneficiaries to enroll in plans; (2) broadly
and enroll in plans; (2) establish a process for determining the actuarial
disseminate information on plans; (3) establish a process for determining the
value of drug coverage; (3) in consultation with an advisory task force,
actuarial value of drug coverage; (4) provide for the development of national
develop standards relating to the electronic prescription drug program; (4)
standards for the drug card or other technology; (5) establish additional Part D
review bids and negotiate contracts with plan sponsors; (5) make low-
standards by January 1, 2005, and periodically review such standards; (6)
income subsidy payments and implement a plan coordinating Part D and
establish risk adjusters; (7) calculate monthly national average premiums; (8)
Medicaid; and (6) administer direct and reinsurance subsidy payments.
establish service areas; (9) negotiate contracts with plan sponsors; (10) make
The Administrator, in order to provide efficient marketing, could provide
payments to plans; and (11) administer subsidy provisions. The Administrator
information to sponsors and organizations about eligible enrollees. The
would be authorized to provide information about eligible beneficiaries to
Secretary, in conjunction with the Secretary of the Treasury, would
eligible entities with contracts under Part D.
Such information would be
coordinate the implementation of the income-related catastrophic limit.
provided as the Administrator determined necessary to facilitate enrollment with
New Sections 1860D-1(b), 1860D-2(b and e) 1860D-3(c and d),1860D-
such entities and for only so long and to the extent necessary to carry out this
4(b, c, and d), 1860D-5, 1860D-6, 1860D-7(d and e), and Section
objective. The Administrator would be authorized to establish procedures, in
1860D-8 (a, d, and g). New Section 1809 as added by Section 801.
coordination with the Secretary of the Treasury and the Secretary of Labor, for
determining whether out-of-pocket costs were being reimbursed by insurance or
other third-party arrangement. New Sections 1860D-1(a); 1860D-2(a and b),
1860D-3(a)(c), 1860D-6(c and e), 1860D-7(g, and h), 1860D-10, 1860D-11,
1860D-13(b), 1860D-14, 1860D-15, 1860D-16, and 1860D-19.

CRS-8
Provision
S. 1
H.R. 1
Noninterference
In carrying out the duties with respect to the drug program and the MA program,
In carrying out the duties with respect to the drug program, the
the Administrator could not, to the extent possible, interfere in any way with
Administrator would be specifically barred from:
(1) requiring a
negotiations between eligible entities, MA organizations, hospitals, physicians,
particular formulary or instituting a price structure for the reimbursement
other entities or individuals furnishing items or services under Medicare
of covered drugs; (2) interfering in any way with negotiations between
(including contractors), and drug manufacturers, wholesalers, or other suppliers
PDP sponsors and MA organizations and EFFS organizations and drug
of covered drugs. New Section 1808 as added by Section 301.
manufacturers, wholesalers, or other suppliers of covered outpatient drugs;
or (3) otherwise interfere with the competitive nature of providing such
coverage through such sponsors and organizations. New Section 1809 as
added by Section 801.
Administration
The benefit would be administered by an MA organization or PDP entity. A PDP
Similar provision for PDPs, MAs, and EFFSs, except eligible entities are
of benefit
entity would be an entity certified under Part D as meeting the Part D standards
not specified. New Section 1860D-4(a, c, and d)
and requirements. In general, an entity would have to be licensed under state law
as a risk bearing entity eligible to offer health benefits or health insurance
coverage in each state in which it offered a prescription drug plan. Alternatively
it could meet solvency standards established by the Administrator for entities not
licensed by the state. An “eligible entity” would be any risk bearing entity that
the Administrator determined to be appropriate to provide eligible beneficiaries
with benefits under a Medicare Prescription Drug Plan. Eligible entities would
include pharmaceutical benefit management companies, wholesale or retail
pharmacist delivery systems, insurers (including insurers that offered Medigap
policies), other risk bearing entities, or any combination of these.
This
requirement would not preclude state pharmacy assistance programs from
becoming qualified entities if they met the requirements).
New Section
1860D(a) and 1860D-7(a, c, d, and e).
Contracts
PDP entities would be required to enter into a contract with the Administrator
PDP sponsors would be required to enter into a contract with the
under which the sponsor agreed to comply both with the applicable requirements
Administrator under which the sponsor agreed to comply both with the
and standards and the terms and conditions of payment. The contract could cover
applicable requirements and standards and the terms and conditions of
more than one plan. Contracts would be for 2 years. MA contract requirements
payment. The contract could cover more than one plan. Contracts would
relating to protections against fraud and abuse, beneficiary protections,
be for at least 1 year. Many of the contract requirements applicable to MA
intermediate sanctions, and termination procedures would apply to contracts with
plans would be incorporated by reference including minimum enrollment,
PDPs. The Administrator would establish additional standards by January 1,
contract periods, allowable audits to protect against fraud and abuse,
2005, and periodically review such standards. New Section 1860D-7(b, f, and
intermediate sanctions, and contract terminations. Pro rata user fees could
h) and Section 1860D-13(f)
be established to help finance enrollment activities; in no case could the
amount of the fee exceed 20% of the maximum fee permitted for an MA
or EFFS plan. New Section 1860D-4(b)

CRS-9
Provision
S. 1
H.R. 1
Relationship to
Standards established for Part D would supersede any state law and regulation to
The standards established under Part D would supersede any state law or
state laws
the extent such law or regulation was inconsistent with such standards and in the
regulation (other than state licensing laws or laws relating to plan
same manner those standards were superseded for MA plans.
Standards
solvency). In addition, states would be prohibited from imposing premium
specifically superseded include those relating to benefits (including requirements
taxes or similar taxes with respect to premiums paid to PDP sponsors or
relating to cost-sharing and the structure of formularies), premiums,
payments made to such sponsors by the Administrator. New Section
requirements relating to inclusion or treatment of providers, coverage
1860D-4(e).
determinations (including related grievance and appeals processes), and
requirements relating to marketing materials and summaries and schedules of
benefits for a plan. States would be prohibited from imposing a premium or
similar tax with respect to premiums paid to the Administrator for PDPs and any
payments made by the Administrator to eligible entities offering such a plan.
New Section 1860D-7(h)
Service areas
The Administrator would be required to establish by April 15, 2005, and
The Administrator would designate at least 10 service areas in the U.S.,
periodically review, service areas in which plans could offer benefits. The
consistent with EFFS regions, to the extent practicable. New Section
Administrator would establish service areas so that they maximized the
1860D-4(d)(5).
availability of plans to eligible beneficiaries and minimized the ability of entities
offering plans to favorably select beneficiaries.
The Administrator would
establish at least 10 service areas which would have to include at least one state.
States could not be divided so that portions of a state were in different service
areas. To the extent possible, multi-state metropolitan statistical areas (MSAs)
would be in a single service area. MSAs could be divided, where necessary, to
establish service areas of such size and geography as to maximize plan
participation. The Administrator could conform service areas to those established
for preferred provider organizations under MA. New Section 1860D-10.
Risk adjusters
The Administrator would be required to establish a method for adjusting
Direct subsidy payments could be risk adjusted, to the extent the
premium payments to plans to take into account variations in costs based on the
Administrator determined it appropriate to avoid risk selection. The
differences in actuarial risk of different enrollees being served.
Any risk
adjustment would be based on factors specified by the Administrator and
adjustment would be designed in a budget neutral manner. The Administrator
be designed to be budget neutral. New Section 1860D-8(c).
could take into account similar methodologies used to adjust payments for MA
organizations.
The Administrator would be required to publish such risk
adjusters not later than April 15 each year (beginning in 2005) to be used for
computing payments to plans for standard coverage. New Section 1860D-11

CRS-10
Provision
S. 1
H.R. 1
Submission of
Entities would submit bids to the Administrator on an annual basis. The bid
Each PDP sponsor would be required to submit specified information to
bids
would contain information on proposed plans including benefits, actuarial value
the MBA Administrator in the same manner information was submitted by
of the qualified prescription drug coverage, the service area for the plan, and the
MA organizations. Required information would include information on
monthly premium. Premium information would have to include an actuarial
qualified drug coverage provided; actuarial value of the coverage; and bid
certification of the basis for the premium, the portion of the premium attributable
and premium for coverage. The Administrator could not approve the
to benefits in excess of standard coverage, and the reduction in bids attributable
premium unless it accurately reflected: (1) the value of benefits provided;
to reinsurance payments. Entities would also be required to provide information
and (2) the 73% federal subsidy for standard benefits. New Section
on whether the entity planned to use any funds in the plan stabilization reserve
1860D-6(a).
fund that were available to the entity for the purpose of stabilizing or reducing
the monthly premium. Service areas covered by the bid could either be the entire
area of one of the service areas established by the Administrator or the entire area
covered by Medicare. Entities could submit separate bids for multiple service
areas, provided each bid was for a single service area. New Section 1860D-12
Plan approval
The Administrator could not approve a plan unless the premium, for both
The Administrator would have the same authority to negotiate the terms
standard coverage and for any additional benefits, accurately reflected the
and conditions of the plans as the Director of the Office of Personnel
actuarial value of the benefits less the actuarial value of reinsurance payments
Management has with respect to Federal Employee Health Benefits
and any stabilization funds used. Each bid submitted by an entity for a qualified
(FEHB) plans. The Administrator would be required to take into account
plan would have to reasonably and equitably reflect the cost of benefits provided
subsidy payments for covered benefits in negotiating the terms and
under that plan. The Administrator would have the authority to negotiate the
conditions regarding premiums. New Section 1860D-4(b)
terms and conditions of the proposed monthly premiums and other terms and
conditions of proposed plans. The Administrator could disapprove, or limit
enrollment in, a proposed plan based on costs to beneficiaries, the quality of
coverage and benefits, the adequacy of the plan network, average aggregate
projected costs of covered drugs, and other factors determined appropriate by the
Administrator. The Administrator could approve a plan only if it provided the
required benefits and was not designed to result in a favorable selection of
beneficiaries. New Section 1860D-12(a-c).
Federal
The Administrator would pay each entity offering a drug plan an amount equal
The federal government would pay direct subsidies and reinsurance
payments to
to the full monthly approved premium, with appropriate risk adjusters. Payments
payments to PDPs, MA Rx and EFFS Rx plans which would equal 73%
plans
to plans would be adjusted to account for differences in actuarial risk of different
of the value of standard coverage. Direct subsidies would be equal to
enrollees being served. Reinsurance payments would be made on behalf of: (1)
43% of the national weighted average monthly bid amount for standard
persons enrolled in a PDP; (2) MA plan (except for MSA plan or private fee-for-
coverage. Each year, the Administrator would compute a national average
service plan not providing qualified coverage); (3) persons eligible for but not
monthly bid amount equal to the average of the benchmark bid amounts
enrolled in Part D and covered under a qualified retiree plan; (4) persons eligible
(i.e., amounts for standard coverage) for each drug plan (not including
for but not enrolled in Part D and covered under a qualified state pharmaceutical
those offered by private-fee-for service entities) adjusted to add back the

CRS-11
Provision
S. 1
H.R. 1
assistance program. Qualified retiree plans and state pharmaceutical assistance
value of reinsurance subsidies. Reinsurance payments would be equal
programs would have to provide coverage at least equal to the actuarial value of
to 30% of the value of standard coverage. Reinsurance payments would
standard coverage. Reinsurance payments would be made to plans in the case of
be provided for: (1) 30% of an individual’s allowable drug costs between
individuals whose spending exceeded the out-of-pocket limit. Payments to plans
$1,001 and $2,000 (in 2006); and (2) 80% for costs over the out-of-pocket
would equal 80% (65% in the case of persons in a state pharmaceutical assistance
limit (in general, $3,500 in 2006). The Administrator would
program) of allowable drug costs exceeding the limit. Administrative costs, and
proportionately adjust payments so that total reinsurance payments for the
costs for coverage in excess of the standard benefit would not be included.
year equaled 30% of total payments by qualifying plans for standard
Payment methods would be determined by the Administrator. Any plan sponsor
coverage during the year. The Administrator could adjust direct subsidy
that was not an employer would be required to redistribute reinsurance payments
payments in order to avoid risk selection. New Section1860D-8.
to employers contributing to the plan maintained by the sponsor; the payments
would be allocated proportionately among all employers contributing to the plan.
New Section 1860D-16(a) and 1860D-20.
Assumption of
A portion of total payments to plans would be subject to risk. Entities would be
Plans would be required to assume full financial risk on a prospective
financial risk
required to notify the Administrator for each year (beginning in 2007) of the total
basis for covered benefits except: (1) as covered by federal direct subsidy
actual costs the entity incurred in providing standard coverage in the preceding
payments or reinsurance payments for high cost enrollees; or (2) as
year. Total actual costs would reflect total payments made to pharmacies and
covered by federal incentive payments to encourage plans to expand
other entities for coverage net of the aggregate amount of discounts, direct or
service areas for existing plans or establish new plans. The entity could
indirect subsidies, rebates, or other price concessions or direct or indirect
obtain insurance or make other arrangements for the cost of coverage
remunerations made to the entity. The notification would not include spending
provided to enrollees. New Section 1860D-4(a).
for administrative costs, amounts spent for coverage in excess of standard
coverage, or amounts for which the entity subsequently received reinsurance
payments. Risk corridors, defined as specified percentages above and below a
target amount would be established. The target amount would be defined as the
total of plan premiums minus a percentage (negotiated between the Administrator
and the entity) for administrative costs. No payment adjustment would be made
if allowable costs were between the first threshold lower limit and the first
threshold upper limit for the year, i.e., if the plans were within the first risk
corridor. A portion of any plan spending above or below these levels would be
subject to risk adjustments. If allowable costs exceeded the first threshold upper
limit, then payments would be increased. If allowable costs were below the first
threshold lower limit, payments would be reduced. During 2006 and 2007, plans
would be at full risk for drug spending within 2.5% above or below the target.
Plans would be at risk for 25% of spending exceeding 2.5% (first threshold upper
limit) and below 5.0% of the target (second threshold upper limit). That is, their
payments would equal 75% of the allowable costs for spending in this range.
They would be at risk for 10% of the spending exceeding 5% of the target. That

CRS-12
Provision
S. 1
H.R. 1
is their payments would equal 90% of the allowable costs for spending in this
range. Conversely, if plans fell below the target, they would share the savings
with the government. They would have to refund 75% of the savings if costs fell
between 2.5% and 5% below the target level, and 10% of any amounts below 5%
of the target. A special transition corridor would be established in the first 2
years. The Administrator would make a payment adjustment if the Administrator
determined that 60% or more of all participating plans (including MA plans)
representing at least 60% of covered beneficiaries had allowable costs that were
more than 2.5% above the target. Risk corridor payments would equal 90% of
any spending greater than 2.5% of the target but below 5% of the target. For
2007-2011, plans would be at full risk for drug spending within 5.0% above or
below the target level. Plans would be at risk for 50% of spending exceeding
5.0% and below 10.0% of the target level. They would be at risk for 10% of the
spending exceeding 10% of the target level. New Section 1860D-16(b)
Stabilization
The Administrator would be required to establish a stabilization reserve fund,
No provision.
fund
within the Prescription Drug Account. If the target amount for a plan for any
year 2006-2010 exceeded applicable costs by more than 3% for the year, the
entity would pay the Administrator the amount of such excess; the Administrator
would deposit such amount in the fund on behalf of the entity. Applicable costs
would be defined as the sum of allowable costs and the amount by which
monthly payments were reduced through application of the risk corridor
provisions.
At appropriate intervals, the Administrator would notify a
participating entity of the balances in any of its stabilization accounts. Beginning
in 2008, entities would be permitted to use account funds to stabilize or reduce
plan premiums. The accounts would expire after 5 years. Any amounts not used
by an eligible entity or that was deposited for use by an entity that no longer had
a Part D contract would revert to the use of the Prescription Drug Account. New
Section 1860D-16(c)
Access
The Administrator would approve at least two contracts to offer a drug plan in an
The Administrator would assure that all eligible individuals residing in the
area. Contracts would be awarded for 2 years. If the Administrator determined
U.S. would have a choice of enrollment in at least two qualifying plan
that at least two plans were not going to be available in the subsequent year, the
options (at least one of which was a PDP) in their area of residence. The
Administrator would reduce the amount of risk required by plans in a region.
requirement would not be satisfied if only one PDP sponsor or one MA or
This would be achieved by adjusting the percentages applicable to risk corridors
EFFS organization offered all the qualifying plans in the area.
If
established under the bill. Alternatively, the reinsurance percentage could be
necessary to ensure such access, the Administrator would be authorized
increased. The Administrator could not provide for the full underwriting of
to provide financial incentives, including the partial underwriting of risk

CRS-13
Provision
S. 1
H.R. 1
financial risk for any entity and could not provide for the underwriting of any
(beyond subsidy payments), for a PDP sponsor to expand its service area
financial risk for a public entity. The Administrator would seek to maximize the
under an existing prescription drug plan to adjoining or additional areas,
assumption of financial risk to ensure fair competition among plans.
The
or to establish such a plan, including offering such plan on a regional or
authority would be used only so long as, and to the extent necessary, to assure
nationwide basis. The assistance would be available only so long as, and
access. The authority could not be used if two or more qualified bids were
to the extent necessary, to assure the guaranteed access. However, the
submitted in an area by qualified entities. New Section 1860D-13(d)
Administrator could never provide for the full underwriting of financial
risk for any PDP sponsor. Additionally, the Administrator would be
directed to seek to maximize the assumption of financial risk by PDP
sponsors and MA and EFFS organizations. New Section 1860D-5(d).
Fallback
Not later than September 1 of each year, beginning in 2005, the Administrator
No provision.
would make a determination as to whether there were two approved bids. If not,
the Administrator would enter into an annual contract with an entity to provide
Part D enrollees in the area with standard coverage (including access to
negotiated prices) for the following year. The Administrator could enter into only
one contract for each such area. A single entity could be awarded contracts for
more than one such area. The Administrator could not enter into such a contract
if the Administrator received two or more qualified bids after exercise of the
authority to reduce risk for entities.
Entities would be required to meet
beneficiary protection requirements. Beneficiary premiums for a fallback plan
would be set at the premium amount that would apply if the plan premium
equaled the national weighted average premium for the area, as adjusted for
geographic differences in drug prices. The contract with the plan would provide
for payments to the plans for the negotiated costs of covered drugs and payment
of prescription management fees tied to performance management fees
established by the Administrator. Performance requirements established by the
Administrator would include the following; (1) the entity contained costs to the
Prescription Drug Account and to beneficiaries; (2) the entity provided quality
clinical care; and (3) the entity provided quality services. The fallback plan
would not be permitted to engage in any marketing or branding of the contract.
An entity that submitted a bid to be a qualified risk-bearing entity could not
submit a bid to be a fallback plan.
In the case of an area with only one
competitively bid contract, the plan (at the plan’s option) could be offered under
the rules established for risk-bearing plans. Beneficiaries could enroll with such
plan or with the fallback plan. New Section 1860D-13(e).

CRS-14
Provision
S. 1
H.R. 1
Pharmacies
An entity would be required to establish a point-of-service method of operation
PDP plan sponsors and entities offering an MA Rx or EFFS Rx plan
under which the plan would provide access to any or all pharmacies not
would be required to permit the participation of any pharmacy meeting the
participating in the network and could charge beneficiaries, through adjustments
plan’s terms and conditions. A PDP and an MA Rx or EFFS Rx plan
in cost sharing, the additional costs associated with this option. This additional
could reduce copayments for its enrolled beneficiaries below the otherwise
cost sharing would not count toward the program’s cost-sharing requirements or
applicable level for drugs dispensed through in-network pharmacies; in no
benefit limits. Entities would be required to permit enrollees to receive benefits
case could the reduction result in an increase in subsidy payments made
(which could include a 90-day supply of drugs or biologicals) through a
by the Administrator to the plan. PDP sponsors and entities offering an
community pharmacy, rather than through mail order; a differential amount
MA Rx or EFFS Rx plan would be required to secure participation in its
(which would not count toward the catastrophic limit) could be paid by enrollees.
network of a sufficient number of pharmacies that dispensed drugs
New Section 1860D-5(b).
directly to patients (other than by mail order) to assure convenient access.
The Administrator would establish convenient access rules which would
be no less favorable to enrollees than those established by the Secretary of
Defense for the TRICARE Retail Pharmacy program. Sponsors would
permit enrollees to receive benefits (which could include a 90-day supply
of drugs or biologicals) through a community pharmacy rather than
through mail-order, with any difference in charge paid by the enrollee.
Pharmacies could not be required to accept insurance risk as a condition
of participation. PDP sponsors would be required, when establishing fees
for pharmacists, to take into account the costs associated with the
medication therapy management program. New Section 1860D-3(c).
Requirements for MA and EFFS Organizations
Provision
S. 1
H.R. 1
Organization
MA enrollees would obtain drug benefits through their MA plan (except for MSA
Beginning January 1, 2006, a
MA organization could not offer a
requirements
enrollees and enrollees in private fee-for-service plans not offering drug
coordinated care MA plan unless either that plan or another plan offered
coverage). Other Part D enrollees would receive their drug coverage through
by the organization in the area included qualified drug coverage. It could
enrollment in a PDP offered in the geographic area in which the beneficiary
not offer drug coverage (other than that already required under Medicare)
resided. Part C requirements relating to MA would be applied (unless otherwise
unless the coverage was at least qualified prescription drug coverage. An
specified) as if: (1) any reference to an MA plan included a reference to a
individual not electing qualified prescription drug coverage under Part D
Medicare Prescription Drug plan; (2) any reference to a provider-sponsored
would be treated as ineligible to enroll in a MA plan offering such
organization included a reference to an eligible entity, (3) any reference to a
coverage.
The organization would be required to meet beneficiary
contract included a reference to a drug plan contract, and (4) any reference to Part
protections outlined in the new Section 1860D-3, including requirements
C included a reference to Part D. New Section 1860D(b).
relating to information dissemination and grievance and appeals. The
organization would also be required to submit the same information

CRS-15
Provision
S. 1
H.R. 1
required of PDP sponsors when submitting a bid. The Administrator
could waive such requirements to the extent the Administrator determined
they were duplicative of requirements otherwise applicable to the
organization or plan. MA organizations providing qualified drug coverage
would receive low-income subsidy payments, and direct and reinsurance
subsidies. A single premium would be established for drug and nondrug
coverage.
The same requirements would be applicable to an EFFS
organization. Section 102
Requirements
No provision.
MA private fee-for-service plans would not be required to negotiate prices
for fee-for-
or discounts; however, to the extent a plan did so, it would be required to
service plans
meet related Part D requirements. If such a plan provided access to all
pharmacies without charging additional copayments, it would not be
required to meet the any willing pharmacy requirement.
The drug
utilization management program requirement would not apply to such
plans.
If the plan provided coverage for drugs purchased from all
pharmacies without entering into contracts or agreements, the requirement
for public disclosure of pharmaceutical prices of the lowest cost equivalent
generic drugs would not apply. Section 102
Pricing; Cost-Controls
Provision
S. 1
H.R. 1
Drug pricing and
The PDP sponsor and MA organizations would determine payments and
Similar provisions. New Section 1860D-2(d) and 1860D-6.
payment
would be expected to negotiate discounts. New Sections 1860D-5(b)
and 1860D-12.
Access to
Eligible entities would be required to have in place procedures to ensure
Both standard coverage and actuarially equivalent coverage would have to
negotiated prices
that beneficiaries were not charged more than the negotiated price of a
provide beneficiaries access to negotiated prices (including applicable
covered drug. The procedures would include the issuance of a card or
discounts) even when no benefits were payable because the beneficiary had
other technology that could be used by a beneficiary to assure access to
reached the initial coverage limit. The PDP sponsor or MA or EFFS entity
negotiated prices for which coverage was not otherwise provided under
would be required to disclose to the Administrator the extent to which
the plan. The PDP or MA organization would be required to disclose
manufacturer discounts or rebates or other remunerations or price concessions
to the Administrator the extent to which manufacturer discounts or
were made available to the sponsor or organization and passed through to
rebates, or other price concessions or direct or indirect remunerations
enrollees through pharmacies and other dispensers. Manufacturers would be
were made available to the sponsor or organization and passed through
required to disclose pricing information to the Administrator under the same

CRS-16
Provision
S. 1
H.R. 1
to enrollees through pharmacies and other dispensers. Manufacturers
conditions currently required for Medicaid. New Section 1860D-2(d).
would be required to disclose pricing information to the Administrator
under the same conditions currently required for Medicaid.
New
Section 1860D-5(b) and 1860D-6(e)
Cost-controls;
Entities could use a variety of cost control mechanisms including
Similar formulary provision, except: (1) pharmacy and therapeutic committee
formularies
formularies, tiered copayments, selective contracting with drug
not required to have an academic expert; (2) the only reference cited for the
providers, and mail order pharmacies. Plans electing to use a formulary
purpose of establishing classes of drugs would be standards published in the
would be required to establish a pharmacy and therapeutic committee
United States Pharmacopeia-Drug Information; (3)any change in the preferred
(that included at least one academic expert, at least one practicing
or tier cost-sharing status of a drug could take effect only after appropriate
physician, and at least one practicing pharmacist) to develop and review
notice to beneficiaries and physicians; and (4) plans would be required to
the formulary. The committee would base clinical decisions on the
provide for periodic evaluation and analysis of treatment protocols and
strength of scientific evidence and standards of practice. The committee
procedures in connection with the formulary. New Section 1860D-3(c, e and
would establish policies and procedures to educate and inform health
f)
care providers concerning the formulary. Drugs could not be removed
from the formulary until after appropriate notice had been provided to
beneficiaries, physicians, and pharmacists. An enrollee would have the
right to appeal to obtain coverage for a drug not on the formulary if the
prescribing physician determined that the formulary drug was not as
effective for treatment of the same condition for the individual or had
adverse effects for the individual. If a plan offered tiered cost-sharing
for covered drugs, an enrollee would have the right to request that a
nonpreferred drug be treated on terms applicable for a preferred drug if
the prescribing physician determined that the preferred drug was not as
effective for treatment of the same condition for the individual or had
adverse effects for the individual. The formulary would be required to
include drugs within all therapeutic categories and classes of covered
drugs (although not necessarily for all drugs within such categories and
classes). For purposes of defining therapeutic categories and classes,
the Administrator would use the following compendia: American
Hospital Formulary Service Drug
Information, United States
Pharmacopeia-Drug Information, the DRUGEX Information System,
and American Medical Association Drug Evaluations, and other
recognized sources, as determined appropriate by the Administrator.
New Section 1860D-5(b, d and e) and 1860D-6(a).

CRS-17
Requirements
Provision
S. 1
H.R. 1
Beneficiary
Plans would be required to comply with a number of beneficiary
Plans would be required to comply with a number of beneficiary protection
protections
protections including those related to:
(1) guaranteed issue and
provisions including those related to: (1) guaranteed issue and community-
community-rated premiums; (2) information disclosure; (3) assuring the
rated premiums; (2) non-discrimination; (3) information disclosure; (4)
participation of a sufficient number of pharmacies that dispensed drugs
assuring the participation of a sufficient number of pharmacies that dispensed
directly to patients to assure convenient access; (4) a cost and drug
drugs directly to patients to assure convenient access; (5) issuance of a card so
utilization management program including medication therapy
beneficiaries could assure access to negotiated prices when coverage was not
management; (5)programs to control fraud and abuse; (6) provisions for
otherwise available under the plan; (6) a cost and drug utilization management
hearing and resolving grievances and handling appeals; including
program including medication therapy management; (7) effective 2007, an
independent review of coverage denials and appeals; (7) safeguarding
electronic prescription drug program that provided for electronic transfer of
the privacy of medical records; and (8) conduct of consumer satisfaction
prescriptions and provision of information to the prescribing health
surveys. Pharmacies or other dispensers would be required to assure
professional; (8) programs to control fraud and abuse; (9) provisions for
that beneficiaries were informed at the time of purchase of any
hearing and resolving grievances and handling appeals; and (10) safeguarding
difference between the price of the prescribed drug and the lowest cost
the privacy of medical records. Each PDP sponsor and entity offering a MA
generic drug that was therapeutically equivalent and bioequivalent and
Rx or EFFS Rx plan would ensure that each pharmacy or other dispenser
that is available at the pharmacy or other dispenser. New Section
informed enrollees at the time of purchase, of any price differential between
1860D-5
their prescribed drug and the price of the lowest cost generic drug covered
under the plan that was therapeutically equivalent and bioequivalent. New
Sections 1860D-1(c), 1860D-2(d), 1860D-6(b), and 1860D-3.
Standards for
A new Part D in Title XI of the Social Security Act would be
PDP sponsors would be required, beginning in 2007, to have an electronic
electronic
established. It would require the development or adoption of standards
prescription drug program. The program would have to be consistent with
prescribing;
for transactions and data elements for such transactions, to enable the
national standards developed by the Administrator. The program would be
Electronic
electronic transmission of medication history, eligibility, benefit and
required to provide for electronic transmittal of prescriptions (except in
Prescription
other prescription information.
In developing the standards, the
emergencies and exceptional cases) and for provision of information to the
Program
Secretary would be required to consult with representatives of
prescribing health professional. To the extent feasible, the program would
physicians, hospitals, pharmacists, standard setting organizations,
permit the prescribing health professional to provide, and be provided,
pharmacy benefit managers, beneficiaries, information exchange
information on an interactive realtime basis.
The standards would be
networks, technology experts, and representatives of the Departments
compatible with those established for the administrative simplification program
of Veterans Affairs and Defense and other interested parties. Patients
established under Title XI of the Social Security Act. The Administrator
could request a written prescription and not be charged for such request.
would establish an advisory task force to provide recommendations to the
The standards would accommodate the electronic transmittal of
Administrator on standards including recommendations relating to: (1) range
information among prescribing and dispensing professionals at the point
of available computerized prescribing software and hardware and their costs
of care. The information that could be transmitted using the standards
to develop and implement; (2) extent to which such standards and systems
would include: information on the drugs prescribed for the patient;
reduced medication errors and could be readily implemented by physicians,
cost-effective alternatives (if any) to the drug prescribed; information
pharmacies, and hospitals; (3) efforts to develop uniform standards and a

CRS-18
Provision
S. 1
H.R. 1
on eligibility and benefits (including the drugs included in the
common software platform for the secure electronic transmission of
applicable formulary and any requirements for prior authorization);
information; (4) efforts to develop and promote universal connectivity and
information on potential drug interactions; and other information to
interoperability for the secure exchange of information; (5) cost of
improve the quality of care and
to reduce medical errors.
The
implementing such systems in hospital and physician office settings and
standards would be designed so that, to the extent practicable, they did
pharmacies; and (6) implementation issues as they relate to administrative
not impose an undue administrative burden on the practice of medicine,
simplification requirements and current federal and state prescribing laws and
pharmacy, or other health professions. The standards developed or
regulations and their impact on implementation of computerized prescribing.
adopted by the Secretary would be consistent with federal regulations
The Administrator would be required to establish the task force by April 1,
concerning the privacy of individually identifiable health information
2004. It would be required to submit recommendations to the Administrator
and compatible with administrative simplification standards.
The
by January 1, 2005. The Administrator would be required to promulgate
Secretary would adopt standards for the exchange of appropriate and
national standards by January 1, 2006. New Section 1860D-3(d)(3).
necessary information among prescribing and insurance entities and
other necessary entities.
The Secretary would have to adopt the
standards by January 1, 2006, and would be permitted to modify them,
but only in a manner that minimized the disruption and cost of
compliance.
Individuals or entities that transmitted or received
prescriptions electronically would be required to comply with the
standards. Entities covered by the standards would have 24 months to
comply. Small health plans, as defined by the Secretary, would have an
additional 12 months to comply.
A new Section 1180A would
authorize the Secretary to award grants to health care providers to
implement electronic prescription programs. There would be authorized
to be appropriated such sums as may be necessary for each of fiscal
years 2006, 2007, and 2008. Section 121.
Financing
Provision
S. 1
H.R. 1
In general
A separate account, known as the Prescription Drug Account, would be
A Medicare Prescription Drug Trust Fund would be created. Low-income
established within the Part B Trust Fund. Funds in this Account would
subsidies, direct subsidies, reinsurance payments, and federal administrative
be kept separate from other funds within the Trust Fund. Payments
costs would be paid from this fund. Funds would be transferred to state
would be made from the Account to eligible entities and MA plans and
Medicaid programs attributable to allowable increases in administrative costs
sponsors of qualified retiree plans, and for low-income subsidies,
associated with identifying and qualifying beneficiaries eligible for low-
reinsurance payments, and administrative expenses. Appropriations
income subsidies. Amounts deposited into the Trust Fund would include the
would be made to the Account equal to the amount of payments and
federal amount which would otherwise be payable by Medicaid except for the

CRS-19
Provision
S. 1
H.R. 1
transfers made from the Account. New Section 1860D-25.
fact that Medicaid became the secondary payer of drug benefits for the dual
eligibles. General revenues would be appropriated to cover remaining costs.
New Section 1860D-9.
Low-Income
Provision
S. 1
H.R. 1
Persons eligible for
Medicaid beneficiaries eligible for medical and drug benefits under their
Beneficiaries with incomes below 150% of poverty and assets below a
subsidies
state Medicaid program (including the medically needy) would continue
specified threshold would be eligible for low-income subsidies. The definition
to receive drug benefits through Medicaid.
Persons meeting the
of income would be tied to that currently used for the QMB, SLIMB, and QI-1
definition of QMB, SLMB, or QI-1, and not eligible for Medicaid
programs. In 2006, the definition of resources would be three times that used
medical and drug benefits would receive their drug benefits through
for the supplemental security income program (i.e., $6,000 for an individual,
Part D. The definition of income would be tied to that currently used
$9,000 for a couple, subject to certain exclusions).
In future years, this
for the QMB, SLIMB, and QI-1 programs (100% federal poverty level
resource level would be increased by the annual increase in the consumer price
for QMB, 120% for SLIMB and 135% for QI-1, subject to certain
index. New Section 1860D-7(a).
exclusions). The current definition of assets ($4,000 for an individual,
$6,000 for a couple) would apply (States may, however, waive the
assets tests). Coverage would also be extended to persons below 160%
of the federal poverty level not meeting the definition of dual eligible,
QMB, SLIMB, or QI-1; no assets tests would apply for this group.
Beginning January 1, 2009, to the extent a state had not already
eliminated application of an assets test, it would be required to permit
individuals to make a self-declaration that assets did not exceed $10,000
for an individual or $20,000 for a couple. In subsequent years, these
amounts would be increased by the increase in the consumer price
index. By January 1, 2005, the Secretary would submit a report to
Congress on recommendations for a voluntary option for dual eligibles
to enroll in Part D drug plans. New Section 1860D-19 and Section
104(e)
Subsidy benefit
QMBs:
Beneficiaries would have 100% premium subsidy for
Income at or below 135% of poverty (and assets below threshold):
premiums provided the plan premium was at or below the national
Beneficiaries would have a Part D premium subsidy equal to 100% of the
weighted average premium (or the lowest premium in the area if none
value of standard drug coverage provided under the plan. Beneficiary cost-
was below the national weighted average). The benefit package would
sharing for spending up to the initial coverage limit ($2,000 in 2006) would be
be defined as having a zero deductible, cost-sharing of 2.5% instead of
reduced to an amount not to exceed $2 for a multiple source or generic drug
50% for costs below the initial coverage limit ($4,500 in 2006); 5.0%
and $5 for a non-preferred drug. No deductible would be imposed. PDPs

CRS-20
Provision
S. 1
H.R. 1
instead of 100% cost-sharing for costs above the initial coverage limit
could not charge individuals receiving cost-sharing subsidies more than $5 per
and below the annual catastrophic limit ($3,700 in 2006), and 2.5%
prescription. (The dollar amounts for cost-sharing charges would be increased
instead of 10% cost-sharing for costs above the catastrophic limit.
in future years by the percentage increase in beneficiary drug costs). Income
SLIMBs and QI-1s: Beneficiaries would the same premium subsidy as
between 135% and 150% of poverty (and assets below threshold):
QMBs.
The benefit package would be defined as having a zero
Beneficiaries would have a sliding scale premium subsidy ranging from 100%
deductible, 5.0% cost-sharing for costs below the initial coverage limit;
of the value of standard coverage at 135% of poverty to 0% of such value at
10.0% cost-sharing for costs above the initial coverage limit and below
150% of poverty. Both groups: PDPs could reduce to zero the cost-sharing
the annual catastrophic limit, and 2.5% cost-sharing for costs above the
otherwise applicable for generic drugs. No coverage would be provided for
catastrophic limit. Persons with incomes below 160% of poverty, not
costs between the initial coverage limit ($2,000 in 2006) and the catastrophic
otherwise eligible for low-income benefits: These persons would have
limit ($3,500 in 2006); however, subsidy payments would count toward the
a sliding scale premium subsidy ranging from 100% of the premium at
out-of-pocket limit. New Section 1860D-7(a-c).
135% of poverty to 0% at 160% of poverty with no additional premium
costs provided the plan premium was at or below the national weighted
average premium (or the lowest premium in the area if none was below
the national weighted average). The benefit package for this population
would be defined as having a $50 deductible in 2006 (indexed in
subsequent years by the annual percentage increase in average per
capita Medicare drug expenditures), 10.0% cost-sharing for costs below
the initial coverage limit; 20.0% cost-sharing for costs above the initial
coverage limit and below the annual catastrophic limit, and 10.0% cost-
sharing for costs above the catastrophic limit. All groups: Plans could
waive or reduce cost-sharing otherwise applicable.
New Section
1860D-19
Administration of
The Administrator would implement a process to notify the eligible
The Administrator would provide a process whereby the Administrator would
subsidy
entity or MA plan that the individual was eligible for a cost-sharing
notify the PDP sponsor or MA Rx or EFFS Rx entity that an individual was
subsidy and the amount of the subsidy. The entity would reduce the
eligible for a subsidy and the amount of the subsidy. The sponsor or entity
applicable cost-sharing and submit information to the Administrator on
would reduce the premiums or cost-sharing otherwise imposed by the amount
the amount of the reduction. The Administrator would periodically and
of the subsidy. The Administrator would periodically, and on a timely basis,
on a timely basis reimburse the entity or organization for the amount of
reimburse the sponsor or entity for the amount of the reductions. New Section
the reductions. New Section 1860D-19
1860D-7(d)
Relationship to
States would be required to make low-income eligibility determinations
States would be required to maintain Medicaid benefits as a wrap around to
Medicaid
for low-income subsidies. States would be required, for purposes of the
Medicare benefits for dual eligibles; states could require that these persons
transitional prescription drug card assistance program (see below), to
elect Part D drug coverage.
States, as a condition of receiving federal
establish eligibility standards consistent with that program; establish
Medicaid assistance, would be required to make eligibility determinations for
procedures for providing presumptive eligibility determinations (similar
low-income premium and cost-sharing subsidies, inform the Administrator of

CRS-21
Provision
S. 1
H.R. 1
to that which currently apply for low-income pregnant women and
cases where eligibility has been established, and otherwise provide the
children); make eligibility determinations for the card program; and
Administrator with information that may be needed to carry out Part D. If a
communicate to the Secretary information on eligibility determinations
state elected to use negotiated prices for a drug under its Medicaid program,
or discontinuations. For purposes of the low-income subsidies for the
the Medicaid rebate requirements would not apply for that drug. Further, the
new Part D program, states would be required, beginning November
bill would exempt any prices negotiated by a PDP, Medicare+Choice plan, or
2005, to make eligibility determinations; inform the Administrator of
qualified retiree program from Medicaid’s determination of “best price” for
cases where eligibility was established, and otherwise provide the
purposes of the Medicaid drug rebate program. Section 103 and Section
Administrator with any information required to carry out Part D. States
1860D-2(d).
would be required to enter agreements with the Commissioner of Social
Security to use all social security field offices in the state as information
and enrollment sites for making eligibility determinations. As part of
the eligibility determination process, states would also be required to
screen for eligibility for Medicare cost-sharing assistance under the
QMB, SLIMB, and QI-1 programs. If a state elected to use negotiated
prices for a drug under its Medicaid program, the Medicaid rebate
requirements would not apply for that drug. Any prices negotiated by
a PDP plan, MA plan, or qualified retiree program would be exempted
from Medicaid’s determination of “best price” for purposes of the
Medicaid drug rebate program. Section 104 (b and d) and New
Section 1860D-6(e).
Matching payments
The federal government would pay an enhanced matching rate for
There would be a federal phase-in of increased costs associated with low-
administrative costs associated with making eligibility determinations
income eligibility determinations. In 2005, the federal matching rate would be
for both the transitional and Part D programs. The rate would be 75%
increased by 6-2/3% and in 2006 by 13-1/3%. In each subsequent year, the
for the period January 1, 2004-September 30, 2005, 70% for fiscal year
percent would be increased by 6-2/3 percentage points (but in no case could
2006, 65% for FY2007, and 60% beginning in FY2008. Beginning
the rate exceed 100%). Beginning in 2019, the federal matching rate would be
November 1, 2005, the rate would be 100% for purposes of making
100%. There would also be a federal phase-in of the costs of premiums and
eligibility determinations for low-income subsidies. In addition, states
cost-sharing subsidies for dual eligibles (i.e., persons eligible for Medicare and
would be entitled to enhanced matching for the costs associated with
full Medicaid benefits, including drugs). Over the 2006-2020 period, the
designing, developing, acquiring and installing improved eligibility
federal matching rate for these costs would be increased to cover 100% of what
determination systems, including hardware and software, for low-
would otherwise be state costs. Section 103.
income subsidy programs. The enhanced rate would be 90% for fiscal
years 2004, 2005, and 2006. The systems would be required to comply
with any standards established by the Secretary for improved eligibility
systems. Further, the systems would have to be compatible with the
standards established under the administrative simplification provisions
of Title XI of the Social Security Act. Section 104(b)

CRS-22
Provision
S. 1
H.R. 1
Part B premiums
Beginning January 1, 2006, states agreeing to provide a drug benefit to
No provision.
their dual eligible population that was at least equivalent to minimum
standards would be relieved of their responsibility to pay Medicare Part
B premiums for persons with incomes between the level established for
the supplemental security income program and 100% of the federal
poverty level.
A state would be required to meet all current law
coverage standards for dual eligibles under Medicaid, including nominal
cost-sharing requirements. States would have to provide beneficiary
protections equivalent to those provided under Part D. States could not
place a limit on the number of prescriptions for dual eligibles.
Appropriate transfers would be made from the Treasury to the Part B
trust fund. Section 104(b).
Part A cost-sharing
If on the date of enactment, a state provided medical assistance to aged
No provision.
and disabled persons up to 100% of poverty, it would be entitled to have
the federal government assume the costs for Medicare Part A cost-
sharing. The Part A costs would be assumed so long as the state
maintained the expanded coverage.
The provision would apply
effective January 1, 2006. Appropriate transfers would be made from
the Treasury to the Part A trust fund. Section 104(b).
Territories
Residents of the territories would not be eligible for regular low-income
Similar provision except for funding. The aggregate amount available would
subsidies.
However, territories would be able to get additional
be $25 million in 2006, increased in subsequent years by the annual percentage
Medicaid funds, provided they formulated a plan on how they would
increase in prescription drug costs for Medicare beneficiaries. Section 103(d).
dedicate the funds to assist low-income Medicare beneficiaries in
obtaining covered outpatient prescription drugs. The aggregate amount
available would be $37.5 million for the last three quarters of FY2006,
and $50 million for FY2007. In subsequent fiscal years, the aggregate
amount would be the amount available the previous year, increased by
the percentage increase in prescription drug spending. The Secretary
would be required to report to Congress on the application of the law in
the territories. Section 103(b).
QI-1 program
The QI-1 program would be extended through December 2008 with
No provision.
total annual allocations of $400 million through fiscal year 2008 and
$100 million for the first quarter of fiscal 2009.

CRS-23
Provision
S. 1
H.R. 1
Cost-sharing for
The cost-sharing specified under the low-income subsidy provisions
No provision.
persons with
would be modified for persons diagnosed with cancer. The cost-sharing
specified diseases
specified under new Section 1860D-19 would apply except for the
following changes. The QMB population would have a full premium
subsidy for at least one drug plan available in the area where the
beneficiary resided. For the SLIMB and QI-1 population, there would
be no premium for any plan whose premium was at or below the
monthly national average premium. For other persons below 160% of
poverty, the premium would be only a percentage of the premium
otherwise applicable. Persons with incomes above 160% of the poverty
line would have, in 2006, the same cost-sharing otherwise specified
under the bill. The same provisions would apply for persons diagnosed
with cardiovascular disease, cancer, diabetes, or Alzheimer’s disease.
Sections 108 and 109.
Relationship to Retiree Plans
Provision
S. 1
H.R. 1
Payments
toward
Payments made by retiree plans for cost-sharing charges would not
Similar provision. New Section 1860D-2(b)(4)(C).
out-of-pocket limit
count toward out-of-pocket limit. New Section 1860D-6(c)(4)(C)
Subsidies
Reinsurance subsidy payments, equal to 80% of costs above the
Special subsidy payments would be made to a “qualified retiree prescription
catastrophic limit, would be made to qualified retiree drug plans. A
drug plan.” A qualified plan would be defined as employment-based retiree
qualified plan would be defined as employment-based retiree health
health coverage (including coverage offered pursuant to one or more collective
coverage provided based on an individual’s status as former employees
bargaining agreements) meeting certain requirements.
The Administrator
or labor union members.
The sponsor would have to attest that
would have to determine that coverage had at least the same actuarial value as
coverage had at least the same actuarial value as standard coverage and
standard coverage. The sponsor (and the plan) would be required to maintain
would have to maintain such records as the Administrator required for
and provide access to records needed to ensure the adequacy of coverage and
audits and other oversight activities. Payment could not be made for an
the accuracy of payments made. Further, the sponsor would be required to
individual unless: the individual was covered under the retiree plan,
provide certifications of coverage.
Payment could not be made for an
entitled to enroll under Part D but elected not to. In addition, any plan
individual unless: the individual was covered under the retiree plan, entitled
sponsor that was not an employer would be required to redistribute
to enroll under a PDP or MA Rx or EFFS Rx plan but elected not to. Subsidy
reinsurance payments to employers contributing to the plan maintained
payments would equal 28% of allowable costs over the $250 deductible but not
by the sponsor; the payments would be allocated proportionately among
over $5,000.
(The dollar amounts would be adjusted annually by the
all employers contributing to the plan. The Administrator would also
percentage increase in Medicare per capita prescription drug costs.) Nothing
make direct payments to sponsors of qualified retiree prescription drug
would preclude an individual covered under an employment-based retiree plan

CRS-24
Provision
S. 1
H.R. 1
plans for each beneficiary enrolled in the plan who was not enrolled in
from enrolling in a PDP plan or MA or EFFs plan or having the employment-
Part D. The amount of the payment would equal the direct subsidy
based plan paying the premium. Employment-based supplemental coverage
percent of the monthly national average premium for the year, as
would be considered the primary payor for purposes of the Medicare secondary
adjusted by risk adjusters. The direct subsidy percent would be 100%
payment provisions. New Section 1860D-8(f)
minus the applicable percent. The applicable percentage for an area
would be 30% divided by: (1) 100%, minus (2) a percentage equal to
total reinsurance payments that would be made in a year divided by
such amount plus total payments that would be made to plans in the
year for standard coverage. New Sections 1860D-20 and 21.
Enrollment
Sponsors of employment-based retiree coverage that offered a
No provision.
prescription drug plan would be permitted to restrict enrollment in the
plan to eligible beneficiaries enrolled in such coverage. Sponsors could
not offer enrollment in a Medicare Prescription Drug plan based on the
health status of beneficiaries. New Section 1860D-26.
Relationship to State Pharmaceutical Assistance Programs
Provision
S. 1
H.R. 1
Payments
toward
Payments made by state pharmaceutical assistance programs for cost-
Similar provision. New Section 1860D-2(b)(4)(C).
out-of-pocket limit
sharing charges would count toward out-of-pocket limit. New Section
1860D-6(c)(4)(C)

CRS-25
Provision
S. 1
H.R. 1
Subsidies
Reinsurance subsidy payments, equal to 65% of costs above the
No provision.
catastrophic limit, would be made to qualified state pharmaceutical
assistance programs. The state would have to attest that coverage had
at least the same actuarial value as standard coverage and that the
actuarial value of subsidies was at least equal to the low-income
subsidies under Part D. The program would have to be in effect on the
date of enactment, be sponsored and financed by the state, and provide
coverage for drugs for persons meeting income and resource-related
qualifications. Payment could not be made for an individual unless the
individual was covered under the state program, entitled to enroll under
Part D but elected not to. The Administrator would also make direct
payments to sponsors of qualified state pharmaceutical assistance
programs for each beneficiary enrolled in the plan who was not enrolled
in Part D. The amount of the payment would be calculated in the same
way that such payments were calculated for retiree plans (see above).
Further, the Administrator would provide for additional payments in
behalf of each person who would otherwise qualify for a low-income
subsidy, if the individual were enrolled in Part D. The payment would
equal the amount the Administrator estimated would have been paid
under the subsidy provisions, but in no case more than the average
payment made under the subsidy provisions for an individual in the
same income group. New Sections 1860D-20, 1860D-22, 1860D-22.
Coordination
Entities offering a drug plan or an MA organization offering a MA plan
No provision.
could enter into an agreement with a state pharmaceutical assistance
program (including one established under a Section 1115 waiver) to
coordinate coverage. New Section 1860D-26.

CRS-26
Relationship to Medigap
Provision
S. 1
H.R. 1
Relationship to
Effective January 1, 2006, Medigap drug policies could not be sold,
Effective January 1, 2006,
the issuance of new Medigap policies with
Medigap
issued or renewed for Part D enrollees. Persons who had such policies
prescription drug coverage would be prohibited unless (1) the policies
could obtain Medigap coverage without drug benefits.
Beneficiaries
replaced another policy with drug coverage; or (2) policies met requirements
who sought to enroll during the Part D open enrollment period
for two new standardized policies for all Medicare services. The first new
established for current beneficiaries would be guaranteed issuance of
Medigap policy would have the following benefits (notwithstanding other
such non-drug policies (without an exclusion based on preexisting
provisions of law relating to core benefits): (1) coverage of 50% of the cost-
conditions). Medigap issuers would be required to notify individuals of
sharing otherwise applicable (except coverage of 100% cost-sharing
these changes 60 days prior to the Part D open enrollment period.
applicable for preventive benefits); (2) no coverage of the Part B deductible;
Medigap insurers could not be required to participate as an eligible entity
(3) coverage of all hospital coinsurance for long stays (as in current core
under the new Part D. Section 103.
package); and (4) a limitation on annual out-of-pocket costs of $4,000 in 2006
(increased in future years by an appropriate inflation 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 the non-drug Plans A through G to individuals who enrolled in Part D
within 63 days and who were covered until then by Medigap policy H, I, or
J. Section 104.
Temporary Drug Discount Card Endorsement Program
Provision
S. 1
H.R. 1
Establishment
The Secretary would establish a program under which the Secretary would
The Secretary would be required to establish a program to: (1) endorse
endorse card programs offered by prescription drug card sponsors meeting
prescription drug discount card programs meeting certain requirements; (2)
certain requirements and would make available information on such programs
provide for prescription drug accounts; and (3) make available information
to beneficiaries. The Secretary would implement the New Sections 1807 (drug
on such programs to beneficiaries. The Secretary would begin operation
card program) and 1807A (relating to the low-income) to assure that discounts
of the endorsement program within 90 days of enactment. The account part
and benefits were available no later than January 1, 2004. The Secretary would
of the program would begin no later than September 2004. The Secretary
provide for an appropriate transition and discontinuation of the programs; such
would provide for an appropriate transition and termination of the program
transition would ensure that benefits continued to operate until the first Part D
on January 1, 2006. Section 105
enrollment period ended. Section 111.

CRS-27
Provision
S. 1
H.R. 1
Enrollment
The program would be voluntary. Any individual entitled to, or enrolled in,
The program would be voluntary. Eligible beneficiaries would be defined
Part A and enrolled in Part B would be eligible to enroll in an endorsed
as persons eligible under Part A or enrolled in Part B, but not enrolled in an
prescription drug card program. The Secretary would be required to establish
MA plan offering qualified prescription drug coverage. The Secretary
procedures for identifying eligible beneficiaries. The Secretary would also be
would establish a process through which an eligible beneficiary could make
required to establish procedures under which beneficiaries could make an
an election to enroll under the new Section 1807 with an endorsed program.
election to enroll and disenroll in an endorsed card program. Section 111.
The beneficiary would have to enroll for a year in order to receive the
benefits for the year. An individual would, in general have only one
opportunity for enrollment. This would occur during an initial, general
enrollment period as soon as possible after enactment, and annually
thereafter. The annual open enrollment periods would be coordinated with
those for MA. Section 105
Selection of
Eligible sponsors would be entities with demonstrated experience and expertise
The Secretary would establish a process through which an eligible
entity
in operating a prescription drug discount card program or similar program that
beneficiary would select an eligible entity to provide access to negotiated
the Secretary determined to be appropriate to provide benefits to Medicare
prices. The entity would be one which had been awarded a contract and
beneficiaries. Such entities would include pharmaceutical benefit management
served the state in which the beneficiary resided. Eligible entities would be
companies, wholesale or retail pharmacist delivery systems, insurers, other
pharmaceutical benefit management companies, wholesale and retail
entities, or any combination of these.
The Secretary would provide
pharmacy delivery systems, insurers, MA organizations, other entities, or
information which compared the costs and benefits of various programs. This
any combination of these. The enrollment process, established by the
information dissemination, intended to promote informed choice, would be
Secretary, would use rules similar to those established for MA. Individuals
coordinated with the dissemination of other educational information on other
could not select more than one entity at a time and, except for unusual
Medicare options. A beneficiary could only be enrolled in one endorsed
circumstances, change the selection once a year.
The process would
program at a time.
Each card sponsor would make available to each
provide for selecting eligible entities for individuals who enrolled in the
beneficiary (through the Internet or otherwise) information that the Secretary
new Section 1807, but failed to select an entity. Entities would compete for
identified as being necessary to provide for informed choice by beneficiaries
beneficiaries on the basis of discounts, formularies, pharmacy networks,
among endorsed programs; this would include information on enrollment fees,
and other services. If an eligible entity served a state, it would be required
negotiated prices, and services related to drugs offered under the program. The
to serve the entire state. Section 105
sponsor would have to provide information on how the formulary functioned.
The Medicare toll-free number, 1-800-MEDICARE, would be used to receive
and respond to inquiries and complaints. Sponsors seeking endorsement of a
card program would submit required information to the Secretary.
The
Secretary would review the information and determine whether to endorse the
program. A program could not be approved unless it and the sponsor complied
with the requirements of the new Section 1807. Section 111.

CRS-28
Provision
S. 1
H.R. 1
Fees
Card sponsors could charge annual enrollment fees, not to exceed $25. The fee
The enrollment fee would be $30 with the 2004 fee including any portion
would be the same for all eligible Medicare beneficiaries enrolled in the
of 2003 covered by the program. The fee would be collected in the same
program and would be collected by the card sponsor. Each card sponsor would
manner as Part B premiums are collected from social security payments,
issue a discount card to program enrollees. Section 111.
except the collection would be made only once a year. States could pay the
fee for some or all low-income enrollees in the state. No federal matching
payments would be available. The Secretary would make 2/3 of the fee
collected available to the eligible entity. Each eligible entity would be
required to issue a card and an enrollment number to each enrolled
beneficiary and to provide for electronic methods to coordinate with
prescription drug accounts established under the new Section 1807A.
Section 105
Beneficiary
Each endorsed drug card program would have to meet beneficiary protection
Beneficiary protections would be established including guaranteed issue
protections
requirements, including those relating to beneficiary appeals and marketing
and nondiscrimination provisions.
Entities would be required to
practices. They would also have to ensure that beneficiaries were not charged
disseminate, to each beneficiary who selected the entity, summary
more than the lower of the negotiated retail price or the usual and customary
information on negotiated prices, access to such prices through pharmacy
price. Each card sponsor would secure the participation of a sufficient number
networks, and how the formulary functioned. Upon request, entities would
of pharmacies that distributed drugs directly to patients to ensure convenient
be required to provide general coverage, utilization, and grievance
access (including adequate emergency access) for beneficiaries enrolled in the
information. In addition, entities would be required to have a mechanism
program. Convenient access would be determined by the Secretary and would
for providing specific information upon request.
The new Part D
take into account reasonable distances to pharmacy services in both urban and
provisions relating to pharmacy access would apply to eligible entities. To
rural areas. Each card sponsor would be required to have in place procedures
the extent the Secretary determined they could be implemented on a timely
for assuring that quality service was provided to eligible beneficiaries enrolled
basis, entities would be required to meet the new Part D provisions with
in a prescription drug discount card program. They would also have to
respect to development and application of formularies and the requirements
safeguard individually identifiable information in accordance with the Health
to have in place an effective cost and drug utilization management program,
Insurance Portability and Accountability Act (HIPAA). Sponsors would be
quality assurance measures and systems, and a program to control fraud,
prohibited from charging any fees, except for the annual enrollment fee. Each
abuse and waste.
Each entity would be required to have in place
card program would be required to provide pharmaceutical support services
meaningful procedures for hearing and resolving grievances and for
such as education, counseling, and services to prevent adverse drug
expedited determinations and reconsiderations of coverage determinations.
interactions. Section 111.
Entities would be required to provide pharmaceutical support services.
They would also be required to provide for confidentiality and accuracy of
enrollee records and periodic reports to the Secretary. They would have to
meet additional requirements identified by the Secretary, including those
that ensured that enrollees were not charged more than the lower of the
negotiated retail price or the usual and customary price. Section 105

CRS-29
Provision
S. 1
H.R. 1
Negotiated
Card sponsors would provide enrolled beneficiaries with access to negotiated
Entities would be required to provide beneficiaries with access to
prices
prices used by the sponsor for payment for prescription drugs, provided such
negotiated prices (including applicable discounts). Negotiated prices could
drugs were not excluded under the program’s formulary. The term negotiated
not be limited to mail order drugs. Entities and contracting pharmacies
price would include all discounts, direct or indirect subsidies, rebates, price
could not charge beneficiaries for any required services. Entities would be
concessions, and direct or indirect remunerations. Medicaid negotiation rules,
required to disclose to the Secretary the extent to which discounts, or
including rebate requirements, would not apply. Card sponsors could not
rebates or other remuneration or price concessions made available by a
recommend switching an eligible beneficiary to a drug with a higher negotiated
manufacturer were passed through to enrollees; such information would be
price, unless a licensed health professional recommended a switch based on a
confidential. Entities would be required to notify enrollees at the time of
clinical indication. Negotiated prices could not change more than once every
purchase of the differential between any prescribed drug and the cost of the
60 days. Section 111.
lowest cost available generic drug that was therapeutically equivalent and
bioequivalent. Section 105
Formularies
Sponsors could use a formulary. Sponsors electing to use a formulary would
If the entity used a formulary, negotiated prices would only be available for
be required to establish a pharmaceutical and therapeutic committee to develop
formulary drugs. Section 105
and review the formulary. The formulary would have to include drugs within
each therapeutic category and class of covered drugs (as defined by the
Secretary) although not necessarily for all drugs within such categories and
classes. The committee would establish policies and procedures to educate and
inform health care providers concerning the formulary. Drugs could not be
removed from the formulary until after appropriate notice had been made
available. Section 111.
Oversight
The Secretary would provide appropriate oversight to ensure compliance of
Eligible entities would submit periodic reports to the Secretary on
programs; including verification of the negotiated prices and services provided.
performance, utilization, finances, and other matters specified by the
Each program sponsor would be required to report to the Secretary on program
Secretary. The Secretary would provide appropriate oversight to ensure
performance, use of drugs by beneficiaries, financial information of the
compliance of eligible entities with requirements, including verification of
sponsor, and other information required by the Secretary. The Secretary could
discounts and services provided. Section 105
not disclose any proprietary data that were reported. The Secretary could use
Parts A and B claims data for purposes of conducting a drug utilization review
program. Section 111.
Accounts; low-
Under a new Section 1807A, the Secretary would award contracts to
The Secretary would be required to establish a prescription drug account
income
prescription drug card sponsors, offering a program that was endorsed by the
for each enrolled individual and deposit into the account the federal
Secretary to offer a prescription drug card assistance program to eligible low-
contribution amount. This amount would be $800 for an accountholder
income beneficiaries. The program would begin no later than January 1, 2004.
with income under 135% of poverty, $500 for an accountholder with
The Secretary would provide for a transition and discontinuation of the drug
income between 135% and 150% of poverty, and $100 for other persons.
card program and the low-income assistance card program when the new Part
Income would be determined under the state Medicaid program or by the

CRS-30
Provision
S. 1
H.R. 1
D program became effective. The transitional programs would continue to
Social Security Administration (SSA). Such sums as may be necessary
operate at least 6 months after the date benefits first became available under
would be authorized to be appropriated to the SSA. If the program was not
Part D. All individuals meeting the definition of QMB, SLMB, or QI-1, who
in effect for all of 2004, the amounts would be prorated. Persons would not
were not eligible to receive drug benefits under Medicaid, could receive
be eligible for a federal contribution if they were eligible for drug coverage
assistance with their prescription drug costs. These persons would have access,
under Medicaid, group health plan, Medigap, medical care for members of
through a drug discount card, to up to $600 per year. The entire $600 benefit
the uniformed services, Veterans’ medical care, Federal Employees Health
would be available for the entire year; any balance left on the card in one year
Benefits program, or the Indian Health Care Improvement Act.
could be carried forward. Beneficiaries would be subject to cost-sharing
Contributions to the accounts would include federal contributions, any state
requirements which could not be less than 10% of the negotiated price for a
contributions, private contributions (including employer and individual
drug. Cost-sharing charges would not count against the $600. At a minimum,
contributions) and spousal rollover contributions. If the accountholder was
card sponsors would provide low-income enrollees with a minimum of a 20%
married at the time of death, the amount in the account attributable to
discount from the average wholesale price for each covered drug. In general,
public contributions would be credited to the account, if any, of the
the enrollment procedures established for the drug discount card program
surviving spouse, or if the spouse was not an eligible beneficiary, into a
would apply for this program. Each sponsor offering an assistance card
reserve account to be held for when the spouse became an eligible
program would be required to enroll any low-income person wishing to enroll
beneficiary. Costs of the Voluntary Medicare Outpatient Prescription Drug
if the program served the geographic area where the beneficiary resided. An
Discount and Security Program would not be considered in calculating the
individual enrolling in an assistance card program would be simultaneously
Part B premium. Section 105
enrolled in a discount card program offered by the sponsor. Enrollment fees
would be waived for these individuals and would instead be paid by the
Secretary. Eligible beneficiaries would have to be provided the information
required for the discount card program.
In addition, sponsors would be
required to notify low-income enrollees, on a periodic basis, of the amount of
coverage remaining and on the grievance and appeals process under the
program. Each card sponsor would secure the participation of a sufficient
number of pharmacies that distributed drugs directly to patients to ensure
convenient access for beneficiaries enrolled in the program. The Secretary
would determine whether convenient access was provided; mail order
pharmacies would not be included in the determination. Further, the Secretary
could not make a determination that convenient access had been provided,
unless an appropriate arrangement was in place for low-income persons in
long-term care facilities.
Drug discount card managers could establish
formularies. A low-income enrollee would have the right to appeal to obtain
coverage for a drug not on the formulary if the prescribing physician
determined that the formulary drug was not as effective for the individual or
had adverse effects for the individual. If a plan offered tiered cost-sharing for
covered drugs, an enrollee would have the right to request that a nonpreferred
drug be treated on terms applicable for a preferred drug if the prescribing

CRS-31
Provision
S. 1
H.R. 1
physician determined that the preferred drug was not as effective for the
individual or had adverse effects for the individual. Sponsors offering
assistance card programs would be required to process claims, negotiate with
brand name and generic manufacturers and others for low prices, track
individual beneficiary expenditures, and perform other functions specified by
the Secretary.
Entities would be required to assure that low-income
beneficiaries were informed at the time of purchase of any difference between
the price of the prescribed drug and the lowest cost generic drug that was
therapeutically equivalent and bioequivalent and that was available at the
pharmacy or other dispenser.
Entities would also be required to have
meaningful procedures for hearing and resolving grievances, comparable to
those established for Medicare+Choice plans. In addition, eligible entities
would be required to meet Medicare+Choice requirements relating to coverage
determinations. Sponsors seeking to offer an assistance program would be
required to submit information to the Secretary, in the manner specified by the
Secretary.
The Secretary would have to determine that the entity was
appropriate to provide benefits to low-income beneficiaries, was able to
manage the monetary assistance provided under the program, agreed to submit
to audits by the Secretary, and provided other assurances require by the
Secretary. There would be no limit on the number of sponsors who could be
awarded contracts. The contract would be for the lifetime of the program and
cover the same service area served by the sponsor under the card program
under Section 1807. The sponsor could submit an application for endorsement
under both programs simultaneously. Section 111.
Other
Provision
S. 1
H.R. 1
Recommenda-
The Secretary would be required to submit a legislative proposal within 6
Similar provision. New Section 1860D-10
tions for
months of enactment containing necessary technical and conforming
technical
amendments. New Section 1860D-26(d)
corrections
Part B only
The Administrator would be required to conduct a study, and report to
No provision.
individuals
Congress by January 1, 2005, on allowing persons not entitled to Part A, but
enrolled in Part B, to enroll in Part D. Section 102.

CRS-32
Provision
S. 1
H.R. 1
Medicare
MEDPAC membership would be expanded to 19 and include experts in the
No provision.
Payment
area of pharmacology and prescription drug benefit programs. MedPAC duties
Advisory
would be expanded to include review of competition among eligible entities
Commission
offering drug plans and beneficiary access to such plans and covered drugs,
(MEDPAC)
particularly in rural areas. Three field hearings would be required in 2007.
Section 105.
Study on
The Secretary, on an ongoing basis, would study variations in spending and
No provision.
variations in
drug utilization under Part D to determine the impact on premiums. The
drug spending
Secretary would examine the impact of geographic adjustments to the monthly
and utilization
national average premium on the maximization of competition and the ability
of eligible entities to contain costs. The Secretary would submit an annual
report to Congress beginning in 2007. Section 106.
Limitation on
During calendar year 2004, the actuarial value of the drug benefit of any
No provision. (However, House passed H.R. 2631which would provide
prescription
Member of Congress enrolled in a FEHBP plan could not exceed the actuarial
that the actuarial value of the prescription drug benefits offered to Medicare
drug benefits of
value of any prescription drug benefit under Title XVIII of the Social Security
eligible enrollees by a plan under the federal employees health benefits
Members of
Act passed by the first session of the 108th Congress and enacted into law.
program would be at least equal to the actuarial value of the prescription
Congress
Section 107.
drug benefits offered by such plan to its enrollees generally).
Standards of
The Secretary would be required to conduct a thorough review of the standards
Within 6 months of enactment, the Secretary would be required to review
practice in
of practice for pharmacy services provided to patients in nursing facilities. The
the current standards of practice for pharmacy services provided to patients
nursing facilities
Secretary would assess the current standards, clinical services and other service
in nursing facilities. Specifically, the Secretary would assess: (1) the
requirements generally used in long-term settings and evaluate the impact of
current standards of practice, clinical services, and other service
these standards with respect to patient safety, reduction of medication errors,
requirements generally utilized for such pharmacy services; (2) evaluate the
and quality of care. Within 18 months of enactment, the Secretary would be
impact of those standards with respect to patient safety, reduction of
required to submit a report to Congress on the study containing: (1) a detailed
medication errors, and quality of care; and (3) recommend necessary
description of the Secretary’s plans to implement the Act in a manner
actions. The Secretary would submit a report to the Congress on the
consistent with applicable state and federal laws designed to protect the safety
findings and recommendations. New Section 1860D-10.
and quality of care of nursing facility patients; and (2) recommendations
regarding necessary actions and appropriate reimbursement to ensure the
provision of care in such manner. Section 110.
Medication
The Secretary would be required to establish a 1-year assessment program to
No provision.
therapy
contract with qualified pharmacists to provide medication therapy management
management
services to fee-for-service beneficiaries. The Secretary would designate six
geographic areas (at least two rural), each containing not less than three sites.

CRS-33
Provision
S. 1
H.R. 1
The program would be implemented between October 1, 2004 and January 1,
2005. Beneficiaries in an area could participate if they identified a qualified
pharmacist to furnish medication therapy management services. The Secretary
would enter into contracts with qualified pharmacists to provide such services.
The fee established under the contract would be designed to test various
payment methodologies including one that applied a relative value scale and
fee schedule. Payments would be made from the Part B trust fund and be
budget neutral. The Secretary would be required to make data on the program
available and report to Congress within 6 months of completion of the
program. Section 110.
Reporting
The trustees of the Medicare Part A and B trust funds would be required to
The trustees of the Medicare Part A and B trust funds would be required to
requirements for
submit a combined report on the status of the two trust funds including the
submit a combined report on the status of the two trust funds and the
trustees reports
Prescription Drug Account. The report would include a statement of the total
Prescription Drug Trust Fund. The report would include a statement of the
amounts obligated during the preceding fiscal year from the General Revenues
total amounts obligated during the preceding fiscal year from the General
of the Treasury and the percentage such amount bore to all other obligations
Revenues of the Treasury for payment of benefits and the percentage such
of the Treasury in that year. This calculation would be made separately for
amount bore to all other general revenue obligations of the Treasury in that
Medicare benefits and for administrative and other expenses. This information
year. This information would be provided for each year beginning with the
would be provided for each year beginning with the inception of Medicare.
inception of Medicare. Ten-year and 75-year projections would also be
Ten-year and 50-year projections would also be required. The report would
required. The report would also provide a comparison to the rate of growth
also provide a comparison of the rates of growth for both benefits and
in the gross domestic product. Section 131.
administrative costs to the rates of growth in the gross domestic product, health
insurance costs in the private sector, employment-based health insurance costs
in the public and private sectors, and other areas as determined appropriate by
the Board of Trustees. The provision would express the sense of the Congress
that the committees of jurisdiction would hold hearings on these reports.
Section 131.
Trustees’ report
The 2004 trustees reports would be required to include an analysis of the total
No provision.
on Medicare’s
amount of unfunded obligation of Medicare. The analysis would compare
unfunded
long-term obligations of Medicare to the dedicated funding sources for the
obligations
program (not including general revenues). Section 132.

CRS-34
Provision
S. 1
H.R. 1
Pharmacy
An eligible entity offering a Medicare prescription drug plan under Part D or
No provision.
benefit
an MA organization offering an MA plan under Part C could not enter a
managers
contract with a pharmacy benefit manager (PBM) owned by a pharmaceutical
transparency
manufacturing company. PBMs would be required to provide the following
requirements
information, on an annual basis, to the Assistant Attorney General for Antitrust
of the Department of Justice and the Inspector General for the Department of
Health and Human Services: (1) aggregate amount of any and all rebates,
discounts, administrative fees, promotional allowances, and other payments
received or recovered from each pharmaceutical manufacturer; (2) the amount
of payments received or recovered from each pharmaceutical manufacturer for
each of the top 50 drugs (as measured by volume); and (3) the percentage
differential between the price PBMs paid pharmacies and the price the PBM
charged the PDP or MA organization. Section 133.
Office of the
Within 1 year of enactment, the Secretary would be required to establish an
No provision.
Medicare
Office of the Medicare Beneficiary Advocate within the Department of Health
beneficiary
and Human Services. The Office would establish a toll-free number for
advocate
beneficiaries to obtain information on the Medicare program, particularly with
respect to Part D. It would establish a WEB site with easily accessible
information on PDPs and MA plans. Section 134.
Transitioning
No provision.
Not later than January 1, 2005, the Administrator would be required to
Part B coverage
submit a report containing recommendations for providing benefits under
Part D for drugs currently paid for under Part B. New Section 1860D-10
Information
No provision.
The provision would permit the Secretary of the Treasury, upon written
disclosure to
request from the Secretary of Health and Human Services (HHS) to
carry out
disclose to officers and employees of HHS specific information with
Medicare
respect to a specified taxpayer for a specific tax year. The information that
Catastrophic
could be disclosed is taxpayer identity information and the adjusted gross
Prescription
income for the taxpayer or, if less, the income threshold limit specified
Drug Program
under the new Part D ($200,000 in 2006). A specified taxpayer would be
either: (1) an individual who had adjusted gross income for the year in
question in excess of the income threshold specified in the new Part D
($60,000); or (2) an individual who elected to use more recent income
information as permitted under Part D. Individuals filing joint returns
would each be treated separately with each person considered to have an

CRS-35
Provision
S. 1
H.R. 1
adjusted gross income equal to one-half of the total. Return information
disclosed could be used by officers and employees of HHS only for
administering the prescription drug benefit. They could disclose the annual
out-of-pocket threshold applicable to an individual to the entity offering the
individual prescription drug coverage.
The sponsor could use such
information only for the purposes of administering the benefit. Section 106
State Pharmaceutical Assistance Programs
Provision
S. 1
H.R. 1
Transition
No provision.
A State Pharmaceutical Assistance Transition Commission would be
commission
established to develop a proposal for dealing with the transitional issues facing
state programs and participants due to implementation of the new Part D
prescription drug program.
The Commission would include:
(1) a
representative of each governor from each state with a program that the
Secretary identified as having a benefit package comparable to or more
generous than the new Part D; (2) representatives from other states that had
pharmaceutical assistance programs, as appointed by the Secretary; (3)
representatives (not exceeding the total under number 1 and number 2) of
organizations that represented interests of participants, appointed by the
Secretary; (4) representatives of MA organizations; and (5) the Secretary or the
Secretary’s designee and other members specified by the Secretary. The
Commission would develop the proposal in accordance with specified
principles, namely: (1) protection of the interests of program participants in
the least disruptive manner; (2) protection of the financial and flexibility
interests of states so they were not financially worse off; and (3) principles of
Medicare modernization outlined in Title II of the Act. The Commission
would report to the President and Congress by January 1, 2005. The report
would
contain
specific
proposals
including
specific
legislative
or
administrative recommendations, if any. The Commission would terminate 30
days later. Section 107.