Medicare Prescription Drug, Improvement, and Modernization Act

The MMA's most touted feature is the introduction of an entitlement benefit for prescription drugs, through tax breaks and subsidies. In the years since Medicare's creation in 1965, the role of prescription drugs in patient care has significantly increased. As new and expensive drugs have come into use, patients, particularly senior citizens at whom Medicare was targeted, have found prescriptions harder to afford. The MMA was designed to address this problem. The benefit is funded in a complex way, reflecting diverse priorities of lobbyists and constituencies. • It provides a subsidy for large employers to discourage them from eliminating private prescription coverage to retired workers (a key AARP goal); • It prohibits the federal government from negotiating discounts with drug companies; • It prevents the government from establishing a formulary, but does not prevent private providers such as health maintenance organizations (HMO) from doing so. Basic prescription drug coverage Beginning in 2006, a prescription drug benefit called Medicare Part D was made available. Coverage is available only through insurance companies and HMOs, and is voluntary. Enrollees paid the following initial costs for the initial benefits: a minimum monthly premium of $24.80 (premiums may vary), a $180 to $265 annual deductible, 25% (or approximate flat copay) of full drug costs up to $2,400. After the initial coverage limit is met, a period commonly referred to as the "Donut Hole" begins when an enrollee may be responsible for the insurance company's negotiated price of the drug, less than the retail price without insurance. The Affordable Care Act, also commonly known as "Obamacare", modified this measure. ==Medicare Advantage plans==

With the passage of the Balanced Budget Act of 1997, Medicare beneficiaries were given the option to receive their Medicare benefits through private health insurance plans, instead of through the Original Medicare plan (Parts A and B). These programs were known as "Medicare+Choice" or "Part C" plans. Pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the compensation and business practices for insurers that offer these plans changed, and "Medicare+Choice" plans became known as "Medicare Advantage" (MA) plans. In addition to offering comparable coverage to Part A and Part B, Medicare Advantage plans may also offer Part D coverage. Changes to plans With the MMA, new Medicare Advantage plans were established with several substantive differences from the previous Medicare + Choice plans, including: • enrollees sign on for a whole year • care could be restricted to specific provider networks • formularies were to be used to restrict prescription drug choices • prescription coverage would be deferred to the patient or a Medicare Part D prescription plan • care other than emergency care can be restricted to a particular region • federal reimbursement can be adjusted according to the health risk of the enrollees ==Health savings accounts==

The MMA created a new Health Savings Account statute that replaced and expanded the previous Medical Savings Account law by expanding allowable contributions and employer participation. After the first 10 years over 12 million Americans were enrolled in HSAs (AHIP;EBRI). ==Other provisions==

While nearly all agreed that some form of prescription drug benefit would be included, other provisions were the subject of prolonged debate in Congress. The complex legislation also changed Medicare in the following ways: • it mandated a six-city trial of a partly privatized Medicare system (by 2010) • it gave an extra $25 billion to rural hospitals (at the request of congressional representatives in the rural West) • it required higher fees from wealthier seniors • it added a pretax health savings account for working people • it required Medicare Part D plans to support electronic prescribing, with a planned implementation date of April 2009. Medicare administration of claims In addition, the legislation mandated a major overhaul of how Part A and Part B claims are processed. Under the new legislation, the Fiscal Intermediaries (FIs) and carriers would be replaced by Medicare Administrative Contractors (MAC's), serving both Parts A and B, and would be consolidated into fifteen Jurisdictions: • Jurisdiction 1—California, Hawaii, and Nevada, plus American Samoa, Guam, and the Northern Mariana Islands • Jurisdiction 2—Alaska, Idaho, Oregon, and Washington • Jurisdiction 3—Arizona, Montana, North Dakota, South Dakota, Utah, and Wyoming • Jurisdiction 4—Colorado, New Mexico, Oklahoma, and Texas • Jurisdiction 5—Iowa, Kansas, Missouri, and Nebraska • Jurisdiction 6—Illinois, Minnesota, and Wisconsin • Jurisdiction 7—Arkansas, Louisiana, and Mississippi • Jurisdiction 8—Indiana and Michigan • Jurisdiction 9—Florida, plus Puerto Rico and the U.S. Virgin Islands • Jurisdiction 10—Alabama, Georgia, and Tennessee • Jurisdiction 11—North Carolina, South Carolina, Virginia, and West Virginia • Jurisdiction 12—Delaware, the District of Columbia, Maryland, New Jersey, and Pennsylvania • Jurisdiction 13—Connecticut and New York • Jurisdiction 14—Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont • Jurisdiction 15—Kentucky and Ohio Four "Specialty MAC Jurisdictions" were also created to handle durable medical equipment and home health/hospice claims: • Jurisdiction A—consists of all states in Jurisdictions 12, 13, and 14 • Jurisdiction B—consists of all states in Jurisdictions 6, 8, and 15 • Jurisdiction C—consists of all states and territories in Jurisdictions 4, 7, 9, 10, and 11 • Jurisdiction D—consists of all states and territories in Jurisdictions 1, 2, 3, and 5 Finally, the underlying contracts would be subject to competition, and would also be subject to the requirements of the Cost Accounting Standards and the Federal Acquisition Regulation. ==Legislative history==

According to the New York Times December 17, 2004 editorial W.J."Billy" Tauzin, the Louisiana Republican who chaired the Energy and Commerce Committee from 2001 until February 4, 2004, was one of the chief architects of the new Medicare law. In 2004 Tauzin was appointed as chief lobbyist for the Pharmaceutical Research and Manufacturers of America (PhRMA), the trade association and lobby group for the drug industry with a "rumored salary of $2 million a year," Tauzin was responsible for including a provision that prohibited Medicare from negotiating prices with drug companies. House Democratic leader Nancy Pelosi said, At about 5:50 a.m., Otter and Trent Franks (AZ-2) were convinced to switch their votes. With passage assured, Wu voted yea as well, and Democrats Calvin M. Dooley (CA-20), Jim Marshall (GA-3) and David Scott (GA-13) changed their votes to the affirmative. But Brad Miller (D-NC-13), and then, Republican John Culberson (TX-7), reversed their votes from "yea" to "nay". The bill passed 220–215. The Democrats cried foul, and Bill Thomas, the Republican chairman of the Ways and Means committee, challenged the result in a gesture to satisfy the concerns of the minority. He subsequently voted to table his own challenge; the tally to table was 210 ayes, 193 noes. The Senate's consideration of the conference report was somewhat less heated, as cloture on it was invoked by a vote of 70–29. However, a budget point of order was raised by Tom Daschle, and voted on. As 60 votes were necessary to override it, the challenge was actually considered to have a credible chance of passing. For several minutes, the vote total was stuck at 58–39, until Senators Lindsey Graham (R-SC), Trent Lott (R-MS), and Ron Wyden (D-OR) voted in quick succession in favor to pass the vote 61–39. The bill itself was finally passed 54–44 on November 25, 2003, and was signed into law by the President on December 8.{{cite web | url = https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=108&session=1&vote=00459 ==Costs==

Initially, the net cost of the program was projected at $400 billion for the ten-year period between 2004 and 2013. Administration official Thomas Scully instructed analyst Richard Foster not to tell Congress of Foster's finding that the cost would actually be over $500 billion. One month after passage, the administration estimated that the net cost of the program over the period between 2006 (the first year the program started paying benefits) and 2015 would be $534 billion. As of February 2009, the projected net cost of the program over the 2006 to 2015 period was $549.2 billion. ==Bar to negotiation of prescription drug prices==

After the enactment of Medicare Prescription Drug, Improvement, and Modernization Act in 2003, only insurance companies administering Medicare prescription drug program, not Medicare, would have the legal right to negotiate drug prices directly with drug manufacturers. The Medicare Prescription Drug Act expressly prohibited Medicare from negotiating bulk prescription drug prices. Oregon Representative Peter DeFazio said, "We could provide a much more meaningful benefit if we negotiated lower prices as other nations have done," and his Maine colleague Tom Allen, remarked on the absurdity, "that the government will not be able to negotiate lower prices," for the drugs on which it plans to spend $400 billion in the next decade. The "donut hole" provision of the Patient Protection and Affordable Care Act of 2010 was an attempt to correct the issue. In 2022, the Inflation Reduction Act removed this ban and allowed Medicare to begin negotiating drug prices starting in 2026. ==See also==