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Medicare Prescription Drug, Improvement, and Modernization Act

Medicare Prescription Drug, Improvement, and Modernization Act
Acronym / colloquial name Medicare Modernization Act or MMA
Act(s) amended
Title(s) amended
U.S.C. sections created
U.S.C. sections substantially amended
Legislative history
  • Introduced in the as by on
  • Committee consideration by:
  • Passed the on ()
  • Passed the on ()
  • Signed into law by President on
Major amendments

The Medicare Prescription Drug, Improvement, and Modernization Act (Pub.L. 108-173, 117 Stat. 2066, also called Medicare Modernization Act or MMA) is a law of the United States which was enacted in 2003.[1] It produced the largest overhaul of Medicare in the public health program's 38-year history.

The MMA was signed by President George W. Bush on December 8, 2003, after passing in Congress by a close margin.

One month later, the ten-year cost estimate was boosted to $534 billion, up more than $100 billion over the figure presented by the Bush administration during Congressional debate. The inaccurate figure helped secure support from fiscally conservative Republicans who had promised to vote against the bill if it cost more than $400 billion. It was reported that an administration official, Thomas A. Scully, had concealed the higher estimate and threatened to fire Medicare Chief Actuary Richard Foster if he revealed it.[2] By early 2005, the White House Budget had increased the 10-year estimate to $1.2 trillion.[3]


Prescription drug benefit

Main article: Medicare Part D

Its most touted change 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 U.S. patient care has significantly increased. As new and expensive drugs have come into use, patients, particularly senior citizens for whom Medicare was designed, have found prescriptions harder to afford. The MMA, is meant to address this problem.

The benefit is funded in a complex way, reflecting the diverse priorities of the lobbyists and constituencies whose support was needed:

  • it provides a subsidy for large employers to discourage them from eliminating private prescription coverage to retired workers (a key AARP goal; the 2005 Annual Report for IBM estimates that company will receive a $400 million subsidy during the six-year period beginning in 2006);[4]
  • it prohibits the Federal government from negotiating discounts with drug companies;
  • it prevents the government from establishing a formulary, though does not prevent private providers such as HMOs from doing so.

Basic prescription drug coverage

Beginning in 2006, a prescription drug benefit, called Medicare Part D, was made available though substantial out-of-pocket costs. Coverage is available only through insurance companies and HMOs and is voluntary.

Benefit: Enrollees will pay the following initial costs for the initial benefits described herein. 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 this initial coverage limit is met a period commonly referred to as the "Donut Hole" begins where an enrollee may be responsible for up to the full amount of drug costs. The Donut Hole ends once the enrollee has met an out-of-pocket amount of $3850, beginning the next phase of coverage. In the final coverage phase the enrollee will pay 5% of all drug costs.

A common misconception is the idea that the $2400 and $3850 are calculated the same way. This leads many to think that the gap is an effectively simple dollar amount of $1450 (3850 minus 2400), which is not the case. The $2400 is a total drug expense, meaning that the amount the manufacturer charges is applied to this total. The $3850 is an out-of-pocket amount, meaning that only what the enrollee has paid towards their medications is applied. For example; If an enrollee gets a prescription filled that would cost $100 without insurance, and the insurance gives a $25 copay, then the $25 goes toward the out-of-pocket (the amount that ends the Donut Hole) and the $100 goes towards the total drug expense (the amount that begins the Donut Hole). This can be a nasty shock for those under the impression that both totals are of the same kind, as the Donut Hole will stretch much further when calculated correctly.

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

When the Medicare + Choice option was first offered, plans were established by several major health care insurers including Humana, Aetna, and the Blue Cross/Blue Shield plans. These plans were organized along traditional HMO (Health Maintenance Organization) business plans, but patients could freely switch back to traditional Medicare insurance. Some felt that these plans lacked the ability to truly manage care,[5] and some plans did cut back their service areas and stopped enrolling new patients.[6][7]

With the MMA, new Medicare Advantage plans were established with several advantages over the previous Medicare + Choice plans:

  • enrollees sign on for a whole year
  • care can be restricted to networks of providers
  • formularies can be used to restrict prescription drug choices
  • prescription coverage can 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

The attraction for health insurers is the large difference between normal healthcare premiums and the federal Medicare premium. Typical health insurance premiums (for someone working or healthy enough to be allowed to enroll) are generally $150 to $350 a month, depending on the level of service desired, health status, and deductibles. For a healthy Medicare-eligible enrollee, the health insurer can receive around $800 a month, more than double the premium for younger citizens. This federal premium can increase to $2000 a month through a complex risk adjustment involving the health status of the eligible enrollee.[8] These plans are being aggressively marketed. Among other benefits, the senior gets an immediate financial boost, as many plans let them skip paying Part B and Part D premiums, waive usual deductibles, and waive copays, all while covering preventive physicals and providing a prescription drug benefit. While the insurance plan can realize immense initial profits, every single Medicare enrollee, no matter their underlying health status, can be expected to undergo between one and six life threatening major illnesses before they die. The pathology and illnesses associated with aging are innumerable and ultimately unbeatable.

The ultimate economic viability of a Medicare Advantage plan will not be known for 10 to 15 years. For seniors, the initial cost savings is balanced against insurance companies’ healthcare rationing through restrictive prescription drug formularies, requiring documentation of medical necessity for imaging studies such as CT scans and MRIs, decreasing physician access, and rationing of lab tests, and ancillary care.

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 changes Medicare in the following ways:

  • it mandates a six-city trial of a partly-privatized Medicare system (by 2010);
  • it gives an extra $25 billion to rural hospitals (at the request of congressional representatives in the rural West);
  • it requires higher fees from wealthier seniors; and
  • it adds a pretax health savings account for working people.

One of the little known features of the 2003 legislation is that means testing for Medicare B (medical insurance) begins in 2007.

Legislative history

The bill was debated and negotiated for nearly six years in Congress, and finally passed amid unusual circumstances. Several times in the legislative process the bill had appeared to have failed, but each time was saved when a couple of Congressmen and Senators switched positions on the bill.

The bill was introduced in the House of Representatives early on June 25 as H.R. 1, sponsored by Speaker Dennis Hastert. All that day and the next the bill was debated, and it was apparent that the bill would be very divisive. In the early morning of June 27, a floor vote was taken. After the initial electronic vote, the count stood at 214 yeas, 218 nays.

Three Republican representatives then changed their votes. One opponent of the bill, Ernest J. Istook, Jr. (R-OK-5), changed his vote to "present" upon being told that C.W. Bill Young (R-FL-10), who was absent due to a death in the family, would have voted "aye" if he had been present. Next, Republicans Butch Otter (ID-1) and Jo Ann Emerson (MO-8) switched their vote to "aye" under pressure from the party leadership. The bill passed by one vote, 216-215.

On June 26, the Senate passed its version of the bill, 76-21. The bills were unified in conference, and on November 21, the bill came back to the House for approval. Former U.S. House Majority Leader Dick Armey, an influential Republican working as Chairman of the limited government group FreedomWorks, wrote an op-ed the day of the vote in the Wall Street Journal opposing the bill.[9]

The bill came to a vote at 3 a.m. on November 22. After 45 minutes, the bill was losing, 219-215, with David Wu (D-OR-1) not voting. Speaker Dennis Hastert and Majority Leader Tom DeLay sought to convince some of dissenting Republicans to switch their votes, as they had in June. Istook, who had always been a wavering vote, consented quickly, producing a 218-216 tally. In a highly unusual move, the House leadership held the vote open for hours as they sought two more votes. Then-Representative Nick Smith (U.S. politician) (R-MI) claimed he was offered campaign funds for his son, who was running to replace him, in return for a change in his vote from "nay" to "yea," but later recanted.[10]

About 5:50 a.m., convinced Otter and Trent Franks (AZ-2) 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 an empty gesture to satisfy 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.[11] However, a budget point of order 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 favour to pass the vote 61-39.[12] The bill itself was finally passed 54-44 on November 25, 2003, and was signed into law by the President on December 8.[13]


In July 2004, it was revealed that Thomas A. Scully, Medicare Administrator, had ordered Richard Foster, a Medicare actuary, to withhold information from Congress on pain of termination. Foster had projected that the bill would cost at least 139 billion more than the White House was claiming.

See also


  1. ^ Medicare Modernization Act Update - Overview. Centers for Medicare and Medicaid Services. Retrieved on 2007-03-30.
  2. ^ Boehlert, Eric (2004-04-05). Lies, bribes and hidden costs. Retrieved on 2007-09-22.
  3. ^ Connolly, Ceci and Allen, Mike. "Medicare Drug Benefit May Cost $1.2 Trillion", Washington Post, 2005-02-09, p. A01. Retrieved on 2007-09-22. 
  4. ^ Notes to Consolidated Financial Statements, p. 95 (from IBM's 2005 Annual Report)
  5. ^ "Starting Medicare Advantage Plan Brings Special Set of Problems", Managed Care Magazine, April 2005. 
  6. ^ "The Failure of Medicare+Choice", Geriatric Times, March/April 2003. 
  7. ^ "More HMOs Exit Medicare", South Florida Business Journal, July 11, 2000. 
  8. ^ Fact Sheet:Federal Payment Methodology to Medicare Health Plans.
  9. ^ Armey, Dick. 2003. ‘‘Say ‘No’ to the Medicare Bill,’’ The Wall Street Journal. November 21, A12.
  10. ^ "Congressman Denies Medicare Vote Bribe Charge", Associated Press, 2003-12-05. Retrieved on 2007-09-21. 
  11. ^ On the Cloture Motion (Motion to Invoke Cloture on the Conference Report to Accompany H.R. 1 ). United States Senate Legislation and Records (2003-11-24). Retrieved on 2007-09-21.
  12. ^ On the Motion (Motion To Waive CBA RE: H. R. 1 - Conference Report ). United States Senate Legislation and Records (2003-11-24). Retrieved on 2007-09-21.
  13. ^ On the Conference Report (H.R. 1 Conference Report ). United States Senate Legislation and Records (2003-11-24). Retrieved on 2007-09-21.

Other articles

  • "The Great Society Meets the 21st Century", by Michael Johns, Orthopedic Technology Review, January 2004.
  • "Medicare Q&A Weekly Column", The Kaiser Family Foundation
  • Under the Influence" - 60 Minutes special on prescription drug lobbyists' influence on the passage of the Medicare Bill
This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Medicare_Prescription_Drug,_Improvement,_and_Modernization_Act". A list of authors is available in Wikipedia.
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