The Medicare Prescription Drug, Improvement, and Modernization Act, also called the Medicare Modernization Act or MMA, is a federal law of the United States, enacted in 2003. 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.
Prescription drug benefits
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.
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