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| Long title | An act to amend title XVIII of theSocial Security Act to provide for a voluntary prescription drug benefit under the medicare program and to strengthen and improve themedicare program, and for other purposes. |
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| Acronyms(colloquial) | Medicare Modernization Act or MMA |
| Enacted by | the108th United States Congress |
| Citations | |
| Public law | 108 - 173 |
| Legislative history | |
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| United States Supreme Court cases | |
TheMedicare Prescription Drug, Improvement, and Modernization Act,[1] also called theMedicare Modernization Act orMMA, is a federal law of the United States, enacted in 2003.[2] It produced the largest overhaul ofMedicare in the public health program's 38-year history.
The MMA was signed by PresidentGeorge W. Bush on December 8, 2003, after passing inCongress by a close margin.[3]
The MMA's most touted feature is the introduction of anentitlement benefit forprescription drugs, through tax breaks and subsidies.
In the years since Medicare's creation in 1965, the role ofprescription drugs in patient care has significantly increased. As new and expensive drugs have come into use, patients, particularlysenior 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 oflobbyists and constituencies.
Beginning in 2006, a prescription drug benefit calledMedicare 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. TheAffordable Care Act, also commonly known as "Obamacare", modified this measure.
With the passage of theBalanced Budget Act of 1997, Medicare beneficiaries were given the option to receive their Medicare benefits through privatehealth 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.
With the MMA, new Medicare Advantage plans were established with several substantive differences from the previous Medicare + Choice plans, including:
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.[4] After the first 10 years over 12 million Americans were enrolled in HSAs (AHIP;EBRI).[5][6]
While nearly all agreed that some form of prescription drug benefit would be included, other provisions were the subject of prolonged debate inCongress. The complex legislation also changed Medicare in the following ways:
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:[8]
Four "Specialty MAC Jurisdictions" were also created to handle durable medical equipment and home health/hospice claims:
Finally, the underlying contracts would be subject to competition, and would also be subject to the requirements of theCost Accounting Standards and theFederal Acquisition Regulation.
According to theNew York Times December 17, 2004 editorialW.J."Billy" Tauzin, the Louisiana Republican who chaired theEnergy and Commerce Committee from 2001 until February 4, 2004, was one of the chief architects of the new Medicare law.[9][10] In 2004 Tauzin was appointed as chief lobbyist for thePharmaceutical 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,"[9] drawing criticism fromPublic Citizen, the consumer advocacy group. They claimed that Tauzin "may have been negotiating for the lobbying job while writing the Medicare legislation."[10][11] Tauzin was responsible for including a provision that prohibited Medicare from negotiating prices with drug companies.[12]
It's a sad commentary on politics in Washington that a member of Congress who pushed through a major piece of legislation benefiting the drug industry, gets the job leading that industry.
— Public Citizen President Joan Claybrook 2004
House Democratic leaderNancy Pelosi said,[10]
I think if seniors want to know why the pharmaceutical companies made out so well at their expense, all they have to do is look at this. This is an abuse of power. This is a conflict of interest.
— House Democratic leader Nancy Pelosi 2004
The bill was debated and negotiated for nearly six months 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 theHouse of Representatives early on June 25, 2003, as H.R. 1, sponsored bySpeakerDennis 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 thatC.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, RepublicansButch Otter (ID-1) andJo 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.
The bill came to a vote at 3 a.m. on November 22. After 45 minutes, the bill was losing, 219–215, withDavid Wu (D-OR-1) not voting. SpeakerDennis Hastert and Majority LeaderTom 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-RepresentativeNick Smith (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." After controversy ensued, Smith clarified no explicit offer of campaign funds was made, but that he was offered "substantial and aggressive campaign support" which he had assumed included financial support.[13]
At about 5:50 a.m., Otter andTrent Franks (AZ-2) were convinced to switch their votes. With passage assured, Wu voted yea as well, and DemocratsCalvin M. Dooley (CA-20),Jim Marshall (GA-3) andDavid Scott (GA-13) changed their votes to the affirmative. ButBrad Miller (D-NC-13), and then, RepublicanJohn Culberson (TX-7), reversed their votes from "yea" to "nay". The bill passed 220–215.[14]
The Democrats cried foul, andBill 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.[15]
The Senate's consideration of the conference report was somewhat less heated, ascloture on it was invoked by a vote of 70–29.[16] However, a budget point of order was raised byTom 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 SenatorsLindsey Graham (R-SC),Trent Lott (R-MS), andRon Wyden (D-OR) voted in quick succession in favor to pass the vote 61–39.[17] The bill itself was finally passed 54–44 on November 25, 2003, and was signed into law by the President on December 8.[18]
Initially, the net cost of the program was projected at $400 billion for the ten-year period between 2004 and 2013. Administration officialThomas 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.[19] As of February 2009, the projected net cost of the program over the 2006 to 2015 period was $549.2 billion.[20]
After the enactment of Medicare Prescription Drug, Improvement, and Modernization Act in 2003, onlyinsurance 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.[21] 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 colleagueTom 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.[22]
The "donut hole" provision of thePatient Protection and Affordable Care Act of 2010 was an attempt to correct the issue.[23] In 2022, theInflation Reduction Act removed this ban and allowed Medicare to begin negotiating drug prices starting in 2026.[24]
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