Robert B. Doherty, BA
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The Medicare Modernization Act (MMA) is the product of a political compromise to attract moderate Republicans and enough Democrats without losing Republican conservatives. The compromise offered more private health plans to beneficiaries while maintaining and improving traditional Medicare's benefits. This compromise did not settle the debate over the legislation, which is a major issue in the 2004 elections. Voters poorly understand the law because of its complexity. In this paper, I explain how the policy decisions made by the U.S. Congress have contributed to the law's complexity and controversy. I examine the new private health plan options that will be offered to beneficiaries, improvements made to traditional Medicare, and the impact of introducing income-based determinations into Medicare. I also discuss the impact of the drug benefit on beneficiaries in different income and assets categories and Congress's decision to prohibit the federal government from directly negotiating prices with drug manufacturers. I conclude by assessing the major claims made by critics and proponents. Both might be more circumspect in their assessments of the law's impact, since it is impossible to predict how a law of such complexity, with so many human variables, will work out in the end. The MMA is a worthwhile but imperfect effort to extend drug coverage to seniors who are most in need. It deserves neither condemnation nor indiscriminate praise but instead a commitment to help it succeed.
By offering beneficiaries a choice of enrolling in private plans or in traditional Medicare with new preventive benefits, Congress adds complexity to the decision-making process for beneficiaries.
By insisting that the benefit stay within a $400 billion expenditure limit over 10 years, Congress had to create a confusing cost-sharing structure to keep costs down.
By departing from Medicare's policy of providing the same benefits at the same cost to all beneficiaries, Congress introduced complex determinations for assets and income.
By prohibiting direct price negotiation between the federal government and drug companies and instead relying on private insurers to negotiate discounts, Congress assures that drug costs and formularies will vary from plan to plan and locality to locality.
Table. Drug Benefit Based on Beneficiaries' Incomes and Assets
It is clear … from the Medicare experience that in such a program everything depends on the human factor, on how patients, physicians, hospital administrators, insurers and others behave. The program is not a mechanical model but a system that has all the messiness that arises when human beings are called on to run complicated, interrelated institutions that depend on human behavior. We should not be discouraged about further extensions of health insurance, but neither should we expect a smooth-running, purring machine.
Doherty RB. Assessing the New Medicare Prescription Drug Law. Ann Intern Med. 2004;141:391–395. doi: https://doi.org/10.7326/0003-4819-141-5-200409070-00100
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Published: Ann Intern Med. 2004;141(5):391-395.
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