Medicare Prescription Drug, Improvement, and Modernization Act

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The U.S Medicare Prescription Drug, Improvement, and Modernization Act of 2003 is the biggest overhaul of Medicare in its 38-year history. It calls for spending $395 billion in its first decade. Its passage, after nearly six years of debate and negotiaton in Congress, came after crucial support from the AARP. It was signed by President George W. Bush in November, after bipartisan (but mostly Republican) support in the Senate and the House.

Table of contents

1 Prescription drug benefit
2 Other changes
3 See also

Prescription drug benefit

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 Medicare Prescription Drug, Improvement, and Modernization Act, 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);
it prohibits the Federal government from negotiating discounts with drug companies (unlike the practice in most other countries);
it prevents the government from establishing a formulary, though does not does not prevent private providers such as HMOs from doing so.

Other changes

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 boosts financial support for insurers to offer competition to the program;
it mandate 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-age people.