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The MMA is an important piece of legislation beyond the media coverage of prescription drug coverage for seniors. This act also contains provisions that include a new managed care program, provider reimbursement changes, coverage of preventive screening tests for certain diagnoses, new coverage timeline determinations, a requirement to contain Medicare costs by increasing deductibles, access to affordable pharmaceuticals and the creation of new health savings accounts.

The following is a brief description of the major provisions of this legislation:

Prescription Drug Coverage
MMAcreates a new voluntary prescription drug benefit under a new Part D of the Social Security Act. Beneficiaries entitled to Part A and enrolled in Pat B, Enrollees in the new Medicare Advantage private fee-for-service plans, and enrollees in Medicare Savings Account plans will be eligible individuals for the prescription drug benefit. Eligible individuals will have access to two prescription drug plans (PDP's). This legislation also provides for a transitional voluntary Medicare prescription drug discount program. The transitional program is scheduled to start six months after the legislation is finalized and continue until January 1, 2006.

The PDP's coverage for eligible individuals is scheduled to start January 1, 2006. Eligible individuals will have the option of standard coverage or alternative coverage. A participating plan can also offer supplemental benefits. Standard coverage will require an annual $250 deductible and coinsurance requirements on a graduated scale. Once an eligible individual spends $3,600 out of their own pocket, additional charges are limited to $5 for generic drugs, and $10 for nonpreferred drugs or 5 percent of the cost for the prescription medication, whichever is greater.

Medicare Advantage
A new Medicare managed care program, called "Medicare Advantage" will replace the current Medicare+Choice program between 2004 and 2010. All managed care plans will be reimbursed at least as high as the rate for traditional fee-for-service (FFS) Medicare. The traditional FFS Medicare rate represents a reimbursement increase for these plans. This reimbursement increase will provide the needed motivation for a number of plans to offer services on a regional and local level.

CMS will establish six demonstration sites in 2010 for a cost adjustment review. This will lead to future reimbursement based on the demographic and health risk of enrollees in the plan. Traditional Medicare FFS will be one of the plans offered to enrollees and will also be paid on the cost adjustment approach.

Provider Reimbursement
Hospitals will receive the full market basket increase in their annual reimbursement rate adjustment for fiscal years 2004 through 2007. Hospitals that do not submit the chosen 10 indicators of quality data will receive .4 percent less of a market basket reimbursement update beginning in fiscal year 2005.

The physician services conversion factor for 2005 and the 2005 fee schedule will not be less than a 1.5 percent increase. The conversion factor increase will be exempt from the budget neutrality adjustment that would have resulted in a negative 4.5 percent reduction in 2005.

Services and payments after January 1, 2004 will include an increase in practice expense relative value units that will include expenses for administering drugs and biologicals. The CPT codes used for administering covered outpatient drugs will be evaluated for potential additions, deletions and/or modifications.

Services furnished on or after January 1, 2004 for certain covered hospital outpatient drugs would be paid based on a percentage of the reference wholesale price for the drug. The reference wholesale price is the average wholesale price for the drug as of May 1, 2003.

Coverage Determinations
Medicare coverage has been approved for the following services or determinations:

1. An initial preventive physical examination that is performed no later than six months after the individual's initial coverage date under Part B.
2. Cardiovascular screening blood tests for services furnished on or after January 1, 2005.
3. National coverage determinations must be made within six months when a technology assessment is not required and within nine months when a technology assessment is required.
4. Diabetes screening tests for an individual at risk for diabetes for the purpose of early detection is a covered medical service.

Cost Containment
The Part B deductible will continue to be $100 for 2004, and will increase to $110 in 2005. The deductible will increase in subsequent years at the same rate the Part B premiums increase.

The amount a beneficiary pays for the Part B premium in 2007 will increase based on income. There will be a phase-in over five years that could result in an individual paying 80 percent of the Part B premium. All Medicare beneficiaries currently pay 25 percent of the Part B premium.

Access to Affordable Pharmaceuticals
Individuals will be allowed to purchase prescription drugs from Canadian providers. The purchase from Canadian providers is subject to U.S. government certification that the providers are safe.

Health Savings Accounts
Employees as well as individuals will be able to purchase new Health Savings Accounts (HSA). These accounts are part of high deductible health plans. A typical high deductible plan for an individual has an annual deductible of at least $1,000 and an out-of-pocket expense limit of no more than $5,000. These limits are doubled for family coverage.

HSA will allow workers up to age 65 to make pre-tax contributions up to $2,250 ($4,450 for families) and indexed for inflation to cover healthcare expenses. HSA, unlike flexible spending accounts, will be portable and assets can accumulate. Workers will have the opportunity to use them for tax-free distributions to cover both current and retirement healthcare costs.