Medicare Prescription Drug, Improvement, and Modernization Act (MMA)

The Medicare Prescription Drug, Improvement and Modernization Act (P.L. 108-173) of 2003 is also known as the Medicare Modernization Act or MMA. This Act created the biggest overhaul of Medicare since its enactment in 1965.

The biggest change associated with MMA was the implementation of the prescription drugs entitlement benefit. The entitlement benefit was designed to address the difficulty Medicare beneficiaries had in purchasing prescriptive medications. Beginning in 2006, a voluntary prescription drug benefit, known as Medicare Part D, was made available through substantial out-of-pocket costs. This coverage is obtainable only through insurance companies and Health Maintenance Organizations (HMOs).

Specifically, the benefit requires Medicare beneficiaries, who chose this coverage, to pay a minimum monthly premium of $24.80 (premiums may vary), a $180 to $265 annual deductible, 25% (or approximate co-pay) of full-drug costs up to $2,400. Once this initial benefit coverage is met, a period commonly called the “Donut Hole” begins. During this period, an enrollee may be responsible for the insurance company’s negotiated price of the drug, which is less than the retail price without insurance. The “Donut Hole” period ends when the beneficiary has met an out-of-pocket amount of $3,850. Once this amount is met, the next period begins where the beneficiary will pay 5% of the negotiated drug costs.

MMA also changed the compensation and business practices for insurers offering Medicare + Choice or Part C plans. The Medicare + Choice plans became known as “Medicare Advantage” plans. In addition to providing comparable coverage to Parts A and B, “Medicare Advantage” plans may offer Part D coverage.

Finally, MMA mandated a major renovation of the processing of Parts A and B claims. In brief, the original Medicare Fiscal Intermediaries (FIs) and carriers were replaced by Medicare Administrative Contractors (MACs), which serve 15 jurisdictions. The full details of the law can be found at the following link:

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