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 December 11, 2003 MEDICARE
PRESCRIPTION DRUG, IMPROVEMENT, In addition to the new Medicare prescription drug benefit, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 includes numerous other provisions that would affect the Medicare program and many retiree health plans. Some of those provisions are the focus of this Capital Checkup. Click on one of the following headings to go directly to the relevant text:
The Act contains
several modifications of the Medicare Parts A and B programs, including
the following:
Part B Premium and Deductible Changes The Act contains two significant changes to the Part B premium and deductible that may affect the costs of employer-sponsored plans that reimburse employees for these expenses. The Medicare Part B deductible, currently $100, has changed only three times since Medicare began in 1965, when it was $50. It has been $100 since 1991, and will continue to be $100 through 2004. In 2005, the Part B deductible will increase from $100 to $110. Thereafter it will be increased by the same percentage as the Part B premium increase. In addition, the Part B premium will be indexed based on income. Currently, beneficiaries pay 25 percent of the costs of the Part B premium. The premium will be indexed to income, as noted in the according to the schedule below, and phased in over a five-year period beginning in 2007.
Beneficiaries will be notified about their premium level at the beginning of each year. They may appeal the level based on major life changes, such as divorce, marriage or death of a spouse. In order to establish the appropriate Part B premium, the Internal Revenue Service may disclose tax return information to the Social Security Administration (SSA). Renaming and Restructuring the Medicare Part C Program The Act renames the Medicare Part C program (which is currently referred to as Medicare+Choice) as "Medicare Advantage," and restructures it. There will be significant structural changes at the Department of Health and Human Services (HHS), and a new office will be created to be responsible for overseeing the prescription drug plans (Part D) and Medicare managed care contracting (Part C). Contracting rules for Medicare administration are also significantly modified. Reasonable cost contracts may be extended indefinitely unless, beginning in 2008, two private local plans or two private regional plans are available to the cost contract's enrollees. One of the most controversial parts of the House bill was a provision that would permit competitive bidding between the core Medicare program and private-sector Medicare Advantage plans, starting in 2010. Beneficiaries selecting a plan that exceeded a competitive "benchmark" would have paid additional premiums. Viewing this as a major step toward privatization of Medicare, critics of the approach warned that this would result in adverse selection, with beneficiaries who are in traditional Medicare paying a higher premium than beneficiaries in a managed care plan. As a result of pressure from critics, the House proposal was eventually transformed from a national program into a demonstration project. The Act creates a new Medicare Beneficiary Ombudsman who would provide assistance to Medicare beneficiaries with respect to complaints, grievances and requests for information. In addition, Medicare appeal adjudication would, by October 1, 2005, be transferred from the SSA to the HHS, and certain aspects of the Medicare claims and appeals process would be revised. Medicare Advantage plans must have an ongoing quality improvement program for improving the quality of care, effective January 1, 2006. Beginning in 2005, the Act requires the Medicare Trustees to make an annual determination as to whether Medicare funding through general revenue funds exceeds 45 percent. If this level is met for two years, the Trustees must issue a "funding warning," which triggers a requirement that the President submit legislation to correct the funding concern. The Act also includes special procedures for Senate consideration of the President's legislation - including such details as limiting the amount of debate on the bill. Critics of the funding warning provision charged that this provision was inflammatory and could unnecessarily heighten concerns about the stability of the Medicare program. Medicare Secondary Payer Modifications The Act retroactively amends the Medicare Secondary Payer statute to clarify that actions to recover Medicare overpayments may be brought against any responsible party, including employers that sponsor or contribute to a group health plan and third party administrators, as well as group health plans, insurers, workers' compensation and liability carriers. Double damages are also available. Coordination with TRICARE for Life Military retirees over age 65 may receive TRICARE for Life, which is a supplement to Medicare. To take advantage of the program, the retiree must be enrolled in Medicare Part B. The Act waives the late enrollment penalty for military retirees who, during 2001 through 2004, did not promptly enroll in Medicare Part B when eligible. In addition, the Act provides a special Part B enrollment period for military retirees through December 31, 2004.
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