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What Is the Medicare Modernization Act?

Medicare is a United States health insurance program designed mainly to provide senior citizens with affordable medical benefits. In December of 2003, President George W. Bush signed into law the Medicare Prescription Drug Improvement and Modernization Act, often referred to simply as the Medicare Modernization Act (MMA). The MMA was the biggest change to Medicare in its 38-year history, and provided a number of different ways to update the Medicare program.

  1. Office of Medicare Beneficiary Ombudsman

    • One of the provisions of the MMA law was the creation of an official Medicare Beneficiary Ombudsman position. The ombudsman's duty is to help each person eligible for Medicare understand his rights and get the information he needs to make informed decisions regarding his Medicare options. One of the results of this is the Medicare.gov website, which allows people to apply for Medicare, ask questions, see information about all Medicare plans, file complaints and report abuse or fraud.

    Creation of Part D

    • Much of the MMA of 2003 concerns the establishment and use of prescription drug plans within Medicare. The act created Part D Medicare, a new plan that offers prescription drug benefits only. Part D is not mandatory, but is available to all people who are entitled to Part A Medicare or enrolled in Part B. (Part D is not sold directly by the federal government, however, but is sold only through private insurance companies.) Part D can be purchased as either a stand-alone plan or bundled with Part A and Part B in a private Medicare Advantage policy.

    Late Enrollment

    • The first initial enrollment period for Part D was set up to run from November 15, 2005, through May 15, 2006. After that, an open enrollment period for Medicare was established to run annually from November 15 through December 31 of each year. During this time, an individual enrolled in Medicare has a chance to choose or change her options. No one is required to join Part D during this period, but if you do not join when you first have the chance and then decide later that you want coverage, you will be charged a late enrollment penalty. The late enrollment penalty does not apply if you have maintained creditable prescription drug coverage outside of Medicare, such as through a retirement plan. You may also not be levied the late penalty if you opted not to join Part D and then involuntarily lost prescription drug coverage through another plan.

    The Doughnut Hole

    • The MMA of 2003 established deductibles, cost sharing and a standard benefit amount for Part D as well. In 2006, the annual deductible was set at $250, with cost sharing of 25 percent for the beneficiary. The initial coverage limit was decided at $2,250 per year. This initial coverage limit included retail costs, not the amount an enrollee personally paid. After the initial coverage limit was met, there were no more Part D benefits until costs reached the catastrophic range, when they would pick back up again. This provision is often referred to as the Part D Doughnut Hole, because of the large gap in benefits between the initial coverage and when catastrophic benefits begin.

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