Medicare Prescription Drug, Improvement, and Modernization Act of 2003: Implications for the Future of Health Care

Upon enactment, the prescription drug component of the Medical Prescription, Drug Improvement, and Modernization Act of 2003 (MMA) (P.L. 108-173) garnered national attention; however, other major and less obvious stipulations could have future ramifications on the structure of Medicare. PRIVATE HEALTH CARE PLANS AND DELIVERY OF MEDICARE BENEFITS Privatization Controversy and Historical Financial Results The MMA can be viewed as an effort to provide relief to vulnerable, older Americans struggling with increasing prescription drug costs. However, language embedded in the MMA establishes a precedent for privatization and reflects the agenda of the private sector and special interests (Bass, 2005; Oberlander, 2007; Polivka, 2007). Critical stipulations established private health care plans, or Medicare Advantage plans, with enhanced payments and financial incentives to health maintenance organizations (HMOs), preferred provider organizations (PPOs), and private fee-for-service (PFFS) plans to provide coverage to Medicare beneficiaries (Polivka, 2007). The MMA also instituted a demonstration project that will commence in 2010 and initiate competition between Medicare and managed care plans. Upon enactment, extensive media emphasis was positioned on the MMA's prescription drug benefit, and critics have stated that "the broader public were blissfully unaware" of other provisions contained in the law (Oberlander, 2007, p. 207). These provisions have the potential of dramatically changing the structure of the traditional Medicare program (Gold, 2005; Moon, 2006). Historically, the use of private plans to deliver health care benefits to Medicare beneficiaries has failed to provide savings as intended (Biles, Dallek, & Nicholas, 2004; Biles, Nicholas, Cooper, Adrion, & Guterman, 2006; Gorin, 2003; Moon, 2006; Polivka, 2007). Efforts to enroll Medicare beneficiaries in prepaid health plans from the late 1960s through the early 1980s consistently failed, primarily because the capitated payment structure was not financially viable for the HMOs. In an attempt to increase enrollment in 1982, the Tax Equity and Fiscal Responsibility Act (TEFRA) dictated that the HMOs were to be compensated at 95 percent per capita fee-for-service (FFS) costs with the expectation that the efficiencies of HMOs would save the government 5 percent. However, a 1990 study concluded that Medicare actually paid more for HMO enrollees than for people with similar benefits in traditional, FFS Medicare (Biles et al., 2006). The creation of Medicare + Choice plans through the Balanced Budget Act of 1997 and the provision of increased payments to plans in areas with low FFS costs continued to demonstrate that the capitated structure was not cost-effective. Plans withdrew from unprofitable areas, reduced additional benefits to enrollees, and beneficiary costs substantially increased (Biles et al., 2006). Historical Quality of Care and Health Outcomes It is also questionable whether private health care plans under Medicare have led to positive health outcomes. One four-year observational study to compare physical and mental health outcomes of 2,235 chronically ill patients revealed that older people and those who were poor and chronically ill had inferior physical health outcomes in HMOs compared with those in FFS Medicare, with declines in physical health more common (Ware, Bayliss, Rogers, Kosinski, & Tarlov, 1996). A similar, more recent study involved a cross-sectional observation of 8,828 Medicare beneficiaries, age 65 and older, in 13 states (Safran, Wilson, Rogers, Montgomery, & Chang, 2002). The authors determined that for nine out of 11 quality-of-care indicators, performance favored traditional Medicare over HMOs. In addition, it appears that strong racial differences can exist in treatment and access outcomes under private health care plans. Virnig and colleagues (2004), for example, found that although the quality of mental health therapy and inpatient hospital care for all older adults enrolled in managed care plans was suboptimal, racial and ethnic minority groups consistently demonstrated poorer results. …