Looking Back -- Medicare Prescription Drug, Improvement, and Modernization Act of 2003

By John Ballard

Remember 2003?
George Bush was still in his first term. The Twin Towers attack virtually assured him a second term and national security was the main topic in the news.
Attorney General John Ashcroft was singing Let the Mighty Eagle Soar and The Patriot Act was rolling along, protecting us against enemies by abridging a raft of privacy rights. (I didn't realize until I just looked it up that "USA PATRIOT Act" is an acronym for Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.)

One might think recent concerns about big government and loss of freedom was something new, a sinister plot by Barack Obama andCompany to expand the role of government, prying into matters left unrestricted so the invisible hand of a self-correcting free market would insure the best outcomes for the most people. 
But one would be wrong. The trend has a running head start before the end of George Bush's first term.

In the case of Health Care Reform the way was paved in 2003.
Even then it was plain that without controls health care costs would soon sink America's economic boat. To that end Congress passed and the president proudly signed into law the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

That was the birth of the now-famous Medicare Part D, the prescription drug part, along with the equally famous Medicare Advantage plans, euphemistically referred to as "Medicare Part C" even though anyone covered by one of those plans was/is no longer a Medicare beneficiary, having been kidnapped by the insurance industry for one entire calendar year until the next open enrollment period comes around, during which the beneficiary's Medicare card (mine is only printed on card stock) and Medicare number are of no value when presented for medical care, replaced instead by a much nicer plastic card issued by a private insurance company.

When we talk about Medicare it's important to think of costs.
Those of us who enjoy the benefit only think about what it costs us personally to participate, but since the program is funded by payroll taxes and we are no longer at work, we tend not to worry too much about what the whole program costs us as citizens and taxpayers. This is where we make a really huge mistake, because thanks to provisions of the Medicare Modernization Act of 2003 we are hit with a double-whammy. First, the program was set in motion without proper funding. Medicare does not operate with a "budget" as most of us understand the word, but drafts expenses from the treasury department with the vain hope that enough will be collected from payroll taxes to cover the expenses. Second, with Medicare Advantage and prescription drugs being assigned to the private sector there is an absolujte certainty that whatever company is handling Uncle Sam's outsourced responsibillities must insure a decent return for stockholders as well as enough in the budget for competitive marketing against one another.

I have no intention of combing through the details of this now-obsolete arrangement. The reason I'm taking time to put together this post and furnish two important links is to point out for the record that a big part of the health care mess has Republican and George Bush fingerprints all over it. In retrospect what they did was unconscionable, in effect giving a blank check to the private sector's drug and insurance industries to suck generously at the federal tit as long as they could get away with it.

When you read aboout five hundred billion dollars getting cut from Medicare it means that the horrendously expensive Medicare Advantage plans are getting a haircut. Until this year Medicare Advantage was costing Medicare fifteen percent more per beneficiary than Original Medicare. Why so? Well no one would expect the private sector to deliver the same results as a government program.After all, private companies have expenses the government doesn't have to worry about. Stuff like advertising, sales bonuses, and don't forget corporate profits.  So beginning in 2011 and continuing until costs are brought under control the private insurance plans will have to do better.  I haven't the patience to do more than furnish the links. Readers here are smart enough to take it from here.

Here are a few provisions of the Medicare Improvement Act of 2003 harvested from the Thomas summary, Library of Congress. As you scan this list, ask yourself if what you are reading is importantly differnent from the misinformed, shrill, fearful blizzard of criticisms rather stupidly called Obamacare.

?Makes this new program effective January 1, 2006. [Two years out.]
?Allows beneficiaries entitled to benefits under Medicare part A or enrolled under Medicare part B (eligible beneficiaries) to elect to enroll under new Medicare part D, and: (1) provided that they are not enrolled in an MA plan, keep their current Medicare fee-for-service coverage and receive qualified prescription drug coverage (as described below) through enrollment in Medicare part D in a new PDP that is offered in the geographic area in which the beneficiary resides; or (2) enroll in the new Medicare part C MA program in an MA plan, give up their current Medicare fee-for-service coverage, and receive qualified prescription drug coverage under the plan along with basic and possibly enhanced medical coverage through health maintenance organization (HMO) or revised MSA coverage options under the new MA program established by this Act under Medicare part C (and as otherwise provided under Medicare+Choice under Medicare part C as discussed more fully below under title II (MedicareAdvantage) of this Act). [Allows those who keep their Medigap policies to also get the presdription drug benefit.]
?Divides qualified prescription drug coverage into either a standard coverage benefit package or an alternative prescription drug coverage with at least actuarially equivalent benefits, both with access to negotiated drug prices. Outlines the standard coverage package, which includes, for 2006, a $250 deductible, 25 percent cost-sharing for drug costs between $250 and the initial coverage limit of $2,250, then no coverage; except that the beneficiary shall have access to negotiated prices, regardless of the fact that no benefits may be payable under the coverage, until incurring out-of-pocket costs for covered drugs in a year equal $3,600, with the beneficiary thereafter to pay five percent of the cost of a prescription, or a copayment of $2 for a generic drug and $5 for any other drug, whichever is greater. [This is the famous donut hole.]
?Exempts prices negotiated from manufacturers for discount card drugs under an endorsement card program and prices negotiated by a PDP under part D, an MA-PD plan, or a qualified retiree prescription plan from the calculation of Medicaid "best price." [Medicaid and the VA can negotiate drug prices but Medicare cannot, although US taxpayers are the biggest population of customers buying medicine.]
?Requires the Secretary to conduct a review of the current standards of practice, clinical services, and other service requirements generally used for pharmacy services in long-term care settings and evaluate the impact of those standards with respect to patient safety, reduction of medication errors and quality of care.  [Even in 2003 the challenge of long term care was clearly a problem. This is not a surprise in 2010.]
?(Sec. 108) Authorizes the Secretary to make grants to physicians for the purpose of assisting them to implement electronic prescription drug programs that comply with appropriate standards. Authorizes appropriations. [E-prescribing is also nothing new. But the provisions of ARRA putting it into practical applications are.]
?Directs the Medicare Payment Advisory Commission (MEDPAC) to conduct a study that assesses the method used for determining the adjusted average per capita cost (AAPCC). ...a report that describes the impact of additional financing provided under this Act and other Acts on the availability on Medicare Advantage plans in different areas and its impact on lowering premiums and increasing benefits under such plans. Requires a Medicare Payment Advisory Commission (MEDPAC) study and report to Congress with respect to authority regarding disapproval of unreasonable beneficiary cost-sharing. [MEDPAC has been around all this time but only now has it done anything other than "conduct studies" and "submit reports." to Congress. Under PPACA it has been rebranded and given real authority to make stuff happen unless Congress says NO.]
?(Sec. 232) Establishes that the MA program is a Federal program operated under Federal rules. Provides that State laws do not apply except State licensing laws or State laws relating to plan solvency. [Why was there no outcry in 2003 about states' rights?]
?Directs the MEDPAC to review the payment changes made under this section insofar as they affect payments under Medicare part B for items and services furnished by oncologists and for drug administration services furnished by other specialists. Requires MEDPAC to submit a report to the Secretary and Congress and for the Secretary to make appropriate payment adjustments on the basis of such report. [The Secretary retains the last word, lest some Congressman or Senator has objections. Medical device and drug companies have to live somewhere, don't they? And their elected representatives are charged with taking care of their best interests.]
?(Sec. 627) Limits payment for custom molded shoes with inserts or extra-depth shoes with inserts for an individual with severe diabetic foot disease by the amount that would be paid if they were considered to be a prosthetic or orthotic device. Allows the Secretary to establish lower payment limits than these amounts if shoes and inserts of an appropriate quality are readily available at lower amounts. Requires the Secretary to establish a payment amount for an individual substituting modifications to the covered shoe that would assure that there is no net increase in Medicare expenditures. [Imagine that. Some people expect to pay more to keep their feet than to have them amputated. Or more likely, unless this loophole is plugged, orthotic and podiatric prices might have no upper limit. This one I haven't figured out.]
?Subtitle B: Income-Related Reduction in Part B Premium Subsidy - (Sec. 811) Provides that beginning in 2007, beneficiaries with incomes over $80,000 for an individual or $160,000 for a married couple will be asked to contribute more to the cost of their Medicare benefits through payment of a higher premium since the monthly amount of the premium subsidy applicable to the premium shall be reduced by a monthly adjustment amount that is based on the product of the sliding scale percentage and the unsubsidized part B premium amount and is phased-in beginning in 2007 through 2010. [Yep. A means test for those who can afford to pay more. Republicans can get away with it but Democrats better not try.]
?Subtitle C: Importation of Prescription Drugs - (Sec. 1121) Directs the Secretary to promulgate regulations permitting pharmacists and wholesalers to import prescription drugs from Canada into the United States. Sets forth specified provisions respecting: (1) importer and foreign seller recordkeeping and information requirements; (2) qualified laboratory drug testing; (3) registration with the Secretary of Canadian sellers; and (4) approved labeling. Declares that the Secretary should: (1) focus enforcement on cases in which individual importation poses a significant public health threat; and (2) exercise discretion to permit individuals to make such importation for non-risk personal use. [Just because Canadians pay less (and Canadian companies buy cheaper from global competitors) why should Americans be allowed to buy drugs from Canada. We're concerned about their safety, don't you know. They might be poison.]

As usual, I could go on but I got tired.
Again, the reader is smart enough to go to the links and comb through the mouseporint for himself. 

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I was inspired to take another look at the Medicare Improvement Act of 2003 thanks to an article mentioned at Gary Schwitzer's place, When docs are paid less, inappropriate prescribing drops.

Take medical uncertainty.

Add financial incentive to treat.

Voila! Increased utilization.

Now take away financial incentive to treat. Guess what you get?

MedPageToday explains in the case of hormone therapy for prostate cancer:

Medicare accomplished what clinical guidelines and evidence-based medicine couldn't: it reduced unnecessary use of androgen deprivation therapy (ADT) in prostate cancer.

Inappropriate use decreased by almost 30% from 2003 to 2005, following enactment of the Medicare Modernization Act, which lowered physician reimbursement for ADT. Appropriate use of ADT did not change during the same time period, according to an article in the Nov. 4 issue of the New England Journal of Medicine.

"Our findings suggest that reductions in reimbursement may influence the delivery of care in a potentially beneficial way, with even the modest [reimbursement] changes in 2004 associated with a substantial decrease in the use of inappropriate therapy," Vahakn B. Shahinian, MD, of the University of Michigan in Ann Arbor, and co-authors wrote in conclusion.

"The corollary is that reimbursement policies should be carefully considered to avoid providing incentives for care for which no clear benefit has been established. **  The extreme profitability of the use of gonadotropin-releasing hormone (GnRH) agonists during the 1990s probably contributed to the rapid growth in the use of ADT for indications that were not evidence-based."

Score one for the old act!
Paying less for getting less really works.
That happens to be the carrot or no-carrot approach of PPACA.
No, the act hasn't any sticks. Just bigger or smaller carrots. Nobody is being sent to jail or paying a fine for not advancing with the times. But those who adapt will be materially rewarded.
Did anyone think medical providers would convert to electronic health records, more expensive to set up and longer to train staff to use, without  incentives?

**  My bold underscores the reasoning behind comparitive effectiveness research. CER will not happen in a short time but will require tons of data collected from as many places as possible over a very long time. Outcomes will be determined for many medicines, devices and approaches to treatment. Good outcomes will be assessed to see what worked and what failed. By comparing many different approaches a better way, just as in the appropriate or inappropriate use of ADT in the treatment of prostate cancers, rewarding what works will, over time, result in decreasing both the use and expense of unnecessary or ineffective approaches.