Overview of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003

Overview of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 Summary On December 8, the President signed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, P.L. 108-173.On November 22, the House of Representatives voted 220 to 215 to approve H.R. 1, the Medicare prescription drug and modernization conference agreement.The Senate voted 54 to 44 to approve the conference agreement on November 25.CRS-2 1 See [ftp://ftp.cbo.gov/48xx/doc4808/11-20-MedicareLetter.pdf] for cost estimate.provisions are estimated to save $21.5 billion over the 10-year period and the cost containment measures are estimated to save $13.3 billion over the period. 1 Prescription Drugs Voluntary Prescription Drug Benefit Program Overview.The legislation establishes a new Voluntary Prescription Drug Benefit Program under a new Part D of Title XVIII of the Social Security Act.Effective January 1, 2006, a new optional benefit will be established under a new Part D. Beneficiaries will be able to purchase either "standard coverage" or alternative coverage with actuarially equivalent benefits.In 2006, "standard coverage" will have a $250 deductible, 25% coinsurance for costs between $251 and $2,250, then no coverage until the beneficiary has out-of-pocket costs of $3,600 ($5,100 in total spending).Once the beneficiary reaches the catastrophic limit, the program will pay all costs except for nominal cost-sharing.Low income subsidies will be provided for persons with incomes below 150% of poverty.Coverage will be provided through prescription drug plans or Medicare Advantage prescription drug (MA-PD) plans.The program will rely on private plans to provide coverage and to bear some of the financial risk for drug costs; federal subsidies covering the bulk of the risk will be provided to encourage participation.Plans will determine payments and will be expected to negotiate prices.