Major Provisions of the Medicare Modernization and Prescription Drug Act of 2002, H.R. 4954, as Passed by the House

Publication Date: July 2002

Publisher: Library of Congress. Congressional Research Service

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On June 28, 2002, the House passed H.R. 4954, the Medicare Modernization and Prescription Drug Act of 2002. This bill represents a reconciliation of the slight differences in measures reported by the two House Committees, Ways and Means and Energy and Commerce, which share jurisdiction over the Medicare program.

This bill would establish a voluntary Medicare prescription drug benefit under a new Part D. The bill would rely on private plans to provide coverage and to bear some of the financial risk for drug costs; federal subsidies would be provided to encourage participation. Coverage would be provided through prescription drug plans (PDPs) or Medicare+Choice (M+C) plans. Beneficiaries could purchase either a standard plan or an actuarially equivalent plan. For 2005, "standard coverage" would be defined as having a $250 deductible, 20% cost-sharing for drug costs between $251 and $1,000, 50% cost-sharing for drug costs between $1,001 and the initial coverage limit of $2,000, and then no coverage until the beneficiary had outof-pocket costs of $3,700 ($4,800 in total spending); once the beneficiary reached the $3,700 catastrophic limit full coverage would be provided. Low income subsidies would be provided for persons with incomes below 175% of poverty.

The Medicare+Choice (M+C) provisions of this bill would increase payments to M+C plans and establish a new M+C payment system based on competitive bidding.

Additionally, this bill would establish a four-site demonstration program for "competitive demonstration areas" that have a high concentration of M+C enrollees. Part B premium amounts for fee-for-service Medicare beneficiaries in these demonstration sites could also be adjusted. The bill would make a number of other changes to the M+C program, including permanently changing reporting dates and deadlines, creating specialized M+C plans for special needs beneficiaries, permanently extending M+C savings accounts (MSAs) and other changes. Additionally, H.R. 4954 would increase funding and make other changes to the Medicare program for services provided by hospitals, home health agencies, skilled nursing facilities, physicians, durable medical equipment suppliers, and others. The bill would also establish a new Medicare Benefits Administration to administer the prescription drug and Medicare+Choice programs. In addition, the bill includes a number of regulatory reforms.

This report will be updated, as necessary, to reflect additional legislative action.