Assessing the New Medicare Prescription Drug Law

Abstract

The Medicare Modernization Act (MMA) is the product of a political compromise to attract moderate Republicans and enough Democrats without losing Republican conservatives. The compromise offered more private health plans to beneficiaries while maintaining and improving traditional Medicare's benefits. This compromise did not settle the debate over the legislation, which is a major issue in the 2004 elections. Voters poorly understand the law because of its complexity. In this paper, I explain how the policy decisions made by the U.S. Congress have contributed to the law's complexity and controversy. I examine the new private health plan options that will be offered to beneficiaries, improvements made to traditional Medicare, and the impact of introducing income-based determinations into Medicare. I also discuss the impact of the drug benefit on beneficiaries in different income and assets categories and Congress's decision to prohibit the federal government from directly negotiating prices with drug manufacturers. I conclude by assessing the major claims made by critics and proponents. Both might be more circumspect in their assessments of the law's impact, since it is impossible to predict how a law of such complexity, with so many human variables, will work out in the end. The MMA is a worthwhile but imperfect effort to extend drug coverage to seniors who are most in need. It deserves neither condemnation nor indiscriminate praise but instead a commitment to help it succeed.