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Two Acts on Drug Law Comparison


The 2009 Health reform legislation was passed with the aim of Medicare saving for the patients in America. In 2009 the House H.R. 3962 approved the Affordable Health Care for America. This bill contains several provisions that are expected to affect Medicare program expenditures for the people of America. Many laws have so far been passed in the last fifty years; they are expected to reduce expenditure in medical care for the people of America. Examples of such laws include the HMO Act of 1973, Social Security Amendments of 1983, COBRA of 1985, HIPAA of 1996, the Balanced Budget Act of 1997, and the Medicare Modernization Act of 2003. However, these laws have varied in terms of their objectives and therefore these variations have always affected the expected outcomes in Medicare spending. According to the Senate, this new law would result in a reduction in Medicare spending by $384 billion, considering that there would be $466 billion in Medicare savings for the period 2010-2019. This paper will compare these figures with those projected by the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of the year 2003 which was one of the laws passed to reduce Medicare expenditures.

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Medicare Prescription Drug, Improvement and Modernization Act 2003

This law is a federal law of the United States that was passed by Congress and signed by President George Bush in 2003. The law is considered to have made a great contribution to the reduction of Medicare expenditure for the last thirty-eight years. The law made great contributions in terms of cost-shifting, cost savings, quality Medicare and also accessibility as will be discussed in this section.

Cost shifting

This law was flexible in that, it was possible to make changes to the initial plans. Major insurers in health care like Aetna, Human and Blue Shield established better health care plans when the law introduced a Medicare choice option. The Health Maintenance Organizations organized these plans. However, under these plans, patients were not in a better position to use traditional Medicare insurance. According to Chovan Chen & Buck (2009) “some patients felt that the plan could not manage care while some felt that the new plans would reduce the enrollment of new patients”. The introduction of the Medical Modernization Act resulted in the realization of new Medicare advantages over the Medicare choice option. For instance; citizens were allowed to sign an insurance cover of one year and also care was to be provided by many providers.

Chovan Chen & Buck (2009) notes that “the federal Medicare premium, therefore, attracted many health insurers as opposed to the normal healthcare premium”. For normal health insurance premiums, a healthy person could pay between $150 and $350 a month depending on the level of services expected, while an eligible enrollee could pay close to $800. According to Bell and Friedman (2005), “the federal government pays the Medicare Advantage plan more to cover the care of a Medicare patient than the federal government pays through the regular Medicare plan”. This plan by the federal government ensured that there were more benefits for eligible enrollees as compared to the regular Medicare plan. As a result, the seniors acquired financial boosts since this plan allowed them to skip Part B and D premiums (Chovan, Chen & Buck, 2009).

Cost savings

The Medical Modernization Act resulted in a reduction in the cost of prescription through the introduction of subsidies and tax breaks. The years before the introduction of this Act, citizens from who Medicare was designed to help could not afford prescriptions. MMA was able to avoid this problem through:

  • Large employers were provided with a subsidy to discourage them from making private prescription eliminations on workers who were already retired. Such companies were therefore entitled to a subsidy equivalent to $400 million for six years since 2006.
  • The law prevents the federal government from discount negotiations with companies that manufacture drugs.
  • The law prohibited the government from the establishment of a formulary, although private providers were not prevented from doing the same.


The passage of the Balanced Act of 1997 improved the quality of MMA in terms of Medicare. Medicare beneficiaries got the opportunity to receive Medicare benefits from private health insurance firms. This was an improvement in service delivery since the Medicare beneficiaries did not require to use the original Medicare plans referred to Part A and B. These plans were referred to Medicare + Choice. According to Frum (2006) “pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the compensation and business practices for insurers that offer these plans changed, and Medicare+Choice plans became known as “Medicare Advantage” (MA) plans”. This plan has made greatly contributed to the quality of Medicare services that beneficiaries receive in that; the private insurance firms compete so as to get more customers. As a result of this competition, the insurance plans have improved considerably.


The basic prescription drug coverage, also called Medicare Part D that was introduced in 2006 made Medicare easily accessible to all eligible enrollees. According to Chovan Chen & Buck (2009) “this coverage was only made accessible through insurance companies and was a voluntary decision”. According to Bell and Friedman (2005), the benefit of this coverage was” to pay a minimum monthly premium of $24.80 (premiums may vary), a $180 to $265 annual deductible, 25% (or approximate flat copay) of full drug costs up to $2,400″. After paying this first coverage limit, an enrollee passed through a period referred to Donut Hole whereby, the enrollee was required to pay almost the whole cost of drugs. After this period, an enrollee paid $3850 and at this stage, the enrollee paid only 5 per cent of the cost of drugs. This plan made Medicare accessible to all people including those who could not afford to enroll.

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Bell, D. & Friedman, M., (2005). “E-Prescribing and the Medicare Modernization Act of 2003”. Journal of Health Affairs, 24 (5): 71-76.

Chovan, T., Chen, C., & Buck, K. (2009). Reductions in Hospital Days, Re-Admissions, and Potentially Avoidable Admissions among Medicare Advantage Enrollees in California and Nevada. Journal of America’s Health Insurance Plans, 4 (10): 42- 48.

Frum, D. (2006). How We Got Here: The ’70s. New York, New York: Basic Books.

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