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Medicare Prescription Drug and Modernization Legislation

In November 2003, the Medicare Prescription Drug and Modernization Act of 2003 was enacted. This historic legislation impacts the M+C program in several important ways:

  • The M+C program, including PSOs, will be renamed “Medicare Advantage” and the Medicare HMO and PSO program will take its place alongside two other Medicare plan options; the traditional “Medicare Fee-For-Service (FFS) Plan” and a new “Regional PPO” plan similar to the commercial PPO plans offered by large managed care organizations. Medicare Advantage local HMOs and PSOs will retain their basic structure and will compete as the true managed care plan option available to Medicare beneficiaries.

  • Effective in 2006, all Medicare beneficiaries will be eligible for prescription drug coverage. To keep the cost within $400 billion over 10 years, the coverage includes deductibles, coinsurance and beneficiary premium payments that materially limit the benefit of the coverage to most beneficiaries. Prescription drug coverage has been a major draw for M+C plans in the past. Medicare Advantage PSOs will compete based on offering a more comprehensive and simpler prescription drug benefit, plus additional coverage and benefits that will be paid for through the savings generated by more aggressive medical management.

  • In 2004 and 2005, payments to Medicare+Choice organizations would increase in order to stop the decline in M+C enrollment. When prescription drug coverage becomes effective in 2006, Medicare Advantage organizations will be eligible to offer the new Medicare Part D drug benefit and collect the additional premium. This additional revenue will give the PSO the capability to provide even better care and better benefits, particularly for prescription drugs, to its beneficiaries and better reimbursement and higher profits to its physician owners, while at the same time enhancing the PSO's financial stability.

  • Regardless of the effectiveness of the 2003 legislation or other legislation in the future, the costs of the Medicare program must be controlled. That translates into managing utilization and reducing costs. The imperative is for a plan that delivers high quality care, high value to beneficiaries and low cost to taxpayers. The M+C/Medicare Advantage PSO health plan owned and governed by treating physicians can best achieve that objective. The constant in the healthcare system is the physician patient relationship. Because the doublesys Physician Owned Health Plan is structure with this relationship as its foundation, this model will remain a viable, competitive Medicare health plan alternatives now and for the long term.

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