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Statement of Need: Implementation of the Medicare Prescription Drug Benefit is required by section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). The addition of a prescription drug benefit to Medicare represents a landmark change to the Medicare program that will significantly improve the health care coverage available to millions of Medicare beneficiaries. The MMA specifies that the prescription drug benefit program will become available to beneficiaries beginning on January 1, 2006.

Summary of the Legal Basis: Section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173).

Alternatives: None.

Anticipated Costs and Benefits: The Prescription Drug benefit will have a positive impact on beneficiaries. All Medicare beneficiaries will have access to a voluntary drug benefit. A typical beneficiary--not eligible for additional low-income benefits--with no coverage today will see their total spending on drugs drop by 53 percent. In addition, it is estimated that nearly 11 million beneficiaries with limited means will participate in the low-income subsidy, receiving substantial additional help from Medicare. Beneficiaries will see lower drug costs as a result of price negotiation and coordination of health services by the prescription drug plans and Medicare Advantage plans.

Risks: Risks include not publishing the final regulation in time to allow prospective prescription drug plans (PDPs) to participate. Prospective PDPs need to apply to become a Medicare PDP and prepare bids in the spring of 2005. This is a particular concern since this is a brand new program and benefit. If plans choose not to participate due to a delay in publishing the final regulation, there is the risk of low participation in the part D program for 2006 and beneficiaries will be without the drug benefit. Because the drug benefit is the cornerstone of the MMA legislation, this is a big risk.