A Publication
of the
New Jersey
Technology
Council
and the
Education
Foundation
Q1 2004 • Vol. 3 No. 1
THE MEDICARE REFORM ACT OF 2003 —
NOT JUST A PRESCRIPTION DRUG PLAN
BY JACOB L. HAFTER, ESQ
By signing the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act,)
President George W. Bush made Dec. 8, 2003 a day of historic significance in the evolution of the
American healthcare system. At a price of over $400 billion, the Act is the largest expansion of the
Medicare program since its implementation in 1965.
Most significantly, the Act creates a prescription drug benefit
for seniors starting in 2006. Seniors who choose to enroll will
pay a monthly premium of $35. The drug benefit will cover 75
percent of prescription drug costs up to $2,250 per year after
a $250 deductible is met. In the meantime, until the plan goes
into effect, seniors can use a discount card that provides a 10
percent to 25 percent discount for drugs.
While the drug benefit has received a majority of the
attention, there are several other important provisions of the
Act, unrelated to the prescription drug benefit. As discussed
below, these provisions are far reaching and apply to the entire
healthcare system, not just Medicare beneficiaries.
Technology Specific Sections
As a modernization Act, technological issues are a significant
concern. The Centers for Medicare and Medicaid (CMS) has
been given a mandate to adopt new uses of technology to
more efficiently administer CMS programs. Throughout the
Act, generally, sections pertaining to demonstration projects,
advisory committee meetings, and other new programs
encourage the appropriate use of technology to increase
productivity. Specifically, the Act sets forth various provisions
that expressly address technological issues.
Non-Technology Specific Sections
The Act creates the Health Savings Account as an employee
benefit to the IRS code. Similar to flex benefit plans, HSAs are a
vehicle for using pre-tax dollars to pay for healthcare expenses.
However, use of an HSA is restricted to qualified individuals, or
people with high deductible health insurance policies. The true
value of the HSA is that unlike a flex benefits plan, the HSA is
not a “use it or lose it” annual benefit.
Also significant to healthcare delivery, the Act creates a
new safe harbor for fraud and abuse. Under the new safe
harbor, transactions previously considered prohibited because
they permitted inappropriate incentives, such as self-referrals
$15.00
and kickbacks in the delivery of healthcare services, may
be permitted if the transaction is intended to provide care
to medically underserved populations (MUP). With at least
one designated MUP area in every county in every state, the JACOB L. HAFTER
potential implications of this new safe harbor are, indeed,
considerable.
Numerous other provisions of the Act are
noteworthy:
The appeals process for denied Medicare claims will be
modified, providing for an expedited review process and
oversight by CMS, not the Social Security Administration.
Certain preventative health screening services, such as
cardiovascular blood tests, diabetes screening tests and
mammography services will be added as Medicare benefits.
Medicare will no longer reimburse physician offices for
Durable Medical Equipment, outpatient drugs or biologicals.
Under the Act, Medicare will only provide reimbursement for
these items if they are provided to a Medicare beneficiary by a
recognized Medicare contractor selected from a competitive bid
process.
The Act authorizes the creation of a pilot program
that permits certain private organizations to engage in
the identification of fraud and abuse practice as well as
recuperation efforts. Long-term care facilities will be required to
institute background checks for all employees who have patient
contact.
To summarize, the Medicare Reform Act of 2003 is an
enormous piece of legislation that has broad reaching
implications throughout the healthcare system. Among the
numerous provisions, some are technology specific, which may
create significant opportunities for the technology industry.
Jacob Hafter is a member of the Health Care Law Practice Group
at Flaster/Greenberg P.C., a South Jersey based law firm. He can be
reached at Jacob.Hafter@flastergreenberg.com.