On December 8, 2003, the President signed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), which added a prescription drug benefit as part of the Medicare program. The MMA significantly reduces the risk of catastrophic out-of-pocket drug expenses. Medicare beneficiaries in standard plans will pay only five percent of prescription drug costs after spending $3,600 out of pocket. Medicare beneficiaries whose incomes are below 150 percent of the federal poverty level will have additional subsidies that pay most of the out-of-pocket expenses.
In the absence of the MMA almost half of Medicare beneficiaries would have been without catastrophic coverage for prescription drugs. The impact of the MMA will be most dramatic for Medicare beneficiaries with high out-of-pocket expenses who do not currently have prescription drug coverage. Overall, the MMA reduces out-of-pocket spending by about half, and the MMA reduces catastrophic expenses most dramatically for low-income beneficiaries.
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