The Medicare Modernization Act of 2003 ("MMA") provided a new prescription drug benefit for millions of Americans who receive healthcare through Medicare. However, for those individuals who qualify for both Medicare and Medicaid, "dual eligibles," the change has proved harmful. Prior to the MMA, states provided prescription drug benefits to their dual eligibles through Medicaid. The MMA prohibited states from providing this coverage by mandating that dual eligibles' prescription drug benefits would solely be provided through Medicare.
Neither the dual eligibles nor the states are receiving the benefits promised. The transition from Medicaid to Medicare was not smooth, as there were lapses in coverage for dual eligibles and increased prescription drug costs. In addition, the MMA was intended to reduce states' benefit expenditures in exchange for a reduction in states' ability to control the programs' costs. The federal government, however, has required states to return most of the savings from the transfer.
Advocates and academics have so far proposed only piecemeal improvements to address the MMA's problems, but none offer a comprehensive solution to improve administration, reduce dual eligibles' lapses in coverage, and lower overall drug costs. This Note argues that the MMA should be reformed to improve administration and reduce lapses in coverage, to allow for price negotiations and lower drug costs, and to give states the means to control their health care expenditures. This solution permits states to provide health care coverage for dual eligibles through Medicaid as they successfully did before the MMA.
The Medicare Modernization Act ("MMA"),1 enacted in 2003 and implemented in 2006, brought about significant changes to government-provided medical care. One of the most controversial provisions was the addition of a prescription drug benefit to Medicare, known as Part D.2 The addition of this program affected not only Medicare enrollees but also many beneficiaries of its sister program Medicaid, and had a particularly negative effect on those who were eligible for both programs.3
A. OVERVIEW OF MEDICAID AND MEDICARE
The federal government enacted Medicaid in 1965 as a meanstested program to provide healthcare for a portion of the country's low-income population. It is by far the government's most costly means-tested program, with total spending exceeding $300 billion per year.4 The federal government and the states jointly run the program, with federal contributions based on a matching formula that takes into account each state's contribution.5 While both state and federal entities participate in setting eligibility levels, the federal government requires states to provide Medicaid for elderly and disabled individuals with income and asset levels low enough to qualify them for Federal Supplemental Security Income ("SSI").6 States also have discretion to cover residents who have assets or income above this level; as of 2006, twenty-one states and the District of Columbia chose to do so.7 Most of these states extended Medicaid coverage up to 100% of the federal poverty line.8 Medicaid is really "not one program but many"9 due to significant variations between states' coverage levels and eligibility requirements. Because of the varying standards, different groups often gain eligibility for Medicaid through different sets of federal and state rules.10
Medicare, the sister program of Medicaid, was also enacted in 1965 and provides healthcare for people over age 65 as well as some disabled persons younger than 65. n In contrast to Medicaid, the federal government alone operates Medicare.12 Medicare is an entitlement program, meaning that anyone who meets the age or disability requirements is qualified regardless of income or assets.13
Medicare coverage is divided into several components. Medicare Part A covers inpatient hospital care after payment of a minimum deductible, up to 100 days of post-hospital skilled nursing care, home healthcare services for those who need care on an intermittent basis, and hospice care services to terminally ill beneficiaries. …