CENTER FOR REGULATORY EFFECTIVENESS: Emerging Regulatory Issues

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Executive Summary of:
Regulatory Requirements in the Clinton Administration's Medicare Prescription Drug Proposal

MBS's Review of the Medicare Modernization Act of 2000.

MBS was asked by PhRMA to conduct a section-by-section review of the Clinton Administration's proposal to establish a Medicare prescription drug benefit, the "Medicare Modernization Act of 2000" ("MMA").

MBS was also asked to identify the number of new Federal regulatory requirements that would be required to implement the MMA, as well as who would be responsible for complying with those requirements.

New Federal Mandates in the Clinton Administration Proposal. MBS counted 412 new regulatory requirements in the Clinton Administration proposal.

Each of the 412 new regulatory requirements is documented in "The MBS Report on Regulatory Mandates in the Medicare Modernization Act of 2000."

Each new mandate is identified by its section and subsection within the MMA.

182 mandates (44%) apply to the prescription drug benefit program; the remaining 229 mandates (56%) apply to other Medicare reform proposals, such as the preferred participants program and the centers of excellence program.

HCFA alone would have to administer 255 new regulatory requirements. These include:

Establishing and regulating at least 15 taxpayer-funded "Prescription Drug Benefit Managers."

Administering an ongoing bidding and contract award process for exclusive contracts to serve as the Benefit Manager for each of the 15 geographic regions to be established nationwide to administer the prescription drug program.

Regulating all aspects of the provision of the prescription drug benefit by the 15 Benefit Managers, including:

Regulations establishing the ground rules for inclusion or exclusion of specific drugs in the benefit (a massive task, given the number of prescription drugs on the market, as well as their varying uses);

Resolving disputes with rejected bidders for Benefit Manager contracts for the 15 geographic regions;

Resolving disputes involving allegations against Benefit Managers brought by beneficiaries and "contracting pharmacies";

Establishing a separate regulatory regime to govern the relationship between Benefit Mangers and pharmacies, including, for the first time, Federal regulation of pharmacies;

Assisting such agencies as the Social Security Administration and the Office of Personnel Management in processing premium payments by beneficiaries and reimbursement payments to pharmacies for �'s of a billion to one billion pharmaceutical transactions per year; and

Establishing and implementing confidentiality standards to govern prescription drug transactions.

Who Would Pay for Establishing and Operating the "Benefit Managers"?

Although the Administration has stated that the prescription drug program would be operated by private-sector Benefit Managers, the Benefit Managers to be established under the MMA would in fact be quasi-governmental bodies:

A Benefit Manager would be allowed to participate in the Medicare program only after winning an exclusive contract to be awarded by the Federal Government.
Every aspect of the Benefit Manager's operations would be subject to Federal Government regulation and oversight.
The administrative costs of operating the Benefit Manager would be paid for by the Medicare program (i.e., ultimately, by the taxpayers).
The Federal Government would decide whether to renew or terminate contracts with Benefit Managers every three-five years.