[Senate Hearing 108-751]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-751

           MEDICARE DISCOUNT DRUG CARD: MEASURING THE SAVINGS

=======================================================================

                                 FORUM

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                           SEPTEMBER 23, 2004

                               __________

                           Serial No. 108-44

         Printed for the use of the Special Committee on Aging




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                       SPECIAL COMMITTEE ON AGING

                      LARRY CRAIG, Idaho, Chairman
RICHARD SHELBY, Alabama              JOHN B. BREAUX, Louisiana, Ranking 
SUSAN COLLINS, Maine                     Member
MIKE ENZI, Wyoming                   HARRY REID, Nevada
GORDON SMITH, Oregon                 HERB KOHL, Wisconsin
JAMES M. TALENT, Missouri            JAMES M. JEFFORDS, Vermont
PETER G. FITZGERALD, Illinois        RUSSELL D. FEINGOLD, Wisconsin
ORRIN G. HATCH, Utah                 RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina       BLANCHE L. LINCOLN, Arkansas
TED STEVENS, Alaska                  EVAN BAYH, Indiana
RICK SANTORUM, Pennsylvania          THOMAS R. CARPER, Delaware
                                     DEBBIE STABENOW, Michigan
                      Lupe Wissel, Staff Director
             Michelle Easton, Ranking Member Staff Director

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator Larry E. Craig......................     1

                           Panel of Witnesses

Mark McClellan, director, Centers for Medicare and Medicaid 
  Serivces.......................................................     2
Jim Firman, president, National Council on the Aging, chair, 
  Access to Benefits Coalition...................................    12
Sharman Stephens, director, Planning and Policy Analysis, Office 
  of Research and Development Information, Centers for Medicare 
  and Medicaid Services..........................................    14
Mary Grealy, president, Health Leadership Council................    33
Robert Helms, resident scholar and director of Health Policy 
  Studies, American Enterprise Institute.........................    42
Julie James, principal, Health Policy Alternatives...............    97

                                Appendix

Study submitted by the Lewin Group...............................   169

                                 (iii)



 
       FORUM: MEDICARE DISCOUNT DRUG CARDS: MEASURING THE SAVINGS

                              ------------



                      THURSDAY, SEPTEMBER 23, 2004

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The forum commenced, pursuant to notice, at 2:39 p.m., in 
room SD-628, Dirksen Senate Office Building.

       OPENING STATEMENT OF SENATOR LARRY CRAIG, CHAIRMAN

    The Chairman. Well, ladies and gentlemen, thank you for 
your patience. Traffic--well, those of you who traffic Capitol 
Hill understand the congestion and the frustration today, and 
then, we had the prime minister of the provisional government 
of Iraq on the Hill, and that has created another traffic 
problem. But most are assembled, and the rest are on the way. 
So why do we not get started?
    Let me say good afternoon to all of you and welcome you to 
what I think is a very valuable forum. The drug discount cards 
and measuring the savings of those cards; of course, this forum 
is one of several that the Special Committee on Aging here in 
the Senate has hosted.
    We have convened today's forum to take a hard look at the 
facts, facts about the new Medicare prescription drug card 
program and the real savings it offers to America's seniors. It 
is no secret that there has been some skeptical chatter about 
the program, but the facts, I am pleased to say, speak louder 
than the words. First, Medicare administrator Dr. Mark 
McClellan is with us. He is here to announce fresh Medicare 
data showing clearly that the drug card program continues to 
provide seniors very significant savings and that these savings 
are solid and improving.
    But let us not just take Dr. McClellan's word for it. Also 
joining us are representatives of three major independent 
studies conducted so far on the drug card program, all of which 
confirm the serious savings available under the program. As 
anyone familiar with the world of health care policy would 
agree, the organizations affiliated with these studies are 
among the most respected in the field, namely, the Kaiser 
Family Foundation, the Lewin Group, the American Enterprise 
Institute, the Health Care Leadership Council and the Health 
Policy Alternatives. Needless to say, when expert groups as 
diverse as these all come out in general agreement, I think it 
is safe to say that we are on to something or at least 
certainly on the right track.
    I am also pleased that today's discussion also coincides 
with this week's announcement that Medicare will soon launch a 
new program to vastly accelerate enrollment of lower-income 
seniors, those who are eligible for the additional $600 in cash 
assistance this year, and another 600 next year. Now, this 
program is not perfect, and yes, there is some confusion. But 
this is normal. I am sorry to say in a new program. How many of 
you have always wanted to rush out and buy a brand new car 
first one off the line? Most do not. Most much prefer that the 
marketplace work with it for a year. But in this reality, that 
does not work. Getting people enrolled and working to get 
people enrolled refines the program and develops the program.
    Finally, I believe it is also important to look ahead. 
Today's drug card program is just the beginning, a stepping 
stone, if you will, toward implementation of the full 
prescription drug benefit less than 2 years away. I hope our 
panelists can comment on the lessons that we can learn today as 
we prepare for the tomorrow of 2006 and beyond.
    Unfortunately, neither my schedule or Dr. McClellan's 
schedule will permit us to stay for the balance of today's 
discussions. However, it is a pleasure to welcome all of you on 
our panel to be with us today, and we look forward to your 
contribution.
    The Chairman. Now, let me introduce the director of CMS, 
Dr. Mark McClellan. Mark.

STATEMENT OF MARK MCCLELLAN, DIRECTOR, CENTERS FOR MEDICARE AND 
                       MEDICAID SERVICES.

    Dr. McClellan. Thank you. Mr. Chairman, I appreciate it. It 
is a real pleasure to be here with all of you this afternoon to 
discuss the savings that are available right now to Medicare 
beneficiaries through the Medicare prescription drug discount 
card and the transitional assistance program that goes along 
with it.
    I especially want to thank this Committee, the Aging 
Committee, for its hard work on the Medicare Modernization Act, 
the law that made this immediate help for lower-income 
beneficiaries with financial help and discounts plus discounts 
for all beneficiaries possible and which we are working as hard 
as possible to bring the most savings to as many beneficiaries 
as we can right now, and that is what I want to talk about.
    I expect that the moderator was held up in traffic going 
from the same event that I was. This morning, Jim Firman and I 
made some joint announcements about further steps that we are 
taking particularly focused on getting low-income beneficiaries 
to start saving. There are literally thousands of dollars in 
savings that they can get right now, and I am very pleased with 
Jim's work as the chairman of the Access to Benefits Coalition, 
which is a broad, nonpartisan group of organizations that have 
one goal in mind, which is to get the most help possible to as 
many Medicare beneficiaries as possible with their drug costs, 
and a key part of doing that is getting them informed about the 
facts of the Medicare drug discount card and getting them 
enrolled, and I am going to get back to that point in a minute, 
but Jim has been very busy today.
    I also want to thank the CMS staff that has worked very 
hard over the last few months not only to implement this drug 
card program on schedule but to continue to work to refine it, 
to improve it, to help it to be even more effective in 
providing discounts and getting assistance to more Medicare 
beneficiaries.
    Well, it has been more than 3 months now, over 3 months 
ago, that Medicare beneficiaries began getting discounts on 
their prescription drugs through the drug card program as an 
important first step toward comprehensive drug coverage in 
Medicare, coverage that is way overdue. The voluntary drug card 
program is providing immediate relief now to seniors and people 
with disabilities who are covered under Medicare.
    The discount cards have already enrolled and reduced 
prescription drug costs for over 4.4 million Medicare 
beneficiaries. That number is growing at about 10,000 new 
enrollees a day, and to put this in perspective, this is the 
fastest takeoff of any recent Federal health program, any 
recent voluntary program. There are now savings, for the first 
time, through Medicare. Medicare is bringing savings on 
prescription drugs to beneficiaries who do not have drug 
coverage. At CMS, we are pleased this afternoon to release a 
new set of studies on drug card savings based on our latest 
research. That research finds that seniors can save even more 
than it looked like they were saving in our earlier studies: 12 
to 21 percent now on sets of brand name drugs, in comparison to 
the national retail average prices paid for by all Americans.
    I want to be clear about this 12 to 21 percent number. That 
is in comparison to the average prices paid by all Americans, 
that includes most Americans who have long had drug coverage, 
and so, are able to get big discounts on their drug prices 
through the public insurance programs they are in like Medicaid 
or VA or the private insurance programs they are in. Medicare 
beneficiaries are now below average, significantly below 
average, 12 to 21 percent below average, when they use the drug 
cards.
    You will hear more about the new CMS studies from Sharman 
Stephens on our staff, who has done a tremendous job for a long 
time at CMS and has been an integral part of making sure we are 
analyzing the drug card program as effectively as possible to 
help it work as effectively as possible. But no matter what 
methodology is used here, the savings of 12 to 21 percent on 
brand name drugs, the much larger savings on generic drugs, 
savings in comparison to retail prices that are offered, the 
findings are similar.
    This goes as well for findings on Internet purchases of 
drugs. The drug cards are offering significantly lower prices, 
as much as 30 percent lower in some cases, on drugs compared to 
reputable Internet sites like Drugstore.com and Costco.com. In 
fact, Drugstore.com is now partnering with a number of Medicare 
drug discount cards to offer even lower prices to Medicare 
beneficiaries online through Drugstore.com.
    So the price reductions are substantial. They are also 
present when you look at retail prices, where the usual retail 
prices for cash-paying customers can be significantly higher 
than the discounted prices that most people with insurance are 
able to obtain, and those comparisons show savings of typically 
20 percent or more according to some of the other recent 
studies that you will hear about from the panel members.
    It is very encouraging to us to see the consistent showing 
of significant savings on prescription drugs at local 
pharmacies, even larger savings on mail order drugs and very 
large savings on generic drugs available through this program. 
We have also set up some new ways to save, including an 
announcement last week. When you go to our Website, or when you 
call us at 1-800-Medicare, you can not only get information 
about how much you can exactly save on your prescription drugs 
that you are taking now, but if there are generic versions of 
the drugs available, we will tell you about them and tell you 
how much you can save on them, and again, generic savings can 
be on the order of 40, 50, 60 percent or more, and if there are 
drugs that work in a similar way to the drug you are taking for 
a cholesterol lowering drug or a drug for stomach acid or a 
nonsedating drug for your allergies, we will tell you about 
those alternatives as well to focus a discussion with your 
doctor where it can be most useful.
    It is very hard to go into your physician, just ask about, 
gosh, how can I get savings on my prescriptions. It is much 
easier if you have got a piece of paper in front of you or the 
notes from your conversation with one of our customer service 
representatives saying that if you switch from Zocor to 
Mevacor, Lipitor, you could save $10, $20, $30 a month. That is 
an additional way to save that we are making possible in order 
to encourage more competition among prescription drugs to get 
the costs down.
    So with these new studies that we are updating today, we 
are seeing clear and consistent savings that have persisted 
over the whole period of our analysis. I should highlight as 
well that the comparisons I mentioned, the 12 to 21 percent or 
more, is in comparison to the average prices that Americans 
paid in the first quarter of this year, so even going back 6 
months plus to a time since when there have been some reports 
about list price increases for drugs, we are still seeing 
actually a little bit larger savings than in the past.
    Our analyses now also extend to breadth of coverage. You 
know, there were a lot of concerns when this program started 
that there might be some bait and switch, and we said, ``That 
we were going to be vigilant in watching out for that by 
keeping an eye on what is happening with prices.'' I just told 
you about some of the main features of our studies as well as 
some of the other studies that have been done.
    But we are also looking at the drugs that have been 
covered. People were worried that some drugs that they were 
taking now might not end up continuing to get coverage on their 
drug card. Now, we are making available on our Website and when 
you call us at 1-800-Medicare some specific information on how 
broad the discounts are on each of the drug cards.
    So with respect to that, I am pleased to tell you that all 
of the cards cover almost all of the top drugs used by seniors 
in this country. Many of the cards cover 100 out of the top 100 
prescription drugs, and all of them cover at least 97 out of 
the top 100. That has been persistent over this program for the 
whole time it has been in existence.
    We looked further at how well the cards do in covering all 
of the prescription medicines that are out there, all of the 
drugs marketed in the United States, and you can get this 
information when you go to our Website or call us at 1-800-
Medicare, and the vast majority of cards are covering, all of 
the cards are covering most of the drugs that are marketed in 
the United States, and most of the cards are covering 70, 80 
percent or more of all prescription drugs in the U.S. A number 
of cards are over 90 percent of all of the prescription drugs 
marketed in the United States, so very broad coverage on the 
cards as well.
    Now, as important as these real and persistent and broad 
savings are on the drug cards to all seniors and people with 
disabilities who are struggling with drug costs because they do 
not have good coverage, the drug card especially means a lot to 
people with limited means and no drug coverage. That is because 
it adds in $600 in assistance right on the card this year; it 
works very similarly to a debit card. When you use the card to 
fill your prescription, the cash that you have on the card will 
be taken off right then. You do not need to come up with the 
money yourself, and then, there is $600 more in assistance next 
year as well.
    On top of that, after the $600 is used up, Medicare cards 
have worked with drug manufacturers to provide additional 
wraparound discounts on more than 200 brand name medications, 
including many of the top drugs, so 6 out of the top 10 
prescriptions in the elderly are covered by these wraparound 
programs now, generally on multiple cards. The way the 
wraparounds work is after you use up that $600 credit, you get 
an extra large discount on your prescription.
    You can typically get the prescription for close to if not 
only the cost of the dispensing fee. That is $15 or less for a 
prescription that might cost $80, $90, $100 otherwise. So if 
you add that all together, the discounts, the credit, the 
wraparound, this is thousands of dollars in help available 
right now with drug costs for the beneficiaries who need it the 
most. They do not have to choose anymore between paying for 
their drugs and paying for other basic necessities.
    Because we know every dollar counts, the cards are free for 
low-income beneficiaries. This is why we at CMS have been 
trying to do as much outreach as possible to make sure lower-
income beneficiaries especially are informed about the benefits 
of these cards, and that is why I am particularly pleased with 
the announcements that we have been able to undertake recently 
with the Access to Benefits Coalition; Jim, who was program 
stuck in the same traffic I was coming over from the National 
Press Club today, has been doing some tremendous work with more 
than 90 national organizations in the Access to Benefits 
Coalition that have a very simple nonpartisan goal, and that is 
to get the most help to lower-income beneficiaries with their 
drug costs as quickly as possible. Again, the drug card, the 
$600 annual credits, and the wraparound discounts are a key 
part of that effort, and I hope that Jim will have a chance to 
talk a little bit about some of the new steps that ABC is 
taking to make that happen.
    This is very important, because the savings offered by the 
drug card are only available to people who are enrolled, and 
that is why we are working harder than ever to ensure that 
seniors, their families, care givers, all of them, have the 
information they need to make informed decisions to select a 
card that can give them a lot of help right now.
    If you are on Medicare, and you are struggling with drug 
costs, you should know that signing up is as simple as calling 
1-800-Medicare with just a few pieces of information: your ZIP 
Code, your drugs and dosages that are found on the prescription 
bottles, and if you think you might qualify for the $600 credit 
and all of the wraparound assistance, your annual income.
    We have staffed up at 1-800-Medicare. We have got over 
3,000 trained customer service representatives who can walk you 
through the card choices. We will focus in on just a limited 
number of choices. We tend to talk about the top five, but if 
people want to hear about fewer than that or more than that, we 
can do that as well. The call to get all the information you 
need to find out about how to save takes less than 15 minutes. 
If you are interested, you can get a personalized brochure to 
take a closer look at the cards on paper before deciding which 
one to enroll in, but if you are ready to sign up when you 
call, our customer service representatives can tell you exactly 
what you need to do to enroll in a drug card over the phone.
    Just today, with help from the Access to Benefits 
Coalition, we announced some new steps to make this even 
easier. We are incorporating information on all of the 
wraparound programs into the guidance that we give people when 
they call us up or when they visit our Website, and we are also 
making it easier to enroll in the transitional assistance over 
the phone or online as well.
    It is not just us. Again, thanks to the work of the Access 
to Benefits Coalition, there is now another Website that people 
can use to get quick information and recommendations and help 
in getting signed up, getting enrolled and actually starting to 
get savings right now.
    To ensure that seniors have all of the information that 
they need and that all seniors are educated about how they can 
start saving right away, we are engaging in more partnerships 
like this one with the Access to Benefits Coalition. We are 
partnering with community-based organizations, with States 
through their State health insurance assistance plans, with 
other Federal agencies to reach out to beneficiaries to make 
sure they get the facts about the discount cards and to make 
sure that they start saving.
    Again, this is very important: no senior today should be 
choosing between drugs and other basic necessities. There is a 
lot of real help available right now, and we are working 
ourselves and with our many partners to get this help available 
as quickly and as easily as possible.
    Now, I mentioned that we have got about 4.5 million people 
enrolled in the card program now. We are well over the 50 
percent mark on enrollment, on expected enrollment, but I think 
we can do a lot better. That is why I think the step that we 
announced yesterday is so important, to add nearly 2 million 
lower income Americans to this program through automatic 
enrollment process.
    These are lower income beneficiaries who are in limited 
Medicaid benefit programs that do not provide drug coverage. 
They are going to be getting a drug card in the mail next 
month. When they get the card, they can start using it 
beginning in November to get the $600 credit. All they have to 
do is make one phone call and answer two questions. They can 
call us up at 1-800-Medicare. They can call the 800 number for 
the card sponsor. Just let us know that they do not have any 
other prescription drug coverage now and let us know that their 
income level is still below the level that gets them to qualify 
for the program. We think that is generally going to be the 
case, because we are targeting this automatic enrollment to 
beneficiaries who are already enrolled in Medicare savings 
programs, these limited Medicaid benefit programs, and then, 
they can start using the card right away.
    So we are going to not only get these letters out in the 
next couple of weeks but with all of our partners around the 
country to make sure beneficiaries get the facts and know that 
they can get literally thousands of dollars in savings right 
away if they just start using this card. We hope, through this 
process as well, to reach many other lower-income beneficiaries 
who can get thousands of dollars in help right now as well.
    The drug cards are an important step. They are providing 
real savings for beneficiaries right now, with millions more to 
come. They are also an important bridge to the new Medicare 
prescription drug benefit that will go into effect in January 
2006. We expect that the experience from this card program is 
going to help get more discount card sponsors converted into 
drug benefit providers; it will also help the drug benefit 
plans do a better job of providing the best service, and it is 
certainly going to help us do the best job possible of 
informing people, working with public-private partnerships to 
help make sure they get the most benefits possible and to 
provide the most support and the most effective support we can 
to Medicare beneficiaries.
    Through this process, beneficiaries are going to continue 
to get discounts on their drugs. With the drug benefit, the 
expectation is that the price, even lower negotiated prices may 
be possible. As both CBO and CMS have said in the independent 
analysis that is underlying our proposed regulations on the 
drug benefit, we think that the competitive approach to price 
negotiation that we are following is going to give the best 
possible prices, prices that are as good if not better than the 
Government could negotiate directly as well as more options in 
terms of making sure that people have access to the 
prescription drugs they need, not a one size fits all 
formulary.
    So we are on the way to doing that, and we are going to use 
this experience to make sure that we get as many people 
enrolled as possible to take advantage of both of the benefits. 
I want to thank all of you again, especially the Chairman, for 
his leadership, and thank you all for the opportunity to talk 
today about the substantial savings that are available through 
the discount drug card program as we are taking an important 
step toward full prescription drug benefits in Medicare.
    This has been too long in coming. We are working very 
quickly and as extensively as we can with outside partners to 
get as much help as possible to our beneficiaries, and even 
more is coming in the months ahead.
    Thank you all very much. [Applause.]
    [The prepared statement of Dr. McClellan follows:]
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    The Chairman. Well, Mark, thank you very much.
    Folks, do the math. Our targeted group is about 7.3 
million. We are at 4.4 million now. The program that Jim and 
Mark have just announced today will add about 1.8 or 2 million 
in a 3-month period of time and more. That is pretty good 
business, and we applaud you for it and appreciate it.
    I do appreciate, Mark, you joining us and sharing those 
numbers today. It is important that we keep track of this 
program as it goes along, get the real numbers and understand 
them and the kind of cooperative effort that is well underway. 
You and your staff, I think, deserve a great deal of credit for 
handling a huge task of implementing this new Medicare program 
in the way that you have.
    It is probably not much of an exaggeration to say that 
drafting the original bill was a picnic compared to the 
implementation of the details, and I will tell you how we 
struggled in the picnic trying to get a bill that we felt would 
work and would respond to the needs of our seniors.
    I guess I can understand, Mark, why you get the award 
indispensable person from the Alliance for Aging Research that 
you got this past week. That is greatly appreciated, I am sure.
    Next, we will turn the proceedings over to Jim Firman. Jim 
has arrived, after having been, I understand, caught in a 
motorcade. He will be the moderator of the panel. Jim, as you 
now know, is president of the National Council on the Aging as 
well as leader of the recently founded Access to Benefits 
Coalition. Jim's ABC Coalition has successfully brought 
together dozens of organizations across the country and is 
doing tremendous work in reaching out to seniors and helping 
them gain access to the benefits of the new Medicare law.
    So, Jim, we thank you very much for being here on what we 
now understand has been a busy day for you. We look forward to 
your moderating and introducing the panelists. Panelists all, 
thank you very much for being with us this afternoon and 
sharing your information and the research work you have done.
    Thank you.

  STATEMENT OF JIM FIRMAN, PRESIDENT, NATIONAL COUNCIL ON THE 
           AGING, CHAIR, ACCESS TO BENEFITS COALITION

    Mr. Firman. Thank you very much. Thank you, Senator Craig, 
Dr. McClellan. [Pause.]
    Thank you very much. My name is Jim Firman. I have the 
pleasure of chairing the Access to Benefits Coalition, which is 
a coalition of more than 90 national, nonprofit organizations 
and 52 State and regional coalitions, all who have come 
together for only one purpose: to make sure that low-income 
Medicare beneficiaries can get the best possible coverage and 
savings for prescription drugs.
    We are nonpartisan. We are only about finding people and 
helping them get the coverage they need, whether it is State 
programs, Medicare cards, the best possible Medicare cards, 
company patient assistance programs, veterans' benefits, 
Medicaid. We do not care. We want to find the best combination 
to work for people.
    We are delighted to be here today, because we have been 
working closely with Administrator McClellan to find ways to 
get as many people as possible into the benefits. We are very 
pleased to be able to be part of the announcement yesterday 
that CMS is going to auto-enroll 1.8 million low-income people 
in the benefit. That is a great step forward. Today, we were 
announcing the new tools for consumers, a new Website called 
Accesstobenefits.org put together by the coalition, designed to 
help people quickly and easily figure out the best combination 
of programs and then enroll in those benefits.
    It takes a somewhat different approach than Medicare.gov, 
but they are both wonderful Websites full of wonderful 
information, and we encourage people to use both of those or 
either of them, whatever works. You will find sometimes, we 
approach a little differently, but pretty much, we come to the 
same kinds of answers, that there are more benefits out there 
than people realize, and the need is for people to sign up for 
them now.
    But as we have done our research, and we have done 
extensive research in focus groups and talking to older people, 
what we find is that many older people and people with 
disabilities on Medicare, particularly those with lower incomes 
are skeptical. They have heard a lot of things. They are not 
sure how significant the savings really are. They do not know 
whether they will qualify for them, even though we are looking 
at people who in many cases we know are eligible. They do not 
think that they will be able to access those benefits.
    That is why today is so important, because I am delighted 
to have the opportunity to chair this panel, where we can get 
some of the facts, and we can find out what is really going on, 
what are the savings, how many of them, because this is very 
important, I think, for consumers to understand, for the public 
to understand as well.
    So let us get on to the real substance of this panel, and 
let us hear from the folks who have done the research and who 
can tell us their findings. Our first presenter--the way this 
is going to work is we are going to hear four presentations, 
about 5 minutes each, and then, we are going to open it up into 
a discussion and ask questions. I am going to ask some 
questions. You on the floor will have an opportunity to write 
down and to pass questions up as well. But the goal is to help 
educate all of us as to what is really going on in terms of 
costs and prices.
    So the first speaker will be Sharman Stephens, who is the 
director of planning and policy analysis in the Office of 
Research and Development Information at the Center for Medicare 
and Medicaid Services at HHS. She has been there since 1996, 
and before that, she was with the Office of the Assistant 
Secretary for Planning and Evaluation at HHS. She is a graduate 
of the Duke University School of Nursing and had received her 
master's in public health from the University of North 
Carolina.

 STATEMENT OF SHARMAN STEPHENS, DIRECTOR, PLANNING AND POLICY 
   ANALYSIS, OFFICE OF RESEARCH AND DEVELOPMENT INFORMATION, 
           CENTER FOR MEDICARE AND MEDICAID SERVICES

    Ms. Stephens. Thank you.
    Good afternoon. I want to thank you for inviting me to 
discuss the analyses we have conducted regarding the level of 
savings available to Medicare beneficiaries enrolling in 
Medicare-approved drug discount cards. My remarks this 
afternoon will focus on a series of CMS studies that have 
examined the level of savings available to Medicare 
beneficiaries through these cards.
    We have examined prices offered by the Medicare approved 
cards from a variety of angles. In the initial weeks of program 
implementation, we found that overall, and as we are showing on 
that first chart over there, for non-low-income beneficiaries, 
absent the $600 in transitional assistance, savings of 11 to 18 
percent were possible over national average retail pharmacy 
prices for the illustrative baskets of commonly used drugs we 
examined.
    We reexamined the prices posted on the Medicare comparison 
Website last week for the same sets of commonly used drugs 
examined previously. As shown on the chart, we found that 
savings are now ranging from almost 12 percent to over 21 
percent for the baskets of drugs we examined. As Dr. McClellan 
pointed out, our point of comparison in these analyses is to 
national average retail prices, which include both the higher 
prices paid by people without insurance, normally, we call them 
the cash-paying customer, and the lower prices paid by people 
with private and public insurance, and most people, actually, 
have coverage. But as a result, we would actually expect that 
beneficiaries' savings would be larger for those who are 
currently paying cash prices at retail pharmacies.
    As you can see, on the right side of the chart, because of 
the annual $600 in transitional assistance, the savings for 
low-income beneficiaries are even greater. Using data from last 
week and estimating for the 4-month period from September to 
December of 2004, we found that when the discounts and the $600 
in transitional assistance are considered, low-income 
beneficiaries during this period can save from nearly 44 to 92 
percent, compared to national average retail prices.
    These savings can be substantially greater for some 
beneficiaries when the special very low pricing arrangements on 
over 200 drugs now being offered by several brand name 
pharmaceutical manufacturers, in coordination with the Medicare 
discount card programs, are considered. Forty-six out of these 
200 drugs are actually among the top 200 drugs used by the 65 
and over population.
    It is also important to note, and I am going to be moving 
over to the next chart here, that generic drugs offer all 
beneficiaries a chance to save even more on their drug costs. 
As shown in the second chart, in a June study on generic drugs, 
we found that those who can switch to generic drugs can save 46 
to 92 percent over the cost of brand-name drugs we examined. We 
also found that those beneficiaries already taking generic 
drugs could save 37 to 65 percent over national average retail 
pharmacy prices by enrolling in a Medicare-approved discount 
drug card.
    As a quick update, based on prices posted last week, we saw 
commonly used generic drugs with savings of 45 to almost 75 
percent. That is shown on the right side of the second chart.
    Because some beneficiaries may choose to get their 
prescriptions through mail order, we have also examined the 
mail order market. Our analyses found that Medicare-approved 
drug card prices for mail order consistently beat the prices 
offered by popular mail order pharmacies. For example, using 10 
commonly used drugs, we found that the best Medicare-approved 
drug cards had prices on these drugs ranging from 5 to 33 
percent lower than drugstore.com and 11 to 34 percent lower 
than Costco.com.
    On the third chart, the top red line is Costco.com, the 
second line, which is blue, is Drugstore.com, and the bottom 
line in green is Medicare. This third chart illustrates the 
savings in dollars for a few commonly used drugs, in this case, 
Celebrex, Prevacid, Norvasc, and Zocor.
    Often, the retail pharmacy prices of the Medicare cards, 
are actually higher than mail order, but we were finding that 
the Medicare cards with the best prices beat mail order prices 
many, many times for these popular Internet service pharmacies.
    Our research has also examined the prices from the 
perspective of medicines used to treat common health conditions 
such as diabetes, hypertension, heart disease, and 
osteoporosis, that are common in the Medicare population. 
Again, updating a prior study, using prices posted on the Web 
last week, we found that beneficiaries with nine common chronic 
conditions can save anywhere from about 10 to 75 percent over 
national average retail pharmacy prices for drugs often used to 
treat these ailments. The higher percentage savings being 
associated on a percent terms on the generic drugs, but we were 
also finding discounts of more than 20 percent on brand name 
drugs.
    Our final chart shows dollar savings for four common 
conditions. For example, for beneficiaries using medications to 
treat high cholesterol, we are seeing savings per monthly 
prescription of $14 to $42. Even at the fifth card down the 
list, we saw per prescription savings of $10 to $42 per 
prescription.
    We have also recently examined drug card program coverage 
of the top 100 drugs, and Dr. McClellan made reference to this. 
It is comprehensive coverage, and the coverage has been stable 
between when the program started in June and September.
    As you can see, our analyses show that the discount drug 
cards offer substantial, reliable savings to Medicare 
beneficiaries and particularly those low-income beneficiaries 
who are eligible for the annual $600 in transitional assistance 
and the special manufacturer wraparound programs.
    I want to thank you for the opportunity to participate in 
today's forum, and I would be happy to answer any questions 
about our analyses.
    [The prepared statement of Ms. Stephens follows:]
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    Mr. Firman. Thank you. I am sure we are going to have 
questions, but we are going to hold all of the questions until 
we hear from the four presenters.
    Our next presenter is Mary Grealy, the president of the 
Health Leadership Council, which is a coalition of chief 
executives of the nation's leading health care companies. Prior 
to her tenure at HLC, she served as the chief Washington 
counsel of the American Hospital Association, and prior to 
that, she was the chief operating officer and executive council 
of the Federation of American Health Systems.
    Ms. Grealy has a bachelor's degree from Michigan State and 
a law degree from Duquesne University. Welcome.

 STATEMENT OF MARY GREALY, PRESIDENT, HEALTH LEADERSHIP COUNCIL

    Ms. Grealy. Thank you, Jim.
    First of all, I would like to thank Chairman Craig on 
behalf of the members of the HealthCare Leadership Council for 
the opportunity to participate in what is a very timely as well 
as very important forum. This Committee is to be commended for 
taking action to help Medicare beneficiaries better understand 
how the Medicare drug discount card program can affect both 
their health and their finances.
    I have submitted a statement for the record today, but I 
would like to say a few words this afternoon about the study 
commissioned by the HealthCare Leadership Council. As Jim said, 
the HLC is a coalition of chief executives of many of America's 
leading health care companies and organizations, representing 
all different sectors of health care.
    Our guiding mission at the Health Care Leadership Council 
is accessible, affordable high quality health care for all 
Americans. Pursuing that goal, we sponsored a study to 
determine if the Medicare drug discount card program is indeed 
making prescription drugs more accessible and more affordable 
for Medicare beneficiaries. We commissioned a highly respected 
firm, the Lewin Group, to answer a simple yet critical 
question: would an average Medicare beneficiary, an individual 
who did not already have some kind of prescription drug 
coverage, see significant savings by enrolling in the Medicare 
discount card program?
    This is a question that needed to be answered. The discount 
card program has been the subject of endless political warfare 
and inflammatory, often misleading rhetoric. We believe that 
for the sake of seniors and others who are on limited incomes 
and need help with their prescription purchases, it is time for 
us to replace rhetoric with indisputable facts.
    We asked the Lewin Group to take a look at the impact of 
the drug discount card, the $600 low-income credit as well as 
manufacturer assistance programs on the 150 prescription drugs 
that are most frequently used by senior citizens. We have 
provided you with that study in its entirety, but allow me to 
highlight just a few of the key findings. As noted in Figure 
11, on the first chart here, Lewin found the Medicare 
beneficiaries who enrolled in the drug discount card program 
and began using their cards on July 1 of this year will save an 
average of $1,247 or 35.5 percent between that date and the end 
of 2005, when the program ends to make way for the full 
Medicare prescription drug benefit.
    Those Medicare beneficiaries who have incomes below the 135 
percent of poverty level and qualify for the annual low-income 
credit will save an average of $1,548 over that same 18-month 
period. On individual prescriptions, the best discount cards 
nationally will save beneficiaries about 20 percent or an 
average of almost $10 per prescription, and more than half of 
the drug discount cards deliver savings of over 17 percent per 
prescription.
    To let you know, by the way, that we found very little 
variation in the discounted prices between and among geographic 
regions or between urban and rural areas. The best available 
price for any medication is generally offered consistently 
across all markets, and that is unusual for the Medicare 
program.
    Let me touch for a moment on the savings that are being 
experienced by low-income beneficiaries as well as those that 
are taking multiple drug regimens for the treatment of chronic 
diseases. The Lewin findings in this area are striking. Low-
income beneficiaries save money not only through the drug 
discount card; but also through the $600 annual transitional 
assistance credit. Additionally, a large number of drug 
manufacturers are offering special assistance to transitional 
assistance program participants. If a qualifying beneficiary 
uses up his or her $600 transitional assistance before the end 
of the year, these manufacturers will make their drugs 
available at either minimal cost or at no cost at all.
    The study shows us an example of how these multiple sources 
of assistance will help a low-income beneficiary with a chronic 
condition. We have outlined this in the other chart that is out 
there, and that is Figure 5A.
    For a senior that is afflicted with diabetes and 
hyperlipidemia or high cholesterol, the average retail spending 
on the most frequently used drugs for those conditions is 
$3,337. Now, a beneficiary using the drug discount card alone 
will save $878. Now, if they use the card and the $600 low-
income credit, they will save $1,478. A beneficiary using the 
card, the low-income credit and manufacturer assistance program 
for those drugs will save $2,198, or 66 percent off the average 
retail price.
    We are very pleased to present this comprehensive study on 
the drug discount card, and we encourage everyone to share 
these findings with your colleagues and for Members of Congress 
to share it with their constituents. We will be disseminating 
this information as well through a new coalition called 
Medicare Today. Medicare Today is made up of over 100 
organizations representing seniors, health care providers, 
consumers and employers, and is dedicated to helping 
beneficiaries take full advantage of the new programs passed by 
this Congress, and we certainly look forward to working with 
Jim Firman and the ABC Coalition and others in the many months 
ahead.
    It is regrettable that there are seniors who have been 
dissuaded by the political controversy from enrolling in a 
program that can make a significant difference in their daily 
lives. It is our hope that by placing this information in the 
public domain that we can encourage beneficiaries, particularly 
those on low or fixed incomes, to take advantage of this 
program and begin saving substantial money on their 
medications.
    For seniors that have not enrolled, every day that goes by 
represents money that they are leaving on the table, and that 
money cannot be recouped. So we want to make sure that that 
does not happen.
    Again, we look forward to working with all of the panelists 
and making sure that we get this information out there to those 
that can use it. Thank you.
    [The prepared statement of Ms. Grealy follows:]
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    Mr. Firman. Thank you, Mary.
    Our next presenter is Robert Helms, who is the resident 
scholar and director of health policy studies at the American 
Enterprise Institute. He has been there for about 11 years, if 
I do my math right. Prior to that, he was the executive 
director of the American Pharmaceutical Institute, and before 
that, he was assistant secretary for planning and evaluation in 
the Department of Health and Human Services from 1984 to 1989.
    Dr. Helms has a Ph.D. and an M.A. in economics from the 
University of California and his bachelor's degree from Auburn 
University.

  STATEMENT OF ROBERT HELMS, RESIDENT SCHOLAR AND DIRECTOR OF 
      HEALTH POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE

    Mr. Helms. Thank you, Jim.
    I would like to thank the Committee for the invitation. I 
am happy to present this study. It is in your packets and also 
on the AEI Website. This study was done by Joe Antos and Ximena 
Pinell back in June, and it was published by AEI in June.
    I am also going to report on some of the updates that we 
have done since then. It is a straightforward study, somewhat 
similar to the others. I might say that compared to these other 
studies, we do not have as many numbers as the other people, 
but we certainly have the best looking publication.
    With the advice of some physicians, we assigned the most 
commonly used drugs to these hypothetical patients on Medicare. 
We think we have a good sample.
    We then looked up the prices of these drugs in the retail 
market, and in the mail order market, as listed on the CMS 
Website as of June 1. Since then, we have updated these prices 
on a number of different locations.
    As figure 2 shows, like the other studies, that for a 7-
month supply--we are looking at from June through the end of 
2004, if people go in without any coverage and without any kind 
of discount card, they would pay full retail prices, would 
spend $2,073. The Medicare retail price, using the card, they 
would spend only $495. The savings, which are almost $1,600, 
come from, primarily, $600 for the subsidy for the people who 
are eligible for this, $575 of discounts from the Medicare 
program and then $403 from the special manufacturer savings.
    So, for the neediest seniors, those who are below the 
poverty thresholds $12,570 for individuals, $16,862, for 
couples, and without drug coverage these are substantial 
savings. But as you see in Figure 3, they can save even more; 
it is consistent with the other studies. This shows our 
evidence from several different--the estimated retail at $2,073 
on the left, the 7-month supply; if you went and got it from 
CVS mail order, AARP retail, the Costco mail order, the AARP 
mail order, but also, that the lowest of those, the AARP mail 
order, would be $1,500 for the period of time, and for the 
Medicare retail, it would go down to $495. But if you were 
willing to go to mail order with the Medicare discount card, 
you could get that down to $388, a savings of 81 percent for 
this senior.
    Now, this is not to say that everybody wants to go to the 
trouble of going to mail order or Canada. For a lot of people, 
the price is not the only thing they value. The convenience of 
going to their local pharmacist and dealing with somebody they 
know is very valuable for many people. So it is not the only 
thing that people have in mind.
    Figure 4 shows the savings that people could get who are 
not eligible for the $600 subsidy who are just the higher-
income beneficiaries. Here, you can see that compared to $2,073 
that they would have to pay with full retail price, and the 
best they could presently get, well, for AARP retail would be 
$1,787, and the AARP mail order would be down to $1,664. But 
with the Medicare card, they could get this down to $1,575 at 
retail level, but if they were willing to go to the Medicare 
mail order, they could get it down to $1,322.
    Now, as you can see in the last bullet, we did some updates 
of this as of last Tuesday, 2 days ago, and the best prices 
there for the Medicare retail go to $1,552, a slight decline, 
and for the Medicare mail order, it goes down from $1,322 down 
to $1,264. So, rather than prices are going up, our best 
indications are that there are probably small declines in 
prices. This is consistent with what you would expect in a 
competitive market in what is going on here, because our 
perception is that people are using this program, the cards to 
get ready for part D, which starts in 2006, so they have very 
strong commercial incentives to get more people on their card 
and keep them there.
    Now, Figure 5 just looks at, identifies the top five drugs. 
We use the Families USA selection of those drugs, and in the 
next table, Figure 6, here, you have the price, the range of 
savings for the price differences for the individuals who are 
the comparison for an individual pharmacy; in other words, the 
individual walking into a retail pharmacy without a card versus 
what they could get at the same pharmacy with the card.
    We have made this comparison in more places than we have 
listed here. Our conclusion is that the savings that are 
available through the Medicare discount card program are 
similar throughout the country, and the range of savings 
presented in this chart represent discounts off full retail 
prices. They range from 8 to 36 percent.
    Summing up, the Medicare prescription drug discount card 
program is a very good deal for most seniors. We find savings 
as high as 36 percent off the full retail prices and 
consistently around 30 percent around the country. The low 
income seniors can save considerably more by taking advantage 
of the $600 subsidies throughout the rest of this year and $600 
throughout 2005. They can save 50 to 75 percent by having the 
card compared to not having it.
    Since the program started on June 1, there is no evidence 
of card sponsors dropping drugs from their formularies or 
raising their drug prices once seniors are enrolled. In fact, 
as I said before, we have seen some evidence that the prices 
seem to be declining even since June. We have also found is 
that most cards offer nearly equivalent savings to seniors. In 
Boise, ID, for example, 31 of 33 available card plans price a 
top-selling set of drugs within 10 percent of the absolute best 
deal.
    That shows us that while it is important to shop around, 
people should not worry too much about getting the absolute 
best card; just get a card and you will get most of the 
savings.
    The bottom line? Most seniors can get substantial savings 
by signing up for one of the discount cards. They can get most 
of these savings at the local pharmacy if they do not want to 
deal with mail order, or if they do not want to deal with going 
to some foreign source of drugs. Almost all of the savings can 
be obtained from all the cards, so it is more important to get 
a card than it is to worry about getting the best card.
    Let me add, as an economist who has been studying this 
pharmaceutical industry for years, my view is that a lot of 
things are changing about the economics of this industry. The 
price transparency that we are going to get in Medicare is 
going to have a larger effect than just the Medicare market. I 
think it is going to speed up the rate of change that the 
market is imposing on this industry now.
    So, thank you.
    [The prepared statement of Mr. Helms follows:]
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    Mr. Firman. Thank you very much.
    Our fourth presenter is Julie James, who is a principal in 
the Washington, DC, consulting firm of Health Policy 
Alternatives. She joined the firm in 1998 with more than 25 
years' experience in health services research, planning and 
policy. Before joining HPA, she was chief health policy analyst 
for the Senate Committee on Finance, where she oversaw policy 
issues, including Medicare and Medicaid.
    Thank you. Welcome.

STATEMENT OF JULIE JAMES, PRINCIPAL, HEALTH POLICY ALTERNATIVES

    Ms. James. Thanks, Jim.
    I guess the advantage of being last is that I just have to 
say ditto. Our study, the results are just totally consistent 
with the other studies that were presented today, with one 
exception. Thank you, Bob. I just did not even realize it until 
you spoke that we did have one different finding, so it gives 
me something to talk about.
    The Kaiser Family Foundation asked our firm last spring to 
take a look at the discount card program and its implementation 
and a little broader than just what the savings are on the 
various drugs. We were also looking at what kinds of cards were 
out there, who was sponsoring them, what their enrollment fees 
were and the whole education and enrollment process and 
documenting what was happening as it was being implemented.
    We have written that, and you all have a copy of the study, 
so I am not going to go into very much detail there. I would 
like to say that we did find, as many of you know, that there 
was kind of a rocky start. It was difficult to get information 
to the extent that we started tracking prices the first 2 weeks 
the prices went up on the Website, and we just had to disregard 
that information, because it was just so unstable.
    But we did enter into constant communication with CMS, and 
they encouraged us every time we found a glitch to let them 
know about it, and they went to great effort to try to fix 
those, and I think everything is working much more smoothly 
now. There is no question that there is information overload 
when you have that many cards, that many drugs, that many 
pharmacies. I mean, there is just this unreal amount of 
information that you can sort through, and I think that the 
changes they have made in terms of how you now get the 
information are very helpful to beneficiaries to try to help 
them sort out and make their choice.
    I am just going to make a couple of points, because 
basically, as I said, ``While the numbers are not exactly the 
same, we all had a little bit different methodology; we all 
used a little bit different sources; we chose different sets of 
drugs, although there is a lot of overlap in terms of those 
that are most commonly prescribed, so we all came at it a 
little differently, but we all ended up with very, very similar 
results.''
    Starting out, though, in terms of the type of card 
sponsors, we found that across the nation, an average 
beneficiary, and let me say that our study focuses on the 
average beneficiary who would not be eligible for transitional 
assistance, because we knew other people were looking at that 
and the impact of the $600. We were looking at the beneficiary 
who did not have coverage but would not be eligible for the 
transitional assistance, and we did not look at those who would 
have the exclusive cards that were being sponsored by the 
Medicare Advantage plans.
    So we were really coming at this in a more narrow way. 
Anyway, we found that there was a good mix in terms of the 
sponsors of the cards. The average beneficiary had about 40 
cards to choose from, a combination of the national cards and 
regional cards that would be available to them. We did find in 
looking underneath the cards that some of them were exactly the 
same. They had the same list of drugs; they had the same 
prices; the only thing that was different was a name and 
perhaps some of the sponsors, and I am sure there are various 
reasons for that.
    But in effect, the real choice, I guess, was a little bit 
less than the actual number of cards that would be presented to 
you. In some cases, for example, we found one card--there were 
two cards, but one of them was only for transitional assistance 
people, and one of them was for everybody else. Otherwise, the 
cards were exactly the same, so there was a little bit of 
overlap.
    Just about half of the cards were sponsored by entities 
that call themselves pharmacy benefit managers or PBMs. The 
other half, though, was an interesting mix. You had some of the 
chain drug stores, the retail drug stores that got together and 
sponsored cards; you have some managed care plans that were 
sponsoring cards. There was a mix, and there is a chart in the 
study that outlines what that mix is. So I think it is not just 
the PBMs out there, but you have got a mix of people coming at 
it from different ways. For example, because of that mix and 
where they are coming from, some of these cards would offer 
mail order, and others do not. Most do, but there are actually 
some that do not.
    Now, in terms of the savings, we concur that we did find 
that there were savings. The savings that we found, the numbers 
are a little bit different, because what we used as our point 
of comparison was a Website that is put out by the attorney 
general in Maryland for retail prices in Maryland. It is very 
difficult to find something that you can use as a baseline, and 
we found this, and that is what we used. I suspect that the 
prices that are on that Website are a little bit higher than 
the average retail prices that CMS is using, and that is why 
our percentage savings are a little bit greater.
    We chose a basket of 10 drugs, and we chose seven cards to 
look at, because it was kind of a difficult process. We had to 
go through the Website like everybody else to gather this 
information. We did not have a master data base that was easy 
to manipulate.
    We found overall savings of 19 to 24 percent at the retail 
level and 27 to 32 percent in mail order for that basket of 10 
drugs. However, for any one drug that was in that basket, we 
found a rate of 8 to 61 percent savings at retail and 23 to 89 
percent savings for mail order. Now, 89 percent savings is 
pretty mindboggling. When you look at those percentages that 
are so high, those are usually generic products, and that would 
be for example a retail $10 generic product that then goes down 
to $1.10. That is the right math, right? I am trying to think 
of 89.
    So at the lower end of the scale would be your brand 
products. Obviously, these drugs cost more, and your savings 
percentagewise are going to be less. The generics, which are 
often under $10, are where you get those huge percentage 
savings.
    We also compared prices to Costco and Drugstore.com and 
found that in all cases, Costco was higher, Costco mail order. 
Drugstore.com was very competitive, and actually, their prices 
fell right in the middle between the highest card and the 
lowest card. But what we do not know is what Drugstore.com's 
prices were before the program started, so we do not know to 
what extent they were actually competing and lowering prices at 
that point.
    We found, and this is where we differ, I think, from what 
Bob reported, that the choice of card does make a very 
significant difference. We had four prototype beneficiaries and 
assigned a different mix of drugs to each of them. Then, we 
looked to see what the impact is, because obviously, you have 
to look at your total aggregate savings for the basket of drugs 
that you take. We had one prototype individual taking four 
drugs and found that the difference between the highest card 
and the lowest card--and we looked at all the cards in this 
case, not just our seven that we were tracking otherwise, and 
we found that he would pay, our fictitious Mr. Miller, would 
pay more than twice as much if he chose the highest price card 
over the lowest price card, and the difference would be between 
$112 a month versus $235 a month.
    Now, for the other three individuals we tested, the 
difference was not that dramatic, but it was still significant. 
I think the lowest difference was the difference between $234 
and $278. So again, that is a pretty significant difference for 
that particular basket of drugs. So we found that shopping 
around and looking at the cards does make a difference.
    Finally, we also found--we were interested to see what was 
happening with prices over time, and we found that they were 
really pretty stable. There were some changes in the beginning. 
As I said, ``We dropped the first 2 weeks of data, because a 
lot of those were simply data errors, data entry errors, data 
reporting errors.'' They were not price changes. Some of them 
were probably price changes, but overall, when we tracked some 
of these drugs over time, we found that they were pretty 
stable.
    So I guess with that, I will wind up, and we can take 
questions.
    [The prepared statement of Ms. James follows:]
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    Mr. Firman. Good. Thank you.
    Now, we are going to open this up a little bit, and I was 
writing down questions for all of you, so I am going to ask a 
couple of the first questions, but I would just like to think 
of this as having a conversation over the dinner table, and at 
least in my family, we all interrupt each other, so, when we 
are talking, so you do not need to wait for me to follow on the 
next person. If it gets out of hand, I will step in.
    But I will actually, for the first couple of questions, 
they will come from me, because one of the things that the 
field of health services research, and I guess this is what 
this is, of an order, is seeing whether when one has multiple 
studies and whether they produce consistent results. We have 
heard a lot of numbers here, and I really want to see to the 
extent to which results were and were not consistent.
    So I have two questions I want to ask each of you. I just 
want to go down the row so that we can see the similarities and 
the differences in the answers. The first question is, for a 
non-low income--this is for a middle class person who does not 
qualify for transitional assistance, who buys their drugs at 
the drug store, which is what most people want to do, and they 
do not want to go somewhere else, what were the average savings 
in your study for a person who uses the card? Do you guys need 
a little moment to do your calculations here?
    Ms. James. OK; I think I just----
    Mr. Firman. OK; I just want to hear one, two, three, four, 
so we can all synthesize this and see whether we have the same 
numbers. The savings?
    Ms. James. The retail?
    Mr. Firman. Retail.
    Ms. James [continuing]. The number that we had was 19 to 24 
percent.
    Mr. Firman. Nineteen to 24 percent.
    Bob.
    Mr. Helms. Well, I need a calculator, but it went from 
$2,073, which is the full retail, for the Medicare retail down 
to $495, and we did calculate that it was down--the mail order 
was $388.
    Mr. Firman. Let me interrupt you. OK; you are going to go 
back and do your calculation only because----
    Ms. James. I think it is apples and oranges, though.
    Mr. Firman. OK; We have got 19 to 22 percent; is that what 
I heard, Mary?
    Ms. James. Nineteen to 24.
    Mr. Firman. I am sorry; Julie.
    Yes, Mary?
    Ms. Grealy. All right; I will just give you the simple 
national average, 20 percent.
    Mr. Firman. OK; 20 percent.
    Sharman.
    Ms. Stephens. I am probably going to make your life 
difficult, but one of the things, and I have sort of----
    Mr. Firman. OK.
    Ms. Stephens [continuing]. I have looked actually across 
all the studies, and how you think about this and one of the 
reasons you see the numbers, you see and why you are getting 
different numbers.
    Mr. Firman. We will get into why they are different later. 
But what is the number?
    Ms. Stephens. Well, what you saw in ours for retail, 
dealing with predominantly brand name drugs, is that we are 
running between 12 and 21 percent. Then, if you go to generics, 
you see a slightly different picture.
    Mr. Firman. OK.
    Ms. Stephens. If you look at individual drugs versus 
baskets----
    Mr. Firman. Right, so people have a mix of drugs. So we 
have heard 12 and 21, 19 and 22.
    Ms. Grealy. Twenty.
    Mr. Firman. Twenty.
    OK; so----
    Six to 25; good, OK. Well, that is--we are seeing some 
consistency, and they are all savings, and they are all--OK, 
now, a little harder one, for low-income Medicare 
beneficiaries, again, I know I am making you do things that 
health services researchers do not do, but think of more of a 
lay person like me. I am in this situation. A low-income 
beneficiary, average range of savings.
    Ms. James. We did not look at that.
    Mr. Firman. OK. You are safe on that one, yes.
    Ms. James. For the $600 people, we did not look at that.
    Mr. Firman. OK; Sharman?
    Ms. Stephens. OK; go ahead.
    Ms. Grealy. No, I was just going to say, ours is up on the 
chart if you look, and I am trying to do the percent: 47.3 
percent.
    Mr. Firman. OK; for----
    Ms. Stephens. For low-income----
    Mr. Firman. Low-income.
    Ms. Stephens [continuing]. Beneficiaries.
    Mr. Firman. We understand it is going to vary by the 
medications they take and different situations.
    Ms. Stephens. Because we look at this in baskets, we come 
up with a range. So, we had anywhere from about 44 to 91 
percent. Now, it also depends on what period of time with which 
you are working.
    Mr. Firman. So 44, in the forties, but a very substantial 
savings in both cases.
    Mr. Helms. Almost 80 percent.
    Mr. Firman. Almost 80 percent. So we are kind of hearing 40 
to 80 percent or so for low-income beneficiaries. Thank you. 
That is helpful, and the fact that different people with 
different approaches or different all sorts of qualifications, 
I know each one of you would rather give me a bunch of 
footnotes on that answer. I really do appreciate that.
    A second question that I have, and this is people, as I 
said, most people in our experience, and we have been talking 
to lots of beneficiaries, you can tell them all these things 
about savings and what they do, but the bottom line is what is 
going on at my drug store? I only want to buy medications at my 
drug store. So my question is to get these savings, are people 
going to have to--by and large, can people get them at their 
drug stores, or are they going to have to go somewhere else to 
get the savings that we are talking about?
    Ms. James. Well, Jim, I think that----
    Mr. Firman. It is easy to ask the questions. You guys have 
got to figure out how to answer them.
    Ms. James. Well, I do think that one of the most helpful 
things to help you sort through all of the information on the 
Website, and Sharman can speak to this better than I can, but 
you can look by pharmacy. So if that is your starting point, if 
you want a particular pharmacy, you can start there and look at 
the cards and only compare the cards that accept that pharmacy.
    Now, we found that many of the cards have very, very 
extensive networks, 50,000 pharmacies, participating.
    Mr. Firman. That is part of the question. These are pretty 
broad networks in the number of----
    Ms. Grealy. Jim, we only looked at retail pharmacy. We did 
not do the mail order. So those savings percentages and numbers 
are just for that.
    Ms. Stephens. I will say an unequivocal yes.
    Mr. Firman. OK; good for you.
    Ms. Stephens. I can tell you, when we do these studies, I 
am pulling from the Website. My staff will confess to many 
early mornings getting up for the pull on Mondays. When we are 
doing this, we are doing it with ZIP Codes, and we are doing it 
with a local radius. So, these savings are in your locality, in 
your neighborhood, and as Julie said, ``The Website has just 
recently been enhanced to make it even easier to look for your 
pharmacy, because we know it matters.''
    Mr. Firman. Good.
    Mr. Helms. Can I, Sharman, do you have any evidence that 
there are any pharmacies out there that just refuse to 
participate?
    Ms. Stephens. I have not looked at it, where I have taken a 
census of the pharmacies and seen if we do not have something, 
but we have quite extensive----
    Mr. Firman. I can tell you what we have heard through that. 
We have heard some concerns and some of the particularly 
independent, smaller, independent pharmacies have found it in 
some cases in rural areas, there have been some problems with 
pharmacists just having small shops, having difficulty with 
some of the arrangements. So at least, there have been some 
cases of people having some difficulty.
    Mr. Helms. But I think in our surveys, we have not found 
one.
    Mr. Firman. Well, there are consumers calling us who have.
    Ms. James. Actually, I have a family member in an assisted 
living facility, and I called the pharmacy to see who they were 
participating with, and they were not interested in 
participating with anything. So I do think in that case, that 
there are some cases----
    Mr. Helms. It is very rare, I think.
    Mr. Firman. Yes, but, OK----
    Ms. Stephens. But the networks, I mean, when we look at the 
network files, they are pretty extensive.
    Mr. Firman. So the savings are real, and you can probably 
get it, some good savings at your drug store.
    Ms. Grealy. Widely available.
    Mr. Firman. Widely available; good.
    OK; another question that I had, and it relates to this. We 
have heard this thing about wraparounds and with the extra 
savings that come from that, and actually, I have some data. I 
would like to share--that we released earlier today. We did an 
analysis of about 20,000 people who had gone to our Website 
accesstobenefits in May and June, and we found that of the 
people eligible for transitional assistance, 83 percent of them 
were taking at least one of those wraparound drugs, medicines 
with the extra saving, and 50 percent were taking two or more 
wraparound drugs.
    So our sense was that these wraparound savings in total 
were actually much more significant than $600, certainly, for 
people taking that, and I was just wondering whether, in the 
analyses that you had, whether you had some consistent types of 
findings of the power or the potential savings from these 
wraparounds.
    Ms. James. Well, I will just say that you can find out 
which of the cards are participating with--and I think when you 
are talking about wraparound, you are talking about the 
pharmaceutical companies that are offering additional 
assistance like flat fees for their products if you qualify. 
There are a number of the companies that are doing that, and 
you can find out which of them are associated with the various 
cards.
    I know of at least one instance with one pharmaceutical 
company that actually changed and broadened its policy in order 
to be out there and reach more people.
    Ms. Stephens. I will do a plug for the Website. One of the 
really new enhancements for the Website is that we are now 
calculating the savings, so that information is available to 
beneficiaries. It was quite extensive work to work with the 
card sponsors and the manufacturers to make sure we understood 
the arrangements so we could do the calculations. But now if 
you go to the website for the beneficiaries who are low-income 
and transitional assistance eligible, the website is 
calculating savings.
    So for people who have been using the Website, there are 
some new features there.
    Mr. Firman. I want to say that is a really great 
enhancement to the site, and we, on our Website, also have a 
lot of emphasis on wraparounds because of the same reasons. 
They really do, I think, are something that our experience is 
consumers do not really know much about but----
    Ms. Grealy. Jim, I was going to say, and not just for the 
Medicare population, but these are programs that have been out 
there, these patient assistance programs by the manufacturers 
that have not been well publicized. I think what is great about 
this program is it is not only bringing publicity to it just 
for this population but for other low-income populations as 
well, and I think also, the manufacturers have really enhanced 
the programs and made them much more accessible and easier to 
use.
    Mr. Firman. Well, you know, you made another important 
point. I do not believe in any of the studies that I heard, you 
were looking at the effect of company patient assistance 
programs which are different than the wraparound programs or 
the State pharmacy programs or the impact. Our analysis has 
shown that if people are eligible for transitional assistance, 
80 percent of those people are eligible also either for patient 
assistance programs or State programs.
    Even if you look at people who are not eligible for TA but 
under 200 percent of poverty, about two-thirds of them are 
eligible for patient assistance programs, so that there are 
other savings beyond what you have talked about from some of 
these other benefits.
    The next question I have--it is fun. I get to ask a couple, 
and then you have to----
    Ms. Grealy. We have to think of one for you.
    Mr. Firman. I know. As you can tell, these are not scripted 
questions. I do not even know what I am going to ask, much less 
you guys.
    One of the questions I have is that I remember maybe 2 
years ago, before all of the Medicare laws came in, I saw 
several studies which showed that the prices within a 
community, from drugstore to drugstore, could vary by as much 
as 200 percent. You could be paying $100 for a drug in one 
store, and three blocks away, you could be paying $200, but 
there was no way to know about that.
    I personally think that is one of the most amazing things 
about this whole price compare is now that you can look at 
numbers. So, my question is now that you guys have looked at 
the numbers, are the same variations still there? If I went 
onto Medicare.gov, and I put in a drug and the highest to the 
lowest, would I still find one being two times as expensive, or 
has the band of prices from the highest to the lowest narrowed 
to any significant extent?
    Ms. Stephens. I do not know that we have looked at that. 
Are you asking from a pharmacy perspective or from a card 
perspective?
    Mr. Firman. From a price perspective; in other words, if I 
were--pharmacy A, and 2 years ago, pharmacy A could have been 
charging $200 for a drug, and pharmacy B could be charging $100 
for the same drug, and that was not uncommon. The question is 
now, if I went and looked at, because of the necessity or the 
price compare, which has made prices transparent, is the range 
still there the same way? If I went onto Medicare.gov and 
entered in a drug, and I said, ``You know, from highest to 
lowest,'' would I likely to see one being twice as expensive, 
or is it more like a 20 percent difference?
    Ms. Stephens. I think in the Lewin study, you see this 
finding. I think Bob mentioned it as well. We do not see across 
the cards large variation in pricing. So, I think some of that 
is the feature of the program. So whether in pharmacies that 
are in a cash market phenomenon, the variation in pharmacy is 
changing, although it could be, I do not know. But within the 
card program for a given card sponsor, if you go across the 
country, which I think you all see, we did not see much 
difference for a given card sponsor.
    Now, between card sponsors, there are pricing differences.
    Mr. Firman. But are they 100 or so, or are they much 
smaller?
    Ms. Stephens. They narrowed over time.
    Mr. Firman. OK.
    Ms. Stephens. They have narrowed.
    Mr. Firman. There was competition. So, in other words, if 
you--at one level, drugs are a commodity. Celebrex is Celebrex 
is Celebrex, and if I went from one gas station to another, I 
would never see one for $1.98 and one for $4. You just would 
not see that kind of variation. Do we think that this price 
compare and transparency is having that kind of effect on 
medication?
    Ms. Grealy. I think absolutely. I think as Sharman said, in 
our study, you can see that there is little geographic 
variation within a card. I think that is remarkable for the 
Medicare program, when you look at the variety of reimbursement 
levels and how disparate that is across different geographical 
markets, but this whole idea of the transparency, I think as 
Bob said, it is really going to drive the market competition 
and lower prices for everyone.
    Mr. Helms. Yes, we will have to wait for some definitive 
studies of this, but there have been a number of studies of 
local markets that found just what you are talking about, that 
there is a lot of dispersion, surprisingly, in the retail 
prices.
    Mr. Firman. Now or in the past?
    Mr. Helms. In the past. In local areas. But my point is the 
fact that you have got a place now that people can easily go 
look up the price and see what Medicare is charging, even if 
they are not eligible for Medicare, they can go shop around, 
and they have a reason to shop some more to find if the can get 
a better price.
    With the publicity you are getting now from the Internet 
and about Canadian prices, it sends a signal to consumers that 
it will probably pay to search. But the other thing is that the 
retail market has been affected by a big growth in insurance 
coverage. That has taken away the incentives for the big 
majority of people who have a plan that covers prescriptions. 
There is not much reward for them for shopping around.
    Ms. James. Yes, but I do think it is important to know that 
the Medicare card prices are not the retail prices that they 
quote when you walk into the pharmacy, and so, there is no way 
to know right now anyway; I do not think anybody is looking at 
that. Although if you look at, for example, the data base that 
we used that Maryland puts out, those are the prices that the 
pharmacists will quote you if you walk in that have nothing to 
do with the Medicare discount card.
    One of the things I wanted to point out that we did find 
was that prices in the urban areas were higher than in the 
rural pharmacies in Maryland. The discount card prices, 
however, are the same. So that actually meant that if you lived 
in the urban area, you were getting a bigger savings, because 
your retail prices are higher there.
    Mr. Helms. We found some of the same kind of urban-rural 
differences in Idaho recently.
    Ms. Grealy. But I think Bob also made a very important 
point. Whenever we are talking about prices and prescription 
drugs, that many people have health insurance coverage that 
covers their prescription drug benefit. That means that in many 
instances, they have someone already negotiating lower prices 
on their behalf, and that is why you probably have fewer people 
who are out there doing that retail pharmacy by retail pharmacy 
comparison. Now, Medicare beneficiaries will have people 
negotiating on their behalf as well.
    Mr. Firman. So let me ask you a question here: if you are 
eligible for the transitional assistance, the card is free, and 
you are going to get $600, so that is kind of a no-brainer. If 
you are not eligible for the transitional assistance, you may 
have to pay $10, $15, up to $30 a year. Are there very many 
people who will not save at least the price of a card somewhere 
or----
    Mr. Helms. Well, hypothetically, if someone paid $30 and 
never had a prescription filled, they would be out $30.
    Mr. Firman. Does anybody know what percentage of 
beneficiaries do not take any drugs?
    Ms. Stephens. Very few.
    Mr. Firman. Very few; OK.
    Ms. Stephens. Very few. Most of them do use a prescription. 
In 2002 about 91 percent of beneficiaries filled at least one 
prescription. Most Medicare beneficiaries do use a prescription 
drug. You do have beneficiaries who, as I think Bob is 
indicating, who may not have drug costs. I can tell you when we 
were working on the impact analysis, you assume that the people 
who are going to sign up kind of do the math a little bit and 
that beneficiaries who are going to sign up have somewhat 
higher drug costs so that they get a return for making the 
investment.
    Mr. Helms. Almost--I do not know the dispersion, but there 
are free cards. You do not have to pay $30.
    Ms. Stephens. Yes, there are some cards with zero 
enrollment fee.
    Ms. James. In our study, we show what the fees are, and 
there are five national cards and seven regional cards that 
have no fee, and there is actually one card, one sponsor that 
has two cards, and one of them has a little higher fee, but you 
get a better price, and the other one is for people who do not 
use very many drugs, and so, the fee is lower, but the drug 
price is, like, 10 percent higher, which I thought was an 
interesting wrinkle.
    Ms. Stephens. Actually, if I can make a plug for the 
Website again, people have been terrific about giving us ideas 
to make the Website better including the folks who have been 
doing studies and, working with it. We really, appreciate all 
of the input that folks have been giving us. But again, one of 
the new enhancements for the Website is now, as it is 
calculating, it is factoring in the enrollment fee into the 
savings that are being calculated. So it is trying to help 
beneficiaries with that judgment.
    So that is another thing that has happened with the 
Website. It is now factoring in the enrollment fee.
    Mr. Firman. Good; thank you.
    I have a question that something you said earlier, because 
the CMS Website is very good, and it is really designed, as I 
understand, to help you get the very best card, figure out what 
the best card is for the best savings. But, Bob, you said 
something earlier. You said--and maybe I heard you wrong, you 
said get a card; do not worry about getting the very best card. 
Get a card. What did you mean by that? I want to know----
    Mr. Helms. I mean, Julie disagrees from their findings, but 
I think what we were saying is that most of them are clustered 
toward the bottom. I mean, you can shop around and look at all 
of them, but most of them are going to be within 10 percent of 
the lowest price.
    Mr. Firman. So you are saying on the retail price side, 
there----
    Mr. Helms. No, I am talking about on the Medicare prices 
available with each card. There is not much difference from 
picking one card versus another.
    Mr. Firman. Would people agree with that, disagree with 
that?
    Mr. Helms. Julie found some exceptions.
    Ms. Grealy. I think Julie found----
    Ms. James. Yes, we found that that was not true, that, in 
fact, actually--I would say, however, that if you are eligible 
for transitional assistance----
    Mr. Firman. We will get to that in a second.
    Ms. James [continuing]. That would hold. But if you are 
not, then, we did find just for a hypothetical individual 
buying four drugs that they could find--one of us found they 
would pay twice as much if they chose the highest card over the 
lowest. Now, that does not mean that some of the cards are not 
somewhere close together around the middle, but between the 
highest and the lowest, there was a significant----
    Mr. Firman. Did you do them about the same time? Was your 
study earlier, maybe, do you think?
    Ms. James. I think it was about the same time.
    Mr. Firman. About the same time, OK.
    Mr. Helms. We did ours around the first of June.
    Ms. James. No, the data were for June.
    Mr. Firman. So it is the same time period.
    Ms. James. I think it was the same. I think it is just this 
whole idea of highest and lowest.
    Mr. Helms. We think they are clustered toward the bottom 
end.
    Mr. Firman. Now, let me push you on one thing, because I 
agree with you up to a point, but I disagree with your point. I 
want to see where the other--and this is where you were 
beginning to go, Julie. That is true; it may not matter, you 
are going to get the same retail prices for most of the--many 
of the cards, but it probably does matter in picking cards in 
terms of the wraparound, because the wraparound coverage is--no 
card has all the wraparounds or different combinations of 
wraparounds, and our experience, and this is one of the drivers 
of the Accesstobenefits.org Website, is it agrees with you to 
the extent that retail price part does not matter, but you want 
to get the card with the most possible wraparounds, because 
those wraparounds are going to save you 80, 90 percent off the 
cost of the drug.
    So I assume you meant other than the wraparound issue.
    Mr. Helms. Right, people not getting the $600.
    Ms. Grealy. But I think we also thought it was important, 
and especially with the transitional assistance, you are going 
to save money regardless and that you do have the opportunity 
to change cards, you know, in November. So I think there was a 
big push, do not delay too long trying to find the absolute 
best card, but you can get some savings right away.
    Mr. Firman. Certainly do not delay, particularly if you are 
eligible for the transitional assistance, do not delay----
    Ms. Grealy. A day.
    Mr. Firman. Well, too long, because you lose the $600 
credit if you do not sign up by then.
    Julie, I think it was you or somebody raised it, the issue 
of whether prices were stable or not, whether if I went on and 
looked at a card, and it said my price for Zocor was going to 
be $192, how likely is it--are the prices varying a lot, or is 
it pretty much the prices I get, I can count on will be the 
price when I have to go to the drug store a month or two later?
    Ms. James. We found some variation but generally very 
stable, and we have actually checked them just recently as 
well. Again, there are some little blips, but mostly pretty 
stable.
    Mr. Helms. Again, the ones we checked seemed to be going 
down a little bit.
    Ms. James. We did not find that.
    Mr. Firman. You did not find the same thing?
    Ms. Stephens. Yes, I think the prices have been very 
stable. I think you have also seen some decreases, and I think 
you have seen a few increases. I think the Lewin study which 
has a table that indicates very stable prices and then some 
increases and quite a number of decreases. So I think some of 
the phenomena that you see where I say first time I looked, we 
were running 11 to 18 percent lower that national average 
retail prices; now, it appears to be 12 to 21.
    Mr. Firman. I had a question, but one--I am sorry, Mary, go 
ahead.
    Ms. Grealy. No, I was going to say, ``I think some of the 
charges that we were hearing early on, one, that prices would 
go up after people had gotten into the program or there would 
be the so-called bait and switch, it just has not played out.'' 
So as you said, ``We just found a lot of stability in the 
program.''
    Mr. Firman. Just to ask in fairness, though, I understand 
most of you did your studies on kind of average. You did not 
use very high expensive drugs? Or did you? The reason I ask 
there was a study for the Center for Medicare Advocacy and the 
Multiple Sclerosis Society which talked about a medicine that I 
think was costing, like, $2,000 or $3,000 a month which was not 
in a lot of programs, and that was going up and down. So I just 
want to first of all ask----
    Ms. James. We did look at some very high-cost----
    Mr. Firman. You did. That is great.
    Ms. James [continuing]. Biotech products and found that 
many of the cards did not cover them. They were not in our 
sample basket of 10, but we just looked and checked on some, 
and we did find out that there could be reasons for that. It 
could require specialty pharmacy or whatever. But we did find 
that a lot of cards did not have some of the very high-tech 
drugs.
    Ms. Grealy. We looked at the 150 most often used drugs by 
seniors. We just thought that would be the most representative.
    Mr. Firman. Sharman, your study, too?
    Ms. Stephens. We were dealing with.
    Mr. Firman. The average basket.
    Ms. Stephens. The common.
    Mr. Firman. I think it is just important as we are putting 
this out for consumers to understand that if they are in a----
    Mr. Helms. We did the same.
    Mr. Firman [continuing]. OK, in those situations.
    OK; well, how about--any of you have any questions of each 
other?
    Ms. Stephens. I do want to ask Julie one question: you 
mentioned, and maybe I did not hear you correctly, that you 
thought one card was transitional assistance only?
    Ms. James. You know, it was the same sponsor, but it was, 
like, card A versus card B, and when I checked them out and 
called them, they told me that if you were transitional 
assistance, you got put in card A, and if you were not, you got 
put in card B. Otherwise, they were exactly the same.
    Ms. Stephens. I wanted to talk a little more, because 
basically, the cards are, you know, that they are to service 
the entire Medicare population. We do see where some card 
sponsors do choose to have different pricing for the lower 
income population, where they are giving slightly better 
pricing, but it is the same card. So I want to get a little bit 
more information on that one.
    Ms. James. Yes, I kind of wondered about it, too.
    Ms. Stephens. No, it is not like different cards for the 
transitional population. There may be different pricing within 
a card but not a different card.
    Mr. Helms. I have a question for Sharman, just curious.
    Mr. Firman. Fire away.
    Mr. Helms. You announced today that you are going to be 
sending out the cards to the low-income people, and Mark, if I 
heard him right, said that you are basing this off some 
eligibility list or some sort. You must have the addresses of 
people who are eligible for State Medicaid programs. How is it 
decided which card they get?
    Ms. Stephens. OK; let me talk about what we are calling 
facilitated enrollment, which we announced today. We know about 
the Medicare population that is in what we call the Medicare 
Savings Programs, which is related to Medicaid, but these are 
people who do not have the full Medicaid benefit.
    Mr. Helms. 1.4 million?
    Ms. Stephens. It is about 1.8 million.
    Mr. Helms. OK.
    Ms. Stephens. So nearly 2 million people. These are 
Medicare beneficiaries who do not have full Medicaid benefits, 
so they do not have prescription drugs, but in fact, the State 
is helping to pay Medicare premiums and, in some cases, 
Medicare cost sharing.
    What we are doing is using the information that we have to 
arrange for these beneficiaries to be enrolled. These are going 
to be national card sponsors with which we have worked and we 
will be--randomly assigning beneficiaries to the card sponsors 
who have volunteered to help with this effort.
    Information will go out to these beneficiaries, including 
an enrollment package. As Dr. McClellan indicated, to activate 
the $600, all they need to do is either call the sponsor or 
call us and answer a couple of questions, and that will 
activate the $600.
    Mr. Helms. So when you mail them out, they actually get a 
card.
    Ms. Stephens. Yes, what we are hoping, to do is to reach 
the beneficiaries thus far have not enrolled. These are 
beneficiaries who we think are eligible for the annual $600 in 
assistance, and we are very anxious to get to them so we can 
get to them the $600 that they have this year, and then, there 
is another $600 next year. Despite concerns over whether they 
get the best card our view on this one is right now, these 
people have not availed themselves. At a minimum, there is 
$1,200 on the table to help them and that what we are hoping is 
then, when they contact us they will be able to work with us.
    They have the option to change the card but we are trying 
to reach these people and get the word out as much as we 
possibly can. We know from experience just with our mailers 
that when we send the mailers to folks, we do see an enrollment 
increase. My colleagues at the Website who are sitting here, 
see an increase to the calls at 1-800-Medicare.
    So, we really want to reach these nearly 2 million people. 
I think the Access to Benefits Coalition has an objective, and 
it really is going to take grassroots efforts and as much 
outreach as we can possibly get, but the money is on the table. 
We need to come get them to come in. We hope this will work.
    Mr. Firman. I do want to say that this has been, we are 
delighted that the announcement has been made, because this is 
a group of people that especially if you look at the data base, 
QMBY-SLMBYs and QI1s, and you then sort out the ones who have 
already enrolled. This is people who you know are already 
eligible for the benefit, and we think this is a very efficient 
strategy, and we are going to do all we can to help encourage 
these people, because as Sharman said, this is a no brainer: 
take the $1,200. It may or may not be the card with the best 
wraparounds, but they can figure that out later. Get the 
$1,200.
    But that leads me to another----
    Ms. Stephens. Just so people know, we have had 19 cards 
raise their hand; it is 17 sponsors, but 19 cards are going to 
be participating in this.
    Mr. Firman. So they will each get just under 100,000, if we 
did the math right. Are those all national cards? Are some of 
them local?
    Ms. Stephens. This time around, they are all national 
cards, just because of the complexity of doing the algorithms 
to do the random assignment. In order to get this done and to 
get it done so that we are in this window of this year, that is 
what it took.
    Mr. Firman. By the way, if people have questions, they 
should give them to one of the staff people; write them down 
and pass them up, and we will be happy to take any questions 
and answer them.
    The question I have is I think we all agree that it is a no 
brainer for a person who is eligible for transitional 
assistance to sign up for the benefit. Does everyone agree with 
that? I assume that is a given. You get $1,200 in savings. You 
may get wraparounds. The savings, you said, are between 40 and 
80 percent for people. Yet, we know there are 7 million seniors 
who are estimated eligible for the transitional assistance; 
about 1.3 million had signed up before the auto enrollment 
effort, which means that about 5.7 million so far on their own 
have not signed up.
    Why? What is anybody's sense of why?
    Ms. Grealy. I think there are two reasons. One, there was a 
tremendous amount of misinformation out there. This was a very 
heated political debate, and again, I think a lot of 
misinformation. That is why we think it is important that we 
move past that. But I think more importantly, this often is a 
population that is just plain hard to reach, and I compare your 
effort, Jim, and our effort as I call it door-to-door sales. We 
are literally having to go person by person to work with these 
folks and to enroll them. They may not have access to the 
Internet; they may not have access to a telephone.
    So it really is going to take a tremendous effort to do 
this outreach, and that is why I think this facilitated 
enrollment is such a great idea.
    Ms. James. Could I ask, Sharman, on that, what about people 
who are in nursing homes? Would not some of them be those 
people who have to have special packaging, et cetera, and the 
cards may not address their needs or be able to?
    Ms. Stephens. Well, one of the things, and people may not 
be aware of this, there are actually cards that were developed 
card sponsors to work with the nursing home population. The 
pharmacies are working with the nursing homes. So, there are 
actually specialized cards for long-term care facilities.
    Specifically, we have card sponsors, and we are working 
with the nursing home industry, and part of this is to get the 
$600, because there is a group of people who have not spent 
down to Medicaid who could use this to help pay for drugs.
    Ms. James. There are also, though, individuals who are in 
assisted living who need to have--what do they call it--special 
packaging, and I know that not all of the card programs can 
accommodate that kind of a need. So would the long-term care 
cards be the ones for----
    Ms. Stephens. Yes, they are who we are working with--now, 
they are working with the nursing homes.
    Ms. James. I am just wondering if there is a gap here, if 
there is a group of individuals--I happen to have a family 
member, you can tell--who fall in this category where 
literally, I know that the pharmacies have told me no, I am 
sorry, we do not do that. But it is not a nursing home, so I am 
not sure the nursing home card works. So you might just think 
about that.
    Ms. Stephens. No, that is a good point. I need to check, 
Julie.
    Mr. Firman. So I guess the question is are you doing auto-
enrollment for the nursing home QMBY-SLMBYs, too? Or we do not 
know?
    Ms. Stephens. Is Lynn still here?
    Mr. Firman. I was hoping to ask a question that somebody 
did not know the answer to, but there are so many experts in 
the room that I can tell I will never be able to do that. That 
is great. Thank you for that answer.
    Mr. Helms. Could I take a stab at your question?
    Actually, I have to ask another question. Whoever came up 
with the 7.5 million that potentially might be eligible for 
this? The researcher in me says you have to look at the 
distribution of the people's demand for drugs. In other words, 
what is the utilization among that population? You are going to 
have a minority of those people who are the big drug users, and 
they are going to have a greater incentive to come sign up.
    But you are probably going to have a majority of them who 
do not consume a lot of drugs. I mean, if they do, it would be 
a big advantage, but until that time, they do not have any 
strong incentive to pay attention to the ads or do anything 
about it.
    Ms. Stephens. Maybe what I can do is help, since one of the 
things I got to do was work on the impact analysis, where I 
think some of these numbers are coming from.
    Just as you said, Jim, we estimated in terms of eligible. 
If we just look at income, you know, and lack of drug coverage, 
for example, we estimated that 7.2 million beneficiaries were 
eligible for the transitional assistance program. Then, our 
actuaries, in looking at, I think, the phenomenon that Bob is 
talking about, which is people's drug spending and also 
experience in looking at what we call uptake, how many people 
will actually go to enroll, we estimated that we thought about 
4.7 million people would actually enroll in the transitional 
assistance program.
    We are currently at 1.1, so we have got some people we need 
to go find and get enrolled.
    Mr. Firman. I do want to note before you do that----
    Ms. Stephens. But based on our actuaries' estimates----
    Mr. Firman. Before you do that, we at the Access to 
Benefits Coalition looked at that 4.7 estimate, and we said 
that is not good enough. We want to do better. We set an 
objective of 5.5. So we are working together. We have both got 
a long way to go, but I wanted--if it is 4.7 or 5.5, it 
underscores the importance of the automated, facilitate 
enrollment initiative, because we will not get all 1.8 million, 
but if we get most of those people, that is going to go a long 
way to achieving our shared objectives here.
    Ms. Grealy. But, Jim, I think if you were to take a look at 
other Federal programs or even look at the QMBY-SLMBY and the 
rates of enrollment of people who are qualified and yet not 
enrolling; you look at the SCHIP program. So I commend you on 
setting that goal, but I think if you even look at the 
experience in other Federal programs that offer tremendous help 
for low-income beneficiaries, sometimes, they are not 
enrolling.
    So that is why I think this facilitated enrollment is a 
whole new approach, and it will be great to see how it works.
    Ms. Stephens. No, I think that is right. I want to clarify 
one thing: the letter that is going to be going out to the 
QMBY/SLMBY population is going to say that if you are in a 
long-term care facility or the other special card that we have 
that relates to the American Indian population, who may be 
using pharmacies that are on the reservations, that we say 
please call us at 1-800-Medicare, and we are going to help get 
you to the right card that is working with the appropriate 
pharmacies.
    But I still want to follow up on assisted living, because 
more and more beneficiaries are living in assisted living.
    Mr. Firman. You know, Mary's point about if you looked at 
enrollment in other Federal programs, they do not always do 
that well, do you have any more specific data, Sharman, on how 
is the enrollment experience or targets compare to the takeup 
on other Federal benefits?
    Ms. Stephens. Well, the most recent experience is really 
with the State Children's Health Insurance Program, the SCHIP 
program. One year into the program, they were at about 55 
percent of what the estimated enrollment was.
    Ms. Grealy. That was not 50 percent of those eligible.
    Ms. Stephens. Yes.
    Ms. Grealy. That was just their target----
    Ms. Stephens. Yes.
    Ms. Grealy [continuing]. For that first year.
    Ms. Stephens. We now are at about 60 in 3.5 months, for 
this discount card program.
    Mr. Firman. By the way, I do not know if there are any 
questions, but I have not gotten them if they are coming up to 
the front.
    Ms. Stephens. I think the experience we are gaining now 
with the discount card our partners, the local communities, and 
the organizations that work with this population is actually 
pretty important, because we have a bigger challenge facing us, 
which is the drug benefit itself.
    There, we are talking about, just a huge population to 
educate and outreach to, and so, I think we can learn a lot 
from this experience and be in a better position.
    Mr. Firman. We could not agree with you more. That is why 
the Access to Benefits Coalition was formed, to get the people 
into the low-income Part D subsidies. In fact, we are going to 
be doing a major benchmarking study of the best outreach 
activities that go on between now and the end of the year, and 
then, early next year, we are going to zero in and look at 
them.
    But I also want to go back to this question of Mary's point 
of that yes, it is true that after all these years, maybe half 
the people eligible for Medicaid, Food Stamps, or SSI do not 
take them, and even though we know, we think they should, 
because it is really good money, and they ought to do it, so 
that says to us that--to Sharman's point that we have to do 
things differently. We do the same things over and over again, 
we are going to get the same result, which is also the 
definition of insanity.
    One of the things that we have come to the conclusion and 
why we are so excited about the automated enrollment, if you 
look at the history of public benefits outreach and say what 
has happened, whether it is Medicaid, Food Stamps, the Pfizer 
Share Card, the patient assistance program, the EPIC State 
program, they have all approached things the same way: they 
have said our challenge is to find the needles in the haystack. 
We need to go out and find among all these people the few 
people that are eligible.
    So, literally, everybody repeats the same process over and 
over again. We have concluded looking at this that this is 
exactly the wrong way to approach things, and that is why we 
get such abysmal results. The strategy is not look for the 
needles in the haystack; it is look for the piles of needles. 
Somebody has already found almost everybody that we are looking 
for. CMS, you have found 1.8 million of them in one pile called 
this program. The Pfizer Share Card has another pile. Together 
RX has another pile. Every State pharmacy program is another 
pile. Every home energy assistance program is another pile of 
low income people.
    What we need to start to realize is instead of spending the 
same money and finding these people again and again and again 
and again, say who has already found them, and how can we 
figure out--and then, we can focus our efforts on marketing and 
convincing them, because one of the things we found, we had a 
project we are doing in the State of Pennsylvania where they 
have this list of people who they know are eligible for a $500 
property tax, just a check in the mail, and they call them up, 
and they are also eligible for QMBY-SLMBY, you know, $800 a 
year in savings, and we call these people up, and we say great 
news, you are eligible for $500 and $1,200 in savings, and they 
say, ``Oh, no, thank you. I do not want to do that.'' There are 
some attitudinal barriers or other kinds.
    So we go back to them and say let me explain this to you. 
You know, this is $800 a year for 10 years. This is $8,000. 
They say, ``Well, I am not sure,'' and they said, ``Well, do 
you have grandchildren? Yes. Well, would you not rather have 
$8,000 and give it to your grandkids?'' It sometimes takes a 
lot of effort. The point is it is worth it if you know that a 
person is eligible to go back to them again and again and 
again.
    So one of the learnings that we are urging everybody to do 
is find the piles of needles that you already have and focus on 
those efforts. We actually believe that is going to be one of 
the strategies that can make a difference in this effort going 
forward.
    Are there any more questions from the audience?
    Any questions from the panelists?
    If not, I really want to thank everybody for coming here 
today for all of the work you have done in these studies. It is 
reassuring to see that people are approaching things 
differently and reaching the same conclusions, and those 
conclusions, to me, are pretty clear. If you are 1 of the 7 
million people eligible for the transitional assistance, it is 
an absolutely no-brainer that you should take these benefits, 
and you are going to save 40 to 70 or 80 percent on your 
medications.
    If you are not eligible for the transitional assistance, 
and you have drug costs that are significant at all, at least 
$500 or $1,000 or more, chances are, which is the case for most 
elderly people, you are going to be able to find discount cards 
through Medicare.gov or elsewhere that are going to save you 
significant 10, 20, at least, percent, which would more than 
justify a fee, maybe, of $30.
    So this is great. I hope we will have another one of these 
in a year from now, and we can have more data on what has been 
saved, and I thank the audience for participating and the 
Senator for bringing us together in the first place and the 
Committee.
    Thank you very much, and this forum is adjourned. 
[Applause.]
    [Whereupon, at 4:28 p.m, the forum concluded.]


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