[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                         IMPLEMENTATION OF THE
                         MEDICARE DRUG BENEFIT

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                         MAY 3 and MAY 4, 2006

                               __________

                           Serial No. 109-84

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

E. CLAY SHAW, JR., Florida           CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut        FORTNEY PETE STARK, California
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania           JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               XAVIER BECERRA, California
JERRY WELLER., Illinois              LLOYD DOGGETT, Texas
KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
RON LEWIS, Kentucky                  STEPHANIE TUBBS JONES, Ohio
MARK FOLEY, Florida                  MIKE THOMPSON, California
KEVIN BRADY, Texas                   JOHN B. LARSON, Connecticut
THOMAS M. REYNOLDS, New York         RAHM EMANUEL, Illinois
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON HEALTH

                NANCY L. JOHNSON, Connecticut, Chairman

JIM MCCRERY, Louisiana               FORTNEY PETE STARK, California
SAM JOHNSON, Texas                   JOHN LEWIS, Georgia
DAVE CAMP, Michigan                  LLOYD DOGGETT, Texas
JIM RAMSTAD, Minnesota               MIKE THOMPSON, California
PHIL ENGLISH, Pennsylvania           RAHM EMANUEL, Illinois
J.D. HAYWORTH, Arizona
KENNY C. HULSHOF, Missouri

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________
                                                                   Page

Advisories announcing the hearing................................     2

                        WITNESSES (MAY 3, 2006)

The Honorable Mark McClellan, M.D., Ph.D., Administrator, Centers 
  for Medicare and Medicaid Services, U.S. Department of Health 
  and Human Services.............................................    10
Beatrice Disman, Chairman, Medicare Planning and Implementation 
  Task Force, Social Security Administration.....................    33


Susan Everett, North Carolina Regional Coordinator, Medicare 
  Today, Raleigh, North Carolina.................................    61
Heath Schiesser, President, Prescription Drug Plan, WellCare 
  Health Plans, Inc., Tampa, Florida.............................    64
Robert M. Hayes, President, Medicare Rights Center...............    73
Bill Wolfe, Vice President, Managed Care, Rite Aid Corporation, 
  Harrisburg, Pennsylvania.......................................    83
Pam Grisnik, Owner, RX Express, Grove City, Pennsylvania.........    89

                        WITNESSES (MAY 4, 2006)

The Honorable Henry Waxman, a Representative in Congress from the 
  State of California............................................   110


Leslie Aronovitz, Director for Healthcare, U.S. Government 
  Accountability Office..........................................   125
Joyce Larkin, Vice President, Public Affairs and Community 
  Relations, Ovations, UnitedHealth Group........................   145
Mark Steinberg, Senior Health Policy Analyst, Families USA.......   151
Vicki Gottlich, Policy Attorney, Center for Medicare Advocacy....   155
Bill Vaughan, Senior Policy Analyst, Consumers Union.............   163

                       SUBMISSIONS FOR THE RECORD

Alamosa Dialysis Center, Fran Koski, Alamosa, CO, letter.........   182
American College of Physicians, statement........................   183
American Medical Directors Association, Columbia, MD, statement..   185
Brief, Cary, Campaign for America's Future, Sherman Oaks, CA, 
  letter.........................................................   189
Center for Medicare Advocacy, Inc., statement....................   189
Collins, Shannon, San Rafael, CA, statement......................   195
Emerick, Therese, statement......................................   195
Fullerton, Linda, Social Security Disability Coalition, 
  Rochester, NY, statement.......................................   198
Harrison, W. M., Durham, NC, letter..............................   200
Health and Disability Advocates and Make Medicare Work Coalition, 
  Chicago, IL, joint statement...................................   201
Kennelly, Barbara, National Committee to Preserve Social Security 
  and Medicare, statement........................................   206
Kieft, Alice, Kewanee, IL, letter................................   208
Mierisch, George, Salt Lake City, UT, letter.....................   209
Miller, Jessica, Huntington, NY, letter..........................   210
Muckway, Linda, Muncie, IN, letter...............................   211
National Alliance on Mental Illness, Andrew Sperling, Arlington, 
  VA, statement..................................................   212
National Association of Health Underwriters, Arlington, VA, 
  statement......................................................   215
National Home Infusion Association, Alexandria, VA, statement....   216
National Kidney Foundation, New York, NY, statement..............   219
Reading, Toniann, Mill Creek, WA, letter.........................   222
Rios, Elena, National Hispanic Medical Association, statement....   222
Romney, Frances, West Valley City, UT, letter....................   225
Sutherland, Arthur, Sandy, UT, letter............................   227


                         IMPLEMENTATION OF THE
                         MEDICARE DRUG BENEFIT

                              ----------                              


                         WEDNESDAY, MAY 3, 2006

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:05 p.m., in 
room 1100, Longworth House Office Building, the Honorable Nancy 
L. Johnson (Chairman of the Subcommittee), presiding.
    [The advisory and second advisory announcing the hearing 
follow:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
April 26, 2006
HL-15

   Johnson Announces Hearing on Implementation of the Medicare Drug 
                                Benefit

    Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Health of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on implementation of the new Medicare 
prescription drug benefit known as Part D. The hearing will take place 
on Wednesday, May 3, 2006, in the main Committee hearing room, 1100 
Longworth House Office Building, beginning at 10:00 a.m. The hearing 
will recess at 12:00 p.m. and reconvene at 2:00 p.m. if necessary.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from the invited witnesses only. 
Witnesses will include Centers for Medicare and Medicaid Services (CMS) 
Administrator Mark McClellan, a representative from the Social Security 
Administration (SSA), as well as representatives of groups affected by 
the new benefit. However, any individual or organization not scheduled 
for an oral appearance may submit a written statement for consideration 
by the Committee and for inclusion in the printed record of the 
hearing.
      

BACKGROUND:

      
    On December 8, 2003, the President signed into law the Medicare 
Modernization Act (P.L. 108-173) (the MMA), which created a new Part D 
benefit in the Medicare program to provide coverage for outpatient 
prescription drugs. Prior to the law, most outpatient drugs were not 
covered by Medicare and many seniors who did not have prescription drug 
coverage through another source either individually assumed this 
financial burden or went without prescription drugs because of the 
cost. According to CMS, starting in January 2006, millions of Medicare 
beneficiaries began receiving prescription drugs through the new 
program. Since that time, almost a quarter of a billion prescriptions 
have been filled, and many seniors have availed themselves of discounts 
through their drug plans, and many have saved.
      
    Under the program, beneficiaries could purchase standard coverage, 
alternative coverage with actuarially equivalent benefits or enhanced 
coverage. In 2006, standard coverage is a $250 deductible, 25 percent 
coinsurance for costs between $251 and $2,250, and catastrophic 
coverage after out of pocket expenses of $3,600. Once the beneficiary 
reaches the catastrophic limit, the program pays all costs except for 
nominal cost-sharing. Low income subsidies are provided for persons 
with limited assets and incomes below 150 percent of the poverty level. 
Coverage is provided through prescription drug plans or Medicare 
Advantage prescription drug (MA-PD) plans. The program relies on 
private plans to provide coverage and to bear some of the financial 
risk for drug costs; Federal subsidies are provided to encourage 
participation. Premiums are determined through a bid process and plans 
compete based on premiums, benefits and negotiated prices.
      
    To date, hundreds of private insurance plans are contracting with 
CMS. Accordingly, Medicare beneficiaries have a number of options to 
choose from, including benefit plans provided by Health Maintenance 
Organizations (HMOs), Preferred Provider Organizations (PPOs) and stand 
alone drug plans. In addition, under the MMA, a 28 percent subsidy is 
provided to employers and unions whose plans at least equal the 
standard coverage for retiree drug costs between $250 and $5,000, and 
this is excludable from taxation. Employers are also permitted to 
structure their benefits around Part D coverage and enroll retirees in 
Part D plans.
      
    There are currently about 43 million Medicare beneficiaries. 
Although the Part D drug benefit program is voluntary, about 27 million 
Medicare beneficiaries are directly benefiting as a result of this 
program. The latest figures show more than 8 million Medicare 
beneficiaries have decided to sign up for stand alone prescription 
plans, up from about 3 million in January, and these numbers continue 
to grow. Finally, the MMA federalized the costs of about 5.8 million 
``dual eligible'' beneficiaries, those who are eligible for both 
Medicare and Medicaid. Problems with the transition for this population 
were reported and continue to be by beneficiary groups, pharmacists and 
some States.
      
    The Centers for Medicare and Medicaid Services have already begun 
the process of reaching out to private drug plans for the 2007 plan 
year. It remains to be seen how beneficiaries and plans will respond to 
the first year of the program and the upcoming May 15 enrollment 
deadline.
      
    In announcing the hearing, Subcommittee on Health Chairman Nancy 
Johnson stated, ``Today more seniors than ever before have access to 
affordable prescription drug coverage through the Medicare drug plan, 
and more seniors are signing up every day. The Medicare drug benefit is 
the biggest expansion of the program since it was created 40 years ago. 
Today more than 27 million Medicare beneficiaries have drug coverage; 
including 8 million who have signed up for stand-alone drug plans. 
During this hearing, we will examine how this significant new program 
is being implemented and discuss with Medicare beneficiaries, federal 
officials and health care providers how we can improve the drug benefit 
going forward.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on implementation of the new Part D benefit.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``109th Congress'' from the menu entitled, ``Hearing Archives'' (http:/
/waysandmeans.house.gov/Hearings.asp?congress=17). Select the hearing 
for which you would like to submit, and click on the link entitled, 
``Click here to provide a submission for the record.'' Once you have 
followed the online instructions, completing all informational forms 
and clicking ``submit'' on the final page, an email will be sent to the 
address which you supply confirming your interest in providing a 
submission for the record. You MUST REPLY to the email and ATTACH your 
submission as a Word or WordPerfect document, in compliance with the 
formatting requirements listed below, by close of business Wednesday, 
May 17, 2006. Finally, please note that due to the change in House mail 
policy, the U.S. Capitol Police will refuse sealed-package deliveries 
to all House Office Buildings. For questions, or if you encounter 
technical problems, please call (202) 225-1721.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons, 
and/or organizations on whose behalf the witness appears. A 
supplemental sheet must accompany each submission listing the name, 
company, address, telephone and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                 

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
May 01, 2006
HL-15 Revised

 Change in Time for the Hearing on Implementation of the Medicare Drug 
                                Benefit

    Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Health of the Committee on Ways and Means, today announced that the 
Subcommittee hearing on implementation of the new Medicare prescription 
drug benefit known as Part D, previously scheduled to begin at 10:00 
a.m. on Wednesday, May 3, 2006, in the main Committee hearing room, 
1100 Longworth House Office Building, will now be held at 2:00 p.m.
    All other details for the hearing remain the same. (See Health 
Advisory No. HL-15, dated April 26, 2006).
                                 

    Chairman JOHNSON OF CONNECTICUT. Good afternoon, everyone. 
The hearing will come to order. Today, I am pleased to chair 
this hearing on the Medicare drug benefit which is so 
dramatically changing the lives of our seniors. Today, more 
seniors and disabled people than ever before have prescription 
drug coverage, and it is because of the Medicare drug benefit. 
This is a momentous time in Medicare's impressive history. The 
largest expansion of the program is improving seniors' access 
to prescription drugs and thereby fundamentally improving their 
health and their financial security.
    The Medicare momentum we are witnessing is undeniable. Last 
year, the Administration set a goal of having 30 million 
Medicare beneficiaries enrolled in the drug benefit. Last 
month, they tapped 27 million, and hundreds of thousands are 
signing up weekly. In fact, just today, 27,382 new enrollees 
have entered the Medicare drug plan. Of the remaining seniors, 
there are another 9 million that already have drug coverage; 
for example, those over 65 who are active employees in the 
public and private sector, members of TRICARE or participants 
in other programs. Seniors and the disabled are filing more 
than 93 million prescription drug prescriptions a month, an 
average of 3 million prescriptions a day. More importantly, 
once enrolled, seniors are happy, happy with the benefits 
provided. The Association for Advancement of Retired People 
(AARP), the largest organization representing seniors, found 
that 8 of 10 seniors enrolled in the program said that it met 
or exceeded their expectations. A Kaiser Foundation poll finds 
that 3 out of 4 seniors enrolled in the Medicare drug plan are 
satisfied with their plan and are not having trouble getting 
the drugs they need.
    Seniors are giving this benefit their stamp of approval. 
This is the largest benefit expansions in Medicare's history. 
So, it is not surprising that there have been some 
implementation pitfalls along the way. What is commendable, 
however, is how quickly the Centers for Medicare and Medicaid 
Services (CMS) has taken ownership of the problems and 
addressed the issues within the first 2 months of the program's 
functioning through close, collaborative, consultive action 
with plans, pharmacists, States and other stakeholders. As the 
program matures, it will need continued refinement, but 
enrollment numbers and survey after survey show undeniable 
momentum. The real story is how seniors across the country are 
signing up and saving money. It is misleading to focus on only 
the refinements, however, when seniors like Gail Blazewski from 
Cheshire, Connecticut is saving $2,000 a year. That is the real 
story that the Medicare prescription drug benefit is telling 
across the country.
    I ran into a senior in my district recently who said to me 
Part D is the difference between my staying in my home and my 
not being able to stay in my home. I can't tell you how 
grateful I have been for the work of the Congress and the work 
of the executive branch and their many, many partners all 
across the country, as I have seen senior after senior breathe 
a huge sigh of relief as the pressure of prescription drug cost 
is taken from their shoulders. I commend CMS for such a broad 
coalition of senior and advocate groups working to help seniors 
sign up. The AARP fielded a multimillion, quote, Reach 
Campaign. The National Association for the Advancement of 
Colored People (NAACP), the Nation's oldest civil rights group, 
not only launched a media campaign but an intense grassroots 
efforts to reach minority seniors and enroll minority seniors. 
Today, 70 percent of minority seniors are signed up, not just 
in the black community, but in the Hispanic community and in 
the Asian community.
    CMS has 10,000 grassroots partners, and they have been 
conducting 1,800 enrollment events across the country each week 
and will do so right up to May 15, 2006. Additionally, CMS has 
increased resources to keep the wait times down and beneficiary 
support up at 1-800-Medicare and Medicare.gov website. To that 
end, I am very pleased to welcome Dr. Mark McClellan, 
Administrator of CMS. I appreciate, Dr. McClellan, how 
thoughtfully and effectively CMS has worked to implement this 
program. I commend your decision to join forces with thousands 
of partners across the country, frankly, an unprecedented 
public-private partnership in the history of my experience of 
Federal Government over many years. I appreciate the dedication 
of you, the employees at Medicare, the employees in the public 
and private sector, and all the volunteers who made it possible 
for so many seniors to sign up.
    I look forward to your report made on the progress of the 
implementation of Medicare Part D benefit, the solutions found 
to the problems you encountered, the efforts you have made to 
prepare for the 2007 general enrollment and also the next 
steps, because Medicare Part D wasn't brought in to be part of 
Medicare just because we wanted to expand the benefit program, 
as important as that expansion. Medicare Part D will mature at 
the same time our knowledge of our chronic disease management 
demonstration projects mature and at the same time, we will 
have implemented a great number of preventive health benefits, 
and that is going to enable us to take some very important next 
steps. I would like to hear your comments on that future as you 
conclude your remarks. Also, on the first panel is Beatrice 
Disman, Chairman of the Medicare Planning and Implementation 
Task Force at the Social Security Administration (SSA). The SSA 
has also addressed this issue with remarkable care, remarkable 
teamwork and remarkable outreach, and I appreciate your hard 
work and look forward to your report on how you are reaching 
the low-income seniors who are the most vulnerable and the most 
in need of good prescription drug coverage.
    On the second panel, Susan Everett, North Carolina Regional 
Coordinator, Medicare Today, a partnership of more than 400 
organizations, will testify to their efforts to inform seniors 
and enroll them in the new benefit. Susan will share 
experiences with working one on one with seniors enrolling on 
the new benefit. Next, we will hear from Heath Schiesser, 
President, Prescription Drug Plan, WellCare Health Plans, Inc. 
WellCare Health Plans, Inc. is offering three different 
prescription drug plans in all 50 States. He will speak to the 
role competition has played in providing high-quality benefits 
at a lower cost for seniors and taxpayers.
    Also, Robert Hayes, President of the Medicare Rights 
Center, a consumer rights organization, will share his 
experiences with assisting seniors in enrolling in the Medicare 
drug benefit, especially those that could benefit from the low-
income subsidy. Then, we will hear from Bill Wolfe, Vice 
President, Managed Care, Rite Aid Corporation, who will speak 
to the operations of the Medicare drug benefit since January 
and the actions that CMS has taken to facilitate this process. 
Finally, we will hear from Pam Grisnik, Owner, RX Express, 
Grove City, Pennsylvania. She will speak on the role of 
community pharmacists and the important role they have played 
in this new benefit. There are still seniors that have 
questions about the program and haven't enrolled. It is natural 
to have questions with a change this big. Every senior, 
especially those without drug coverage, should write down the 
drugs they take and talk to a counselor at 1-800-Medicare or at 
one of the many hotlines States are operating or at the local 
senior citizens center or Area on Aging.
    They should not let questions about this program keep them 
from finding answers and saving money, like so many of their 
friends, family and neighbors. For years, Members of Congress 
talked about adding prescription drug benefits to Medicare. 
Today, right now, a Medicare prescription drug benefit is a 
reality. Thirty million seniors are benefiting from it, 
including 8 million who had no drug coverage before. This is a 
great, historic achievement for both the health and financial 
well-being of the seniors of America. Welcome, Dr. McClellan. 
Excuse me. First let me turn to Pete Stark, and then I will 
come to Dr. McClellan.
    Mr. STARK. Thank you, Madam Chair. I am glad we finally got 
to holding this hearing and hope that we have the time to get 
into this question thoroughly. The Medicare Prescription Drug 
Program (PDP) is now forecast to cost us $1 trillion over the 
next decade. I hope today we could look at what we have gotten 
for our money, and I suspect you will find that we haven't 
gotten very much for that $1 trillion. CMS will declare a 
victory when they tell us that more than 30 million people now 
have prescription drug coverage through Medicare or through a 
former employer and that nearly 6 million more are covered 
elsewhere. They won't tell you that they have lowered the goal 
from 40 million, reduced it by 10 million to 30 million, so 
that they can claim success.
    I understand that Dr. McClellan, today, is going to declare 
normal at 103 million, and therefore, many of the seniors who 
were classified as sick are called instantly well. The 
``mission accomplished'' that will be quoted from the deck of 
CMS is premature. As a matter of fact, I wondered where all of 
those people who counted weapons of mass destruction went when 
they were kicked out of the Defense Department, and there they 
are in CMS, finding out how many signed up in this drug bill. 
With fewer than 20 million enrolled in Part D and an additional 
6 or 7 million in an employer plan subsidized by Medicare, some 
people have been newly covered under the law, and that is good. 
After all, it would be virtually impossible to spend the $1 
trillion and not help anyone.
    I am very concerned that we have created this enormous, 
complicated, inefficient program that has eroded coverage for 
many of our most vulnerable and still not achieved the original 
goal of securing coverage for all. Millions of people covered 
by Medicare and Medicaid, the so-called dual eligibles, pay 
more today and are in plans that cover fewer medications 
relative to Medicaid. These are the people who are least able 
to afford this benefit reduction and that, to me, is not a very 
kind thing for us to be doing with the $1 trillion. A recent 
survey by the Medicare Prescription Network, a group financed 
in part by the pharmaceutical companies, found that one out of 
five Medicare beneficiaries now pay more for their medication 
than they did before the law went into effect.
    I can't say that I am surprised, that is what happens when 
you negotiate a law in secret, and follow the bidding for 
pharmaceutical industries is payback for campaign 
contributions. Unless you think I am entirely negative, I do 
want to take this opportunity to compliment CMS for several 
recent improvements. They have extended the enrollment deadline 
for people who are eligible for limited-income subsidies. They 
have also prohibited planned formulary changes from affecting 
medications their enrollees are currently taking. These are 
important changes. They will help, but more is needed.
    I realize the Chair and others are not ready yet to do what 
we really need, and that would be a drug benefit in Medicare 
that would require the government to negotiate lower prices for 
the beneficiaries, just as we do for veterans today. That is 
why today I think we should only focus on a modest change, and 
that is to delay the May 15, 2006 enrollment deadline and the 
corresponding financial penalty. It is something we should all 
be able to agree on. It is something which we on the other side 
of the aisle would give complete credit to the Republicans for 
accomplishing, and I assure you we would have no problem with 
extending that under what we believe is the authority that CMS 
has to do this administratively.
    We will be told by CMS that the May 15, 2006 deadline is 
important, because healthy people won't enroll without a 
deadline. I agree that a deadline at some point is necessary, 
but May 15 just doesn't seem to be the appropriate date, given 
all the confusion, the complexity, and the errors. For example, 
the Government Accountability Office (GAO) report--and, Madam 
Chair, I would like to make the GAO report that was released 
this morning a part of the record. We had hoped that they would 
be here to testify, but we could put their report in the 
record.
    Chairman JOHNSON OF CONNECTICUT. If the gentleman would 
yield, I would be happy to include their report in the record. 
Unfortunately, they could not brief us on it before, which is 
why they didn't testify. They have to have the authority of 
those who asked for the report in order to brief others on it 
before they are released. You all know not to do that. I am 
happy to have it put in the record, and I am sure that we will 
all have our reasons to refer to it.
    [The information is being retained in the Committee files.]
    Mr. STARK. Sure, one of the things that they have showed is 
that for the people whom you have suggested call these numbers, 
that when people asked for the lowest costs, given a certain 
list of drugs, in 60 percent of the cases, 43 percent of the 
calls were unanswered or they received inappropriate responses, 
and 16 percent were inaccurate. That is a 60 percent failure 
rate. Of all the calls that they monitored, one-third of the 
beneficiaries received no answer, an answer that was 
incomplete, inaccurate or inappropriate. I don't think that is 
a record that we should rely on to adequately inform our 
seniors. These are fundamental tools that they need to guide 
them in the decision-making process. They certainly weren't 
adequate to let Secretary Leavitt's father make the right 
choice, and that hits pretty close to home.
    The government, the Congressional Budget Office (CBO), has 
told us that the change we are asking would cost $2 billion 
over 5 years. In a $1 trillion program, that is chump change; 
and it would, in fact, increase this year's enrollment, 
according to the CBO, by about 1 million people and reduces the 
penalties for 7.5 million beneficiaries that they would pay 
over their lifetime--that penalty comes to the Treasury, so 
that would be no additional funding for the pharmaceutical 
industry, who would get 1 million more people to sign up. To 
me, that is a win-win. Nobody gets harmed. We pay a little more 
money to include these 1 million people and reduce the tax on 
7.5 people. It seems to me that would be money well spent. I 
would also in conclusion, Madam Chair, like to ask unanimous 
consent that some of our full Committee, non-Subcommittee 
members, be allowed to participate in today's hearing.
    Chairman JOHNSON OF CONNECTICUT. I would be happy to have 
them participate after the Subcommittee members and if it 
doesn't exhaust the witnesses' time; if the witnesses' time 
isn't exhausted by the Subcommittee members.
    Thank you, Mr. Stark. As I recognize Dr. McClellan, let me 
just note that, Pete, in your district, 83 percent of the 
seniors were signed up by the middle of April. In my district, 
only 62 percent of the seniors were signed up by the middle of 
April. I clearly have a lot of work to do, but I am glad to see 
that 83 percent of yours are signed up.
    Mr. STARK. If the gentlelady would yield, half of the 
people who belong--live in my district--belong to one plan, 
Kaiser Permanente. So, they were automatically switched. That 
is sign A.
    Chairman JOHNSON OF CONNECTICUT. That is great. You will 
also see as we start this hearing, a chart that shows the 
number of eligible Americans signed up for other kinds of 
subsidy programs, Medicaid, food stamps, Slimby, Quimby, the 
Earned Income Tax Credit, just so we can put into context the 
achievement that has been accomplished in 125 days in regard to 
signing up seniors into the Part D subsidy. Dr. McClellan.

   STATEMENT OF MARK McCLELLAN, M.D., Ph.D., ADMINISTRATOR, 
CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. DEPARTMENT OF 
                   HEALTH AND HUMAN SERVICES

    Dr. MCCLELLAN. Thank you very much, Chairman Johnson, Mr. 
Stark. Chairman Johnson and all Members of the Subcommittee, I 
appreciate the opportunity to update you on the new Medicare 
prescription drug coverage and especially the steps that we are 
taking to help people enroll as we enter the final days of the 
open enrollment period.
    I want to thank my colleague, Bea Disman, and all of the 
staff at the SSA who have been working diligently to help our 
most vulnerable beneficiaries take advantage of the extra 
assistance in this program and who have collaborated with us 
every step of the way. I also want to take this opportunity to 
thank all of you who have participated in counseling and 
enrollment events across the country. I am very grateful for 
your personal assistance in driving awareness of Part D and 
helping millions of beneficiaries enroll in drug coverage to 
get savings and protection for the future.
    Members of Congress have been an important part of our 
massive grassroots education effort, and I want this 
partnership to continue as we now begin to drive more effective 
use of Medicare's new preventive benefits and the drug 
coverage. This is the next step, Chairman Johnson, in turning 
Medicare from a traditional indemnity insurance program into a 
program that partners with our beneficiaries to improve their 
health and prevent unnecessary health care costs.
    Millions of seniors and people with disabilities are 
already using this money to stay healthy, to gain peace of 
mind. Approximately more than 9 million beneficiaries have new 
individual prescription drug coverage since the program began. 
Several million individuals who, because they also qualify for 
Medicaid or the low-income subsidy, will also have low or no 
premiums in deductibles and cost-sharings, and many millions 
more have more extensive and more secure drug coverage building 
on the coverage they already preferred as a result of the drug 
benefit.
    CMS estimates that almost 270 million prescriptions were 
filled under Part D during the first 3 months of 2006 for all 
of our beneficiaries with drug coverage, and numerous surveys 
show high rates of beneficiary satisfaction with their 
coverage.
    Each week, hundreds of thousands of more beneficiaries are 
enrolling. We have already exceeded the initial enrollment 
expectations with more than 30 million beneficiaries with 
coverage, through Part D or a former employer, as of mid-April.
    In addition, almost 6 million Medicare beneficiaries get 
drug coverage equal to Medicare's from other sources such as 
the Veterans Administration, and we want to work hard over the 
coming days to reach as many of the remaining 6 million. As 
close as possible. That is close to 96 percent of all Medicare 
beneficiaries. Half of those remaining are beneficiaries with 
limited incomes who we will continue to reach in the months 
ahead with expanded partnerships with SSA and outside 
organizations.
    We have worked with the plans, the pharmacists, the States 
and hundreds of other partners around the country to educate 
beneficiaries and their caregivers about their choices, to help 
people understand how to make decisions based on cost, 
coverage, convenience, and peace of mind. We put in place many 
outreach resources to support these efforts.
    While the vast majority of beneficiaries are already 
getting the savings security of drug coverage, again, we are 
working to reach as many more as possible between now and May 
15, and that would put us at the 90-percent-or-above range, 
with many of those left having continuing opportunities to 
enroll.
    To spread out any last-minute rush to enroll, CMS and our 
partners are undertaking a major effort to encourage 
beneficiaries to take advantage of the assistance now. In the 
past month, there have been more than 1,900 events per week 
across the country to provide beneficiaries with personalized 
help so they can understand their coverage options and make a 
confident decision about enrollment.
    Not only is enrollment way up, costs are down and benefits 
are better than expected as a result of competition. 
Beneficiaries are able to enroll in plans that meet their needs 
far better than a one-size-fits-all benefit package and a 
single drug formulary could do. The result is coverage that 
serves beneficiaries well and costs less.
    Over 90 percent of beneficiaries have opted for plans other 
than the standard statutory benefit design. They have enrolled 
in plans with low or no deductibles, flat copayments for 
covered drugs, and in many cases, coverage through the coverage 
gap.
    Consequently, even though the new drug coverage is offering 
better benefits, it is costing much less for beneficiaries, 
taxpayers, and States than had been anticipated. The passage of 
the Medicare Modernization Act (MMA) (P.L. 108-173), the 
creation of the prescription drug benefit, posed some real 
changes for us in awareness, education and operational 
implementation that are unprecedented in scale and scope since 
the onset of the Medicare program 40 years ago.
    Before implementation of the drug benefit, we provided most 
information directly to beneficiaries using traditional tools, 
including the Medicare and You handbook, 1-800-Medicare and our 
Web site, medicare.gov. Now, these are important pieces of 
information, but with the passage of the MMA we saw a need to 
improve and diversify our tools and to develop new strategies 
to reach a wider audience and to target hard to reach 
populations, including rural areas and minority communities.
    In addition to print, radio, and television advertisements, 
we have a multipronged approach to raise awareness and assist 
beneficiaries and their caregivers in making decisions about 
prescription drugs.
    During 2004, we began reaching out to develop partnerships, 
and now we have a network that is incredibly diversified and 
committed, with more than 10,000 local partners. For several 
months, we held training sessions around the country to educate 
our partners about the benefit structures and the enrollment 
tools so that they could help us raise awareness and educate 
enrolled beneficiaries.
    We recognize that to achieve the promise of the MMA we need 
to reach all segments of the Medicare population, especially 
underserved populations and those with language and cultural 
barriers. To reach them, including minority, low income, 
limited English-speaking, rural and homebound populations, we 
entered into a contract with the National Association of Area 
Agencies on Aging. Our strategies included strategy with 
community network-based organizations and nine national aging 
organizations with local affiliates to conduct outreach to low-
income populations.
    We developed specialized campaigns for the African 
American, Hispanic, American Indian and Asian American, and 
Pacific Islander communities, using new partnerships, creating 
materials in other languages, and doing specialized, targeted, 
paid media campaigns.
    We are pleased that this is paying off with enrollment in 
minority populations that is running ahead of the national 
average. I think that is probably unprecedented.
    We appreciate your participation in outreach, and we 
welcome your continued involvement as we work to reach 
remaining beneficiaries. Altogether we have hosted over 22,000 
events since January. Chairman Johnson, as you mentioned this 
extensive grassroots-level partnership is unprecedented. There 
are many people all over the country, where they live and work 
and play and pray. It has enabled us to reach beneficiaries who 
otherwise might not have gotten the support they needed to 
enroll, and it has helped millions make a decision about 
Medicare coverage already.
    It has helped personalize Medicare in a way we could never 
do from our national offices. I think this will be a lasting 
and fundamental change in the way that Medicare works.
    I do want to spend a minute talking about the importance of 
our customer service and support. It is always a top priority 
at CMS to ensure that beneficiaries and our partners get 
accurate and timely information. We have handled more than 22 
million calls between November 15 and April 24 of this year, 
and the agency takes great care in answering these calls 
promptly and providing accurate and useful information to 
callers. That is why we have ongoing and extensive and 
continuous monitoring improvement activities to make sure we 
are providing the most effective customer support possible.
    We have worked diligently to improve the wait times and to 
ensure accurate information is available in a timely manner to 
those seeking assistance. We have ongoing monitoring programs 
of actual beneficiary calls, which evaluate a random sample of 
hundreds of actual calls on an ongoing basis every month. It 
has found that calls to 1-800-Medicare in 2006 have been 
answered accurately 93 percent of the time. Actual calls, 93 
percent of the time answered accurately.
    This high accuracy rate is reflected in the high rates of 
overall satisfaction from 1-800-Medicare callers. We also do 
regular contact and follow up with a random sample of the 
beneficiaries who actually call us. I am pleased to say that 
CMS customer satisfaction surveys indicate that of the bulk of 
callers who interact with our customer service representatives, 
87 percent are satisfied with their experience.
    Our Web site, medicare.gov, has also been visited more than 
829 million times in the past 4 months. Many consumer experts 
like Consumer Reports, Jane Bryant Quinn, and Terry Savage of 
the Chicago Sun-Times all recommend using medicare.gov as a 
useful tool to get information about drug plans.
    With this array of tools available, and the incredibly 
diverse and unprecedented scale and scope of our outreach 
activities around them, I am confident that we can reach more 
beneficiaries than have ever been possible before to help them 
take advantage of Medicare benefits.
    Now, I would like to make special mention of the pharmacy 
community before I conclude. They are the linchpin of the drug 
benefit and have been tremendous in helping us. We are working 
hard to meet the demands of this new program, and so we will 
continue to take steps to support pharmacists, like supporting 
the creation of new computer standards and new approaches to 
recognizing and promoting high-quality pharmacy services.
    I want to thank you again for the opportunity to discuss 
our progress during the first 4 months of the drug benefit. 
This has been a very exciting time for CMS, as we now have many 
new and important relationships that we are going to continue 
to strengthen for future outreach and education aimed at 
continuous improvement and the quality of care and health for 
the Medicare population.
    While we are pleased that millions of Medicare 
prescriptions are being filled every day now, we will continue 
to work to ensure every person with Medicare can use this 
coverage effectively.
    I am happy to answer any questions you may have.
    Chairman JOHNSON OF CONNECTICUT. Thank you, Dr. McClellan.
    [The prepared statement of Dr. McClellan follows:]

    Prepared Statement of The Honorable Mark McClellan, M.D., Ph.D.,
       Administrator, Centers for Medicare and Medicaid Services,
              U.S. Department of Health and Human Services

    Chairman Johnson, Representative Stark, distinguished Members of 
the Subcommittee, thank you for the opportunity to update you on the 
new Medicare prescription drug coverage, and especially the steps we 
are taking to maximize enrollment as we enter the final days of open 
enrollment period. I also want to address the steps that we are taking 
concerning preparations for 2007 to make the prescription drug benefit 
program even better. I want to take this opportunity to thank those of 
you who have participated in CMS' enrollment events throughout the 
country. I appreciate your interest in this topic, but more importantly 
I am very grateful for your personal assistance and that of many of 
your colleagues in driving the awareness of and enrollment in Part D. 
Members of Congress have been an important part of this massive 
grassroots education effort and I am very hopeful that this partnership 
we have created can continue as we begin to drive greater awareness and 
use of the prevention benefits which the Congress included in the 
Medicare Modernization Act (MMA).
    More than 8 million beneficiaries have new individual prescription 
drug coverage since the program began and more than 93.8 million 
prescriptions were filled for these beneficiaries with drug coverage 
during March--averaging 3 million prescriptions filled per day. The 
vast majority of beneficiaries are using their coverage effectively and 
each week hundreds of thousands of beneficiaries are enrolling in the 
new program. CMS has already exceeded the enrollment target with more 
than 30 million beneficiaries with drug coverage through Part D or a 
former employer as of April 18, 2006. In addition, almost 6 million 
Medicare beneficiaries get drug coverage from other sources with 
prescription drug coverage such as the Department of Veterans Affairs 
equal to Medicare. This brings the total to approximately 36 million 
Medicare beneficiaries who are now receiving prescription drug 
coverage.
    According to data collected through beneficiary satisfaction 
surveys, 84 percent of seniors enrolled in the Medicare prescription 
drug program are satisfied with their coverage and 52 percent say they 
are enjoying significant cost savings.\1\ Further, a U.S. Chamber of 
Commerce study shows that 85 percent of enrollees say their plan covers 
the medicine they need and a study conducted by the Kaiser Family 
Foundation reveals that 82 percent of enrollees who have filled a 
prescription under the benefit reported having no problems.\2\
---------------------------------------------------------------------------
    \1\ U.S. Chamber of Commerce, April 25, 2006.
    \2\ Kaiser Family Foundation, April 25, 2006.
---------------------------------------------------------------------------
    CMS worked with the plans, pharmacists, States, and hundreds of 
other partners leading up to the start of the drug benefit to educate 
beneficiaries and their caregivers about the their choices and to help 
people understand how to make decisions based on cost, coverage, 
convenience, and peace of mind. There are still twelve more days to 
enroll before the May 15, 2006 enrollment deadline for the year, and we 
need to help beneficiaries get the savings and security of prescription 
drug coverage now.
    We have put into place many outreach resources to get the 
information to beneficiaries so they can enroll. To minimize an 
anticipated last minute rush to enroll, CMS is making a monumental 
effort to enroll beneficiaries as soon as possible. In the last month, 
there have been more than 1,880 events per week across the country to 
provide beneficiaries with personalized help so they understand the 
prescription drug coverage options available to them and so they can 
enroll in a plan. I know that you and other Members of Congress have 
been very helpful with events in your district as well. I have 
personally contacted many of the high enrollment plans to express my 
concern that they put adequate resources into their call centers. 
However, we know there will be a large number of enrollments as the May 
deadline approaches. While this may lead to longer wait times on both 
our call lines and plan sponsor lines, we have worked with the plans 
and we will make every effort to enroll everyone who wants to enroll. 
But to minimize problems, you should encourage your constituents to act 
now.
    Millions of seniors and people with disabilities are already using 
this benefit to save money, stay healthy, and gain peace of mind. This 
includes several million individuals who, because they also qualify for 
Medicaid, or the low-income subsidy (LIS), will have very low or no 
premiums deductibles and cost sharing. CMS estimates that almost 270 
million prescriptions were filled during the first three months of 2006 
for all Medicare beneficiaries with drug coverage. Because of strong 
competition in the prescription drug marketplace, there has been slower 
growth in prescription drug inflation in recent years, due in part to 
increasing generic drug availability. Also, the proliferation of tiered 
co-payment drug plans and use of formularies have caused the use of 
generic drugs to increase and further slow drug spending growth. 
Consequently, the new Medicare prescription drug coverage is costing 
much less for beneficiaries, taxpayers, and the States than 
anticipated.
    Beneficiaries are choosing plans that best meet their needs, 
leading to coverage that serves them well and costs less for them and 
for taxpayers. Enrollment data reveal that the vast majority of 
beneficiaries are choosing plans that offer benefits other than the 
standard option as defined in the law. They are choosing plans that 
have low premiums, no deductibles, fixed copays, and coverage in the 
gap. In fact, only 16 percent of prescription drug plan (PDP) enrollees 
chose the standard, statutory option and only 5 percent of Medicare 
Advantage prescription drug plan (MA-PD) enrollees chose the standard 
option. Beneficiaries are also often choosing plans with access to a 
broad range of drugs. Beneficiaries eligible for the low-income subsidy 
have a very comprehensive benefit, with no coverage gap and usually no 
deductible.
    CMS anticipates that plan sponsors will consider current enrollment 
statistics when submitting their bids for 2007, and will limit their 
plan options accordingly. CMS' expectations for plan bids are outlined 
in the 2007 Call Letter, which I will discuss shortly.
    We are hearing reports from our partners about the cost savings 
people with Medicare are experiencing. It is estimated that the 
Medicare drug benefit will pay on average about half of total drug 
spending in 2006 for seniors who are not eligible for extra help.
    The beneficiaries who qualify for the low-income subsidy receive 
substantially greater assistance, with a benefit that will cover on 
average over 95 percent of their drug costs.

CMS and Our Partners have Raised Awareness Nationwide
    With the passage of the Medicare Modernization Act of 2003 and the 
creation of the Medicare prescription drug benefit, the Congress posed 
awareness, education, and operational challenges to CMS unprecedented 
in scale or impact since the onset of the Medicare program more than 
forty years ago. Notwithstanding a short timeline, CMS has risen to the 
challenges as evidenced by the most recent enrollment numbers, which 
exceed our target. With the outstanding help of our partners, CMS has 
instituted a grassroots initiative across the country, with 
partnerships which we believe will last long after the May 15th 
enrollment deadline. We have an extensive partnership network with more 
than 10,000 local partners including senior organizations and centers, 
youth groups, churches, civic and social organizations and federal 
state and local government agencies.
    Before implementation of the drug benefit, CMS provided most 
information directly to beneficiaries using the traditional tools, 
including the Medicare & You Handbook, 1-800-MEDICARE, and 
www.medicare.gov. However, with the passage of the MMA, CMS saw the 
need to improve our existing tools and to develop new strategies in 
order to reach a wider audience and to target specific hard- to -reach 
populations, including rural areas and minority communities. In 
addition to print, radio and television advertisements, CMS has a 
multi-pronged approach to raise awareness and assist beneficiaries and 
their caregivers in making decisions about prescription drug plans.
    CMS knew from the outset that it was essential to provide 
beneficiaries with more hands -on assistance than was available in our 
traditional educational materials through outreach events and one-on-
one training. This effort would have to be both a high-touch and high-
tech outreach campaign, with high-tech resources like the personalized 
Plan Finder web tool for use by our partners and our beneficiaries, as 
well as high-touch efforts involving one-on-one personal contacts using 
an intricate web of grassroots partners collaborating and leveraging 
each other for the maximum benefit of people with Medicare.
    In addition, rather than just reaching beneficiaries, CMS cast a 
wider net to reach caregivers, family and friends of beneficiaries.
    During 2004, CMS began reaching out to develop partnerships, and 
now the network is incredibly diverse and committed. For several 
months, we held training sessions throughout the country to educate our 
partners about the benefit structure and the enrollment tools so they 
could help raise awareness, educate, and enroll beneficiaries. CMS 
provided special training for social service coordinators to help them 
counsel low-income seniors. CMS relied heavily on our partner 
organizations to work with beneficiaries on a one-on-one basis.
    President Bush, Secretary Leavitt, and I, along with CMS' regional 
office staff, have traveled over 500,000 miles across the country in a 
mobile office bus to form grassroots partnerships that help people with 
Medicare make an informed decision about prescription drug coverage. 
About 70 percent of these mobile office stops have taken place in rural 
communities throughout the country. Many Members of Congress have 
served as honorary chairs for these events and we appreciate their 
involvement in forging over 240 grassroots community and statewide 
networks, each led by a community partner. The mobile office reached 
rural areas across the country to complement our dedicated funding for 
outreach to rural areas. Since January 1, 2006, 269 events have 
involved the participation of an elected official. We appreciate your 
participation in outreach and we welcome your continued involvement in 
activities to reach beneficiaries.
    We have continued to work harder than ever to help beneficiaries 
and their loved ones learn about their drug coverage. Since January, 
CMS and its partners have hosted over 22,000 events. Our partner 
organizations are also providing personalized counseling by request to 
help beneficiaries enroll in a plan that best meets their needs. CMS 
worked with the Social Security Administration and various 
organizations to provide training and conduct outreach to beneficiaries 
who may qualify for low-income assistance. In addition, we forged 
partnerships with other federal agencies, which have helped to 
disseminate information to beneficiaries, especially to those who might 
qualify for the low-income subsidy.
    Also, CMS regional offices along with State Health Insurance 
Assistance Programs (SHIPs), senior advocacy organizations, and 
agencies on aging have held thousands of information and enrollment 
events. In fact, CMS has more than doubled its funding to SHIPs since 
2003, recognizing the importance of SHIP assistance to beneficiaries. 
In 2004, CMS provided more than $21 million and increased that to more 
than $31 million in 2005. The funding level will remain high, even 
after the initial enrollment period for prescription drug coverage 
ends, to ensure that SHIP counselors will continue to play an important 
role in educating beneficiaries about the drug benefit and their plan 
options in the months ahead.
    We recognized that to achieve the promise of the MMA we would need 
to reach all segments of the Medicare population, especially 
underserved populations and those with language and other cultural 
barriers. To target these hard to reach populations, including 
minority, low-income, limited English-speaking, homebound, and rural 
populations, CMS has a contract with the National Association of Area 
Agencies on Aging. Strategies included contracting with Aging Network 
community-based organizations and nine National Aging Organizations 
with local affiliates to conduct outreach to low-income populations. 
Thus, we developed specialized campaigns for the African American, 
Hispanic, American Indians, and Asian American Pacific Islander 
communities, utilizing new partnerships, creating materials in other 
languages, and doing specialized paid media campaigns.
    In summing up a new set of outreach initiatives for African-
American beneficiaries, Dr. Sandra Gadson, president of the National 
Medical Association, has described the importance of this targeted 
outreach to specific populations such as African American 
beneficiaries. ``If we think we have a health disparity crisis in the 
African American community today, imagine if we do not succeed in 
enrolling the most needy of our eligible seniors and people with 
disabilities.'' She noted that many of the organizations she was 
working with had not supported the law, but that it was clearly time to 
put politics aside in helping people take advantage of the new coverage 
. . . coverage that for low income seniors, as Jim Firman, of the 
National Council on Aging has said, is the most important new health 
care benefit in 40 years.
    These extensive, grassroots-level partnerships are truly 
unprecedented for the Medicare program. We are reaching out to people 
with Medicare, many people, all over the country . . . ``where they 
live, work, play, and pray.'' It has completely changed awareness about 
the drug benefit, and has helped millions make a decision about 
Medicare coverage already. It has helped personalize Medicare in a way 
that we could never do from our national offices. And I believe this 
will be a fundamental and lasting change in the way that Medicare 
works. This has been a very exciting time for CMS as we now have many 
new important relationships which we will continue to nurture for 
future outreach and education efforts aimed at continuous improvement 
in the quality of health of the Medicare population.
    In addition to events around the country, we have worked to enhance 
our traditional methods of outreach and education. For instance, CMS 
treats the Medicare & You 2006 handbook, which is mailed to all 42 
million beneficiaries and includes detailed information about the new 
prescription drug coverage, as a continuous quality improvement 
project. Every year, in an effort to make the handbook a valuable and 
understandable beneficiary resource that is straightforward and easy to 
read, CMS conducts consumer testing of the draft handbook at two 
separate stages. Additional testing is sometimes done for specific 
sections. CMS also solicits input from our partners, including Members 
of Congress.

CMS Prioritizes Customer Service to Our Beneficiaries and Our Partners
    As always, customer service is a priority at CMS to ensure 
beneficiaries and our partners are given accurate, timely information. 
With implementation of a brand new part of Medicare, CMS understands 
that people with Medicare, their families, doctors, and pharmacists 
will have questions about the new Medicare drug benefit. CMS' 1-800 
MEDICARE Call Center has customer service representatives (CSRs) 
available to answer Medicare questions 24 hours a day, seven days a 
week with assistance in English and Spanish and many other languages as 
well. CMS' helpline and www.medicare.gov have served as critical tools 
for beneficiaries, caregivers, and enrollment assistance centers to 
sign up for the prescription drug benefit.
    CMS has handled more than 22 million calls between November 15, 
2005 and April 24, 2006, and the Agency takes great care in answering 
these calls as promptly as possible and providing accurate, useful 
information to callers. Because of the great interest in the new drug 
benefit, call wait times have been longer than we would like at times. 
CMS has worked diligently to improve the wait times caused in part by 
data translation problems to ensure accurate information is available 
in a timely manner to those seeking assistance. As shown in Figure 1, 
on average, callers have experienced wait times of less than two 
minutes from January to mid-April, with longer waits sometimes 
occurring during peak call periods.

Figure 1

[GRAPHIC] [TIFF OMITTED] T3132A.001

Figure 1: Call Volume and Wait Times to 1-800 MEDICARE

    In order to help beneficiaries understand their drug plan choices 
and select the plan that best meets their needs, CMS increased the 
number of Customer Service Representatives (CSRs) from 3,000 in June of 
2004 to as many as 7,800. We have also acquired additional 
infrastructure including telephone lines, workstations, and seats at 
call center sites. We have refined our CSR scripts by reducing 
redundant information, indexing scripts for quick access, and including 
probing questions to help the CSRs better identify the caller's 
concerns. In addition, all beneficiary toll-free numbers were moved to 
a single 1-800 number with a centralized Interactive Voice Response 
(IVR) system, allowing beneficiaries who call 1-800-MEDICARE to get 
answers to all Medicare questions through a single number, which has 
helped to channel calls appropriately and improve efficiency. Further, 
the IVR system was enhanced to incorporate more plain language, user-
friendly functionalities, and synonyms for common beneficiary terms.
    CMS has implemented a major enhancement through the use of Smart 
Scripts, which provide the CSRs with an easily followed path of 
responses to the most frequently asked questions. Smart Scripts are a 
new type of script that has hyperlinks built into the body of the text. 
When activated, these hyperlinks will take the CSR directly to related 
information about that subject. In addition, we have CSRs participate 
in the content workgroups for the actual development of scripts and job 
aides. CMS has also implemented a CSR feedback system and streamlined 
our approval process for updating the scripts in a timely manner to 
respond to the changing needs of our customers or to incorporate policy 
updates.
    All CSRs receive one week of classroom training followed by two or 
three additional days of practice calls, simulation, quality 
monitoring, and follow-up coaching to ensure peak performance. CSRs are 
required to be certified with a written examination and test calls 
prior to taking live calls. CMS has taken steps to strengthen the call 
centers' capabilities and reduce wait times in order to address 
beneficiaries' concerns as they arise. CMS hired and trained additional 
staff to use the Prescription Drug Plan Finder tool to help 
beneficiaries get the information they need to enroll in a drug plan 
that suits their needs.
    I am pleased to say that CMS customer satisfaction surveys indicate 
that the bulk of callers who interact with our CSRs, 87 percent, are 
satisfied with their experience. They are particularly pleased with how 
courteous and patient the CSRs are (rated at 97 percent). These 
responses came not only from people with Medicare, but also friends or 
relatives calling on their behalf, who made up 23 percent of callers 
during March 2006.
    In addition to beneficiary satisfaction surveys, CMS also evaluates 
the 1-800-MEDICARE CSRs through ``mystery shopping'' to ensure they are 
providing accurate and complete responses to callers. ``Mystery 
shopping'' calls are made to CSRs by an independent specialized quality 
evaluation contractor who has developed scenarios and scripts to 
measure the CSRs on various topics to determine if CSRs are being 
``fully responsive.'' A response is considered ``fully responsive'' if 
all key points are conveyed to a caller. We have consistently found 
that the information provided by the CSRs was fully responsive to the 
caller's needs most of the time.
    CMS' Medicare Web site, www.medicare.gov, has also been a source of 
useful information for people with Medicare. Since the first of the 
year, our frequently asked questions have been accessed more than one 
million times. CMS also has responded to more than 19,000 e-mails 
received through the site, with 93 percent of them being resolved 
satisfactorily in the first response. In addition, the medicare.gov web 
site has been visited more than 829 million times since January 1, 
2006.
    With the array of educational tools available, I am confident that 
beneficiaries are getting the information they need to enroll. We have 
seen steady enrollment since November 15th.

CMS Works With Plans To Improve Their Customer Service
    In addition to this significant strengthening of our 1-800-MEDICARE 
capabilities, we have issued guidance to the plans instructing them to 
increase the numbers of CSRs in their own call centers and take other 
necessary steps to provide timely and effective responses to inquiries 
from enrollees and health professionals. Plans have responded and 
reported significant increases in the number of CSRs in their call 
centers, and as a result, plan performance has improved.
    While many plans are now providing timely phone access, some have 
not responded adequately. Therefore, CMS has increased monitoring of 
plans' call center activities to help assure a high level of 
performance. We are surveying all prescription drug plans to assess 
whether they provide correct information to beneficiaries and 
pharmacists within a reasonable time. We expect continuing improvements 
as we address systems and data transfer issues. The 2007 Call Letter 
provides specific wait time metrics to which the plans must adhere, 
which I will outline shortly.

CMS Provides Caseworkers for One-on-One Counseling
    While millions of prescriptions are being filled for people with 
Medicare, CMS is very concerned about those individuals who are 
encountering difficulties at the pharmacy counter. This is certainly 
distressing for those individuals and their caregivers.
    CMS has established a system to help resolve urgent issues on a 
case-by-case basis. CMS has hundreds of trained caseworkers who are 
working as rapidly as possible to resolve urgent issues to help ensure 
that people with Medicare get their prescriptions filled. CMS urges 
people with Medicare or their family members who are having 
difficulties to call 1-800-MEDICARE, and if necessary, their case will 
be forwarded to our caseworkers. Urgent cases have high priority for 
rapid resolution.
    While the number of individual cases is small in comparison to the 
millions of prescriptions and individuals who are successfully 
receiving their prescriptions, CMS is committed to ensuring that every 
individual receives his or her needed medicines, is properly 
identified, and is charged the appropriate copays.

CMS Takes Steps To Identify Areas of Concern
    While considerable progress has been made, change of this magnitude 
in such a short time span is bound to encounter some difficulties. CMS 
is very concerned about anyone who has experienced problems in 
obtaining their medicines. We make no excuses for the problems. They 
are important, they are ours to solve, and we are finding and fixing 
them. We have and are continuing to take action to address issues so 
that all beneficiaries enrolled in a Medicare prescription drug plan 
can obtain their medications without incident. CMS also has been 
correcting data transmission problems between Medicare, health plans, 
pharmacists, and the States.
    CMS developed the Complaints Tracking Module (CTM) to capture 
complaints CMS receives from beneficiaries, providers, or plans about 
prescription drug plans, pharmacies, subcontractors, and providers. The 
design of CTM evolved from CMS' experience with the Medicare-approved 
prescription drug cards. Because it is a Web-enabled system, it can 
accept large numbers of daily transactions simultaneously from many 
users across the Agency. Information can be efficiently exchanged, 
which allows for quicker resolution and accountability. CMS launched 
the CTM into production October 3, 2005 and began tracking complaints 
in January 2006 and we have seen a general decline in the number of 
complaints during this time.
    In addition, in order to assist pharmacists, who have been 
outstanding in their commitment to service, CMS is working to ensure 
they have the resources and support they need. CMS is also coordinating 
with the States that used their state reimbursement systems to pay for 
prescriptions that should be paid by the new Medicare prescription drug 
plans. We are also monitoring plan activities and will use our 
enforcement measures, if necessary, to ensure they are adhering to the 
requirements of participating in the Medicare prescription drug 
program. The 2007 Call Letter outlines CMS plan sponsor evaluation 
criteria. These efforts build on the preparations that were made long 
before the January 1, 2006 launch of the Medicare prescription drug 
benefit. In addition, the 2007 Call Letter contains policy statements 
developed in response to lessons learned during the Part D program 
implementation. It also features reiteration of existing program 
requirements to emphasize their importance to CMS and to our 
beneficiaries.

CMS Applauds and Supports the Outstanding Work of Pharmacists
    Pharmacists are the linchpin of the prescription drug benefit and 
all over the country they have been tremendous in implementing the new 
program. Traditionally, the start of a new year is one of the busiest 
times for pharmacists with new enrollments occurring in commercial and 
government plans in January. With the launch of the new Medicare 
prescription drug benefit, the task facing pharmacists was an 
additional challenge and CMS applauds and supports their tremendous 
efforts. Pharmacists are working hard to meet the demands of the new 
program, and CMS will continue to provide them and their software 
vendors and support associations with the tools they need to serve 
their customers.

CMS Provides Dedicated Support to Pharmacists
    CMS has provided a number of ways for pharmacists to obtain help in 
filling prescriptions for plan enrollees. To help pharmacists identify 
what plan a beneficiary is in, CMS collaborated with pharmacists 
starting in 2004 to create an electronic eligibility and enrollment 
query system that operates as part of their existing computer systems. 
If the enrollee does not have a card or proof of enrollment in a 
prescription drug plan, pharmacists can use this eligibility system 
(the E1 system) to obtain information needed to fill the prescription. 
Using instructions and updates provided by their software vendors, 
retail pharmacists now generally have the ability to perform real-time 
eligibility determinations on their existing computer systems. 
Pharmacists can also call plans directly, on lines dedicated for 
pharmacists. They can contact Medicare's own CSRs on the toll-free 
pharmacy support phone lines if need be, and CMS also has specially 
trained case workers in our regional offices who can intervene in 
special cases to make sure that enrollees get the medications they 
need.
    To help resolve issues pharmacists encounter in dispensing 
medications to those newly enrolled in the Medicare prescription drug 
plans, CMS has increased its call handling capacity at the pharmacist 
help line. In addition, the line is now available 24 hours a day. This 
increased capacity has reduced the wait time to less than a minute for 
pharmacists who want to use this mode of communication for eligibility 
and enrollment determination.

CMS Supports Simplification Initiatives
    We have heard concerns from pharmacists about different claims 
processing and administrative systems used by the various Medicare 
prescription drug plans. We have helped make sure that plans are aware 
of the challenges posed by their varying requirements. We have 
supported external discussion efforts between plan and pharmacy 
representatives to make rapid technical progress towards more 
standardized electronic responses and prior authorization process for 
the pharmacists. CMS remains supportive of this initiative undertaken 
by the plans and pharmacists to improve how the new program operates on 
a day-to-day basis. This is one of many examples of how various parties 
are working together to improve the systems associated with the new 
program.
    CMS has also identified a number of business process issues that 
can be simplified for plans, physicians and beneficiaries. To 
supplement established prescription drug reject codes, America's Health 
Insurance Plans (AHIP), the National Association of Chain Drug Stores 
(NACDS), the National Community Pharmacists Association (NCPA), and 
others have announced standardized coding messaging designed to assist 
pharmacists and better serve beneficiaries when they fill prescriptions 
at pharmacies. Specifically, these standardized electronic messages 
will help pharmacists quickly determine the appropriate course of 
action for filling beneficiaries' prescriptions under four different 
circumstances: (1) when a particular drug is not covered; (2) when 
prior authorization is required; (3) when plan quantity or other 
coverage limitations have been exceeded; and (4) when the pharmacy is 
not part of the Part D plan's network.
    This consensus agreement on new message coding protocols will make 
transaction processing more streamlined and efficient which will save 
time and prevent phone calls and delays between plans and pharmacists. 
This is important not only for the Medicare drug program, but may 
produce benefits throughout our entire health care system, as these and 
other protocols are applied to other public and private programs. CMS 
now views these consistent messages as best practices for the drug 
benefit, and we expect all Part D plan sponsors to adopt and implement 
these practices as soon as possible. We will be looking at these and 
other best practices as measures of plan performance.
    To further the goal of simplifying procedures in the new drug 
benefit, last week the American Medical Association (AMA) and America's 
Health Insurance Plans (AHIP), in conjunction with CMS, released a 
standardized exceptions form designed to assist physicians in 
requesting exceptions and prior authorizations on behalf of Medicare 
beneficiaries enrolled in Medicare drug plans. This form allows for a 
simplified process for physicians to apply for coverage determinations 
on behalf of all of their Medicare patients, regardless of which Part D 
plan the beneficiary is enrolled in.
    In addition to the new messaging standards, we sent information to 
the plans which will expedite their processes for making sure they are 
not inappropriately paying for drugs that should be covered under Part 
B, and we have worked with Epocrates, an electronic prescribing 
software company, to ensure that their product provides accurate and 
easy access to plan formularies. We've also held weekly prescribers' 
conference calls and bi-weekly meetings with the AMA and other 
organizations to find out what prescribers are experiencing, to supply 
them with information on our activities and answer their specific 
questions.
    CMS issued a fact sheet on February 24, 2006 to provide physicians 
with updated, practical information about the exceptions and appeals 
processes. This fact sheet describes the physician's role in these 
processes and emphasizes the short decision-making timeframes. In 
addition, on March 24, 2006, CMS held a ``Coverage and Appeals'' 
training session for providers and other CMS partners. We had close to 
1,500 sites calling in for the training, and we conservatively estimate 
that 3,000 people were listening in.

CMS Facilitates Creation of the Pharmacy Quality Alliance
    CMS continues to engage in rigorous outreach to the pharmacy 
community, through national, state and local pharmacy organizations and 
their newsletters and email lists, as well as their standards 
organization and technical societies.
    I am very pleased to announce the establishment of the Pharmacy 
Quality Alliance (PQA). Similar to the Ambulatory Quality Alliance 
(AQA), the mission of the Pharmacy Quality Alliance is to improve 
health care quality and patient safety, and to reduce overall 
healthcare costs. The PQA will use a collaborative process in which key 
stakeholders agree on a strategy for measuring performance at the 
pharmacy level; collecting data in the least burdensome way; and 
reporting meaningful information to consumers, plans, providers, and 
other stakeholders to inform choices and improve health outcomes.
    The Alliance highlights the role of the pharmacist as a member of 
the integrated health care team and recognizes the value the pharmacist 
can bring to the equation of total patient care. CMS may further 
support this collaborative process by developing a demonstration 
project to provide further evidence on the impact of Medication Therapy 
Management (MTM) and other pharmacist interventions that could help 
promote high quality patient care and lower costs in both the Medicare 
and Medicaid programs--a win-win for plans, pharmacists, and most 
importantly, beneficiaries.
    Individuals with more than one chronic disease often require 
treatment with several prescription medications, which increases their 
risk for drug-related problems. Additionally, they represent a 
disproportionate amount of health care expenditures. Each Part D 
sponsor must have an MTM program for beneficiaries who have multiple 
chronic diseases and are taking multiple Part D drugs with projected 
annual costs of at least $4,000. The quality of care for these 
individuals can be improved and medical costs can be reduced through 
MTM, which promotes appropriate medication use, reduces the risk of 
adverse events, and optimizes therapeutic outcomes.
    MTM programs may be furnished by a pharmacist or other qualified 
provider and must be developed in cooperation with pharmacists and 
physicians. This creates opportunities for the pharmacists to play 
active roles in the MTM services provided. To realize the full 
potential of MTM, quality metrics for MTM and related pharmacy services 
must be developed so that more can be done to support high-quality 
pharmacy care.

Physician Outreach Provides Information about Formularies, Exceptions, 
        Appeals, and Expedited Requests
    Physicians are a key partner in the implementation of the Medicare 
prescription drug benefit, and CMS conducted extensive outreach about 
formularies, exceptions, appeals, and expedited requests to promote 
effective interactions with physicians and beneficiaries. CMS used the 
Physicians Regulatory Issues Team (PRIT) web site to provide advice for 
providers and an invitation for them to call or email CMS with issues 
or concerns about the Medicare prescription drug benefit. In addition, 
CMS sent a letter to physicians outlining specific sources of help and 
information. Some specific steps we have taken to ease processes for 
both physicians and pharmacists include the following:

          A web-based formulary finder linked to all plan 
        formularies.
          Information about Epocrates, an electronic handheld 
        and web-based drug and formulary reference for physicians, that 
        is providing plan formulary information including both tier and 
        step therapy information and is updated constantly.
          An exceptions and appeals contact list for each 
        prescription drug plan so physicians can help a patient by 
        filing an exception or appeal for a medication or a 
        medication's tier.
          Information about coverage determinations, 
        exceptions, appeals, and expedited requests.
          AHIP, AMA and others developed a standardized form 
        that physicians can use to request prior authorization and 
        coverage for non-formulary drugs.
          To facilitate communications between pharmacists and 
        physicians, we posted a form for pharmacists to use to inform 
        physicians that their patient's plan is requiring use of 
        another drug, step therapy, or prior authorization.
          We have encouraged plans to accept prior approval 
        requests by fax, rather than requiring phone calls from 
        physicians, since that is less time consuming for the 
        physicians.
          A chart and other support tools to determine quickly 
        if the drug a physician prescribed is a Part B or Part D drug.
          Information about the CMS web-based email and weekly 
        conference calls where physicians can get direct help with 
        their concerns.

Strong Enrollment Trends Continue
    As a result of successful outreach efforts, participation in the 
drug benefit is off to a strong start. CMS has exceeded the enrollment 
target and over 30 million beneficiaries have drug coverage from Part D 
or a former employer. The number of Medicare beneficiaries receiving 
coverage continues to grow at a rate of hundreds of thousands of 
beneficiaries per week. As shown in Figure 2,
    Overall prescription drug coverage figures as of April 18 are:

          Stand-Alone Prescription Drug Plans (PDPs): 8.1 
        million people with Medicare have enrolled in stand-alone 
        prescription drug plans. This total includes 1 million 
        beneficiaries who had their enrollment facilitated by CMS. This 
        subset of beneficiaries were either automatically approved for 
        the low income subsidy or applied for the subsidy through the 
        Social Security Administration or states, but had not selected 
        a prescription drug plan on their own.
          Medicare Advantage with Prescription Drugs (MA-PDs): 
        Nearly 5.8 million beneficiaries receive coverage through 
        Medicare Advantage plans with drug coverage (MA-PDs). More than 
        950,000 MA-PD beneficiaries have signed up on their own since 
        prescription drug coverage was added to Medicare Advantage 
        plans.
          Medicare/Medicaid: About 5.8 million beneficiaries 
        were automatically enrolled in prescription drug plans, plus 
        about 500,000 enrolled in Medicare Advantage plans with 
        prescription drug coverage.
          Retiree Coverage: More than 6.8 million retirees are 
        enrolled in an employer or union sponsored plan that has 
        applied for the Medicare retiree drug subsidy. In addition, 
        about 1.4 million retirees are in employer- and union-sponsored 
        coverage that incorporates Medicare group drug coverage.
          Federal retiree coverage: 3.5 million

                  TRICARE: There are 1.9 million 
                beneficiaries with TRICARE retiree coverage.
                  FEHB: There are 1.6 million beneficiaries 
                with FEHB retiree coverage. This figure includes 
                spouses with Medicare who are covered under a FEHB 
                family policy by retirees who also have Medicare 
                coverage.

          Additional Sources of Prescription Drug Coverage for 
        Medicare Beneficiaries:

                   Approximately 5.8 million Medicare beneficiaries 
                have alternative sources of ``creditable'' prescription 
                drug coverage:

                          Veterans Affairs (VA): There are 
                        an estimated 3.2 million beneficiaries with 
                        creditable drug coverage through the VA.
                          Indian Health Service (IHS): 
                        There are an estimated 0.1 million 
                        beneficiaries with creditable drug coverage 
                        through the IHS.
                          Active Workers with Medicare 
                        Secondary Payer: There are an estimated 2.0 
                        million beneficiaries who are active workers 
                        with creditable drug coverage through an 
                        employer group health plan.
                          Other Retiree Coverage: An 
                        estimated 500,000 retirees are continuing in 
                        coverage from a former employer or union that 
                        supplements individual market Medicare drug 
                        coverage or is not coordinated with Medicare 
                        drug coverage.

    So, in addition to over eight million beneficiaries in stand-alone 
prescription drug plans, many millions more are getting more 
comprehensive coverage in Medicare Advantage plans, and millions more 
continue to receive retiree coverage--exactly as the law was intended 
to work.

[GRAPHIC] [TIFF OMITTED] T3132A.002

Figure 2: Enrollment in Medicare Prescription Drug Benefit, Medicare 
        Advantage-PDPs, the Retiree Drug Subsidy, FEHBP, and TRICARE 
        3, 4
---------------------------------------------------------------------------
    \3\ MA-PDP enrollments are under-reported as plans update CMS 
records concerning the movement of beneficiaries from MA to MA-PD 
plans.
    \4\ Retiree Drug Subsidy enrollment numbers between 12/27/05 and 1/
8/06 are estimates.

    In addition to general participation, CMS research indicates that 
our partners' and our outreach efforts have been particularly 
successful in minority communities. Seventy percent of Medicare-
eligible African Americans, 75 percent of Asians, and 70 percent of 
Hispanics have enrolled in Part D or have coverage from an employer 
taking the retiree drug subsidy. These figures exclude FEHB and 
TRICARE.
    Polls show that people are finding the enrollment process easy and 
are saving money from participating in the benefit. An AARP survey 
found that 78 percent of those enrolled in a Medicare prescription drug 
plan say they are satisfied.\5\ An AHIP survey released on March 13, 
2006 found that nine out of 10 seniors who are dually eligible for 
Medicare and Medicaid say they have experienced no problems using the 
new Medicare drug benefit.\6\ According to AARP's survey, of those 
surveyed who had prescription drug coverage before 2006, 63 percent 
indicated that their Medicare drug plan is either better or as good as 
their previous coverage. Further, the survey found that 40 percent of 
survey participants thought if Medicare had not added the new 
prescription drug benefit, they would need to give up things such as 
groceries, full dosages of medication, or cut back on savings.
---------------------------------------------------------------------------
    \5\ ``New Medicare Drug Benefit is Meeting or Exceeding 
Expectations,'' AARP, Released April 12, 2006.
    \6\ ``Tracking Survey of Seniors Who Are Enrolled in the Medicare 
Prescription Drug Benefit,'' AHIP, Released March 13, 2006.
---------------------------------------------------------------------------
    More than 30 million Medicare beneficiaries now have prescription 
drug coverage and CMS is encouraged by the strong enrollment numbers. 
Outreach efforts will continue to promote enrollment for those who have 
not yet enrolled.

Competition Helps Lower Drug Prices
    Competition in the prescription drug marketplace and among sponsors 
of Medicare prescription drug plans have helped reduce prescription 
drug costs for Medicare beneficiaries, which a number of recent studies 
have illustrated.
    CMS analyses demonstrate that Medicare beneficiaries with common 
chronic conditions can save a substantial amount on their drug bills by 
enrolling in a Medicare prescription drug plan (PDP) compared to what 
they would pay with no drug coverage.\7\ For instance, people with 
Medicare who select the lowest-cost plan in their area may find savings 
up to 71 percent off the prices they would pay without prescription 
drug coverage. The analysis also demonstrates that a range of plans 
available to beneficiaries can provide significant savings. This is 
also true for a very broad range of plans if beneficiaries are willing 
to use generic versions of their existing drugs, when available, which 
are required to have the same active ingredients and work in the same 
way as the brand-name drug. These results indicate that beneficiaries 
can see substantial savings on their drug bills by focusing on a few 
plans with the features they prefer--such as a low premium, or fixed 
copayments, or coverage in the gap, and low out-of-pocket costs.
---------------------------------------------------------------------------
    \7\ CMS Office of Policy, Analysis of Savings Available Under 
Medicare Prescription Drug Plans, March 1, 2006.
---------------------------------------------------------------------------
    Even larger savings are possible--as much as 83 percent--by 
switching to drugs in the same class that treat the same condition as a 
beneficiary's current brand-name drug, for example drugs that treat 
common conditions like stomach acid problems, allergic rhinitis, high 
blood pressure, and high cholesterol levels. According to Consumers 
Union, considering these alternative drugs could save beneficiaries 
billions more in drug costs each year.\8\ Beneficiaries can get 
personalized information on these additional savings from 
www.medicare.gov, 1-800-MEDICARE, and many of Medicare's partners.
---------------------------------------------------------------------------
    \8\ ``Helping Medicare Beneficiaries Lower Their Out-of-Pocket 
Costs Under the New Prescription Drug Benefit,'' Consumer's Union, 
December 14, 2005.
---------------------------------------------------------------------------
    A number of external reports strongly support these findings. For 
example, the Pharmaceutical Care Management Association (PCMA) released 
a study in February 2006 indicating that Medicare drug plans offer 
significant price discounts compared to what beneficiaries would pay 
without coverage.\9\ The study found that prices under the Medicare 
prescription drug program were on average 35 percent less at 
participating retail pharmacies and 46 percent less through mail order 
pharmacies. Further, for 25 commonly used medications, the PCMA study 
found savings from 18 percent on brand name drugs at retail pharmacies 
to 26 percent at mail order pharmacies. In addition, a January 2006 
report prepared by the Lewin Group demonstrates that beneficiaries with 
chronic conditions, particularly those with multiple conditions, will 
see significant savings on their prescription drug bills by enrolling 
in a Medicare prescription drug plan.\10\ For example, while 
beneficiaries with one chronic condition will save on average $396 on 
their medications with Medicare drug coverage, accounting for 26 
percent of their current drug spending, those with four or more 
conditions will save an average of $1,774, or 41 percent, on their 
medications. These studies have made ``apples to apples'' comparisons 
of drug prices available at retail pharmacies instead of, for example, 
common, but misleading, comparisons between retail pharmacy and mail-
order prices. In addition, in their recent forecast of prescription 
drug spending trends, the independent Medicare actuaries have concluded 
that overall drug spending in the presence of the Medicare drug benefit 
will be slightly lower when compared to spending in the absence of a 
Medicare drug benefit, even though Medicare beneficiaries will be able 
to fill millions more prescriptions than would have been possible 
without the drug coverage.
---------------------------------------------------------------------------
    \9\ ``Medicare Drug Discounts Real & Holding Steady,'' 
Pharmaceutical Care Management Association, February 7, 2006.
    \10\ The Lewin Group, ``Savings From the Medicare Drug Benefit for 
Beneficiaries with Chronic Conditions,'' Prepared for National Health 
Council, January, 2006.
---------------------------------------------------------------------------
    Beneficiary premiums are expected to average $25 a month--down from 
the $37 projected in last July's budget estimates--and the overall cost 
to taxpayers for 2006 has dropped about 20 percent since the July 2005 
estimate, according to the CMS Office of the Actuary. The savings 
result from lower than expected costs per beneficiary; projected 
enrollment in the drug benefit has not changed significantly. For the 
10-year period from 2006-2015, the net total cost of the drug benefit 
to Medicare is now estimated to be about $130 billion less--$797 
billion compared to an estimated $926 billion last year.\11\ In 
addition, the state phase-down contributions are now projected to be 
$37 billion (about 27 percent) less over the 10-year period.
---------------------------------------------------------------------------
    \11\ CMS Office of the Actuary, February 9, 2006. Actual future 
costs of the benefit could be higher or lower than these updated 
estimates.
---------------------------------------------------------------------------
Market Forces Drive Plan Simplification
    In addition to reducing the cost of prescription drugs, market 
forces are working to simplify the plan offerings, resulting in more 
attractive alternatives for beneficiaries. For instance, the standard 
plan design calls for a $250 annual deductible. However, to increase 
their number of enrollees, 85 percent of sponsors chose to not include 
a deductible in their plan design and, in fact, most beneficiaries are 
selecting plans without a deductible. CMS is continuing to work on ways 
to display comparable plan information to make it as easy as possible 
for beneficiaries to review different plan options and make apples-to-
apples comparisons between them. We are encouraged by a recent 
Washington-Post-ABC News poll, indicating that three-quarters of 
enrollees said the paperwork to sign up for the benefit was easy to 
complete, and that nearly two-thirds are saving money under the new 
program.\12\
---------------------------------------------------------------------------
    \12\ Washington Post, April 12, 2006.
---------------------------------------------------------------------------
    Medicare and its partners are already making available personalized 
information on important plan features, and we are working with many 
outside organizations to enhance the resources available to 
beneficiaries to help them identify the specific plan or plans that are 
a good fit based on their own preferences. As individuals have 
different needs and preferences when it comes to their health-care 
coverage, presenting plan features in a way that facilitates comparison 
on the basis of plan attributes and performance indicators will make it 
easier for beneficiaries to choose the plan with the features that are 
most important to them.
    In our research, we found that the vast majority of the new 
enrollees in stand-alone drug plans have chosen plans offering a plan 
design other than the ``standard'' drug benefit. Many beneficiaries 
chose coverage with a low or no deductible, fixed copayments for most 
prescriptions instead of coinsurance, and/or coverage in the coverage 
gap--coverage options made possible by the strong competition in the 
Medicare drug benefit. In fact, as Figure 3 shows, CMS found that 
nearly 69 percent of PDP and almost 90 percent of MA-PD enrollees chose 
a plan with no Part D deductible. A very small percentage (2 percent) 
of PDP enrollees selected plans with a deductible between $1 and $249, 
and 29 percent of the enrollment was in plans with a $250 deductible.

[GRAPHIC] [TIFF OMITTED] T3132A.003

Figure 3: Percent of Enrollment by Deductible Amount

    The range of premiums offered by PDPs varies between $1.87 and 
$104.89, and the Part D portion of the MA-PD total premium ranged from 
$0 to $147.12. The majority of PDP enrollees are in plans with drug 
premiums below the national average. In fact, as shown in Figure 4, 
while 38 percent of PDP plans offered premiums below $32.20, 73 percent 
of the beneficiaries enrolled in one of these plans. It appears that 
beneficiaries place a high priority on premium when selecting a plan.

[GRAPHIC] [TIFF OMITTED] T3132A.004

    Note 1: $32.20 is the 2006 National Average Premium.
    Note 2: This is after excluding the full-benefit dual eligible 
beneficiaries.
Figure 4: Percent of Plans and Enrollees by Premium

CMS Automatically Enrolled Full Benefit Dual Eligible Individuals into 
        Plans
    To prevent a lapse in prescription drug coverage for full benefit 
dual eligible individuals, CMS worked diligently to make sure they were 
enrolled in a Medicare prescription drug plan before January 1, 2006. 
In November 2005, any individual who was a full benefit dual eligible 
for even one month, beginning in March 2005, was automatically enrolled 
in a prescription drug plan. While other individuals generally have the 
opportunity to change plans only at the end of the calendar year, dual 
eligible individuals have the opportunity to change plans once a month. 
This flexibility allows them further opportunities to select a plan 
that best meets their needs.
    CMS has also worked with the States to identify and auto-enroll 
individuals who are about to become full-benefit dual eligible prior to 
the end of their Medicaid drug coverage to work toward a seamless 
transition. This includes those Medicaid individuals who will age into 
Medicare or who will reach the end of the 24-month Medicare disability 
waiting period. In anticipation of the shift of drug coverage from 
Medicaid to Medicare for full benefit dual eligible individuals, CMS 
developed a process for a back-up plan at the pharmacy point-of-sale to 
ensure that these individuals experience no gap in coverage.

CMS Facilitates Enrollment for Individuals who Qualify for the LIS
    To make sure beneficiaries who qualify for the low-income subsidy 
do not miss out on the coverage, we also facilitated enrollment in a 
drug plan for beneficiaries who are LIS-enrolled but did not choose a 
plan on their own. The group includes not only people who have applied 
for and been approved for extra help but also people who are enrolled 
in other federal assistance programs such as Supplemental Security 
Income and Medicare Savings Programs. This way, we ensured that they do 
not miss out on comprehensive, low-cost drug coverage.
    In the first phase of this effort, CMS began mailing letters to 
approximately 1 million people who are LIS-enrolled but have not chosen 
a plan. The letters let them know which Medicare prescription drug plan 
they would be enrolled in if they took no action before April 30th and 
that their prescription drug coverage would begin on May 1st.
    The letter explains that beneficiaries can choose a different 
approved plan in their area. It listed all the prescription drug plans 
available in their region with premiums at or below the low-income 
premium subsidy amount. It also makes clear that they can decline 
enrollment if they choose and recommends calling 1-800-MEDICARE to find 
out more about these plans.
    Medicare beneficiaries who qualify after May 15th for the LIS will 
have a one-time opportunity, using a special enrollment period, to 
enroll in the drug benefit if they have not already done so. The extra 
help allows for comprehensive and valuable drug coverage--in most cases 
it means beneficiaries must pay just a few dollars for every 
prescription--and we want to make sure that people who need help the 
most can use this coverage as soon as they become eligible. The change 
in status resulting from an LIS determination after May 15th is an 
``exceptional circumstance'' that warrants a special enrollment period. 
This special enrollment period enables these beneficiaries to enroll in 
a Medicare prescription drug plan right after they become eligible for 
the LIS. Medicare will also continue to facilitate enrollment into a 
drug plan for people who qualify for the LIS if they do not choose a 
plan on their own. Medicare similarly offers one-time special 
enrollment periods for other important changes in status.

CMS Worked to Achieve a Smooth Transition in Long Term Care Facilities
    CMS is committed to ensuring that the estimated 1.6 million people 
with Medicare in the 15,800 long term care (LTC) facilities nation-wide 
continue to receive the medications and pharmacy services they need 
under the new Medicare prescription drug coverage without interruption. 
Many ``private pay'' patients in LTC facilities are getting many 
thousands of dollars worth of help with their drug costs for the first 
time ever. A majority of individuals in LTC facilities are Medicare 
beneficiaries, and many of them also are eligible for Medicaid. 
Individuals in LTC facilities represent a unique and vulnerable 
population because many have cognitive and/or functional impairments. 
This population typically has multiple co-morbidities, the highest 
utilization of drugs, with an average of nine medications per day, and 
the highest spending for prescription drugs compared to other people 
with Medicare.
    CMS established dedicated fax lines and mail-in services to allow 
nursing homes to obtain beneficiary enrollment information from CMS. 
This strategy enabled CMS to help nursing homes identify the plans into 
which CMS auto-enrolled more than 500,000 residents. Pharmacists used 
the electronic eligibility and enrollment verification (E1) system to 
identify the remainder of beneficiaries. By notifying plans that their 
dual eligible enrollees reside in nursing homes, and by assisting LTC 
facilities in working to correct cases where copay information is not 
up to date, CMS is ensuring nursing home residents who are full-benefit 
dual eligible beneficiaries have access to Medicare drug coverage 
without premiums and copays.

CMS Has Taken Specific Steps to Address Areas Where State Changes are 
        Needed
    Under the MMA, coverage for outpatient drugs for full benefit dual 
eligible beneficiaries shifted from the Medicaid program to Medicare 
Part D. As a result, state Medicaid programs no longer must pay for 
high-cost home infusion drugs. Medicare Part D requires coverage of 
home infusion drugs that are not currently covered under Parts A or B 
of Medicare. While the Part D benefit does not cover equipment, 
supplies, and professional services associated with home infusion 
therapy, it does cover the ingredient costs and dispensing fees 
associated with infused covered Part D drugs. Medicaid federal 
financial participation (FFP) is available for medical supplies and 
services associated with administering the infused drugs. To the extent 
that Medicaid covers these supplies and services for its non-dual 
eligible Medicaid population, the State must also cover these for full 
benefit dual eligibles.
    We are committed to making the distinctions between Part D versus 
Part B coverage as clear as possible. CMS is currently working with 
providers, states, and the home infusion industry to clarify payment 
obligations under Medicare for home infusion therapy. In addition to 
comprehensive guidance issued in 2005, we recently distributed a quick 
reference chart to plans and pharmacists and posted a MedLearn article 
on the subject. In March, CMS sent to plans and the State Medicaid 
Directors letters clarifying the roles of the Medicare Part D drug 
program and State Medicaid programs in providing home infusion drugs 
and services. The letter clarified CMS access requirements for home 
infusion drugs, provided information about how home infusion drugs must 
be provided in usable forms, addressed the need for plans to receive 
assurances that ancillary services will be provided, and provided a 
reminder of the time sensitive nature of home infusion therapy.
    Further, we recently sent information to the plans which will 
expedite their processes for making sure they are not inappropriately 
paying for drugs that should be covered under Part B, and we have 
worked with Epocrates, an electronic prescribing software company, to 
ensure that their product provides accurate and easy access to plan 
formularies. We've also held weekly prescribers' conference calls and 
bi-weekly meetings with the AMA and numerous specialty societies to 
find out what prescribers are experiencing, to supply them with 
information on our activities and answer their specific questions. 
Finally, on February 13, 2006, we sent letters to medical specialty 
groups recommending that providers include certain additional 
information on prescriptions that may help plans and pharmacists 
differentiate between Part B and D drugs.

CMS Works With States
    Since both CMS and the States are responsible for administering 
benefits for dual eligible individuals, CMS is committed to working 
with States on an ongoing and collaborative basis. CMS and the States 
commenced work in August 2004 through a State Issues Workgroup, which 
included representatives from State Medicaid Agencies, the Social 
Security Administration, and CMS to assure that States report and CMS 
knows of every dual eligible beneficiary in the country undergoing the 
transition from Medicaid to Medicare drug coverage.
    CMS also engaged the States in a series of summits, conference 
calls, and workshops to discuss and address implementation issues 
associated with the MMA. These gatherings include monthly all-State 
conference calls; State Pharmacy Assistance Program Workgroup 
conference calls; and conferences hosted by organizations representing 
the States. In addition, CMS provided States with beneficiary 
enrollment information, comparative information about the plans, and 
targeted educational and outreach materials. Finally, CMS has worked 
diligently with States to appropriately identify their full benefit 
dual eligible individuals.

Reimbursing States for Assisting in the Transition Process
    Despite extensive planning and preparation, some dual eligible 
beneficiaries, particularly those who changed plans late in a month, 
have had difficulty obtaining their prescriptions at the pharmacy. Due 
to these difficulties, 32 States took action to ensure people received 
the medicines they needed by activating their state payment systems. We 
appreciate the States that supported pharmacists who have faced 
difficulties in serving certain dual eligible beneficiaries. States 
paid for prescriptions that should have been paid by the new Medicare 
prescription drug plans, and CMS believes they should be reimbursed for 
these expenses.
    To that end, we have established a demonstration project to 
reimburse the 50 States and the District of Columbia for costs they 
incurred by covering drugs that should be covered by the appropriate 
plan. Under the demonstration, Medicare will reimburse States by 
reconciling drug payments with prescription drug plans, and by paying 
any differential between the drug plan reimbursement and Medicaid 
costs, as well as certain state administrative costs. Forty-five States 
and the District of Columbia have been accepted into the demonstration 
program. Of the States accepted into the demonstration program, 12 did 
not activate their state payment systems and are seeking reimbursement 
only for administrative costs. In February we notified states that they 
could apply for reimbursement for the help they provided to 
beneficiaries during the transition until March 8, with some states 
receiving extensions until March 31 for costs associated with Part D 
claims. By the time that deadline occurred, the vast majority of early 
difficulties had been resolved and states no longer needed to provide 
emergency back-up.
    We are ready to honor our commitment to states. CMS has extended 
the deadline for states to incur administrative costs related to 
transition full benefit dual eligible individuals to May 5, 2006. We 
are currently working through a contractor to process claims, reconcile 
with plan sponsors, and begin reimbursing states.

CMS is Correcting Data Transmission Issues
    Transmitting accurate and timely beneficiary and plan data was 
paramount in ensuring the prescription drug benefit could be 
implemented on January 1, 2006. However, despite everyone's best 
efforts, information sharing between CMS, the States, and the Medicare 
prescription drug plans has not always been perfect. Although smooth 
and timely data transfers among Medicare; our drug plans, Medicare 
Advantage plans, and retiree plans; and 56 States and territories have 
occurred for most beneficiaries, we have been working intensively to 
improve these data handoffs.
    As an additional safeguard in mid-January, CMS contracted with 
Electronic Data Systems (EDS) to help CMS work together with the plans, 
States, and pharmacies to resolve challenging data translation issues. 
CMS has worked diligently to ensure our data systems interact properly 
with other systems so that data information exchanges are accomplished 
smoothly and completely to correct problems.
    Many plans are sending CMS daily files reflecting their enrollment 
transactions, and reliably use our responses to these daily files as 
well as our weekly summaries of the results for timely and accurate 
updates of their systems. Our goal is that plans covering 90 percent of 
the enrollee population will use these daily and weekly data transfer 
processes successfully to reduce lags in obtaining updated beneficiary 
information.
    To check and further assure the accuracy of the information 
exchange between plans and CMS, we have sent special updated data files 
to plans, including full copayment information, on the full dual and 
low-income subsidy enrollment in plans. Our goal is to achieve, by ten 
days before a new coverage month begins, at least a 95 percent match 
for enrollment and LIS copayment information on applicable 
beneficiaries between Medicare and the plans. We obtained a match rate 
of greater than 99 percent for duals submitted by the States in the 
fall of 2005, and we expect to maintain a high match rate.

CMS is Monitoring Plan Compliance
    It is important to note that the plans providing drug coverage to 
people with Medicare are under contract with CMS. We have the 
operational responsibility to ensure that the plans are providing the 
best services available to our beneficiaries. Toward that end, we are 
enforcing compliance with plan contracts, including call center 
responsiveness, formulary requirements, appeals processes, and pharmacy 
contracting.
    Key dimensions of customer service include timely access for 
beneficiaries and their representatives, pharmacists, and other health 
professionals. HHS is conducting routine surveys to determine plan 
compliance with Part D standards concerning call abandonment rates and 
percentage of calls answered within 30 seconds. Plans will receive this 
analysis to inform their performance and compliance analysis, and 
information on the performance of plan service lines will be publicly 
available in the weeks ahead. Complaint rates related to customer 
service are also an important consideration for future participation by 
a plan.
    We are addressing issues on a case-by-case basis. While we are 
responding to complaints, we are also monitoring trends. This tracking 
information can lead to corrective action or sanctions if needed, and 
will be considered in our contracting decisions for future years. While 
most plans are complying with the requirements set forth in their 
contracts, we will use the full array of administrative tools and other 
enforcement remedies to ensure plans adhere to the terms of their 
contracts. When we hear of specific complaints we work with plans to 
ensure timely resolution.

Extensive Plan Formulary Requirements Provide Access to Needed 
        Prescription Drugs
    CMS developed a set of checks and oversight activities to ensure 
that prescription drug plans offer a comprehensive benefit that 
reflects best practices in the pharmacy industry, as well as current 
treatment standards. Plan formularies must recognize the special needs 
of particular types of people with Medicare, such as individuals with 
mental health issues, individuals with HIV/AIDS, individuals living in 
nursing homes, people with disabilities, and others who are stabilized 
on certain drug regimens. CMS reviewed plan formularies and benefit 
structures to verify that they are in compliance with the following 
critical requirements: a plan's formulary must cover multiple drugs in 
each class with a minimum statutory requirement of at least two drugs 
in each approved category and class (unless only one drug is available 
for a particular category or class); and CMS requires that each plan's 
formulary include all or substantially all drugs in each of the 
following key categories: antidepressants, antipsychotics, 
anticonvulsants, anticancer drugs, immunosuppressants, and 
antiretrovirals for treating HIV/AIDS.
    In addition, each Medicare prescription drug plan's formulary was 
developed and reviewed by the plan's pharmacy and therapeutics 
committee. Each formulary must be consistent with widely used industry 
best practices. Furthermore, CMS compared the prescription drug plans' 
use of benefit management tools to the way these tools are used in 
existing drug plans to ensure they are being applied in a clinically 
appropriate fashion.
    Plans must accommodate the needs of long-term care residents within 
their formulary structure by providing coverage for all medically 
necessary Part D medications at all levels of care. Coverage of all 
medically necessary medications may include, but is not limited to, 
alternative dosage forms such as liquids that can be administered 
through feeding tubes, intravenous medications, or intramuscular 
injections.
    CMS will review any request for deletion of a drug from a plan's 
formulary to ensure continued access to a broad range of drugs. Plans 
cannot remove a drug from their formulary without, among a number of 
other steps, first obtaining CMS approval and providing a 60-day 
advance notice to their affected enrollees. As we deem it appropriate, 
we are working to strengthen formulary protections. On April 26, we 
changed our policy to better protect Medicare beneficiaries from the 
sudden loss of coverage for drugs they currently take. Now, plans that 
change their formularies during the year will exempt beneficiaries who 
are already receiving the drugs when the change is made. This should 
provide many beneficiaries with greater peace of mind that their 
prescription drugs will remain covered throughout the plan year. The 
enrollment period continues for almost two more weeks and we are 
encouraging and helping people with Medicare to review their options 
and select a plan that works best for them.
    In addition, CMS developed specific procedures for timely 
exceptions and appeals to ensure that enrollees receive prompt 
decisions regarding whether medications are medically necessary and 
therefore covered by their prescription drug plan. For example, if the 
enrollee is requesting coverage of a non-formulary drug, the drug may 
be covered if the prescribing physician determines that all of the 
drugs on the formulary would not be as effective as the non-formulary 
drug or would have adverse effects for the enrollee, or both. The plan 
would review the physician's determination and must make its decision 
as expeditiously as the enrollee's health condition requires after it 
receives the request, but no later than 24 hours for an expedited 
coverage determination or 72 hours for a standard coverage 
determination. We are collecting information on the use of a plan's 
appeals and grievance processes to ensure that each plan is complying 
with the requirements.

CMS is Ensuring Pharmacists Receive Prompt and Accurate Payments from 
        Plans
    We have heard from pharmacies about the early problems they faced 
in receiving payments from the prescription drug plans for the services 
they provided. While new billing and payment cycles caused cash flow 
issues at some pharmacies in January, pharmacies now are receiving 
payments in regular cycles in accordance with their plan contracts. CMS 
is taking compliance with required contractual payments very seriously. 
When we hear specific complaints about a plan failing to abide by its 
contract with a pharmacy, we investigate and hold the plan responsible 
for complying with its contract. Our investigations to date have found 
that pharmacists are generally being paid according to their contracts, 
though some are having other difficulties, such as not connecting the 
name of the payer with the prescription drug plan or facing challenges 
in matching claim dates with payment dates, making it difficult to 
reconcile their financial books. CMS will continue to investigate and 
track any complaints from pharmacists regarding payments, and will take 
action if we determine that plans are not following their contractual 
agreements.

CMS Commitment to Continuous Quality Improvement demonstrated in Annual 
        Adjustments for 2007
    On April 3, 2006 CMS issued the 2007 Call Letter, which provides 
guidance to existing PDP sponsors as well as those that are newly 
applying to enter the program. I would like to take this opportunity to 
highlight some of the more significant policies for bidders in 2007.

CMS Anticipates Bids Will More Clearly Reflect Variations that 
        Beneficiaries Prefer
    In order to ensure that plan choices offered in 2007 clearly meet 
beneficiary needs and enable beneficiaries to compare different kinds 
of plans and confidently choose the coverage that is best for them, CMS 
intends to negotiate with PDP Sponsors to ensure that each benefit 
package they submit will provide beneficiaries with a substantially 
different option. In 2006, we allowed sponsors to offer a wide array of 
plan designs in addition to the standard benefit designed by the 
Congress. However, as discussed earlier, an overwhelming majority of 
beneficiaries are choosing plans that offer benefits other than the 
standard option as defined in the law. In 2006, almost 90 percent of 
beneficiaries were not enrolled in the standard benefit design, but 
rather have enrolled in plans with low or no deductibles, flat payments 
for covered drugs, and in some cases, coverage in the coverage gap.
    Plans will continue to have flexibility to offer people with 
Medicare benefit designs with these popular features in 2007. However, 
in general we expect that more than two bids from a sponsoring 
organization would not provide meaningful variation, unless one of the 
bids is an enhanced alternative plan. Further, CMS anticipates that 
plan sponsors will design new plan options for 2007 in accordance with 
the enrollment trends in 2006.

CMS Evaluation Criteria
    CMS will issue PDP Sponsor contractor renewal notices to those 
Sponsors we have determined, based on information available to us, 
continue to be qualified to hold a contract during 2007. CMS reviews 
each PDP sponsor's compliance with all requirements of the program to 
determine whether contract renewal is warranted. While many plans are 
performing well or achieving significant improvements in key areas of 
beneficiary service and support, CMS considers non-renewal if there has 
been a substantial failure to comply with program requirements. We pay 
special attention to key operational areas which impact customer 
satisfaction and successful delivery of the benefit, including 
effective data systems, customer and provider service, exceptions and 
appeals processes and pharmacy support, which are outlined in more 
detail below.

Effective Data Systems
    Determining a beneficiary's correct enrollment status, including 
copayment status, lies at the heart of ensuring his or her access to 
the Part D benefit. Because enrollment data are updated much more 
frequently than previously done in the Medicare+Choice program, and 
timely and accurate data processing by plans is essential, CMS expects 
sponsors to develop and maintain information systems that accurately 
process updated enrollment information at least weekly, following 
recommended processing procedures to avoid significant delays or 
inaccuracies in processing enrollments.

Effective Customer Service
    CMS expects PDP Sponsors to provide a high and consistent level of 
access and service for beneficiaries and their representatives, 
pharmacists, and other health care providers. CMS has updated for 2007 
performance standards for certain customer service and provider contact 
telephone line operations. CMS is conducting routine surveys to 
determine Sponsor compliance with Part D standards. For the Current and 
Prospective Enrollee Call Center, CMS provided specific minimum 
requirements for hours of operation and the content of information 
available from the call centers to address beneficiary inquires. As an 
example, the call center must answer 80 percent of incoming calls 
within 30 seconds, and the abandonment rate of all incoming calls is 
not to exceed 5 percent.
    For the Pharmacy Technical Help Call Center, Sponsors must operate 
a toll-free pharmacy technical help call center to respond to inquiries 
from pharmacies and providers regarding the applicant's Medicare 
prescription drug benefit. The call center must operate during the 
entire period during which the sponsor's network pharmacies in their 
plans' service areas are open, and must meet the same answering and 
abandonment rates as the beneficiary call centers.
    For the Exceptions and Appeals Call Center, Sponsors must operate a 
toll-free call center to respond to physicians and other providers for 
information related to exceptions and prior authorizations, as well as 
beneficiary appeals. The call center must operate during normal 
business hours and provide a secure voicemail.

Following Transition Guidance
    While the new prescription drug plans are required to cover 
medically necessary prescriptions, CMS required plans to establish an 
appropriate transition plan for all new enrollees to address situations 
where a new enrollee's prescribed medications are not on the plan's 
formulary. The transition policy allows beneficiaries to get a 
temporary supply of their current drugs while they determine whether a 
similar on-formulary medicine will work for them. Additionally, CMS 
recommends that transition plans address unanticipated enrollee 
transitions when individuals need to change treatment settings due to a 
change in their level of care. In addition to reviewing Sponsor reports 
on its transition compliance, CMS is monitoring complaint rates related 
to transition coverage of drugs.

Avoiding Excessive Burdens in the Exceptions and Appeals Process
    CMS expects PDP Sponsors to provide prior authorization and 
exceptions forms and access to information to make transition 
procedures straightforward for providers and patients. PDP Sponsors are 
expected to limit administrative burdens for physicians and other 
providers by implementing recommended best practices for consistent 
forms, including steps to obtain formulary exceptions and processes for 
providing needed clinical information for processing prior 
authorization requests for specialized drugs.
    Sponsors must also have a ``one stop'' area on their web site that 
provides needed information on the procedures, the forms, and the 
contact information for their prior authorization and exceptions 
processes.

Maintain and Strengthen Relationships with Pharmacists through 
        Contractual Support and Avoiding Administrative Burdens
    PDP Sponsors must comply with the contractual agreements they have 
made with their participating pharmacies, and CMS is monitoring 
pharmacists' complaints about plan compliance with these agreements and 
other pharmacy requirements of the Medicare program. Sponsors are also 
expected to follow recommended best practices for consistent coding and 
secondary message responses when formulary, prior authorization, Part B 
coverage, or other rejection edits are activated.

CMS Changes Co-Branding Policy in 2007
    In addition to the abovementioned policy for 2007, based on 
feedback from beneficiaries and the health care industry, co-branding 
names and/or logos of contracted providers may be confusing to 
enrollees and unintentionally convey a message that they can only use 
the co-branded provider, rather than all participating providers listed 
in the plan's provider or pharmacy directory. Thus, effective with the 
beginning of CY 2007 marketing (October 1, 2006), PDP sponsors will not 
be permitted to place co-branding names and/or logos on their member 
identifications cards.

Anticipating Next Steps
    In addition to the actions CMS took to address issues that arose at 
the start of the new Medicare prescription drug benefit, we are looking 
ahead to ensure we address any issues facing people with Medicare, 
caregivers, providers, the plans, and pharmacists in the future. We are 
anticipating increased enrollment ahead of the end of the open 
enrollment period in May, and we are continuing to optimize systems to 
limit problems with coverage at the pharmacy counter on June 1st. In 
recent weeks, we have been doing all we can with the support of our 
partners to help people find out about and take advantage of the new 
coverage if they haven't made a choice yet. We are drilling down to the 
census block and neighborhood levels with our partners--including many 
of you--where we will be continuing our full scale effort on education 
and enrollment events.
    In addition, we will continue to improve data translation among 
Medicare, the health plans, and States to continue reductions in the 
number of rejected or delayed transactions. CMS also is monitoring 
plans' customer service and hotline wait times, while also providing 
responsive service through 1-800-MEDICARE. CMS continues to work with 
the States participating in the reimbursement program to ensure 
effective use of Medicare coverage by connecting beneficiaries to their 
new Medicare prescription drug plans and helping pharmacists use 
Medicare backup systems if necessary. As implementation continues, and 
more and more beneficiaries select and enroll in a new prescription 
drug plan, CMS will continue to improve the program and solve problems, 
guided by the lessons we have learned to date.
Conclusion
    Thank you for the opportunity to discuss our progress during the 
first four months of the Medicare prescription drug benefit. While we 
are pleased that millions of Medicare prescriptions are being filled 
every day, we are going to continue working to ensure every person with 
Medicare can use their coverage smoothly. I am happy to answer any 
questions you may have.

                                 

    Chairman JOHNSON OF CONNECTICUT. Ms. Disman, before we 
proceed we must recess for three votes. So, it will take about 
20 minutes. Then we will pick up with your testimony and then 
questioning to this first panel.
    Thank you very much.
    [Recess.]
    Chairman JOHNSON of CONNECTICUT The hearing will resume. 
Ms. Disman, if you will proceed.

 STATEMENT OF BEATRICE DISMAN, CHAIRMAN, MEDICARE PLANNING AND 
   IMPLEMENTATION TASK FORCE, SOCIAL SECURITY ADMINISTRATION

    Ms. DISMAN. Thank you, Madam Chairman and Members of the 
Subcommittee. On behalf of Commissioner Barnhart, I want to 
thank you for inviting me to discuss Social Security's efforts 
to implement the new Medicare Part D low-income subsidy of the 
Medicare Modernization Act, or MMA.
    I am Beatrice Disman, Regional Commissioner of the New York 
Region of the SSA. I have been in my current position since 
1995, and I have actually been with Social Security since 1965, 
and I was there for the implementation of the Medicare program 
in our midtown Social Security office.
    In December 2003 Commissioner Barnhart asked me to chair 
Social Security's Medicare Planning and Implementation Task 
Force, making me responsible for Social Security's role in 
implementing MMA.
    As you know, Madam Chairman, Social Security was given the 
responsibility from Congress to take ``extra help'' 
applications and to make eligibility determinations for 
individuals who were not automatically eligible. I have 
explained the eligibility requirements in detail in my written 
statement.
    Social Security was given its MMA responsibilities because 
of its network of nearly 1,300 offices and 40,000 employees 
across the country. We are in every community, and that was a 
real benefit for the program as well as for our role in 
administering some parts of the Medicare program already.
    Upon passage of MMA, we immediately recognized the 
development of the simplified application for extra help was 
essential for successful implementation of the program. As I 
have described in my written statement, we, in partnership with 
the Centers for Medicare and Medicaid Services, conducted 
substantial testing of the extra-help application. The paper 
application changed significantly over time, going through many 
drafts before being finalized.
    Our system staff contributed to the design of the 
application, to make sure the information on the form could be 
electronically scanned into our computers, thereby minimizing 
the number of employees needed to process incoming forms.
    We worked to develop alternatives to the traditional paper-
based application. In July of last year we unveiled the 
Internet version of the application, allowing people to file 
online for help with costs associated with the Medicare drug 
plan. The online application has been a tremendous success with 
more than 1,300 individuals daily filing for the extra help.
    Telephone inquiries were also part of our efforts to make 
the extra-help application process as simple as possible. We 
provided extensive training to our teleservice representatives 
so that they could answer subsidy-related questions. We 
developed an automated application-taking system, allowing our 
teleservice representatives to refer callers directly to 
specialized claims-taking employees who could take the 
application by phone.
    We developed a computer matching process with the Internal 
Revenue Service to validate resource and income-related 
information provided by applicants. Using this computer match 
allowed Social Security to build an application process that 
would not require applicants to submit proof of resources and 
income as long as the applicant's statement was in substantial 
agreement with the computer records.
    This permitted greater use of the scannable and the 
Internet application, and actually reduced the need of Medicare 
beneficiaries to travel long distances to visit our Social 
Security offices.
    I would now like to turn to the efforts Social Security has 
undertaken to inform beneficiaries about the extra help 
available for prescription drugs. For example, more than 72,000 
Medicare outreach events have been held and in many of these, 
we were certainly there with CMS and CMS was certainly at these 
events with us.
    As we also had targeted application-taking events held in 
our Social Security field offices, I can tell you from my New 
York experience that we opened our offices on Saturday and 
stayed late in the evening to assist people to file for the 
extra help. We continued to work with all the States and other 
organizations to identify people with limited income and 
resources, who may be eligible for the extra help, and to take 
applications from them. We are on site in senior citizen 
centers, hospitals, community centers, housing authorities, 
adults' homes, churches, just to mention a few locations.
    Our outreach efforts are continuing because there is no 
deadline for individuals to file for the extra help for lower-
income beneficiaries. Although the new prescription drug plan 
did not begin until January of 2006, Social Security began 
mailing applications to individuals who might be potentially 
eligible in May 2005. The initial effort also allowed us to 
begin making eligibility determinations for the extra help as 
early as July 2005.
    As much as the initial mailing of applications was 
important, follow-up telephone calls or letters to individuals 
who didn't return the application was just as important.
    Again, there is more detailed information in my statement. 
The results of these many months of efforts speak for 
themselves. At the end of April, Social Security has received 
applications from more than 4.9 million beneficiaries, 
including almost 850,000 applications that were duplicate 
applications.
    Of the remaining approximately 4 million, we have made 
determinations on 3.9 million individuals. We have now found 
that 1.7 million individuals are eligible for the extra help.
    In conclusion, I want to express Commissioner Barnhart's 
thanks and my personal thanks to the Committee for your 
continuing support for the agency. Your support for the 
President's 2007 budget will allow Social Security to continue 
to provide the kind of service your constituents have come to 
expect from us, not only in administering the low-income 
subsidy and premium withholding for the Medicare prescription 
drug program, but also for our traditional services. We look 
forward to working with you as we continue our efforts to reach 
the low-income population.
    Thank you. I will be glad to answer any questions you may 
have.
    Chairman JOHNSON of CONNECTICUT. Thank you very much.
    [The prepared statement of Ms. Disman follows:]

Prepared Statement of Beatrice Disman, Chairman, Medicare Planning and 
       Implementation Task Force, Social Security Administration

Madam Chairman and Members of the Subcommittee:
    On behalf of Commissioner Barnhart I want to thank you for inviting 
me to discuss Social Security's efforts to implement the new Medicare 
prescription drug coverage low-income subsidy program.
    SSA has already done a great deal to assist low-income Medicare 
beneficiaries in receiving extra help with their prescription drugs 
through the new Medicare prescription drug coverage, and we will 
continue this mission with a firm commitment to the public we serve. As 
Commissioner Barnhart has said, ``Together, we can make sure no one has 
to make the difficult choice of spending their limited income on 
prescription drugs or other basic needs.''

Background
    To begin, it may be helpful to describe Social Security's role and 
responsibilities regarding the new Medicare prescription drug coverage. 
This will provide the context to further describe SSA's activities in 
getting low-income people the extra help intended by Congress.
    As you know, the Medicare Modernization Act, or MMA, enacted in 
December 2003, established the new Medicare prescription drug benefit. 
The new Medicare prescription drug coverage was designed to allow all 
people with Medicare an opportunity to voluntarily enroll in 
prescription drug coverage. MMA also provided an extra level of 
assistance for people with Medicare who have limited incomes and 
resources in helping to pay for the monthly premiums and cost-sharing 
that is required by the new Medicare prescription drug coverage. This 
assistance is the low-income subsidy, or ``extra help,'' as it is 
frequently called.
    The responsibility for enrolling individuals for the prescription 
drug coverage is a joint effort between the Department of Health and 
Human Services (HHS) and private insurance companies, which establish 
Prescription Drug Plans (PDPs) for that purpose. Individuals who were 
already eligible for Medicare and full Medicaid benefits were 
automatically enrolled by the Department of Health and Human Services 
in the subsidy, and did not need to apply. They were also auto-enrolled 
in a plan in November 2005.
    SSA was given the responsibility by Congress to take extra help 
applications and to make eligibility determinations for individuals who 
were not automatically eligible. In order to be eligible for the 
subsidy, individuals must have incomes below 150 percent of the poverty 
level applicable to their corresponding household size, and resources 
of less than $11,500 for single individuals or $23,000 for married 
couples.
    Individuals with incomes between 135 percent and 150 percent of 
poverty are eligible for a subsidy amount based on a sliding scale. 
Individuals with incomes below 135 percent would be eligible to receive 
the most subsidies.
    Additionally, SSA was charged by Congress with the collection of 
premiums for the prescription drug program itself, in cases where 
beneficiaries tell the Prescription Drug Plans when they enroll that 
they want their premiums withheld from monthly Social Security 
benefits. This withholding of premiums is similar to the function SSA 
already performs for beneficiaries in the withholding of other Medicare 
premiums. SSA was given these responsibilities because of its network 
of nearly 1,300 offices with 35,000 employees across the country, and 
because of its already existing role in administering some parts of the 
Medicare program. Over the past 70 years, SSA has gained a reputation 
for helping citizens in the communities where they live, and Congress 
realized that SSA's presence ``on the ground'' would be vital in the 
launch of the Medicare extra help program. Also, the low-income subsidy 
was designed with many similarities to the Supplemental Security Income 
(SSI) program, a means-tested assistance program for low-income aged, 
blind and disabled individuals, which SSA has administered for more 
than 30 years.
    Obviously, these new responsibilities have impacted SSA's 
workloads. We saw significant increases in our office visits and 
telephone calls, especially in December and January. Some of this 
increase was due to uncertainties by Medicare beneficiaries on whether 
to contact CMS, the Prescription Drug Plans, or SSA to enroll in Part 
D. However, the increases were also caused by changes that SSA 
implemented to its enumeration process in mid-December. The 
strengthened evidence requirements for obtaining a Social Security card 
have caused a sustained increase in our field office traffic.

Development of Extra Help Application
    Upon passage of MMA, Social Security immediately began planning for 
the implementation of the limited-income subsidy. We recognized from 
the onset that development of a simplified application for the extra 
help was essential for successful implementation. Thus, our goals were 
to develop an application that elderly and disabled Medicare 
beneficiaries, their caregivers, or other third party assistance 
providers would be able to understand and easily complete. SSA also 
wanted to maximize the use of automation, not only to process these 
forms efficiently, but also to process them in a timely manner.
    To accomplish these goals, SSA conducted substantial testing of the 
extra help application form. The paper application changed 
significantly over time, going through many drafts before being 
finalized. Social Security, in collaboration with CMS, conducted focus 
groups with current Medicare beneficiaries to test potential 
applicants' understanding of the application, and conducted special 
cognitive testing of the subsidy application and had design engineers 
review the layout of the applications. We also discussed various draft 
versions of the application with national and local advocacy groups and 
with State Medicaid Directors.
    Our Office of Systems staff contributed to the design of the 
application as well to make sure that the information on the form could 
be electronically scanned into our computers, thereby minimizing the 
number of employees needed to process incoming forms.
    Realizing the need to reach our beneficiaries in new ways, SSA 
worked to develop alternatives to the traditional paper-based 
application. In July of last year, we unveiled the Internet version of 
the application located at www.socialsecurity.gov, allowing people to 
apply online for help with Medicare Prescription Drug Plan costs. The 
online application has been a tremendous success, receiving one of the 
highest scores ever given to a public or private sector organization by 
the American Customer Satisfaction Index (ACSI). As of April 2006, we 
are still receiving more than 1,300 Internet applications daily.
    Telephone inquiries were also part of our efforts to make the extra 
help application process as simple as possible. We provided extensive 
training to assist our teleservice representatives in answering 
subsidy-related questions. We also developed an automated application-
taking system, allowing the teleservice representatives to refer 
callers directly to specialized claims-taking employees who could then 
take applications by phone. This new system allows individuals calling 
our 1-800 number to immediately file for the extra help.
    Under authority created by the Medicare Modernization Act, we also 
developed a computer matching process with the Internal Revenue Service 
(IRS) regarding the validation of certain income information provided 
by applicants. Using this computer match allowed SSA to build an 
application process that would not require applicants to submit proof 
of resources and income, as long as the applicant's statement on the 
application was in substantial agreement with the computer records.
    In summary, although means-testing is by its very nature complex, 
we believe that we have created a simple application process, which 
allows individuals to apply for the extra help as quickly and easily as 
possible, while also taking advantage of current technology.

Outreach Efforts
    I would now like to turn to the efforts SSA has undertaken to 
inform beneficiaries about the extra help available for prescription 
drugs. Efforts to educate the public about the new, extra help program 
began almost immediately after passage of MMA, and this outreach 
continues today. SSA has worked with CMS and other Federal agencies, 
community based organizations, advocacy groups, and State entities in 
order to spread the word about the available extra help.
    During the past year, SSA has held more than 72,000 Medicare 
outreach events. Targeted application-taking events were held in Social 
Security offices throughout the country, and personal invitations to 
these events were mailed to beneficiaries who had not yet applied for 
the extra help, but had been identified as being potentially eligible 
for the program.
    We continue to work with States that have their own pharmaceutical 
programs, State Health Insurance Programs, Area Agencies on Aging, 
local housing authorities, community health clinics, PDPs, and others 
to identify people with limited income and resources who may be 
eligible for the extra help.
    Throughout these efforts, SSA's goal has been to reach every 
potentially-eligible Medicare beneficiary multiple times, in a variety 
of ways, for example, by targeted mailings, follow-up phone calls, and 
targeted events. And while we are confident we have taken appropriate 
steps to reach out to those who may be eligible for the extra help, our 
outreach efforts will continue throughout 2006. There is no enrollment 
period for the extra help--a Medicare beneficiary can apply at any 
time.

Additional Outreach & Mailing of Subsidy Applications
    Although the new Medicare prescription drug coverage did not begin 
until January 2006, SSA began mailing applications to individuals who 
were potentially eligible for extra help in May 2005. During the 
following three months, we mailed almost 19 million applications. Our 
goal was to have as many potentially eligible limited income Medicare 
beneficiaries as possible file for the extra help before the Medicare 
prescription drug program started in January 2006.
    We also intended to cast the widest net possible in our efforts to 
reach the public. Thus, we sent the 19 million applications to 
potentially eligible individuals, even though we knew that not all of 
this group would meet the income and resource requirements. This 
initial effort also allowed us to begin making eligibility 
determinations for the extra help as early as July 2005.
    As much as the initial mailing of applications was important, 
follow-up contacts with those individuals who did not return the 
application was just as important. We contracted with a vendor to 
remind individuals of the availability of the extra help program and to 
ask if they needed assistance. Of the 9.1 million people who were 
called by the vendor, 800,000 had applications resent to them, and 
400,000 requested assistance and were referred to SSA. In addition, 5 
million follow-up notices were sent because the vendor could not locate 
a phone number for the individual (for example, an individual who was 
displaced by Hurricane Katrina).
    We continue to use Agency mailings to inform the public. For 
example, the cost of living adjustment notice sent in December 2005 to 
52 million Social Security beneficiaries contained information about 
the new drug program and the availability of extra help. The 4.2 
million letters SSA sent to individuals potentially eligible for extra 
help, during September and October 2005, also contained information 
about the subsidy.
    Also, SSA identified approximately 1.5 million disability 
beneficiaries who received an extra help application mailer, but did 
not file an application. We mailed a follow-up notice to these 
beneficiaries between March 16 and April 11 notifying the beneficiaries 
that they may be eligible for the subsidy.
    In addition, as a pilot, we recontacted approximately 5,000 
beneficiaries, who did not respond to an extra help application mailer, 
but had previously applied for and received the Medicare $600 drug 
discount card credit, to offer help in completing the extra help 
application. We are now looking at expanding the effort.
    SSA is also examining other ways in which we might reach 
individuals who could be assisted by the extra help program. For 
example, we established cooperative projects with tax preparers, who 
deal with people filing for the Earned Income Tax Credit, to screen for 
the extra help.

Success So Far
    As of April 30, SSA has received applications from more than 4.9 
million beneficiaries, of which almost 850,000 were unnecessary, 
because either the applicants were automatically eligible or because 
they had filed more than one application. We have made over 3.9 million 
determinations on the eligibility for extra help and have now found 
more than 1.7 million of these individuals eligible. We have also 
notified the individuals who filed unnecessary applications of their 
current eligibility.
    While we are proud of the initial success that we have had with 
helping so many beneficiaries pay for their prescription drugs, there 
is much more that we need to do. Commissioner Barnhart has made it 
clear that we need to continue to aggressively promote this valuable 
benefit, and to this end, we continue to look for ways to reach those 
eligible for the extra help program.
    While SSA has no direct role in assisting individuals in either 
selecting or enrolling in PDPs, we have also provided instructions to 
the field offices on how to make sure those with the new Medicare 
prescription drug coverage questions are directed to the resources they 
need. In some cases this means our employees will simply refer the 
questioner to 1-800-MEDICARE, or to the beneficiary's PDP provider, but 
in other cases it means making a personal call to state coordinators, 
reprinting and faxing award notices, and even making emergency calls to 
CMS Regional Offices.
    In short, we are committed to doing whatever we can to help make 
this new program accessible to our beneficiaries.

Conclusion
    In conclusion, I want to express Commissioner Barnhart's thanks, 
and my personal thanks, to this Committee for your continuing support 
for the Agency. Your support for the President's 2007 budget will allow 
Social Security to continue to provide the kind of service your 
constituents have come to expect from us, not only in administering the 
low-income subsidy and premium withholding for the Medicare 
prescription drug program, but also for our traditional services.
    We look forward to a continued dialogue with your Committee as we 
progress with implementation of the extra help program. We very much 
want to hear your ideas. While we have found that there is no single 
contact method that guarantees success, we have learned that the more 
times we reach these limited-income beneficiaries, the more we are able 
to help them.
    Thank you and I will be glad to answer any questions you may have.

                                 

    Chairman JOHNSON OF CONNECTICUT. We have now just passed an 
hour since I convened this hearing. In that hour, 1,813 seniors 
have joined the Medicare Part D program. In addition, Mr. Stark 
has asked me to enter into the record the Congressional Budget 
Office's letter that estimates that 1 million beneficiaries 
would enroll in Part D in 2006 if the enrollment period were 
extended.
    [The information follows: PENDING]

    Chairman JOHNSON OF CONNECTICUT. Dr. McClellan, I 
understand that your actuaries at CMS have done similar 
estimates, and I would like you to comment on this estimate and 
also to provide for the record the statement from the CMS 
actuary on this issue.
    Dr. MCCLELLAN. We will be happy to do that. In terms of the 
impact on the enrollment deadline, our actuaries have 
concluded, like actuaries around the country find with 
insurance plans and other benefits, that deadlines are very 
important in encouraging people to act.
    The CMS actuaries concluded that without the deadline, 1.6 
million fewer Medicare beneficiaries would enroll in the drug 
coverage and get advantages from the benefits. I have been 
going around the country a lot. I see this firsthand. A lot of 
the people who are looking in the program now are people who 
have been putting off a decision. Signing up for health 
insurance may not be the most fun thing you do in a day, but 
they know it is very important for their health and very 
important for their finances so they are doing it. Also a lot 
of people with low drug costs are understandably waiting until 
close to the deadline.
    I was down in Arlington, Texas and met a nice lady there 
who said she takes only one or two drugs now, but she will sign 
up for the coverage now so she will have peace of mind as she 
gets older. She is 102 years old, but this benefit works for 
all beneficiaries no matter how old they are.
    We are seeing more people sign up because the deadline is 
there. Now is the time when we have lots of assistance 
available for them, when all of our partners, all of our 
customer service representatives are there, between now and May 
15, to help them make that decision.
    Chairman JOHNSON OF CONNECTICUT. Thank you very much. We 
look forward to having that letter to put in the record, 
alongside the other letters. It shows how difficult it is to 
estimate.
    I was interested that The New York Times had said the 
deadline was a useful prod for fence-sitters. Certainly we all 
know how much we intend to do something and often don't do it 
until we absolutely have to do it.
    I also thought it was very interesting that 75 percent of 
seniors who have enrolled in Plan D are either satisfied--are 
either very satisfied or satisfied with the plans performance.
    I was equally interested in, because both of you have 
worked very hard at getting tools out there, getting local 
voices in the community, enabling seniors to go to people they 
trust. Indeed, in one of my senior citizens centers they don't 
want the choice because they like the pool of people who are so 
well trained, and they would rather wait their turn with their 
local advisers. That has worked very, very well.
    All of the grassroots training that you have done is very 
important. Yet in the Kaiser Foundation poll of April 6th to 
11th, they found that 54 percent of those who had chosen a 
Medicare drug did so on their own. That is interesting to me, 
because in my office we have had people call and say oh, this 
is so confusing, and this is so confusing. When we ask them 
have you tried, they say, oh, no. When we have them try or when 
I see them at sign-up things, they say it isn't so confusing.
    So, it is unfortunate that so much print and breadth of 
public leaders has been devoted to basically scaring seniors 
that was dangerous and difficult; when it is, it certainly is 
something you have to put your mind on, but the people you have 
gotten out there to help one on one have made all the 
difference; and that many seniors, we forget, many seniors are 
able to use the computers.
    In fact, some of the advisers who signed up, one I met 
recently, was a former human resources developer. So, we have 
had some very good success not only with getting seniors to 
sign up, but with generating support in the community for 
helping one another. That has been wonderful to see. Frankly, I 
haven't seen that level of just communities coming together to 
help each other in a long time. We will come back later on to 
some other aspects of the plan that will help it.
    Right now, I will recognize Mr. STARK.
    Mr. STARK. Thank you, Madam Chair. Could I just borrow 
this? Look at those aluminum tubes, just right out of the State 
Department testimony.
    In your benefit design, as I understand it, about 86 
percent of the stand-alone plans have a doughnut hole or some 
coverage gap, and about 8 million people and change have 
enrolled in stand-alone plans.
    Can you give me an idea, or can you get back to me as to 
how many of these 8 million in stand-alone plans still have a 
doughnut hole or some form of coverage gap, or do you know, 
approximately?
    Dr. MCCLELLAN. I can get you that number, approximately, in 
just a minute. What the beauty of a program with choice is of 
the options out there, people don't have to choose any one of 
them that they don't like, and people are disproportionately 
enrolling in the plans that fill in the doughnut hole, just 
like they are disproportionately enrolling in plans that 
provide other benefits. That is a big extra help for people who 
have high expected drug costs.
    Mr. STARK. Okay. Again, my concern is not that we can't 
help some people, as I said earlier. You throw $1 trillion at 
40 million people, somebody has got to get help besides the 
pharmaceutical industry.
    I have trouble with--and I hate to tell you this, but you 
probably already know it--your boss, Secretary Leavitt, just 
some moments ago, in his testimony in the Senate, before the 
Health and Human Services Appropriations Subcommittee, said, I 
think definitively as Congress Daily put it, said: There ain't 
going to be any extension.
    I was kind of hoping you guys would have an epiphany, is 
that what it is, John, in the last--in the eleventh hour, and 
save a lot of those seniors from the penalty.
    If I am correct in this assumption, I know you have stated 
in a variety of forums and ways that the penalty is necessary, 
basically to prevent adverse selection, for me to stay out of 
the plan until I know I am going to need diabetic drugs or 
chemotherapy and then sign up. That is why I would agree with 
you and everybody else, and at some point, a penalty, like we 
have in Part D.
    I am not so sure, maybe you could convince me otherwise, 
that we lose a lot by letting people go to January without a 
penalty. If what you are suggesting is out of these 7- or 8 
million people, that they have got this all figured out, my 
guess is that with their shoes and socks on, they can do the 
math; and the penalty would cost them more than what they would 
spend in 8 months in premiums.
    I am sure that is the case in any of these plans; that if 
you look at some life expectancy beyond 5 years, to say, jeez, 
I am going to have a penalty of 10, 12 percent, what it could 
run, for the remainder of my life, or I have the option of 
paying for just an extra couple of months, even these guys are 
going to figure out that they are probably on the better side 
of the math, if they are that sophisticated, to take the lower 
premium and not gamble. You may have figured it out 
differently.
    If, though, you will agree with me, without a question of 
fault, that there is some confusion, there is some waiting 
because of lack of resources to take everybody and get them the 
information, the costing they need, instantaneously--and I 
don't expect we could do that. Quantify for me the dollar harm, 
if you can, that you could see in giving these people another, 
basically, 7 months, and forgoing that penalty until the first 
of the year.
    You have done it for some already. My guess is that in the 
long run, we would have people who would have done a better job 
of selecting the right plan, and the government would lose some 
penalty dollars, and as CBO tells us, $2 billion over $5 
billion. If you are talking about a $1 trillion program, I 
would submit that that is not very urgent to us, and we may be 
better off with a better-served population.
    Quantify for me, the other side of that, which I know you 
are on.
    Dr. MCCLELLAN. Let me try to throw out a few numbers. First 
of all, I think you are absolutely right; for someone who is 
thinking about getting this protection, because the premiums 
have turned out to be so low--in your district it is only 
around $10 a month and all over the country it is under 20--
this is a very inexpensive way to get peace of mind for the 
future.
    Now, in terms of the number of people that are affected 
here, as you mentioned there are about 5- or 6 million who have 
not yet signed up and who don't have coverage from another 
source.
    Out of that group, more than half are eligible for the low-
income subsidy. As we have already talked about, we will be 
continuing and redoubling our efforts to reach that population. 
We have new partnerships that are really getting underway right 
now. There, we will continue to be getting them enrolled as 
quickly as we can, before or after May 15. That takes us down 
to 2- or 3 million beneficiaries, which is well under 10 
percent of the total Medicare population. We are seeing 
hundreds of thousands of people sign up each week. We are 
seeing a surge in the number of our phone calls that we are 
getting now, a surge in the use of online enrollment. People 
clearly are starting to focus in with the deadline. I think we 
are going to get--have an opportunity to get most of those 
people enrolled now.
    The reason that I think--well, let me give you one more 
important number to focus on; that is the $1,100 that is the 
average savings a beneficiary will get this year from the drug 
coverage. If you talk about the penalties, the penalties come 
from beneficiaries not getting this assistance as soon as 
possible.
    If we lose 1.6 million people, which is most of this 
population that is left--that is actuaries' estimates--that is 
forgoing billions of dollars in drug savings that our 
beneficiaries really need. Between now and May 15 is when all 
of the assistance is available to help them make a good choice 
and start saving money. That help is not going to be available 
after May 15.
    So, the result is potentially--I think that is the right 
number--$1 billion in lost opportunities to save on the drugs. 
It is not a large part of our overall population. I am not as 
concerned about the penalty amounts as I am about our 
beneficiaries getting help with their drug costs, making a 
confident decision about their coverage as soon as possible.
    Mr. STARK. If the Chair would indulge me for just another 
minute.
    CBO tells me we get another 1 million people in. It is 
dueling statistics, but it is a gamble. My question to you is 
twofold: One, let us gamble on the side of getting people in. 
They will be better off for it as you and I would agree.
    Secondly--and I am sure Ms. Disman could remind you if you 
don't know--but there is not a one of us here on this dais who 
hasn't had a town meeting where somebody has come in and waved 
this direct-mail solicitation to help them solve a notch 
problem.
    What you may very well be doing for us, and you will earn 
the enmity of everybody on this dias, is creating a whole new 
batch of notch babies, who, for the next 10 years, will be 
coming to our town meetings and saying, why do I have to pay 
this extra money? I don't think there is anybody here who will 
disagree with this--you would help us a lot, Doc, if you could 
find a way to do away with this potential notch.
    Dr. MCCLELLAN. I very much appreciate your commitment to 
helping everyone possible save under the drug benefit. I am 
sure we will keep talking about this not just now, but soon 
after May 15 as well.
    Chairman JOHNSON OF CONNECTICUT. I would like to recognize 
now Mr. McCrery, in whose district 73 percent were signed up in 
the middle of April.
    Mr. MCCRERY. Thank you, Madam Chair. I thank both of you 
for appearing today. I also want to say what a good job CMS and 
Social Security and the Department of Health and Human Services 
(HHS), for that matter, have done since the early rollout of 
this program.
    We all know there were problems with the early rollout, 
everything from speedy payment, pharmacies, to dual-eligible 
seniors having problems, some drugs being dropped or not 
covered. CMS, HHS, jumped on that with both feet, and you 
haven't let go since. You have just done a fantastic job of 
admitting that there were problems and getting after them and 
solving them.
    The SSA has done a wonderful job of reaching out to seniors 
and offering your outreach to seniors all across the Nation and 
trying to help seniors understand this program and to get help 
getting signed up for this program.
    So, I think, particularly for those of us from Louisiana, 
it is refreshing to be able to compliment Federal agencies for 
a change. You certainly deserve it.
    Dr. MCCLELLAN. Thank you.
    Mr. MCCRERY. Dr. McClellan, you talked about the premiums. 
I think, originally, weren't premiums projected to be about $35 
or $37 a month?
    Dr. MCCLELLAN. Thirty-seven dollars a month, yes.
    Mr. MCCRERY. Thirty-seven dollars a month. Now they are 
between $20 and $25, on average?
    Dr. MCCLELLAN. That is right. It is about $25, on average. 
Overall, the Medicare Advantage plans have premiums that are 
significantly lower than that, on average.
    Mr. MCCRERY. What do you think accounts for the difference 
in the original projections and what is reality?
    Dr. MCCLELLAN. I think it is two things. First of all, it 
is the strong competition that we have among the drug plans. 
They know that they have got to offer strong discounts, low-
cost effective coverage, or they are not going to get 
beneficiaries.
    Second, we have seen some very impressive shopping behavior 
by our beneficiaries. They are overwhelmingly enrolling in 
plans that are relatively low cost. That is good news for them. 
They are getting much lower premiums as a result. It is good 
news for taxpayers because the cost of the benefit is coming 
way down as a result.
    Our Trustees Report, issued this week, pegs the drug 
benefit cost to be 20 percent lower than had been projected as 
recently as last year, before these premium bids and before we 
saw the actual choices that our beneficiaries are making.
    Getting back to Congressman Stark's questions, 1 in 4 of 
our beneficiaries is signing up for a plan that has coverage in 
the gap. So, the plans are responding, not just with lower 
costs but also with coverage, more like with what many people 
want. So, I would give a lot of credit to our beneficiaries 
making informed choices. It takes some effort, but I would also 
give a lot of credit to all of our partnerships in networks to 
help people make an informed choice. That can be as simple as 
calling 1-800-Medicare or going to one of these thousands of 
events around the country.
    Mr. MCCRERY. So, private sector competition seems to be 
working after all.
    Dr. MCCLELLAN. Private sector competition plus 
beneficiaries choosing the coverage that they want, not the 
coverage that others tried to design for them.
    Mr. MCCRERY. Are you familiar with the recent survey from 
the pharmacy benefit managers trade group, Pharmaceutical Care 
Management Association, in which they track the top 25 drugs 
purchased by seniors and show the costs at retail pharmacies 
and under the program and through mail order programs?
    Dr. MCCLELLAN. Yes, I think I have seen that, sir.
    Mr. MCCRERY. They show discounts of 35 percent to seniors 
at retail pharmacies--seniors who are in the Part D program--
and 46 percent through mail order. A lot of seniors can do mail 
order because they have maintenance drugs that they know they 
will need every month so they can do it through mail order. 
Sometimes they have to go to retail pharmacies, but a lot of 
them can get it through mail order. So, that is a big savings 
that they can get through mail order.
    However, CMS, I understand, for those that signed up for 
the lowest-cost plans, they can get discounts of 57 percent to 
71 percent in those low-cost plans. That is a huge savings for 
seniors. I think you earlier stated that the average savings 
per senior who signed up for Part D is $1,100; is that right?
    Dr. MCCLELLAN. That is right, it is 50 percent.
    Mr. MCCRERY. It is about $100 a month these seniors are 
saving. That is just the average.
    Dr. MCCLELLAN. One other way to look at it, if you don't 
mind, is our actuaries in February issued their projections for 
national health expenditures. For 2006, the first year we have 
full implementation of the drug benefits, their estimates of 
total prescription drug spending in the United States have come 
down significantly because of exactly what you mentioned: the 
substantially lower prices that seniors are now getting on 
their drugs.
    Even though seniors are getting millions more prescriptions 
filled because of the coverage, it also brings down the cost of 
drugs, so it is many more prescriptions, but less total 
spending on prescription drugs in this country as a whole this 
year, because of the drug benefit.
    Mr. MCCRERY. What is happening--I will see if you agree 
with me--but what is happening is seniors are now in 
pharmaceutical plans, drug plans, that are like the one I had 
through the Federal Employees Benefit Plan.
    I was paying less for my drugs than I would have paid had I 
not had a plan and just walked down to the corner drugstore and 
paid retail for it, because I got a discount through my health 
plan. Now we are giving seniors a discount through their health 
plan, Medicare, through Part D. That is what is happening.
    Now, my time is out, but I hope somebody will talk about 
the low-income seniors and how we are taking some of the burden 
off the States, who were previously paying the cost for those 
seniors, and how if the States want to, they can supplement 
Part D and actually make those seniors whole or even better off 
than they were.
    Dr. MCCLELLAN. Many of them are.
    Mr. MCCRERY. Thank you.
    Chairman JOHNSON OF CONNECTICUT. Thank you.
    Now I would like to recognize Mr. John Lewis of Georgia who 
has about 69 percent of his seniors--sorry, 69 percent of the 
seniors in his district signed up. Mr. Lewis.
    Mr. LEWIS. Thank you very much, Madam Chair.
    Dr. McClellan, in your response to the question raised by 
my colleague from Louisiana, are these the same actuaries who 
said that this plan was going to cost about $400? Are they 
using the same people?
    Dr. MCCLELLAN. Those are the same people. That was the 
April estimate from 2004 to 2013. We are now looking at 2006 to 
2015 and the cost projections are right in line with what the 
actuaries had forecast back then.
    Mr. LEWIS. You are really telling us that these wonderful, 
unbelievably qualified people hit the dime on the head?
    Dr. MCCLELLAN. Very close to their original estimates. Back 
in February, when the President's budget came out, our 
actuaries compared a comparison.
    The trillion dollars I think that Congressman Stark--I am 
not sure where he got that from. I am sure he can explain more 
clearly than I. Some estimates are of the so-called gross costs 
of the benefits that do not count the savings from premiums, 
that do not count the savings from State payments for a portion 
of the costs that they would have incurred, that do not count 
all the savings in Medicaid.
    If you look at the net cost of the Federal Government, as 
our actuaries did in that comparison in February, which we 
would be delighted to share with you, they are roughly in line 
with what had been forecast a couple years ago.
    Mr. LEWIS. Doctor, let me ask you, have you seen the GAO 
report that was released today?
    Dr. MCCLELLAN. I have.
    Mr. LEWIS. Do you care to comment on the report?
    Dr. MCCLELLAN. Thank you for asking. I do have a few 
comments on it. While I think it is very important for us to 
look at input and feedback from any source, I am very concerned 
about the report being incomplete and inaccurate and out of 
date, at least as some people are interpreting its findings. I 
can tell you a little bit about that.
    Mr. LEWIS. Doctor, the report is saying that much of the 
information that was sent out by you and CMS was inaccurate and 
misleading, incomplete, too complicated for seniors. It 
suggested that many of the seniors that you want to sign up, 
they have only a fourth-grade reading level, and that much of 
the information you sent out was for people who could read at a 
seventh-grade level or maybe a college level. Do you care to 
comment?
    Dr. MCCLELLAN. Absolutely. Again, there is a lot more I can 
say about this, but on the specific point that you raised about 
reading level, first of all, we have not been able to see the 
methods that GAO used. We asked them to share them with us, but 
they would not release them. If it is as described in their 
summary statements, their reading level determinations are 
based largely on syllable counts, the number of syllables in 
the words in the documents that they reviewed, what we found is 
that is a partial but not complete way of looking at how easy 
materials are to understand. There are some words that our 
beneficiaries need to know that have multiple syllables that 
many of them do understand, words like ``Medicare'' or 
``prescription'' or ``beneficiary.'' In cases where we use 
these, we will use the words to make sure that we are clear and 
accurate about what beneficiaries need to know. It does mean 
the syllable count goes up.
    We have had our materials reviewed by many independent 
groups that focus on plain language and clear communications; 
and those results which we compiled in our response to the GAO 
had very different conclusions about the ease of readability of 
the materials. In fact, the Medicare new handbook has won 
awards for its plain language.
    Mr. LEWIS. To consistently tell people to go on line; if 
you want information, go on line. Apparently 70 percent of the 
people that receive Medicare have never been on line and they 
never use a computer. They do not know anything about a Web 
site or iPOD, whatever these things are.
    Dr. MCCLELLAN. iPOD things, whatever they are. I could not 
agree more that is why going on line is only a small part of 
our diverse grassroots outreach campaign. In Georgia we are 
partnering with faith-based organizations, counseling groups 
like Georgia Cares and the Georgia health insurance counseling 
organizations, to get into people's neighborhoods for face-to-
face talking about what the drug benefit means for them.
    People can also call us anytime. We have more than 6,000 
customer service representatives, and that is why we have been 
able to get our minority enrollment, and that is why you have 
been able to get enrollment in your district to run ahead in 
our national average in many respects.
    Mr. LEWIS. Do you think all of these are exceptional 
circumstances that would justify extending the May 15 
enrollment deadline?
    Chairman JOHNSON OF CONNECTICUT. Excuse me. It has just 
been called to my attention that Dr. McClellan has to leave at 
4:00. There are enough Subcommittee members here so that if we 
each stick tightly to 5 minutes, we may not all get to question 
him. So, I would like to ask you to suspend the rest of your 
questions, since your time has expired, and anyone else who can 
keep their questioning to 4 minutes out of respect for other 
members so we can get through everybody, that would be great.
    Dr. MCCLELLAN. We will be happy to answer more in writing. 
This outreach is very important to us.
    Mr. LEWIS. Thank you.
    Chairman JOHNSON OF CONNECTICUT. Thank you. Mr. Johnson.
    Mr. JOHNSON OF TEXAS. Thank you, Madam Chairman, I 
appreciate it. Listen, I think you guys have done a super job 
and I do not know if you have answered the question yet, but 
the effect of eliminating the May 15 deadline; have you talked 
about that already?
    Dr. MCCLELLAN. We have and how that would reduce enrollment 
in the program.
    Mr. JOHNSON OF TEXAS. How do you propose that half of the 
beneficiaries are not aware of the deadline?
    Dr. MCCLELLAN. At this point, about 85 percent-plus of our 
beneficiaries have drug coverage that is secure. Mostly it is 
through the new Medicare drug benefit, and those beneficiaries 
do not need to focus at all on any deadline. They are in 
coverage. They are not going to pay any penalties. They got 
protection for the rest of their lives against high drug costs.
    For the ones who are left, it is about 15 percent, and even 
half of those qualify for the low-income assistance, and they 
will have chances to enroll after May 15. So, it is really only 
a small part of our population that we still need to reach. We 
want to make sure they know about the deadline, but most people 
have moved on. They are using the coverage, they are saving 
money, and they are satisfied with it.
    Mr. JOHNSON OF TEXAS. I agree with you. I would like you to 
emphasize that the lower income do not have a deadline, in 
effect. You will help them get the coverage regardless of the 
time frame.
    Dr. MCCLELLAN. That is right.
    Mr. JOHNSON OF TEXAS. What would happen among plans if the 
Secretaries were allowed to negotiate prices?
    Dr. MCCLELLAN. Congressman, I get asked that question a 
lot, so I have made a point of discussing it with our actuary 
and his staff who did an independent evaluation of proposals. 
As he reiterated again recently, there is no evidence that 
government negotiation would lead to lower prices than what we 
are seeing with a strong and aggressive price negotiation that 
the drug plans have to use in order to get people to enroll in 
their plans. They have gotten prices way down and compared to 
our experience in Medicare Part B, where Medicare did cover 
some drugs using price regulation for a long time there, we 
have moved to a new competitive system for pricing the drugs 
and we have saved billions of dollars. So, according to our 
actuaries there is no evidence that price negotiation would 
drive down costs any more.
    I think it is especially important to be careful about 
government controls on access to drugs, and which drugs you 
take, when there are so many new medications coming along and 
when beneficiaries being able to get access to the medicines 
they need is constantly changing and needs to stay up to date.
    Mr. JOHNSON OF TEXAS. Choice and free enterprise work, do 
they not.
    Dr. MCCLELLAN. It seems to.
    Mr. JOHNSON OF TEXAS. Thank you very much.
    Chairman JOHNSON OF CONNECTICUT. Thank you very much, Mr. 
Johnson.
    Mr. Doggett.
    Mr. DOGGETT. Thank you very much, Doctor, for your service 
and for your testimony. I wish you well in signing up as many 
people as you can possibly get. As much as I deplore what I 
think are many of the deficiencies in this legislation, I 
personally join in that effort to try to get as many people in 
the south Texas area that I represent signed up.
    Dr. MCCLELLAN. Thank you.
    Mr. DOGGETT. Just continuing with Mr. Johnson's line of 
questions then, I guess you have concluded, then, based on 
talking to the actuary, that we should repeal the negotiation 
authority to the Veterans Administration that gets less 
expensive prescription drugs for our veterans than any of these 
plans provide under Part D.
    Dr. MCCLELLAN. I do not think I would say that. The 
Veterans Administration is a good program for veterans. It 
works well for them.
    Mr. DOGGETT. It sure is. You are familiar with the Families 
USA study that it is so good that it provides prices on, I 
think, the top 20 most prescribed pharmaceuticals that are 
about half what your best plans under Part D are providing.
    Dr. MCCLELLAN. For the drugs that are on the Veterans 
Affairs (VA) formulary, that is true. A lot of drugs are not.
    Mr. DOGGETT. That is a pretty significant savings. Even by 
any standard a 50 percent savings--I think to actually be 
accurate, it was 48.2 percent--less than the government is 
paying through the veterans program, where we negotiate prices, 
than we are paying under this great system that has been set up 
that we are talking about today. That plan also is one that has 
been evaluated by our staff over at the Government Reform 
Committee. They show that actually there has been an increase 
in prices of these Part D plans from December to February.
    Does your office study the changes in prices that are 
available?
    Dr. MCCLELLAN. We have been watching that very closely. We 
sent a response letter to Consumers Union, who also picked up 
on part of the same study that you saw that pointed out some of 
the problems with minority staff's study on the Government 
Reform Committee. Basically the only price changes that we are 
seeing are changes in the so-called Average Wholesale Price for 
a drug that applied to every program, including the VA. Many 
Medicare beneficiaries have chosen plans with flat copays that 
stay the same for the whole year for their drugs, and so are 
protected even from those kind of changes in prices. We would 
be happy to share with you the details of that. The prices and 
savings have remained stable over time, overall, and they have 
actually increased.
    Mr. DOGGETT. I think it would be helpful to add as you 
filed other documents with your testimony, those studies as 
well----
    Dr. MCCLELLAN. We will get that letter into the record.
    Mr. DOGGETT [continuing]. that your actuary has provided 
that are critical or are objecting to price negotiation.
    Dr. MCCLELLAN. We are happy to do that.
    Mr. DOGGETT. As far as the study that my colleague, Mr. 
Lewis, was just asking about on the GAO, I understand you do 
not have all of your discussions back and forth between your 
staff and their staff about how they did what they did, but you 
are aware that they reported that one 1 of every 3 times that 
someone calls in to CMS, they get the wrong answer or they get 
no answer or they get an answer that is incomplete and 
inappropriate.
    Dr. MCCLELLAN. Well, I would like to just correct your 
statement, because that is an incorrect interpretation of what 
the GAO did. They did not look at any actual calls that 
beneficiaries were making. They made up five questions and they 
looked at those questions which did not even apply to most of 
the tools that we have available. They did not really even look 
at our toolbox. They dusted off a hammer and got that out and 
did not even look at our power tools. Our power tools, which 
are what most beneficiaries use when they call us, rely on 
personal information from the beneficiary. They tell us who 
they are, and then we give them personalized support in making 
a decision. The GAO did not even look at any of those calls, 
and that is the vast majority of calls that come into us.
    If you look at the actual calls coming into the Medicare 
program, the satisfactory rate of beneficiaries that call us 
with the information they get is 87 percent and the ongoing 
evaluations of the accuracy of the answers is 93 percent. So, 
that analysis was not based on actual calls by actual 
beneficiaries, which is what we are really focused on.
    Mr. DOGGETT. Perhaps we can pursue that--since the time is 
up--in a future hearing, because the actual report refers to 
incomplete, inaccurate, and unusable answers. I have hope you 
will file your response with your testimony.
    Dr. MCCLELLAN. It is with the GAO report. You can see it 
now.
    Chairman JOHNSON OF CONNECTICUT. Thank you, Mr. Doggett. 
The record really should note that the VA formulary excludes 20 
of the 33 most common brand-name drugs used by seniors, and the 
VA system delivers drugs to only 429 VA pharmacies; whereas the 
Medicare prescription drug benefit is delivered to 54,371 
pharmacies.
    Mr. CAMP.
    Mr. CAMP. Thank you, Madam Chairman.
    Welcome. Dr. McClellan, this GAO report that we have heard 
referred to, it seems many of the observations they made were 
the early days of the program. How do you respond to the fact 
that it seems that GAO's findings really apply to information 
that is out of date?
    Dr. MCCLELLAN. It is very much out of date. In our response 
to the GAO report, we listed what we have done on each of the 
four specific recommendations that the GAO made. Some of these 
were kind of technical recommendations. One of the main reasons 
they scored one question as being an inaccurate response is 
because we talked about the savings from generic drugs, for 
example, and they thought, well, if there is a generic version 
of a drug, you should not automatically tell a beneficiary 
about that. I personally think that is exactly what we ought to 
be doing because they can offer so much savings and they are 
exactly the same drug, but we have since modified our script to 
let people look first at the overall cost of their brand-name 
drug if that is what they really want.
    Again, I do not think that is the right thing to do, 
speaking as a doctor, if you want to save money safely on your 
medications. So, in that area, in each area we have made major 
further steps in improving our tools since the report was done 
in January.
    Mr. CAMP. I want to thank you for all the hard work your 
Agency has done in enrolling millions of beneficiaries in the 
prescription drug coverage. I also want to personally thank you 
for the responses to my office that have been very very timely. 
Over 70 percent of the seniors in my district are benefiting 
from the program and surveys show an overwhelming majority are 
pleased with their coverage.
    My question is how is CMS and HHS working together to 
expedite approval of the patient assistance program? I have 
heard some concerns from people who were covered by one of the 
plans in the past. That is obviously changing. Can you comment 
on that?
    Dr. MCCLELLAN. I sure can. The Office of the Inspector 
General has provided a clear road map for how manufacturers can 
continue their assistance programs, in addition to Part D, just 
as they had before. I am very pleased that a number of drug 
manufacturers like Schering-Plough, like Merck, have come 
forward and done the right thing and continued their programs.
    I personally think it is unacceptable for any drug 
manufacturer to use the start-up of Medicare Part D as an 
excuse to cut back on assistance to beneficiaries who still 
could get help in addition to Part D. This should be a win-win 
for the manufacturers and for the drug beneficiaries when it 
comes to assistance programs, because many beneficiaries who 
previously needed the manufacturer program now qualify for 
extra help. They have got comprehensive payments for their 
drugs. There are still some that have incomes between, say, 150 
or 200 percent of poverty that will get some help from the 
Medicare drug benefit but could use the assistance program in 
addition.
    The Office of the Inspector General has provided a clear 
road map for how manufacturers can do that. Some of them, like 
Merck, did not even need to get a specific opinion for their 
own program because they are following the road map. That is 
what I hope all manufacturers will do.
    Mr. CAMP. Thank you. Quickly, before my time expires, the 
pharmacists have been a big help in this program and many are 
concerned about timely payment. How is CMS addressing those 
issues?
    Dr. MCCLELLAN. We are firmly supporting pharmacists and 
making sure their contracts are enforced for timely payment. If 
any pharmacist is having difficulty with a drug plan meeting 
the terms of their contract to pay on schedule, they should let 
us know. We have handled some complaints in that regard and 
gotten them resolved. At this point we are seeing a very low 
number of complaints related to payments being made according 
to a contract.
    Mr. CAMP. Thank you very much.
    Chairman JOHNSON OF CONNECTICUT. Thank you. It is very nice 
that the last three members to question have either 71 or 72 
percent of their seniors signed up in this program.
    Now we turn to Mike Thompson of California.
    Mr. THOMPSON. How many people do I have signed up?
    Chairman JOHNSON OF CONNECTICUT. In your district, 72 
percent are signed up.
    Mr. THOMPSON. Seventy-three thousand four hundred and nine-
five, according to your data, Doctor. Thank you for providing 
that. What I do not know is how many of these 73,495 people 
that you have told me have signed up were not getting some 
sorts of benefit before? We have asked you or your office for a 
breakdown in those numbers, and we were told that that is not 
available. Will that be available sometime soon?
    Dr. MCCLELLAN. I will certainly look into it. I know we 
have made available that information at the county level and we 
will look into providing some additional numbers. We have put 
out an awful lot of information lately of these county-level 
breakdowns.
    Mr. THOMPSON. I would be interested to have the county 
level. I have got all or part of seven counties, and I would 
love to see it on that basis, if nothing else because it is one 
thing to state for certain, as the Chair has been doing, that 
these people have received coverage under this program. Maybe 
they have. I hope they have. I hope the more people that we can 
get in the better, but I think it is important for us to know 
the facts of this. How many are getting it now that didn't have 
coverage before?
    Dr. MCCLELLAN. Many are getting much better coverage. Many 
people in your district with Medicare Advantage plans have much 
more comprehensive coverage. Many have much more secure retiree 
coverage. That coverage had been going away. We are keeping it 
in place.
    Mr. THOMPSON. If you give me the data that we asked for, we 
won't have to argue it across the dais. We will have it for 
sure.
    Doctor, is it your understanding--and you may have covered 
this while I was out at another meeting, and I apologize if you 
have--is there any interest in, or do you suppose that we are 
going to extend this May 15 deadline?
    Dr. MCCLELLAN. We do not have the authority to do that.
    Mr. THOMPSON. Do you see, from your vantage, that 
happening?
    Dr. MCCLELLAN. As I said before, what we are seeing, what I 
see when I go around the country is seniors who are focusing in 
on this because the deadline is coming up. Most people do not 
do their Christmas shopping in August. They wait until closer 
to the deadline, and now is when we have put tremendous 
resources and all of our partners around the country and in 
your district are doing a lot of work to help people get their 
questions answered and make a confident decision, so now is the 
best time to look into the program.
    Mr. THOMPSON. I appreciate that, but I just want to point 
out that there was another deadline that has come and gone, and 
that was the deadline for States to take action to get folks 
into the program. The States, unfortunately, did not have a 
Federal Government partner that met its fair share of that 
deadline, and you guys did not meet your deadline, so different 
States have had to come up with funding to provide 
prescriptions to folks who otherwise would not have had 
prescriptions. As a matter of fact, in California there has 
been 815,700 prescriptions paid for by the State, at a total of 
$60 million, just in the month of April; 178,000 at $15 
million.
    So, I would hope that we are not holding the beneficiaries 
to a different standard than the Federal Government is having 
to hold up to. I would be interested in knowing when States, 
California included, can expect to get reimbursed for this.
    On the issue of partners, I just want to point out that one 
of the best partners has been the State Health Improvement 
Plans (SHIPs), Health Insurance Counseling and Advocacy 
Programs (HICAPs) in California. If you look at the numbers, 
they are doing 20 times the normal caseload and they get about 
80 cents per beneficiary for the work that they do. I would 
argue that you would have just terrible statistics if it were 
not for these HICAPs and the like organizations in other 
States.
    Now they are going to experience a further cut in their 
benefits. These are people--I have one small county that used 
to get 200 calls a month. Now they are getting 200 calls a day, 
and we are going to cut their funding. How do you determine 
what the funding is?
    Chairman JOHNSON OF CONNECTICUT. I am sorry, I have to cut 
you off.
    Mr. THOMPSON. Maybe you can get back to me.
    Dr. MCCLELLAN. I want to make sure these are issues that I 
can clearly respond to. With respect to the State payment, we 
worked out a framework and a schedule for carrying out that 
framework with a bipartisan group of State Medicare directors. 
We are just kind of following their lead so that the States 
will get paid back in the way that is easiest for them. Your 
Medicaid Director, Stan Rosenstein, was one of the members of 
that Committee. We are implementing that on schedule. 
California sent in their first round of data for that process, 
and we will be carrying out the reimbursement according to 
schedule for the States that followed through on the approach 
that they wanted for this reimbursement process.
    With respect to partners like HICAP, I could not agree more 
that they are tremendously valuable assets and partners in 
making this program available and effective for all of our 
beneficiaries. We have more than doubled the funding for HICAP 
over the last few years. I will permanently keep that funding 
level high. We have also vastly expanded the use of other 
partners in your district, around California and around the 
country, to help take some of the load of more personalized 
connections with our beneficiaries. We will keep that in place 
too.
    Right now we are helping people find out about drug 
coverage. In the years ahead, it will be great for helping them 
close the prevention gap by using our preventive benefits and 
our drug benefits more effectively. So, this is a permanent new 
part of the Medicare program, and I want to support them much 
more strongly than has ever been the case in the past.
    Chairman JOHNSON OF CONNECTICUT. Mr. Ramstad.
    Mr. RAMSTAD. Thank you, Madam Chairman. Thank you for your 
important leadership on the Medicare prescription drug benefit 
from day one. I also want to thank our two witnesses for your 
excellent testimony.
    Dr. McClellan, my home State of Minnesota, thanks to the 
leadership of Governor Pawlenty, was one of the States that 
stepped up to the plate with Medicaid dollars to fill the gaps 
when there were initial problems with the dual-eligible 
population. I am sure you agree that seniors and people with 
disabilities never should have faced those difficulties. There 
were really some major problems during the start-up of the 
program. to your credit, when the States started filling up the 
gap, you stepped in and announced that CMS would reimburse 
States that did step up to the plate to fill the gap with dual-
eligibles, and I appreciate your leadership at that time as 
well.
    I have two questions. One, can you assure us that CMS is 
taking every possible step to ensure that dual-eligibles never 
face those obstacles again? Second, when can the State of 
Minnesota expect to be reimbursed?
    Dr. MCCLELLAN. On the first question, as you said, starting 
on January 2 we began taking further steps to address the 
issues that arose for some of our beneficiaries. While the vast 
majority of our beneficiaries have been using the coverage 
effectively from the start, too many were having difficulty at 
the beginning, and so we took new steps like implementing new 
data transfer procedures with the States and the drug plans.
    We now do bi-monthly checks, twice a month, to make sure 
the plans with dual-eligible beneficiaries have up-to-date and 
complete information on their enrollment data and their 
copayment data to make sure those steps are done correctly.
    We have also worked with the States, where there had been 
trouble with handoffs, to eliminate those difficulties; and 
that has been an ongoing process. We have also implemented some 
further steps with the plans for more timely transfers of data 
and more effective monitoring of the charge information in the 
pharmacy computer system, the so-called ``for our arts data.''
    As a result, we have seen a vast reduction in the rate of 
problems arising at the pharmacy counter, people being unable 
to fill their prescriptions easily.
    We did not stop there. We also have in place a casework 
tracking system so if any beneficiary does have trouble, we 
have a well-established business process between us and the 
plans, to resolve it quickly. We have been seeing a declining 
number over time, from month to month, of the cases where we 
need to intervene and provide this help, but it is there. So, 
any beneficiary that is having difficulty can follow up with us 
to work to get that resolved as quickly as possible.
    Mr. RAMSTAD. So, it is fair to say, in summary, that 
quality controls are in place?
    Dr. MCCLELLAN. Absolutely, and we have been tracking----
    Mr. RAMSTAD. When can the State of Minnesota, before my 
time runs out, expect to be reimbursed? I am asked that 
question all the time at home.
    Dr. MCCLELLAN. That is right. Congressman Thompson asked 
that question as well. We have set up a process with the States 
that follows the procedure that the States wanted to follow to 
minimize their burden. There is a time frame in there. We need 
to get data from Minnesota on the people who they want 
reimbursement for, and then summary information on those 
claims. As long as Minnesota follows that schedule and that 
framework that we laid out, they will get reimbursement. I 
expect that generally to occur by June if they provide us the 
data that they have agreed to provide us.
    Mr. RAMSTAD. Thank you.
    Chairman JOHNSON OF CONNECTICUT. Thank you.
    Mr. ENGLISH. Thank you, Madam Chair. Just to clarify 
something, Dr. McClellan, I think that you alluded to earlier. 
Today, as we know, the GAO released a report regarding CMS 
operations outreach and communications with beneficiaries about 
their options under the new Medicare program. We have 
referenced that earlier in this hearing. We are told that GAO 
found many times beneficiaries were given incorrect answers to 
basic questions, but it seems many of the observations made by 
the GAO, as has been noted, dated to the early days of the 
program.
    First, how do you respond to the GAO findings directly, and 
is the information, in fact, yesterday's news? What has the CMS 
done to correct the issues highlighted by the GAO?
    Dr. MCCLELLAN. Well, we have a number of concerns about the 
way the GAO report was presented, which I think makes it 
incomplete and inaccurate and out of date. It is incomplete in 
the sense that it didn't look at most of the tools that we 
actually use and that our beneficiaries prefer for getting 
information about the drug coverage.
    For example, most of our beneficiaries give us their 
Medicare number when they call us or when they go on line, so 
that we can provide personalized assistance to them. The GAO 
did not evaluate that part of our outreach and education 
program at all. Even in the cases where they did look at our 
answers, they scored us as being inaccurate, when in fact they 
simply did not get information because they did not provide 
this beneficiary number.
    Now we have made clear that you can get information even 
without providing a beneficiary number. When they actually 
looked at it, in the vast majority of cases they got the right 
answer. So, incomplete evaluation. Also, they asked questions 
like: Can people compute with paper and pencil their out-of-
pocket drug costs for the standard plan? Well, we have tools 
that beneficiaries are using to compute their drug costs so 
they do not have to do it by hand. It is much more complete 
information on predicting your cost for a year than has ever 
been available in any insurance program. So, that was not 
evaluated. So, incomplete and inaccurate as a result of not 
really looking at our whole tool status. It is like taking a 
screwdriver and trying to use it to hammer in a nail, and not 
even using any of our power tools at all.
    The evaluations of actual beneficiary calls during February 
and March have shown satisfactory rates by beneficiaries around 
86, 87 percent, and accuracy rates for these calls, the actual 
calls that beneficiaries make, of 93 percent.
    There are many other independent and third-party 
evaluations that have gone on before, during, and after this 
time of our tools as well that come to similar conclusions, and 
those are all incorporated in our response to the GAO.
    Finally, as you said, it is out of date. This looked at the 
circumstances in January. We have made a lot of improvements in 
the program since then, including specific responses to the 
recommendations of the GAO. Our goal is to make sure that our 
beneficiaries can get the help they need when they want to 
enroll in coverage, and that is reflected now in the hundreds 
of thousands of calls that we are answering every day, the tens 
of thousands of people that are enrolling in coverage every 
day, and the very high rates of satisfaction with that coverage 
and the savings that our beneficiaries are getting.
    Mr. ENGLISH. Thank you for your comprehensive answer which 
has exhausted my time. I yield back.
    Chairman JOHNSON OF CONNECTICUT. Mr. Emanual.
    Mr. EMANUEL. Doctor, I know we talked earlier about some of 
the cost savings here. If I am not mistaken, the original price 
of the prescription drug bill was $394 billion, and even with 
those savings it is way over $394 billion. It is not even close 
as an evaluation. I think the number I saw the other day in the 
report is that it will come in at $800 billion; and even, by 
standards in Chicago, that is twice as much as originally 
projected and originally told to Members on the floor.
    So, I compliment that there has been a, quote-unquote, 20 
percent savings over the trillion-dollar figure, but it is 
still twice as much as the original 400 billion or $395 billion 
originally quoted on the floor and told to both Members, the 
public, and, most importantly, the taxpayers.
    It gets to the issue--and we go around and around on this 
subject--as a leader and somebody who is taking the leadership 
both in reimportation as well as the issue of direct 
negotiations, I know you know of the study done by the Center 
for Economic and policy research, a nonpartisan group. You are 
familiar, I am sure, with the study.
    Dr. MCCLELLAN. I do not think I looked at it recently, but 
I am sure I have seen it.
    Mr. EMANUEL. They say there is $40 billion worth of savings 
if you do what the VA does or Australia does, which is direct 
negotiations. Rather than have this fight of direct 
negotiations versus private subsidized plans, I still do not 
understand this ideological, almost theological obsession about 
negotiation. Why will we not have Medicare negotiate, private 
plans do theirs, and let the public choose which one they want?
    If it is all about choice, which has been the rhetoric that 
you always say--and I appreciate that--why would we prevent 
choice?
    Dr. MCCLELLAN. Beneficiaries do have a choice.
    Mr. EMANUEL. No disrespect. I do know something about spin. 
I asked a specific question. Why would we prevent choice 
between direct negotiations by Medicare and the negotiations 
that either United Health, WellPoint, or any of the other plans 
provide? Why would we prevent the consumers, that is, the 
senior citizens, from having the choice, that basic market 
decision, because both choices--that competition would drive 
prices down. Why would we prevent the seniors from having 
choice, which was the selling point of this plan, which a 
number of us opposed?
    Dr. MCCLELLAN. I am all for seniors having choice.
    Mr. EMANUEL. Good.
    Dr. MCCLELLAN. It has to be choices between specific real 
proposals, and I have not seen any specific real proposal along 
the lines that you have described that has been scored as 
saving money, that would operate in real neighborhood 
pharmacies, not the VA.
    Mr. EMANUEL. Dr. McClellan, there has been from GAO to this 
study, we can submit: Listen, if you want go to my Web site, I 
will give you another choice. I list Costco in Chicago; Costco 
in Toronto; 500 miles apart. Costco, bulk purchaser, 
negotiator. The Costco in Toronto every month, and we update it 
for the same drugs, same milligrams, same doses. The Costco in 
Toronto is always over $1,000 cheaper than the Costco in 
Chicago. I will accept the theology of you and the philosophy 
of choice. Bought in. Done. Sold. Let's have a competition and 
choice between a Medicare negotiation price versus United 
Health, WellPoint, and any of the other 43 plans.
    I want choice. Not a conscripted choice; a choice of direct 
negotiations or private market negotiations. Let's have choices 
and then let the consumer choose.
    Dr. MCCLELLAN. I am not sure what the question is. If it is 
about should Medicare rely on drug importation for all of its 
seniors, I am not sure the numbers work out.
    Mr. EMANUEL. That is not what I asked.
    Dr. MCCLELLAN. Are you asking for a VA option in Medicare?
    Mr. EMANUEL. Sure.
    Dr. MCCLELLAN. That comes with--I would like to see the 
specific proposal, because that would come with a very narrow 
access to pharmacies, a 75 percent use of mail-order 
prescriptions rather than community-based prescriptions--which, 
as you know in Chicago, is the way that most of your seniors 
get their drugs now--and would come with a specific government-
determined formulary and specific government-determined and 
government-paid staff positions, government-owned hospitals, a 
very strict network of care. It works great for VA 
beneficiaries.
    I am not sure it is the model that Medicare beneficiaries 
in this country want. They like choices of doctors. They like 
choices of pharmacies. I would like to see the specific 
proposal.
    Mr. EMANUEL. I spend time with seniors, since I have the 
oldest population of any of the 19 congressional districts in 
the country.
    Chairman JOHNSON OF CONNECTICUT. I am sorry, Mr. EMANUEL. 
We do want to get through.
    Mr. Hulshof.
    Mr. HULSHOF. Thank you, Madam Chairman.
    Dr. McClellan, it has been suggested that perhaps you will 
do something about this May 15 deadline. While you are at it, 
would you do something about this pesky April 15 tax deadline 
while you are at it?
    It was also referenced to you and your boss, Secretary 
Leavitt, when you and your other boss, the big boss, when you 
and the President came to Missouri recently--I mean no 
disrespect--the two of you were upstaged by the three 
Missourians on stage with you.
    It is a constructive critique but exactly--the gentleman 
who is healthy, who did not take prescription drugs, who signed 
up anyway as you recall; or the woman, delightful woman who had 
12 medications and she went on line and talked about the $200 a 
month she was saving with the choice; and even the old dairy 
farmer who said he knew his way around a dairy cow but not 
around a computer, and yet 1-800-Medicare gave him real 
savings.
    So, especially the steady success, even when our own 
colleagues and outside groups call public meetings just to bad-
mouth the program, I think the success we have had on behalf of 
America's seniors has been extraordinary.
    It was not that long ago we heard predictions, even within 
this room, even within this Committee, this will not work. Now 
we hear well, okay, maybe it is working but wait until the 
doughnut kicks in. We heard seniors will not have choices.
    Now the complaint is too many choices. We heard we will 
have to legislate the premium because we could not guarantee a 
$35 monthly premium. As you pointed out, now many seniors, 95 
percent of which have access to premiums half that, should they 
choose to make it.
    Again, it is great to see the progress and the aggressive 
efforts you have had.
    Now, here is the question, to follow up on my colleague, 
Mr. Camp of Michigan. There are a number of independent 
pharmacists in my district, and I have a meeting with several 
of them coming up, in fact, on Monday back home in Columbia, 
and they are concerned about the new landscape. There is a 
suggestion out there--in fact the next panel will suggest that 
there needs to be some legislation, a prompt-pay legislation 
that would direct plans to pay electronically submitted claims 
within 14 days; other claims within 30 days. That is one 
proposal, one suggestion. I know there is another one about a 
set dispensing fee.
    Let me yield to you, then. Are these good suggestions, why 
or why not?
    Dr. MCCLELLAN. First, let me again express the tremendous 
gratitude that we have to the work that pharmacists all over 
the country have done, especially in those early weeks of the 
program when we were implementing a new benefit for more than 
20 million people on the same day. They did a tremendous amount 
of work to help people get the drugs they need, and since that 
time have been giving us a steady stream of constructive ideas 
about how to make the program work better. Those ideas have 
translated into some steps that are reducing costs for 
pharmacies and helping them improve quality of care as well. I 
will talk about those in a second.
    With respect to specific legislation, I would like to 
obviously talk to you more about any ideas. I am concerned 
about proposals that would get us directly involved in 
negotiating contracts or setting prices. Those tend not to keep 
up with modern medicine and may not lead to the most effective 
ways of dealing with care.
    I would be particularly concerned about steps that might 
actually increase costs of drugs for beneficiaries and for the 
overall program. With that in mind, I think there are a lot of 
steps that we can and are taking together with the Nation's 
pharmacists to reduce their costs and improve quality of care.
    Let me give you a couple of examples. With the National 
Community Pharmacists Association (NCPA) we have worked with 
the health plans to come up with a standard set of codes that 
are going to be used for most of the transactions that up until 
now have required pharmacists to look things up in a book or 
make a call to a health plan.
    By having standard consistent coding in the pharmacy 
computers for things like prior authorizations or off-formulary 
drugs, we can reduce their administrative costs significantly 
and make their job easier. That means more time for serving the 
beneficiaries that they really care about.
    Second, we started a new collaboration called the Pharmacy 
Quality Alliance, partially led by the NCPA, but again working 
with health plans and consumer groups and really all of the 
health care stakeholders to do a better job of identifying and 
then supporting high-quality pharmacy care.
    I am a physician. I have seen this in my own practice. You 
get squeezed with payment rates coming down, and it just gets 
harder and harder to make that up on the volume. So, what we 
want to do is support a business model I think many pharmacists 
want to pursue, where they get paid more when they take steps 
to help beneficiaries lower their drug costs and help them get 
better quality of care. There are so many ways pharmacists can 
do that: by helping to educate people about generics, by 
helping them with problems of medication interactions, by 
improving medication compliance.
    Many patients don't comply with the prescription they get. 
That is the next challenge we will meet. We will do it with 
help from the pharmacists. So, there are a lot of steps we can 
take together to improve pharmacy business, improve quality, 
and reduce costs that I think might be worth pursuing in the 
short term.
    Chairman JOHNSON OF CONNECTICUT. Dr. McClellan, if we could 
go to the two members who are not----
    Dr. MCCLELLAN. Absolutely, I would be happy to stay for 
those.
    Chairman JOHNSON OF CONNECTICUT. Mr. Herger of California.
    Mr. HERGER. Thank you. Dr. McClellan, in your statement you 
write: For the 10-year period of 2006 to 2015 the net total 
costs of the drug benefit to Medicare is now estimated to be 
about $130 billion less. In addition, the State phased-down 
contributions are now projected to be $37 billion less. Not 
only have there been reductions in the cost of prescription 
drugs, market forces have allowed for more attractive 
alternatives for beneficiaries. In fact, CMS research has found 
that the majority of new enrollees have chosen plans offering a 
plan design other than the standard drug benefit.
    Doctor, does CMS have plans to improve the display of 
comparable plan information, to make it easy as possible for 
Medicare beneficiaries to review plan options and make an 
apples-to-apples comparison?
    Dr. MCCLELLAN. Congressman, we are taking steps to do that 
now that we have got a clearer idea of what beneficiaries 
value. As you said, it is not the standard benefit. If we had 
tried to come up and guess what benefit package they wanted I 
think we might not have gotten it right. Now that we are seeing 
what they actually want, we are setting up comparison systems 
that focus on the key dimensions that matter to beneficiaries.
    What we are seeing that matters is the premium, the overall 
out-of-pocket costs for the drugs that can be expected; but 
also some important benefit features like whether or not there 
is a deductible, whether or not there is a co-insurance, 
meaning the beneficiary pays a percentage of the drugs, or a 
flat copayment, a flat rate; whether or not there is coverage 
in the so-called coverage gap.
    Those dimensions seem to be very important to our 
beneficiaries and we are improving our side-by-side display of 
plans to help beneficiaries focus in the key dimensions that 
they are telling us are important to them in their own choices.
    Mr. HERGER. Dr. McClellan, I want to thank you for the job 
you have done, looking at the magnitude of what you have done, 
the job to roll out this entirely new program.
    I had a visit in one of my town hall meetings a few weeks 
ago with a pharmacist in one of my small communities of 
Weaverville, California, and to hear him say how good the 
program was working, how happy those that signed up were when 
they were coming in. As a matter of fact, he said because the 
costs were lower, they were actually purchasing more drugs. 
That was because they needed more and they could not afford it 
before.
    So, again, I think you are doing a great job. We certainly 
have a ways yet to go, but considering the challenge, I want to 
commend you. Thank you, Madam Chairman.
    Chairman JOHNSON OF CONNECTICUT. Thank you. Mr. Becerra.
    Mr. BECERRA. Thank you, Madam Chair. Especially thank you 
for letting those of us who are not on the Subcommittee to ask 
questions.
    Dr. McClellan, thank you very much for extending your stay 
here. We appreciate that very much. We hope you continue to 
work for that eventual goal of getting as many people enrolled 
as possible.
    A quick question to you, and I am going to try to keep, 
Madam Chair, my questions under the 5 minutes. So, please feel 
free to gavel me as soon as that red light comes on, if it 
does.
    The call centers. We know there are some issues with the 
call centers. The volume in some cases has increased and, 
obviously, for the next 2 weeks we expect it to be much higher 
than it has been in the past. I know you had a contractor go 
out there to monitor some of these call centers from some of 
these plans to find out what is going on. Some are not doing as 
good of a job as others.
    Would it not be helpful for beneficiaries to have access to 
the information that this contractor found out about the call 
centers--who is doing well, who is not doing well--so that 
these beneficiaries can make an informed decision on which plan 
will suit them best?
    Some plans have heeded your call to try to be more 
aggressive in handling the work that is coming through from 
those who are inquiring about their plans. Others are not. I 
would think that we would want to let the American public, the 
taxpayers, know which plans are really trying to do a good job 
of marketing themselves to those they will give money, or from 
whom they will get money to offer the plan.
    So, you have this contractor who did this examination of 
the call centers from the various health plans. Why not make it 
available before the May 15 deadline so people can see which 
plans are really trying to do the work of attracting their 
business?
    Dr. MCCLELLAN. We are doing all we can to monitor the plan 
performance and so we have got a contractor that is now 
checking on the wait times. That full process has been in place 
just for a few weeks, and we do not yet have reliable data at 
the plan level.
    What I can tell you is that we do want to make that 
available as soon as possible, when we have reliable estimates. 
What I can also tell you is some good news in terms of wait 
times. The vast majority of plans are answering the vast 
majority of calls in under 5 minutes. As we get more precise 
information, we will make it available.
    Mr. BECERRA. Can I ask you what more you will be doing to 
try to make sure that folks who are not as proficient in 
English or are suffering from a particular disability, hearing 
disability, speech impediment, those who are going to have a 
little bit more difficulty trying in these last hairy weeks to 
make sure they do the right thing, that they are given access 
to people that can help answer the questions they will have on 
making a decision on which plan to enroll.
    Dr. MCCLELLAN. That is very important to me because that 
describes a lot of our beneficiaries. We have not only ramped 
up our whole customer support staff. We have got more than 
6,000 representatives. It is all hands on deck between now and 
May 15. We have also made sure that all of our help lines, all 
of our major Web pages, are available in English and Spanish. 
We have increased our partnerships with groups that specialize 
in other languages, more than 16.
    Mr. BECERRA. The difficulty I have with what you just said 
is that we know that the vast majority of seniors, period, have 
not signed up to your Web page.
    Dr. MCCLELLAN. Call lines, too.
    Mr. BECERRA. You have a lot of folks who do not sign on to 
the Web page. Those who are limited English-proficient are less 
likely to sign on to the Web page as well, and have 
difficulties with your call center.
    So, I hope what you will do is you will ramp up the 
services for those who are really trying to make informed 
decisions, but are not gaining access to people who can give 
them the information they need.
    Dr. MCCLELLAN. That is why we are partnering with groups 
like the National Alliance for Hispanic Health. They are 
helping us with community-based events. We are doing faith-
based events, I think, in your district. I want to thank you 
for the help with supporting many of those. It is that local 
grassroots outreach that is really making a difference with 
many of these hard-to-reach populations, and we are 
accelerating all of that between now and May 15.
    Mr. BECERRA. Hopefully, May 15 can be moved back a bit. I 
know a number of us are very concerned. We appreciate that you 
at least came here to tell us a little bit about what is going 
on.
    Thank you, Madam Chair. I yield back.
    Chairman JOHNSON OF CONNECTICUT. As we close, want to take 
one last look at the chart that I talked about at the 
beginning. The tallest silo on the left shows that the earned 
income tax credit for the elderly, first passed in 1975, still 
reaches out to only 68 percent of the eligible seniors. 
Medicaid for the elderly only encompasses and touches 60 
percent of the eligible seniors. Supplemental security income 
reaches only 53 percent. Food Stamp reaches only 30 percent.
    So, truly, Dr. McClellan, it is outstanding that you are 
moving now beyond the 70 percent and the 80 percent and looking 
at the possibility before the May 15 deadline and certainly 
through the low-income people that will register thereafter, 
you are looking at 90 percent of the 42 million seniors either 
in the Medicare program or in a position where they did not 
need it and therefore didn't sign up.
    To have only 4 million left, I expect you will have by May 
15, and with May 15 and the follow-on work of both agencies 
with the low-income seniors that have special eligibility, it 
is really a powerful performance that you and all the good 
workers at CMS and the SSA and your partners throughout the 
State and local governments and all of your many partners in 
the nonprofit sector have turned in.
    The seniors have got it. They are signing up because they 
save money. They get protection from poor drug interactions. 
They get protection against catastrophic drug costs, equally 
important, they get to tailor the program to themselves.
    I think it has been broadly missed that whether you go to 
the doctor or whether you do not, you pay $88 a month for Part 
D. This plan, if you do not use drugs in my district, you can 
get the $7.35 variety. In California, I understand they have a 
$5.25 variety. I think in some other States they even have a 
lower cost variety than that.
    If you use a lot of drugs, you can get the higher confident 
premium and being covered during the doughnut hole, so to 
speak.
    So, what is nice about this program is that it is not one-
size-fits-all; government could not provide that kind of choice 
to our seniors. Indeed, as they live longer, as they live 
healthier lives, having that kind of choice is extremely 
important. You, having that delivery system that you have 
built, is the only hope that Medicare can begin to focus on 
helping seniors use our health benefits, our preventive 
benefits, and lead healthier lives and be financially more 
secure, therefore.
    So, thank you both very much for the hard work of you and 
all those behind you, and for your testimony here today. Thank 
you.
    The Subcommittee will recess for about 10 minutes while we 
go over and vote. Maybe even less.
    We are going to take the panel right away after the first 
vote, and we will be here, then, during the debate on the 
motion to recommit and part of the next vote. Then we will have 
to hear the rest of the panel when we come back. We will be 
back as soon as we can, probably 8 to 10 minutes, and proceed 
with Panel II.
    Thank you very much Dr. McClellan and Ms. Disman.
    [Recess.]
    Chairman JOHNSON OF CONNECTICUT. The second panel will 
gather. We will reconvene. Ms. Everett, would you please 
proceed. Susan Everett of Medicare Today.
    Thanks to my colleagues for getting back. We have about 15 
minutes, 20 minutes.

      STATEMENT OF SUSAN EVERETT, NORTH CAROLINA REGIONAL 
      COORDINATOR, MEDICARE TODAY, RALEIGH, NORTH CAROLINA

    Ms. EVERETT. Okay, I will talk fast.
    Chairman Johnson and Members of the Subcommittee, thank you 
for the invitation to join you today and for the opportunity to 
testify regarding the implementation of the Medicare Part D 
prescription drug benefit.
    My name is Susan Everett, and I am representing Medicare 
Today, a partnership of over 400 national and local 
organizations that have spent the last several months providing 
information to literally millions of Medicare beneficiaries.
    I am a regional coordinator for Medicare Today and have 
been personally involved in numerous education and enrollment 
events in Virginia--Virginia, Kentucky, North Carolina, 
Tennessee, Maryland and West Virginia.
    Let me begin by telling you a story about a woman I met at 
one of our events. Her name is Doris, and she is from Newport 
News, Virginia. Doris originally wanted nothing to do with the 
Medicare Part D benefit. She had heard so much negative 
commentary about it from critics who were quoted by the media 
saying it was too complicated and wouldn't save anyone any 
money. She was so discouraged by what she heard that she 
decided it wasn't for her.
    Then Doris ran into some health complications that required 
a new prescription costing more than she could afford on her 
fixed income. Her sister convinced her that she should at least 
come to the Medicare Today event that we were doing in her 
community to learn a little about the program firsthand.
    Well, once Doris got there, we not only ran her information 
through the CMS plan finder and found a plan that would save 
her money, but we also connected her with the SSA official on 
site and got her enrolled for low-income assistance. Today 
Doris doesn't have to wonder whether she can afford her 
medicine or not.
    Doris' story goes to the heart of my testimony today. The 
Part D implementation process has, by and large, worked. It 
hasn't been perfect, but I don't see how any program of this 
magnitude could be perfect in its first year of operation. 
Because the Centers for Medicare and Medicaid Services created 
tools for beneficiaries to use to find the best plans for their 
circumstances, and because so many organizations like ours are 
on the ground, interacting every single day with beneficiaries, 
the implementation process has been a positive one.
    In 2005 and thus far in 2006, Medicare Today has conducted 
over 2,500 beneficiary events. We have provided information to 
over 5.5 million beneficiaries and helped enroll over half a 
million, not counting those who enrolled on their own after 
attending one of our events. We have trained 175,000 people in 
all 50 States so that they are qualified to help Medicare 
beneficiaries enroll in the Part D program.
    I could fill the rest of this evening with anecdotes about 
people who have been helped through this effort, but I want to 
give you some empirical evidence as well regarding the 
effectiveness of the implementation effort.
    The Medicare Today partnership commissioned an American 
viewpoint survey of 1,000 seniors in April, asked whether 
enrolling was easy or difficult. Seventy-two percent said they 
found it very or relatively easy, to just 20 percent who said 
it was very or relatively difficult.
    We also asked those who were self-enrolled if they 
encountered any problems in enrolling; 89 percent said they had 
no problems. I think these are very solid results for a major 
program in its first year of existence.
    We have learned a great deal over the past few months. We 
have learned that advertising and mass messaging is important, 
but is not a substitute for meeting people and answering their 
questions face to face. We have learned that to reach low-
income seniors and to get them the assistance they need, you 
have to work through established systems such as Meals-on-
Wheels programs and subsidized housing facilities.
    We have also seen the value of public-private partnerships, 
having worked very successfully with SHIP programs and Area 
Agencies on Aging. A good example of this collaborate effort is 
seen in the work of one of our partners, Ascension Health, and 
its many hospitals and health services throughout the country.
    In Bridgeport, Connecticut, to name one instance, the 
parish nurses of Ascension St. Vincent Health Services worked 
with the State to have computer-equipped vans at churches to 
educate and enroll parishioners. This type of effort has been 
very successful and well received.
    I want to thank the members of this Subcommittee and this 
Congress for creating this drug benefit for my new friend Doris 
in Virginia and the millions more like her whose lives are made 
better by it.
    I hope I have given you a useful on-the-ground perspective 
on what I believe has been a very successful enrollment 
process. It is my hope and belief that the lessons we have 
learned will make the next open enrollment period even more 
productive and problem-free.
    Thank you, and I will be pleased to answer your questions.
    Chairman JOHNSON OF CONNECTICUT. Thank you very much.
    [The prepared statement of Ms. Everett follows:]

     Prepared Statement of Susan Everett, North Carolina Regional 
          Coordinator, Medicare Today, Raleigh, North Carolina

    Chairman Johnson and Members of the Subcommittee. Thank you for the 
invitation to join you today and for the opportunity to testify 
regarding the implementation of the Medicare Part D prescription drug 
benefit.
    My name is Susan Everett, and today I am representing the Medicare 
Today partnership, an alliance of over 400 organizations representing 
seniors, patients, health care providers, employers, caregivers and 
many others. The members of Medicare Today have spent the last several 
months working personally with Medicare beneficiaries, providing 
information and enrollment assistance to literally millions of 
individuals. I am a regional coordinator for Medicare Today and have 
personally been involved in numerous education and enrollment events in 
Virginia, Kentucky, North Carolina, Tennessee, Maryland and West 
Virginia.
    Let me tell you a little about what I have learned from meeting 
with and assisting hundreds of Medicare beneficiaries, and then I'll be 
pleased to answer your questions.
    When the Part D enrollment period began last November, I will admit 
that my optimism was guarded. We were introducing people to a brand-new 
program, and seniors tend to be naturally skeptical consumers. And that 
skepticism was heightened by the amount of negative commentary in the 
media from people saying the program wouldn't work, it wouldn't really 
save seniors any money, it was too complicated.
    I met, for example, with a woman named Doris from Newport News, 
Virginia. She had heard so much negative commentary about the Medicare 
drug benefit that she really wanted nothing to do with it. Then, after 
she had some health complications that required a new prescription 
costing more than she could afford on her fixed income, her sister 
convinced her that she should at least come to the Medicare Today event 
we were doing in her community because she had nothing to lose from 
hearing a little about the program.
    Well, once Doris got there, we not only ran her information through 
the CMS PlanFinder and found a plan that would save her money, but we 
also connected her with the Social Security Administration official on 
site and got her enrolled for low-income assistance. Today, Doris 
doesn't have to wonder whether she can afford her medicine or not.
    And Doris's story goes to the heart of my testimony today, Chairman 
Johnson. The Part D implementation process has, by and large, worked. 
It hasn't been perfect. I don't see how any program of this magnitude 
could be perfect in its first year of operation. But because the 
Centers for Medicare and Medicaid Services has created tools for 
beneficiaries to use to find the best plan for their circumstances, and 
because so many organizations like ours are on the ground, interacting 
every single day with beneficiaries, the implementation process has 
been a positive one.
    We come to this conclusion from considerable experience. In 2005 
and thus far in 2006, Medicare Today has conducted over 2,500 
beneficiary events, almost 500 of them in coordination with members of 
Congress. We have provided information to over 5.5 million 
beneficiaries and helped enroll over half a million, and that does not 
include the people who enrolled on their own after attending one of our 
events. We have trained over 175,000 people in all 50 states, so that 
they are qualified to help Medicare beneficiaries enroll in the Part D 
program.
    We've learned a great deal as we've gone along. We've learned, for 
example, that advertising and mass-messaging is important, but it is 
not a substitute for meeting people face-to-face and being able to 
answer their questions about a brand new program. We've learned that to 
reach low-income seniors and help them get the assistance they need, 
you have to work through established systems, such as meals-on-wheels 
programs and subsidized housing facilities. And we have also worked, 
from the beginning, with SHIP programs and area agencies on aging with 
great success. We've learned over the last few months that these 
public-private partnerships can make considerable progress in locating 
and linking people with the benefits they need.
    A good example of this collaborative effort is seen in the work of 
one of our partners, Ascension Health, and its many hospitals and 
health services throughout the country. In Bridgeport, Connecticut, for 
example, Ascension's St. Vincent's Health Services hosted several 
events at their facilities and St. Vincent parish nurses worked with 
the state and with the Area Agency on Aging to have computer-equipped 
vans at churches to educate and enroll parishioners. This type of 
effort has been very successful and well-received.
    It is my hope and belief that the lessons learned by us, by CMS, 
and by other groups like the Medicare Rx Education Network, the ABC Rx 
Coalition, AARP and others will make the next open enrollment period 
even more successful and problem-free.
    I can share with you my personal experiences, but I can also offer 
some empirical evidence. The Medicare Today partnership commissioned 
the American Viewpoint public opinion research firm to do a survey of 
1,000 seniors in April regarding the Part D enrollment process. Asked 
whether enrolling was easy or difficult, 72 percent said ``very or 
relatively'' easy compared to just 20 percent that said ``very or 
relatively'' difficult.
    We asked those who were self-enrolled if they encountered any 
problems in enrolling. 89 percent said no. Only eight percent said yes. 
I think these are very solid results for a program in its first year, 
especially one that was launched amidst so much criticism.
    Chairman Johnson, there is certainly more I could say, were it not 
for the time limitations. Let me leave you, though, with one anecdote 
that occurred recently at a Medicare Today event near Lexington, 
Kentucky.
    At this event, I met an elderly gentleman who wanted to learn more 
about the Part D program. I learned through our conversation that he 
could not read or write, so that meant it took quite a bit of extra 
time to explain the process to him and to tell him how a prescription 
drug plan would work for he and his wife. As our conversation 
continued, I also learned that he and his wife had been cutting pills 
in half, skipping some of their doses and not getting prescriptions 
filled because they couldn't afford them. It was an emotional moment 
for both of us when I explained that he would save nearly $300 per 
month and wouldn't need to cut pills in half anymore.
    I want to thank the members of this subcommittee and this Congress 
for creating this drug benefit, for this gentleman in Kentucky and the 
millions more like him whose lives are made better by it. I hope I've 
given you an on-the-ground perspective on the enrollment process, and I 
will be pleased to answer your questions.

                                 

    Chairman JOHNSON OF CONNECTICUT. Dr. Schiesser.

  STATEMENT OF HEATH SCHIESSER, PRESIDENT, PRESCRIPTION DRUG 
       PLAN, WELLCARE HEALTH PLANS, INC., TAMPA, FLORIDA

    Mr. SCHIESSER. I am not a physician, but I am flattered.
    Good afternoon. I am Heath Schiesser, president of 
Prescription Drug Plans for WellCare Health Plans. I appreciate 
this opportunity to testify about the implementation of the 
Medicare Part D program.
    WellCare has been privileged to serve Medicare 
beneficiaries for more than 10 years. According to the most 
recent data from CMS, approximately 850,000 Medicare 
beneficiaries are enrolled in prescription drug plans offered 
by our company in all 50 States. Another 70,000 beneficiaries 
received prescription drug coverage through our Medicare 
Advantage health plans. WellCare is strongly committed on a 
long-term basis to meeting the health care needs of Medicare 
beneficiaries.
    We applaud Congress for enacting the Medicare Modernization 
Act of 2003. We thank CMS for its tremendous work in achieving 
a largely successful implementation of the Part D program.
    My testimony today will focus on three areas: First, 
examples of the savings and the value of the Part D program is 
delivering to beneficiaries; second, steps we are taking to 
communicate with beneficiaries and further strengthen the 
program; third, the importance of providing options to 
beneficiaries.
    WellCare is giving beneficiaries the option of choosing 
prescription drug coverage that goes well beyond the minimum 
requirements established by the MMA. We are offering three PDP 
alternatives across the Nation, all of which offer a $0 generic 
drug copay with no deductible and low premiums.
    We also offer Medicare Advantage plans that offer Medicare 
Part D coverage, along with lower physician and hospital 
copays, for no monthly plan premium, including no Part D 
premium, in 50 counties across 6 States.
    To more clearly illustrate the value the Part D program is 
delivering to Medicare beneficiaries, I would like to review 
the experiences of two seniors who are enrolled in a WellCare 
prescription drug plan. Mike is a Medicare beneficiary in 
California, who will probably save about $2,400 this year as a 
member of a WellCare plan. He is taking six prescriptions that 
would cost about $520 per month retail. By comparison, with our 
discounts and the coverage provided by Part D, he will save 
about 38 percent this year.
    Ann is a Medicare beneficiary in New Hampshire, who will 
probably save about $700 this year and avoid the coverage gap 
as a member of our Signature plan. She is taking two drugs 
whose combined cost ordinarily would cause her to reach the 
coverage gap in about November. However, by switching to 
generic alternatives, Ann's monthly drug care cost will 
probably drop to about $70 per month, which will allow her to 
avoid courage gap entirely. Even better, since the WellCare 
Signature plan is zero dollars for generic copays, her monthly 
copays for those drugs will be zero. As a result, Ann's monthly 
premium of about $24 for her Part D plan will probably be her 
only expense on prescription drugs for the entire year.
    As for how we are working to strengthen the program, I 
would like to briefly highlight three key areas. First, in 
January, Part D programs across the Nation experience extremely 
high call volumes, largely because of problems of eligibility 
data and operational difficulties in pharmacies. WellCare moved 
quickly to adopt corrective measures, dramatically increasing 
our staff, working overtime, and refining our process.
    Between January and April, we increased our staffing by 
approximately 75 percent. Today WellCare is consistently 
delivering service in excess of CMS requirements. Our average 
time to answer has been under 20 seconds over the last 2 
months.
    Also, we adopted transition plans in January, which CMS 
subsequently required all plans to extend to March 31. As we 
approach the end of this transition period, we took a number of 
steps to ensure a smooth shift into the normal application of 
our formulary, which have proven to be successful.
    Finally, at the industry level, WellCare and other plan 
sponsors have been working through our national trade 
association, AHIP, to address implementation issues in 
collaboration with the leading pharmacy and physician groups.
    These are just a few examples of the strong measures that 
WellCare and our industry as a whole are taking to help 
strengthen the Part D program and assure its long-term success.
    I also want to briefly note our concerns with proposals 
that would standardize benefit packages under the Part D 
program. We believe this is a bad idea for several reasons. 
First, millions of beneficiaries would be forced to leave the 
benefits they have chosen and enter into a standardized plan 
that may not be the best option for their specific needs.
    Second, the standardization approach underestimates the 
abilities of beneficiaries to make thoughtful, informed 
choices.
    Finally, we think that instead of focusing on limiting 
choices, we need to be focusing on providing beneficiaries with 
better information.
    Third, the standardization proposals overestimate the 
ability of the experts to design benefits that will meet the 
beneficiaries' needs.
    In closing, I hope you will agree that the Part D program 
is providing significant value to beneficiaries, that WellCare 
and other sponsors are working hard to ensure the success of 
the program, and that beneficiaries are well served by a 
program that gives them a wide range of choices.
    Thank you for the opportunity to testify. I look forward to 
answering any of your questions.
    Chairman JOHNSON OF CONNECTICUT. Thank you very much.
    [The prepared statement of Mr. Schiesser follows:]

  Prepared Statement of Heath Schiesser, President, Prescription Drug 
           Plan, WellCare Health Plans, Inc., Tampa, Florida

I. INTRODUCTION
    Good afternoon, Madam Chairwoman and Members of the Subcommittee. I 
am Heath Schiesser, President of Prescription Drug Plans for WellCare 
Health Plans. For over 10 years, WellCare has been serving Medicare 
beneficiaries through health plans that offer high quality, 
comprehensive, affordable coverage. More recently, as participants in 
the new Medicare Part D prescription drug program, we have launched 
three new stand-alone Medicare prescription drug plans providing 
coverage that became effective on January 1, 2006. We consider it a 
great privilege to be able to serve Medicare beneficiaries throughout 
the nation.
    We appreciate this opportunity to testify about implementation of 
the Medicare Part D program. According to the most recent data released 
by the Centers for Medicare & Medicaid Services (CMS), approximately 
850,000 Medicare beneficiaries have enrolled in Part D prescription 
drug plans offered by WellCare in all 50 states. Another 70,000 
beneficiaries receive prescription drug coverage through WellCare's 
Medicare Advantage health plans.
    WellCare is strongly committed to meeting the health care needs of 
Medicare beneficiaries and we are excited about our participation in 
the new Part D program. This program, along with other provisions of 
the Medicare Modernization Act of 2003 (MMA), is providing important 
benefits and peace of mind to millions of Medicare beneficiaries. We 
applaud Congress for enacting this landmark legislation, and we thank 
CMS for its tremendous work in achieving a largely successful 
implementation of the Part D program within a relatively short period 
of time.
    In our testimony today, we will focus on: (1) the savings and value 
the Part D program is delivering to both beneficiaries and taxpayers; 
(2) the critically important role that competition based on benefit 
design has played in the program's success; (3) the experiences of 
beneficiaries who have enrolled in WellCare's Part D plans; and (4) 
specific steps WellCare and other plan sponsors are taking, in 
collaboration with CMS and other partners, to strengthen the program.

II. PART D IS PROVIDING VALUE TO BENEFICIARIES AND TAXPAYERS
    WellCare and other Part D sponsors are delivering more 
comprehensive benefits at a lower cost than the experts had predicted 
before plans developed their benefit packages for 2006. This outcome is 
largely a result of the fact that plans have developed a number of 
tools and techniques that have proven to be highly effective in making 
prescription drugs more affordable for consumers. This positive outcome 
is also a result of the success of the MMA legislation in creating 
strong and vibrant competition among health plans which has led to 
lower costs and better benefits for Medicare beneficiaries.
    WellCare is giving beneficiaries the option of choosing 
prescription drug coverage that goes well beyond the minimum 
requirements established by the MMA. WellCare offers three PDP 
alternatives across the nation. All three plans offer $0 generic drugs 
without any co-pay, no deductible, and low premiums starting as low as 
$17.13 in New York and averaging $22 across all our members. (Of 
course, our full-dual and low income subsidy members have their 
premiums paid entirely by Medicare.)
    WellCare also offers Medicare Advantage plans with Part D drug 
coverage in 53 counties that are home to more than 5.2 million Medicare 
beneficiaries. In all of these counties, WellCare offers plans that 
provide Part D coverage, plus lower physician and hospital co-pays, for 
no monthly plan premium--including no Part D plan premium. Furthermore, 
in 40 of those counties, 4.4 million beneficiaries have access to a 
WellCare plan with no monthly plan premium and $0 generics in the 
coverage gap.
    Much like WellCare, a wide range of plans across the nation are 
offering coverage that exceeds expectations. Many plans--including 
WellCare's Medicare Advantage plans--are providing additional benefits 
in the MMA-established ``coverage gap'' that begins after a 
beneficiary's annual drug expenditures exceed $2,250. Under the MMA, 
the standard benefit includes a coverage gap in which beneficiaries 
would pay 100 percent of their total drug costs exceeding $2,250 until 
their out-of-pocket expenditures reach $3,600. However, in all 50 
states, beneficiaries have the option of choosing a Part D plan that 
covers a portion of the costs in this coverage gap.
    The value offered by Part D plans also can be seen in the lower-
than-expected premiums that beneficiaries are paying. Before plans 
submitted their benefit packages for 2006, beneficiary premiums were 
projected to average $37 a month. However, according to CMS, the 
average premium for all prescription drug plans nationwide is actually 
$30 a month--almost 20 percent lower than originally expected--with a 
number of plans offering premiums that are far lower.
    In addition, many plans have deductibles below the $250 maximum 
standard, including 58 percent of all stand-alone prescription drug 
plans that offer zero deductibles.\1\ According to CMS,\2\ 69 percent 
of beneficiaries in stand-alone prescription drug plans and 89 percent 
of beneficiaries in MA-PD plans have selected options offering zero 
deductibles.
---------------------------------------------------------------------------
    \1\ AHIP analysis of CMS data, November 2005.
    \2\ CMS, Presentation by Abby Block, Director of Centers for 
Beneficiary Choices, April 5, 2006.
---------------------------------------------------------------------------
Savings Generated by Competition
    Overall, HHS has reported \3\ that beneficiaries who previously did 
not have drug coverage are now saving an average of $1,100 on their 
annual prescription drug costs by enrolling in the Part D program. 
Moreover, a recent CMS analysis \4\ found that beneficiaries who select 
the lowest-cost plan in their area can save up to 71 percent relative 
to the amount they would pay without prescription drug coverage.
---------------------------------------------------------------------------
    \3\ HHS, Secretary's Progress Report II on the Medicare 
Prescription Drug Benefit, February 22, 2006.
    \4\ CMS Office of Policy, Analysis of Savings Available Under 
Medicare Prescription Drug Plans, March 1, 2006.
---------------------------------------------------------------------------
    While all types of beneficiaries can save money by choosing Part D 
plans, financially vulnerable beneficiaries can expect to receive 
exceptionally large savings because of the low-income subsidies the MMA 
provides. On average, Medicare will pay more than 95 percent of 
prescription drug costs for these low-income beneficiaries.
    The savings available to low-income beneficiaries are measured by 
an August 2005 study, performed by PricewaterhouseCoopers,\5\ which 
concluded that beneficiaries with incomes at or below 150 percent of 
the federal poverty level and who are not on Medicaid can expect to see 
their annual out-of-pocket prescription costs drop from an average of 
$1,657 to $180 by participating in the new drug program. Another more 
recent study, conducted by the Lewin Group,\6\ found that beneficiaries 
without previous drug coverage who have one or more of five chronic 
conditions--arthritis, diabetes, hypertension, osteoporosis, or 
respiratory illness--can save 58 percent on their drug costs by 
enrolling in a Part D plan.
---------------------------------------------------------------------------
    \5\ PricewaterhouseCoopers, Medicare Tomorrow: Future Savings for 
Beneficiaries, August 25, 2005.
    \6\ The Lewin Group, Chronic Health Conditions & the New Medicare 
Part D Benefit: Savings on Frequently Used Medications, April 12, 2006.
---------------------------------------------------------------------------
    According to CMS data, the number of beneficiaries who are choosing 
this new benefit and receiving these savings is increasing by more than 
400,000 with each passing week. The agency recently announced that, as 
of April 18, almost 20 million Medicare beneficiaries were receiving 
prescription drug coverage through either stand-alone Part D 
prescription drug plans or Medicare Advantage health plans. Another 6.8 
million beneficiaries are benefiting from Part D subsidies that are 
partially supporting their retiree health benefits. Overall, the total 
number of Medicare beneficiaries with prescription drug coverage now 
exceeds 30 million.
    Taxpayers also are benefiting from plans' success in delivering 
quality prescription drug coverage at an affordable price. HHS has 
announced \7\ that the savings generated by competition in the Part D 
program are greater than expected and are reducing costs for Medicare. 
Since July 2005, the projected cost of the Part D program for 2006 has 
declined by $7.6 billion. Similarly, projected program costs for the 
next five years have declined by $30 billion according to HHS' most 
recent estimates. These lower-than-expected costs mean that taxpayers 
are receiving high value for the dollars they invest in the Part D 
program.
---------------------------------------------------------------------------
    \7\ HHS, Secretary's Progress Report II on the Medicare 
Prescription Drug Benefit, February 22, 2006.
---------------------------------------------------------------------------
Sustaining These Benefits
    Our experience at WellCare suggests that benefit design matters. We 
have seen strong enrollment in our plans precisely because we have 
developed plans that are meeting beneficiary needs. While some suggest 
that standardization of benefits would simplify the program, proponents 
of this approach are overlooking the reality that innovation will 
continue to flourish as long as plans are competing based on their 
ability to design benefits that are appealing to beneficiaries. This 
element of competition is critically important in sustaining the high 
quality, comprehensive, affordable options that beneficiaries are 
seeing in this first year of the Part D program.
    A review of the program indicates that plans are offering different 
benefit packages, allowing beneficiaries to choose options that better 
meet their needs with coverage that goes far beyond the minimum 
requirements. It would be a serious mistake for Congress to undermine 
these choices by requiring plans to adhere to rigid standardization 
requirements. Allowing the market to produce high quality choices 
through healthy competition is a much more effective way to meet 
beneficiaries' needs than mandating one-size-fits-all benefits 
packages.
    The vast majority of beneficiaries have responded to these choices 
by selecting benefit packages that differ from the minimum requirements 
set by the MMA. CMS data \8\ show that the standard defined benefit has 
been selected by only 16 percent of beneficiaries in stand-alone 
prescription drug plans and by only 5 percent of beneficiaries in 
Medicare Advantage plans with prescription drug benefits (MA-PD plans). 
All other beneficiaries are choosing plans that offer enhanced benefits 
or alternatives to the standard benefit.
---------------------------------------------------------------------------
    \8\ CMS, Presentation by Abby Block, Director of Centers for 
Beneficiary Choices, April 5, 2006.
---------------------------------------------------------------------------
    The value of choice has been demonstrated by WellCare for years in 
our Medicare Advantage business. For example, in Broward County, 
Florida (the Fort Lauderdale area), we offer three plans: Choice, Value 
and Dividend, each of which have attracted a large number of members. 
All three plans offer Part D coverage with $0 generics and no 
deductible. They also offer reliable co-pays rather than co-insurance, 
and lower physician and hospital costs for Medicare beneficiaries.

          The Choice product offers co-pays of $0, $10 and $50 
        for primary care physician (PCP) office visits, specialist 
        office visits, and per-day hospital charges for the first five 
        days in the hospital. Choice also offers $0 generics in the 
        coverage gap.
          By comparison, our Value product offers $0 co-pays 
        for PCP office visits, specialists and hospital stays, but does 
        not provide coverage in the coverage gap.
          Finally, the Dividend product has higher co-pays of 
        $0, $15 and $50 with no coverage in the coverage gap, but 
        refunds $87.70 per month towards the member's Medicare Part B 
        premium.

    To summarize, these three products offer beneficiaries the choice 
of coverage in the gap, $0 co-pays, or over $1,000 a year toward Part B 
premiums. These are meaningful differences that recognize the fact that 
beneficiaries want a range of options to meet their particular needs 
and circumstances.
    There is another advantage to having plans compete based on benefit 
designs. This approach creates incentives for innovation and makes the 
marketplace competitive. Just look at WellCare's success in signing up 
people into its PDP programs. We did not do it with a big, nationally 
recognized brand name like AARP or Blue Cross. Despite being well known 
and respected in many of our markets, WellCare is virtually unknown in 
most of the country. Nor can our success be attributed to an expensive 
advertising campaign. Rather, I believe WellCare attracted members by 
providing a distinctive benefit package with $0 generics and no 
deductible. And as long as there is flexibility in creating different 
benefit packages, there will continue to be vibrant efforts to better 
understand and meet the needs of Medicare beneficiaries.

Tools and Techniques for Increasing Value
    WellCare is able to offer high quality, affordable coverage through 
the Part D program because we have developed tools and techniques to 
reduce out-of-pocket costs for beneficiaries and, at the same time, 
improve quality by reducing medication errors and promoting clinically 
sound drug use.
    Drug Interactions: Before Part D, if a Medicare beneficiary 
purchased drugs at more than one retail location, or perhaps via the 
mail, no one entity had a complete picture of all the drugs that he or 
she was taking. Now, through their pharmacy benefit manager, plans are 
able to review all the drugs that an individual is taking and identify 
potentially dangerous interactions before the drug is dispensed to the 
member. Likewise, plans are also able to monitor dosages and frequently 
abused drugs, like narcotics, and assure that they are treated 
appropriately.
    Screening for Excessive or Sub-Therapeutic Dosages: In some 
instances, we have received requests for up to 900 tablets of a drug 
whose normal 30-day supply is only 30 or 60 tablets. Recognizing the 
potential for abuse, we typically will contact the prescribing 
physician to determine if the prescription is appropriate. Another 
circumstance in which we may take similar action is when we receive 
requests for low dosages of a schizophrenia drug that is sometimes used 
off label as a sleeping aid--a usage that could have a detrimental 
effect on a patient's health.
    Encouraging Generic Drug Use: One of the most important steps 
Medicare beneficiaries can take to minimize their drug costs, and in 
many cases avoid the coverage gap, is to utilize generic drugs, which 
cost on average less than 20 percent of their brand counterparts. We 
encourage this by designing products with $0 generic drug co-pays and 
by adopting system edits that substitute generic drugs for more 
expensive brand name drugs. In addition to helping WellCare keep plan 
premiums low, this approach minimizes the cost to the beneficiary and 
makes the most of the coverage that Medicare Part D provides. 
Interestingly, over 80 percent of the most prescribed brand drugs have 
a generic therapeutic alternative available. Of course, if the member's 
physician has particular concerns that make the generic an unacceptable 
alternative, then the member can continue to take the more expensive 
brand name drug.
    Discounts: Another way WellCare helps beneficiaries avoid the 
coverage gap, or help them minimize costs if they do reach the coverage 
gap, is by negotiating attractive discounts with retail pharmacies. For 
example, WellCare has negotiated prices that are more than 15 percent 
below typical cash prices. This clearly helps beneficiaries make the 
most of the Part D benefit.
    I recognize that there has been some concern about the effect of 
Part D on independent pharmacies. A few facts to clear the air. First, 
of the 52,000 pharmacies in our network, approximately 16,000 are 
independent and are valuable partners in serving our members. They are 
an important part of our nation's system for delivering drugs to 
members. Second, our payments to independent pharmacies are, on 
average, about 1-3% higher than our payments to chain pharmacies. 
Third, our payments to independent pharmacies are timely; we receive 
bundled claims from our pharmacy benefit manager twice a month and we 
typically pay these claims, by electronic wire transfer, within 3 to 5 
days after receiving them.
    Formularies: Formularies, which also play an important role in 
controlling costs, must comply with stringent standards which ensure 
that they include drugs necessary to treat all major diseases. Medical 
professionals play a central role in developing formularies. To ensure 
that formulary decisions are clinically appropriate, health plan 
Pharmacy & Therapeutics Committees--comprised principally of physicians 
and pharmacists--identify drugs for inclusion on health plan 
formularies based on documented safety, efficacy, and therapeutic 
benefit.
    A number of studies demonstrate that these strategies are highly 
effective in making prescription drugs more affordable for consumers. 
For example:

          The Congressional Budget Office (CBO) has estimated 
        \9\ that private sector management techniques employed by 
        Medicare Part D plans would save individuals 20-25 percent off 
        retail prices for prescription drugs.
---------------------------------------------------------------------------
    \9\ CBO, A Detailed Description of CBO's Cost Estimate for the 
Medicare Prescription Drug Benefit, July 2004.
---------------------------------------------------------------------------
          A 2003 study,\10\ conducted by Associates and Wilson 
        on behalf of America's Health Insurance Plans (AHIP), found 
        that the PACE program in Pennsylvania--the largest state 
        pharmacy assistance program in the nation--could save up to 40 
        percent by adopting the full range of private sector pharmacy 
        benefit management techniques.
---------------------------------------------------------------------------
    \10\ Associates & Wilson, Prescription Drug Benefit Management: 
Improving Quality, Promoting Better Access and Reducing Cost, October 
2003.
---------------------------------------------------------------------------
          In addition, the Government Accountability Office 
        (GAO) has reported \11\ that pharmacy benefit management 
        techniques used by health plans in the Federal Employees Health 
        Benefits Program (FEHBP) resulted in savings of 18 percent for 
        brand-name drugs and 47 percent for generic drugs, compared to 
        the average cash price customers would pay at retail 
        pharmacies.
---------------------------------------------------------------------------
    \11\ Government Accountability Office, Federal Employees' Health 
Benefits: Effects of Using Pharmacy Benefits Managers on Health Plans, 
Enrollees, and Pharmacies (GAO-03-196), January 2003.

    These findings clearly demonstrate that the private sector has a 
strong track record of using its experience and capabilities to deliver 
affordable prescription drug benefits. At a time when federal resources 
are severely strained, it is important for policymakers to recognize 
the ability of health insurance plans to implement strategies that are 
enabling Medicare beneficiaries to receive the greatest possible value 
for the dollars the Medicare program is spending on their prescription 
drug coverage.

III. Beneficiary Experiences and Attitudes
    To more clearly illustrate the value the Part D program is 
delivering to Medicare beneficiaries, I would like to review the 
personal experiences of two seniors who are enrolled in WellCare's 
prescription drug plans. These real world examples demonstrate that 
beneficiaries are achieving significant savings on their prescription 
drugs by choosing Part D plans.
    ``Mike'' is a Medicare beneficiary in California who will probably 
save about $2,400 this year as a member of a WellCare plan. He is 
taking six prescriptions that would cost about $520 per month at 
retail. By comparison, with WellCare's pharmacy discounts and the 
coverage provided by Medicare Part D, he will save about 38 percent 
this year.
    ``Ann'' is a Medicare beneficiary in New Hampshire who will 
probably save about $700 this year and avoid the coverage gap as a 
member of WellCare's Signature plan. She is taking Nexium and Clarinex, 
which average about $240 per month combined at retail prices, or about 
$2,500 over the course of the year with our discounts. At that rate, 
she would reach the coverage gap in about November and spend about $250 
in the coverage gap. By switching to generic alternatives, her monthly 
total drug cost will drop to about $70 per month, which will allow her 
to avoid the coverage gap entirely. Even better, since the WellCare 
Signature plan has $0 generic co-pays, her monthly co-pays for those 
two drugs will be zero. As a result, Ann's monthly premium for her Part 
D plan will be her only expense on prescription drugs for the entire 
year.
    While these examples provide just a brief glimpse at the success of 
the Part D program, the experiences of these Medicare beneficiaries are 
not uncommon. Numerous surveys show that a large percentage of the 
overall Medicare population is pleased with the new program and the 
benefits it is delivering.
    In early March, Ayres, McHenry & Associates conducted two surveys 
to evaluate the attitudes of beneficiaries who already were covered by 
Part D plans. One survey \12\ focused on beneficiaries who chose plans 
on their own and the other focused on dual eligibles who were 
automatically enrolled in the program. Among seniors who voluntarily 
signed up for the program, 59 percent said they already were saving 
money and more than 80 percent reported that they had no problems 
related to enrollment or usage of their new benefits. Additionally, 65 
percent of enrolled seniors said they would recommend that other 
seniors sign up for the program, versus 8 percent who said they would 
not.
---------------------------------------------------------------------------
    \12\ AHIP, Most Medicare Drug Enrollees Already Saving, March 13, 
2006.
---------------------------------------------------------------------------
    The other survey \13\ found that among seniors who are dually 
eligible for both Medicare and Medicaid, 90 percent said they had 
experienced no problems using the new Medicare drug benefit. Another 4 
percent said they had a problem that was resolved, while 4 percent said 
they had a problem that was not yet resolved.
---------------------------------------------------------------------------
    \13\ AHIP, Ninety Percent of Low-Income Seniors Surveyed Say No 
Problems Using Medicare Drug Benefit, March 13, 2006.
---------------------------------------------------------------------------
    In recent weeks, these findings have been reinforced by numerous 
other surveys indicating that beneficiaries are well-served by the Part 
D program. These survey findings clearly indicate that a large majority 
of Part D enrollees already are saving money, have not had problems 
signing up for or using their new benefits, and would recommend the 
program to others.

IV. PLANS ARE WORKING TO FURTHER STRENGTHEN THE PROGRAM
    WellCare has been preparing for implementation of the Part D 
program for more than two years.
    We are proud to be a partner with CMS in working to ensure that the 
program is meeting beneficiary needs and continues to be strengthened 
on an ongoing basis.
    At every step of the implementation process, WellCare has provided 
leadership and offered input to CMS on measures needed to promote a 
smooth transition for beneficiaries. We have significantly expanded our 
customer service systems, we have reached out to pharmacists, and we 
have adopted transition policies to ensure that enrollees in our 
plans--including dual eligibles and low-income seniors--receive their 
medications on a timely basis.

Improvements to Customer Call Centers
    In January, WellCare's call centers--like other PDPs across the 
nation--experienced extremely high call volumes. These call volumes 
were related to problems with eligibility data and operational 
difficulties in the pharmacies. Since our staffing models did not 
anticipate these problems and the calls they would create, we were not 
adequately staffed to absorb these additional calls. As a result, the 
performance of our call centers initially did not meet the high 
standards we set for ourselves. Most other plans had similar 
experiences. Therefore, we moved quickly in early January to adopt 
corrective measures, dramatically increasing our staff, working 
overtime, and refining our processes. Between January and April, we 
increased our staffing by approximately 75 percent.
    Call volumes have moderated significantly as most of the 
eligibility and operational challenges have been resolved in the 
intervening months. Now, WellCare is consistently delivering service 
levels in excess of CMS requirements. In the month of April, WellCare 
answered 90 percent of our member calls and 87 percent of our 
pharmacist calls within 30 seconds. In March, those figures were 91 
percent and 93 percent, respectively. Our average time to answer has 
been under 20 seconds over the last two months.
    CMS has attempted to measure the performance of WellCare and other 
companies' call centers through an outside contractor. Unfortunately, 
this contractor's methodology appears to be flawed and is yielding 
results that are dramatically inconsistent with our data. We are 
working closely with CMS to urge improvements in the contractor's 
methodology. In the meantime, I am confident that the contractor's 
results, based on fewer than 80 calls per week, are less reliable than 
our data which is based on the thousands of calls we receive every 
week.

Transition to Formularies
    To ensure continuity of care during the initial implementation of 
the program, WellCare and other plan sponsors adopted transition plans 
in January to ensure that beneficiaries continued to receive an initial 
prescription for covered Part D drugs they had been taking that 
otherwise would have been subject to formulary rules. CMS subsequently 
required all plans to extend these transition policies through a 90-day 
period that ended on March 31.
    As we approached the end of this transition period, WellCare took a 
number of steps to ensure a smooth shift into the normal application of 
our formulary. First, we pro-actively communicated with members, 
pharmacists, and in some cases physicians to alert them to the fact 
that the transition would be ending soon and, additionally, to 
encourage a switch to formulary drugs. Second, we are phasing out the 
transition over several months to moderate the effect on members, 
providers and our own call centers. We have further increased our staff 
to be prepared to handle the requests for exceptions to our formularies 
in a timely manner. So far, we have succeeded in saving millions of 
dollars for members and taxpayers through the phasing in of our 
formularies, while at the same time maintaining call center times above 
CMS standards and continuing to respond to requests for exceptions to 
our formulary within 24 hours (versus the 72 hours required by CMS).

Simplifying the Exceptions Process
    On April 11, AHIP and the American Medical Association (AMA) 
announced a standard form to simplify the process by which physicians 
can request prior authorization and coverage of non-formulary drugs 
under the Part D program. This standard form was developed through the 
collaborative efforts of plan sponsors, an AMA work group, and several 
beneficiary advocates. CMS is expecting Part D plans to implement the 
standard form as a ``best practice'' as soon as possible and will 
require its adoption in the near future. Meanwhile, AHIP members are 
continuing to work with the AMA and other partners on auxiliary forms 
that can be used for specialized drugs that require more information.
    In addition to AHIP members and the AMA, other organizations 
involved in this collaboration include the American Psychiatric 
Association, the American Academy of Family Physicians, the American 
College of Physicians, the Medical Group Management Association, the 
National Council on the Aging, the Center for Medicare Advocacy, the 
Alzheimer's Association, the American Pharmacists Association, and the 
American Society of Consultant Pharmacists.
    The agreement on this standard form is an important step toward 
ensuring that physicians know how to help beneficiaries obtain their 
medications on a timely basis. It also clearly demonstrates our 
industry's strong commitment to simplifying administrative procedures 
and improving uniformity wherever possible.

Standardizing Messages for Pharmacists
    On April 18, AHIP joined the National Association of Chain Drug 
Stores (NACDS) and the National Community Pharmacists' Association 
(NCPA) in announcing a joint agreement on standardized electronic 
messaging that will promote the consistent use of key terms by Part D 
plans to assist pharmacists in better serving beneficiaries. The 
standardized electronic messages were developed to help pharmacists 
quickly determine the appropriate course of action for filling 
beneficiaries' prescriptions under four different circumstances: (1) 
when a particular drug is not covered; (2) when prior authorization is 
required; (3) when plan quantity or other coverage limitations have 
been exceeded; and (4) when the pharmacy is not part of the Part D 
plan's network.
    AHIP, the NACDS, and the NCPA have asked the National Council for 
Prescription Drug Programs (NCPDP) to endorse these messages at its 
upcoming meeting in May. The NCPDP previously adopted our 
recommendation to develop new codes for notifying pharmacists in clear, 
understandable terms when drugs are statutorily excluded from Part D 
basic benefits or are covered under Part B.
    This agreement on standardized messaging is strengthening the 
program by helping to eliminate a possible source of confusion for 
pharmacists, thus allowing them to provide more prompt and effective 
service to beneficiaries.

Ensuring Continuity of Care
    WellCare and other plan sponsors also have taken steps to balance 
the goals of: (1) ensuring continuity of prescription drug coverage for 
beneficiaries; and (2) using formulary management techniques to 
maximize the quality and cost-effectiveness of the Part D drug benefit. 
On April 27, AHIP's Board of Directors issued a statement (see Appendix 
A) indicating support for the principle of providing continuity of care 
for beneficiaries enrolled in the Medicare Part D prescription drug 
program. This statement supports recent efforts by CMS--announced by 
the agency in an April 26 guidance document--to ensure that Medicare 
beneficiaries who have been prescribed a medication on a Part D 
formulary will not be required to change their medication or pay 
increased copays or coinsurance throughout a contract year.
    In addition to supporting continuity of care when formulary changes 
are made, the AHIP Board statement discusses the importance of 
providing Medicare beneficiaries with a prescription drug benefit that 
reflects the latest scientific evidence regarding the efficacy of 
various medication therapies, side effects and adverse reactions, 
interactions among medications, and disease-specific concerns. The 
statement identifies two circumstances under which formulary changes 
for existing enrollees are justified to protect the health of 
beneficiaries or enable them to receive greater value: (1) when safety 
or efficacy concerns have been identified by the Food and Drug 
Administration and/or the plan's Pharmacy and Therapeutics Committee 
based upon scientific evidence; or (2) when an FDA-approved generic 
alternative to a brand name drug becomes available.
    AHIP's Board statement gives beneficiaries the peace of mind of 
knowing that they will be able to continue to receive their Part D 
formulary drugs throughout the year. At the same time, it preserves 
flexibility for plan formularies to maximize the value of the drug 
benefit when safety concerns are raised or generic equivalents come to 
market.

V. CONCLUSION
    Thank you again for this opportunity to testify about our 
perspectives on these important issues. Please be assured that WellCare 
remains deeply committed to the long-term success of the Medicare Part 
D prescription drug program. We appreciate the support many Members of 
the Subcommittee have demonstrated for this valuable program and for a 
strong public-private partnership in Medicare. We look forward to 
continuing to work with you to meet future challenges in Medicare and 
throughout the U.S. health care system.

                               __________
                               Appendix A
    Statement by the Board of Directors, America's Health Insurance
  Plans on Maximizing Quality and Affordability of Prescription Drug 
                  Coverage for Medicare Beneficiaries
                             April 27, 2006

INTRODUCTION
    Formularies and other pharmacy benefit management strategies allow 
Part D plans to control costs while ensuring the quality and safety of 
prescribed drugs for Medicare beneficiaries. These tools have kept Part 
D premiums affordable for beneficiaries and reduced costs to the 
Federal Government. Beneficiaries, who were initially expected to pay 
$38 per month in Part D premiums, are paying an average of $25. This is 
a savings of nearly one-third of the predicted premium amount, and the 
projected cost of the program to the Federal Government has been 
reduced by $7.6 billion in 2006 and $30 billion over the next five 
years. For this success to continue, Part D plans need to rely on the 
proven best practices in pharmacy benefit management that are already 
providing Medicare beneficiaries with affordable, high-quality 
prescription drug benefits.
    The formulary is a list of drugs that have been reviewed for safety 
and efficacy and are approved for coverage by the plan. Such drugs 
commonly are categorized into several ``tiers,'' with cost-sharing for 
the drug determined by the tier to which it is assigned. Formularies 
play an integral role in ensuring beneficiaries have cost-effective 
access to clinically appropriate drugs. Part D plans have Pharmacy and 
Therapeutics (P&T) Committees, primarily composed of physicians and 
pharmacists that make decisions about which drugs to include on 
formularies based upon a clinical review of the scientific evidence. 
Formularies promote affordability by encouraging competition among 
pharmaceutical manufacturers. Once the P&T Committee determines there 
are multiple drug products with similar therapeutic value, they 
consider cost effectiveness to ensure that beneficiaries receive the 
greatest value from their prescription drug benefit.
    The Centers for Medicare & Medicaid Services (CMS) evaluates and 
approves all Medicare Part D formularies to ensure they are 
comprehensive in accordance with CMS standards. CMS has established 
clear procedures under which beneficiaries and their physicians can 
request coverage of prescription drugs that are not on a plan's 
formulary. This process establishes strict timeframes and includes an 
opportunity to appeal to external reviewers who have no affiliation 
with the plan.

ENSURING CONTINUITY FOR BENEFICIARIES
    In addition to premiums and out-of-pocket costs, the drugs included 
on a Part D plan's formulary and the tier structure are important 
factors that Medicare beneficiaries evaluate when determining which 
Part D plan best meets their specific needs and circumstances.
    Appropriate formulary management improves clinical benefits and 
reduces costs for Medicare beneficiaries. The prescription drug arena 
is continuously evolving, with new scientific evidence emerging almost 
daily regarding the efficacy of various medication therapies, side 
effects and adverse reactions of both newer and older medications, 
interactions among medications, and disease specific concerns. With 
that in mind, Plan sponsors may need to make formulary changes during 
the year to provide Medicare beneficiaries with a prescription drug 
benefit that reflects the latest in scientific evidence.
    At the same time, AHIP members strongly support maintaining 
continuity of care if a formulary change is made. Accordingly, we will 
support CMS' efforts to ensure that Medicare beneficiaries who have 
been prescribed a covered Part D formulary medication will not be 
required to change their medication or pay increased copayments or 
coinsurances throughout a contract year except when:

          Safety or efficacy concerns have been identified by 
        the Food and Drug Administration and/or the plan's Pharmacy and 
        Therapeutics (P&T) Committee based upon scientific evidence; or
          An FDA approved generic alternative to a brand name 
        drug becomes available.

    In these two circumstances, changes for existing enrollees are 
justified to protect the health of beneficiaries or enable them to 
receive greater value for the dollars they spend on prescription drugs 
while ensuring quality. Changes would only be made following 
appropriate notice as specified by CMS.

                                 

    Chairman JOHNSON OF CONNECTICUT. Mr. Hays.

STATEMENT OF ROBERT M. HAYES, PRESIDENT, MEDICARE RIGHTS CENTER

    Mr. HAYS. Good afternoon, Madam Chairman, Mr. Stark, Mr. 
Doggett. We do very much appreciate the opportunity to share 
with you our experiences and our clients' experiences during 
the first 4 months of the Medicare Part D implementation.
    As you may know from national and State hotlines, casework, 
education programs, we provide direct assistance to people with 
Medicare. Each year the Medicare Rights Center receives over 
80,000 calls for assistance. In recent months we have 
particularly concentrated our services on enrolling people with 
Medicare in low-income programs, especially Extra Help.
    We have also launched a Part D appeals program. We have 
recruited a battery of lawyers, volunteer lawyers and 
physicians, to assist people with Medicare, obtain the 
medications that plans have denied them.
    The Medicare Rights Center is a nonprofit, independent 
organization relying on a small staff with hundreds of deeply 
committed volunteers. We are not supported by the 
pharmaceutical industry, the insurance industry, or any other 
special interest group. We have no political or commercial 
interest that interferes with our effort to propose public 
policies to serve people with Medicare.
    That being said, Madam Chairman, at the Medicare Rights 
Center we are experiencing Part D to be badly designed, a 
scandalously wasteful program that provides far too little drug 
assistance, health security and peace of mind to people with 
Medicare.
    Now, this does not mean that people with genuine need 
cannot and do not get meaningful assistance. We work to bring 
that help to people every day. We do not dispute the polls that 
say up to two out of three people enrolled in a plan are 
actually saving some money, but in a $1.3 trillion program, we 
ask about the millions of people in need who are not seeing 
savings.
    Our clients continue to report problems. Many find that 
their drugs are not covered by their plan, that they cannot 
afford their copayments, that they lost better coverage.
    I will just mention very quickly some of the aid-specific 
correctives we are recommending in our written testimony.
    Number one, first and foremost, Madam Chairman, we should 
automatically enroll eligible people in the low-income subsidy. 
There is widespread--there has been widespread bipartisan 
agreement that the number one priority of a Medicare drug 
benefit is to assist the poorest Americans, secure the 
medicines that doctors prescribe.
    Our key work over the past 6 months has been to enroll as 
many people as we could in Extra Help. We have enlisted 
hundreds of volunteers to reach out. We advertise a toll-free 
phone number, run public service announcements, work 
cooperatively with drug plans. We work with pharmaceutical 
companies that supply us with contact information for poor 
people who have been disqualified from pharmaceutical 
assistance programs because of Part D. Ironically these people 
are good candidates for Extra Help.
    Still the results are dismal. It takes 33 calls to identify 
a likely candidate for Extra Help; 80 percent of eligible 
people, Madam Chairman, have not yet been enrolled. These are 
the folks who need our help the most. We all admire the 
tenacity of Sisyphus futilely pushing his boulder up the hill, 
but that should not be our model in a public program aimed at 
protecting the lives of millions of Americans.
    Federal financial data on income and income-generating 
assets can be used to automatically enroll men and women 
eligible for Extra Help. Automatic enrollment with opt out 
works very well in Medicare Part D, which has a 96 percent 
enrollment rate. It can work for part D's Extra Help as well.
    Another recommendation, let us require meaningful Part D 
plan comparisons. Reasonable public policy should not require 
people with Medicare to shoot in the dark to pick a plan that 
will work for them. Thoughtful choices is not what has been 
going on over the past 3 or 4 months. Many callers now to a 
hotline, who are enrolled in plans, never understood that a 
covered drug could come with $100 per prescription copayment. 
They never thought a covered drug would come with requirements 
that they try other medications first, or that their doctor 
would have to agree to become a witness in a legal appeal so 
they could get their covered drug.
    Almost no one now hitting the gap in coverage, this 
infamous doughnut hole, was told about this by the plans. How 
many brokers, people earning commissions for each enrollment, 
each person they sign up, how many brokers do you think told 
their customers about the doughnut hole? Congress should force 
a more finite number of plans into meaningful comparisons to 
allow customers, however imperfectly, to make a less risky 
selection.
    Look, even with these reforms, there still will be too much 
waste, not enough help to provide a benefit as good as we can 
afford with finite dollars. The lessons of Part D cry out for 
enactment of a drug benefit administered directly by Medicare. 
Let the plans compete with a Medicare drug benefit, increase 
choice, and look to keep administrative costs low and 
profiteering nonexistent. Honest supporters of a market 
approach should not fear competition, not even for Medicare.
    Thank you.
    [The prepared statement of Mr. Hayes follows:]

   Prepared Statement of Robert M. Hayes, President, Medicare Rights 
                                 Center

    Good afternoon, Madam Chairman, Mr. Stark and Members of the 
Committee. We appreciate the opportunity to share with you our day-to-
day experiences assisting people with Medicare obtain good health care. 
Today, we will report on the gratifying but often heart-breaking work 
we do with our clients as they struggle to navigate the Medicare Part D 
prescription drug program.
    The Medicare Rights Center (MRC) is the largest independent source 
of Medicare information and assistance in the United States. Founded in 
1989, MRC helps older adults and people with disabilities obtain good 
affordable health care. Every day we assist people with Medicare as 
they navigate the health care system, enroll in programs that can help 
them pay for health care, and overcome barriers to needed care.
    The Medicare Rights Center is a not-for-profit consumer service 
organization, with offices in New York, Washington and Baltimore. It is 
supported by foundation grants, individual donations and contracts with 
both the public and private sectors. We are consumer driven and 
independent, relying on a small staff and hundreds of deeply committed 
volunteers to carry out our mission. We are not supported by the 
pharmaceutical industry, insurance companies or any other special 
interest group. Our non-partisan mission is to serve the 43 million men 
and women with Medicare.
    Through national and state telephone hotlines, casework and 
professional and public education programs, MRC provides direct 
assistance to people with Medicare from coast to coast. Each year, the 
Medicare Rights Center receives over 80,000 calls for assistance from 
people with Medicare. Our counselors are trained to assist consumers 
with complex problems and we complement the basic services offered by 
the 1-800-MEDICARE hotline operated by the Centers for Medicare and 
Medicaid Services (CMS). Indeed, 1-800-MEDICARE is the largest source 
of referrals to our hotline; MRC receives no CMS support for its 
consumer hotline.
    MRC also brings to professional counselors, care givers and 
consumers across the country Medicare Interactive, a web-based 
counseling tool--developed with major foundation support and with a 
seed technology grant from the United States Department of Commerce. 
Medicare Interactive assists people with Medicare access benefits, 
including Part D.
    We also reach out into low income, minority communities and, in 
recent months, have concentrated our services on enrolling people with 
Medicare in low income programs--the Part D Extra Help Program and 
Medicare Savings Programs, especially QI-1.
    We have launched a Part D appeals program, recruiting a battery of 
volunteer lawyers and physicians to assist people with Medicare obtain 
medications denied to them by their Part D plans. Drug plans place the 
Medicare Rights Center's toll free phone number on notices informing 
their enrollees that the Part D plan is denying coverage of a 
prescribed medication. Since we receive no federal or state financial 
support to assist people with these Part D appeals, we can only make a 
dent in the great need for this assistance. The Committee should know 
that without competent, independent representation, the Part D appeals 
and exceptions process is, for most people with Medicare, a sham.
    MRC gathers data on the health care needs of the men and women whom 
we serve, and devises policy recommendations from those data. MRC is 
committed to policy recommendations that are grounded in our work with 
the people we serve. We have the freedom of having no political or 
commercial interest that interferes with our efforts to propose 
sensible, non-ideological public policies that serve the interest of 
people with Medicare.
    To that end, we reiterate our appreciation of this opportunity to 
share with you our experiences, our clients' experiences and the 
lessons learned from the first four months of the implementation of 
Medicare Part D.
``Scandalously Wasteful Program''
    We intend to avoid the formulaic debates that Part D typically 
stimulates. As you may know, and as I will explain, we at the Medicare 
Rights Center consider Part D to be a badly designed, scandalously 
wasteful program that provides far too little drug assistance, health 
security and peace of mind to older and disabled Americans. The 
architects of Part D seem to have forgotten many of the lessons learned 
on what makes Medicare a national treasure.
    But this does not mean that people with genuine need cannot and do 
not get meaningful assistance from the Part D drug benefit. We have no 
reason to dispute polls that say up to two of three people enrolled in 
a plan are saving at least some money. But in a $1.3 trillion program, 
we must ask about the millions of people in need who do not see 
savings.
    We have no reason to dispute, as the HMO lobby reported, that 
nearly 90 percent of the impoverished Americans switched from Medicaid 
drug coverage to Medicare drug coverage were not wrongly denied needed 
medication during the transition. But what about the ten percent, the 
600,000 men and women--some small percentage of whom swamped our 
hotlines--that were?
    People who have managed to enroll in the low income subsidy or 
Extra Help Program are certainly well served by Part D--so long as they 
find a plan that covers their drugs. But why have the diligent efforts 
of the Social Security Administration and hundreds of community 
organizations like MRC been able only to enroll less that 20 percent of 
eligible Americans in the Extra Help Program?
    It is good news that millions of additional people with Medicare 
now have some drug coverage than had it in 2005. But millions do not 
and millions more are worse off then before.
    Our clients come to us in droves to report continuing problems. 
Many find that their drugs are not covered by their plan, that they 
cannot afford their co-payments, that they lost better coverage. We 
believe that an objective appraisal of Part D would lead Congress to 
redesign this program, starting off by allowing Medicare to offer a 
drug benefit integrated into Part B that would be comprehensible and 
reliable.
    But allow me to start with eight correctives that would make the 
existing drug program better able to meet its stated objectives.

AUTOMATICALLY ENROLL ELIGIBLE PEOPLE IN THE LOW INCOME SUBSIDY

[GRAPHIC] [TIFF OMITTED] T3132A.005


    Since the beginning of the debate of the Medicare Modernization Act 
of 2003 (MMA), there has been widespread, bi-partisan agreement that 
the number one priority of a Medicare drug benefit is to assist the 
poorest Americans secure the medication their doctors prescribe. The 
low income subsidy, popularly called the Extra Help Program, offers the 
promise of a comprehensive and affordable drug benefit--so long as the 
patient selects a drug plan that works for her.
    One of MRC's key priorities over the past six months has been to 
enroll as many people in that benefit as humanly possible. With funding 
from the Starr Foundation and Robin Hood Foundation, among others, we 
have enlisted hundreds of volunteers to reach out to likely candidates 
for Extra Help, explain the program to them and whenever possible 
enroll people on line. We are probably as sophisticated as anyone in 
conducting this work. We advertise a toll free phone number through 
AARP, chain drug stores, senior centers and elsewhere. We have public 
service announcements and look to work cooperatively with drug plans 
(who gain enhanced payments when we sign up their enrollees in Extra 
Help). We work with pharmaceutical companies that supply us with 
contact information for people with low incomes who have been 
disqualified from their patient assistance programs because of Part D: 
they are good prospects for Extra Help eligibility. Still, the results 
are dismal: it routinely takes 33 calls by MRC volunteers and staff to 
identify a likely candidate for the Extra Help Program.
    We can all admire the tenacity of Sisyphus futilely pushing his 
boulder up the hill. But that does not mean that the Myth of Sisyphus 
should be our model in designing a public program aimed at protecting 
the lives and health of millions of older Americans. If we are sincere 
about assisting poor Americans with Medicare have real access to a 
comprehensive and affordable drug benefit, we know how to do it.
    All people with Medicare whose financial data demonstrate 
eligibility for the low income subsidy should be automatically enrolled 
in the Extra Help Program. To simplify this, Congress should eliminate 
the asset test. The Social Security Administration's own figures show 
that the asset test disqualifies half those who apply for Extra Help. 
Considerable research--and MRC's on-the-ground experience--shows that 
the asset test discourages many people from even applying for 
assistance. But with or without an asset test, federal financial data 
on income and income generating assets can be used to automatically 
enroll men and women eligible for the Extra Help Program. Automatic 
enrollment, with opt-out, works well in Medicare Part B which has a 96 
percent enrollment rate.
    Congress: eliminate from the Extra Help Program these hoops that 
many frail elders will not be able to negotiate. Automatic enrollment 
could make real the promise of affordable medicine for many of the 
poorest Americans with Medicare.

REQUIRE MEANINGFUL PART D PLAN COMPARISONS
    Reasonable public policy would not require people with Medicare to 
shoot in the dark to pick a drug plan that would work for them. We 
appreciate efforts like that of Congressman Doggett's daughter, a 
physician, to assist her grandmother select a drug plan. Secretary 
Leavitt, according to published reports, made a similar if less 
successful effort to assist his parents select a drug plan. But Las 
Vegas-style gambling on one's health care is not what we should be 
purchasing for our parents, our grandparents and ourselves.
    Many callers to MRC's hotlines are among the more sophisticated of 
consumers. They did what the President and others told them to do. They 
found help with the internet, they found a plan that said it covered 
the drugs they now are taking, they found a plan with premiums and 
deductibles that seemed affordable, and they signed up.
    Now they call us in a panic. They never understood that a ``covered 
drug'' could come with a $100 per prescription co-payment. They never 
thought that a ``covered drug'' would come with trapdoors--requirements 
that they try other medications first, or that their doctor would have 
to agree to become a witness in a legal appeal so they could get the 
``covered drug.'' Almost no one now hitting the gap in coverage, the 
infamous donut hole, was told about this by the plans. How many 
brokers, people earning commissions for each person they enroll, do you 
think told their customers about the donut hole?

[GRAPHIC] [TIFF OMITTED] T3132A.006


    If a majority of the members of Congress continues to support this 
marketplace experiment, two steps could help: one, Congress should 
authorize a drug benefit integrated into Medicare to serve as a 
reliable safe harbor, a genuine choice, for people dissatisfied with 
the private plans; and two, Congress should force a more finite number 
of plans into meaningful comparisons that will allow, however 
imperfectly, some consumers to make a less risky selection.

END MARKETING ABUSES
    MRC's experience with frantic callers to our hotline is leading us 
to the unhappy conclusion that nearly all marketing of Part D plans is 
misleading, nearly all of it exploitative of the neediest and frailest 
older Americans. Worst off are people who were contacted by 
telemarketers, a practice sanctioned by CMS. Caller after caller tell 
us that they did not know much about the plan they had enrolled in, and 
that they had been told things that were just not true. Other callers 
tell us that they did not know that they had signed up for an HMO, not 
a drug plan, until their doctor presented them with a bill and told 
them he is out of the HMO's ``network.'' Increasingly, as people fall 
into the gap in coverage, the infamous ``donut hole,'' they are 
shocked. Why?

[GRAPHIC] [TIFF OMITTED] T3132A.007


    The design of this privatized drug program creates a single 
commercial incentive for the drug plans, the brokers they employ, and 
the marketing firms they retain. The incentive: market share. Even 
putting aside purposeful fraud by the unscrupulous, deception is an 
inevitable by-product of this market created by the MMA and CMS.
    Have you reviewed marketing material from the drug plans? Have you 
heard sales pitches at free breakfast meetings? At senior centers? A 
plan with a low deductible or a low premium will highlight that 
feature. People will be sold low deductible plans without understanding 
the other side: restricted formulary, rigid medication utilization 
tools, excessive costs per prescription. How many members of Congress 
have seen plan marketing materials--TV ads, brochures, radio spots--
talk about the gap in coverage? Even CMS is part of the problem. Late 
last year CMS spent untold public dollars running an insert about Part 
D in Parade Magazine. CMS, supposedly explaining the standard drug 
benefit, neglected to even mention the donut hole. Shareholders are 
protected by the Securities Exchange Commission and securities laws. 
Aren't older Americans entitled to similar protections from the 
predatory practices of the insurance industry? Deception comes in many 
forms: omitting material information from drug plan advertising is one 
that is epidemic in Part D.
    Telemarketing of drug plans must be banned, and all marketing 
materials must be limited to accurate and comprehensive comparisons of 
standardized plans.

IMPROVE ACCESS TO MENTAL HEALTH DRUGS
    Clients continue to flock to MRC seeking help with barriers drug 
plans are putting in the way of access to antidepressants and 
antipsychotics, drugs commonly needed by people with mental illnesses. 
As you know, CMS required plans to cover ``all or substantially all'' 
of these medicines, along with drugs in four other critical therapeutic 
classes. But that requirement is being undermined by other restrictions 
imposed by plans--prior authorization, step therapy and quantity 
limits. Quantity limits in particular are billed as ``safety edits,'' 
but drug plans (seeking, of course, to maximize profits) generally 
impose them only on the most expensive drugs. Cost, not safety, is 
motivating the plans.

[GRAPHIC] [TIFF OMITTED] T3132A.008


    One important, and relatively inexpensive, class of drugs--
benzodiazepines--is excluded by law from Part D coverage. This 
exclusion threatens the stability of the drug regimens of many people 
with mental illness. Most state Medicaid programs continue to provide 
coverage but many people with low incomes do not qualify for Medicaid, 
and states are under financial pressure to cut back coverage. In 
Florida, people who qualify for Medicaid through spend down are finding 
it difficult to maintain access to these medicines.
    Congress should end the exclusion of benzodiazepines from the Part 
D benefit and ensure adequate coverage of mental health drugs, and 
should enjoin plans from doing an end run around formulary requirements 
with utilization management dodges.

ELIMINATE THE ``DONUT HOLE''
    The donut hole, the gap in coverage that extends from about $2,250 
to $5,100 in drug spending will disrupt treatment for needy men and 
women with Medicare. Our clients are hitting it already, and estimates 
suggest that some 7 to 10 million people with Medicare are at risk of 
reaching the coverage gap. Even those enrolled in a plan will be forced 
to choose between buying medicine, paying the monthly premiums they 
still owe, and buying other necessities of life. Most impacted are 
those who fail to qualify for the Extra Help Program, perhaps because a 
life insurance policy or other savings they rely on for financial 
security puts them over the limit.

[GRAPHIC] [TIFF OMITTED] T3132A.009


    We understand that the donut hole resulted from the financial 
constraints imposed on Congress by the White House when it was debating 
the MMA in 2003. But the decision to hand the drug benefit over to 
private insurers rather than have Medicare secure lower prices 
precluded savings that could have been used to fill the coverage gap. 
Studies show that, if Medicare secured the same prices that the 
Veterans Administration or other industrialized countries pay, there 
would be enough money to fill the donut hole. We appreciate that there 
is much debate, some of it informed, about this assertion. Proof of 
Medicare's effectiveness as a negotiator is found in the pharmaceutical 
industry's virulent opposition to allowing Medicare to negotiate drug 
prices.
    We understand why PhARMA will fight this to the death. Why are a 
majority of the members of Congress afraid to try it?

STANDARDIZE, STREAMLINE PART D EXCEPTIONS AND APPEALS
    Parts A and B of Medicare have worked well because they are based 
on the concept that individuals will have access to care deemed 
medically necessary by their treating physician. In theory, drugs under 
Part D are supposed to follow a comparable concept: while Part D 
consists of a patchwork of plans with various options and limitations 
on prescriptions, the MMA also includes exceptions and appeals 
provisions intended to allow individuals to access medically necessary 
drugs.
    We now know from our first hand experience that the current system 
fails to deliver on this bedrock concept--access to medications that 
are medically necessary. Over the last several months MRC has helped 
hundreds of men and women take on the Part D appeals system. Most of 
our appellate clients had been denied access to medically necessary 
medications, and almost all were stymied by the Part D appeals process. 
Here are ways to improve this flawed, consumer hostile system:

          standardize the appeals process and forms;
          streamline the appeals process; and
          provide resources for independent consumer 
        organizations to provide representation to people denied 
        medically necessary medicine.

    The Part D appeals process is impossible for the average consumer 
to navigate. Following near universal criticism, the recent move to 
standardize the coverage determination request form is a welcome, but 
very small start. Use of these forms by plans is voluntary, and they 
are only the first step in a multi-step appeals process. Steps must be 
taken to standardize the rest of the appeals process. There should be 
one form and one set of rules for obtaining an exception. That form and 
those rules should be posted on the CMS website and mailed to all 
people with Medicare. Obtaining life-saving medications should not be 
akin to navigating a mine-field.

[GRAPHIC] [TIFF OMITTED] T3132A.010


    A standardized appeals process must also be a streamlined one. 
Individuals should receive a formal denial before they leave their 
pharmacy, complete with plain instructions on how to appeal that 
denial. After an initial appeal to a Part D plan, individuals would 
then appeal directly to the Independent Review Entity.
    This would cut out an unnecessary and generally futile step. 
Currently, after being denied a claim at the pharmacy, people with 
Medicare must ask the plan twice to cover their drug before receiving 
an independent review. Drugs subject to prior authorization require 
three requests for coverage at the plan level before an independent 
review is allowed. Each of these preliminary steps causes delay in 
violation of mandatory timelines and at considerable risk to the well 
being of the patient.
    Further, for the current process to be meaningful, people with 
Medicare require assistance in prosecuting appeals. The current system 
assumes a helpful and willing physician. Do members of this Committee 
know many doctors who are routinely willing to take on arduous, 
uncompensated paper work for the sake of their patients? And who is to 
help patients pursue appeals?
    As noted, MRC is listed on plan denial forms as a go-to patient 
advocate for people denied coverage of medicines prescribed by their 
doctors.
    How much does CMS contribute to this representation?
    Nothing.
    How much do the drug plans contribute?
    Less.
    If Congress wants people with Medicare to have access to medically 
necessary drugs, it must standardize and streamline the Part D appeals 
process, and provide assistance to individuals with bona fide appeals 
of a plan's denial of medically necessary medications.

EXTEND THE MAY 15TH DEADLINE
    It's difficult to believe that at some point in the next two weeks 
the Administration will not move to extend the May 15th deadline for 
enrolling in a Part D plan. From a bureaucratic perspective, we 
understand that the Administration believes that adding the pressure of 
a deadline on people will accelerate enrollment. From a humane 
perspective, adding more stress on people already overwhelmed with the 
anxiety of this complicated program will only add to more distress and 
more bad decisions. The May 15 deadline will lock in those bad 
decisions.

[GRAPHIC] [TIFF OMITTED] T3132A.011


    Although the deputy administrator at CMS has declared publicly that 
the agency lacks authority to extend the deadline, the Medicare Rights 
Center has supplied CMS with a legal analysis showing that it is amply 
empowered to create a special enrollment period that would cover this 
calendar year. This would allow people not yet enrolled in a drug plan 
to do so; perhaps more important, it also would allow people in the 
wrong plan to switch to one that works better for their health care 
needs. Justifications to create the special enrollment period are not 
hard to find.
    Computer systems problems--blame CMS, blame SSA or blame the plans, 
they each blame each other--continue to leave people without coverage, 
enrolled in the wrong plan, or charged the wrong amounts for the plan 
that they are in. The insurer with the most Part D enrollees and the 
best brand name startled people with Medicare over the last two weeks 
by wrongly threatening to cut them off unless they promptly paid 
already paid premiums.
    As noted, high-pressure marketers have steered people with Medicare 
into drug plans that do not cover their drugs and into HMOs that do not 
cover their doctors.
    And no one, not even the strongest proponents of the drug program's 
design, anticipated that 40, 50 or even 60 plans would join the gold 
rush in most states leaving consumers bewildered and ripe for 
exploitation.
    According to a Washington Post poll 71 percent of people polled 
support extending the enrollment deadline. According to a Kaiser Family 
Foundation poll, 45 percent of older adults say they do not know about 
the deadline. Fairness requires Congress to extend the deadline if the 
Administration refuses to exercise its power to do so.

DELAY THE ENROLLMENT PENALTY
    Like the May 15th deadline, the prospect of a late enrollment 
penalty creates needless anxiety among people with Medicare already 
frustrated by a confusing choice of plans. The late enrollment penalty 
accrues during the months people with Medicare are locked out of drug 
coverage after May 15 and will rise each year as the average drug plan 
premium rises. With all the problems and confusion associated with the 
roll-out of the Part D benefit, it is inevitable that some people with 
Medicare will miss the enrollment deadline. Congress should step in and 
waive the late penalty for 2006.
    People with Medicare below 135 percent of the federal poverty line 
pay only 20 percent of the late penalty for a limited period of time--
literally just a few cents each month and less than the co-payments 
they are now struggling to pay. But for this vulnerable group, just the 
existence of a late penalty could discourage enrollment in the benefit. 
The administrative cost of collecting this penalty is not worth the 
revenue it generates. Congress should waive the late penalty for all 
low-income people with Medicare.

ENACT A MEDICARE DRUG BENEFIT

[GRAPHIC] [TIFF OMITTED] T3132A.012


    These eight reforms would be helpful, because we believe in the 
principle that anything that helps a single person is a worthy reform. 
But, even with these reforms the drug benefit will continue to waste 
billions of dollars that could better be used to deliver a reliable and 
comprehensive drug benefit to people with Medicare through the Medicare 
program.
    Americans need affordable prescription drug coverage that meets our 
changing health care needs, a program that covers the drugs we need 
today--and the drugs we will need tomorrow. Medicare provides a cost 
effective and largely affordable safety net, reliably allowing older 
and disabled Americans the peace of mind, the security of knowing that 
medically necessary and reasonable health care services will be 
covered. There is a human cost to abandoning that Medicare design for 
the coverage of prescription drugs.
    To provide a benefit as good as we can afford with finite dollars, 
we think the lessons of Part D--objectively evaluated--teach that the 
Congress should enact:

          A drug benefit administered directly by Medicare, 
        without the waste and restrictions that come with private 
        health insurers as commercial, profit seeking middleman;
          Negotiated drug prices that keep costs down; and
          One comprehensible, reliable and secure drug benefit 
        that adapts to the needs of the American people now and in the 
        future.

    Health security, not a health care lottery, is what people with 
Medicare require. People in good faith may still believe, even after 
the evidence of 2006, that the new cottage industry of for profit 
middlemen hawking incomprehensible drug benefit packages is the way to 
go. We do not think so. But we are content to allow those plans to 
continue, so long as these middlemen face a real market. Let the for-
profit insurers compete with a Medicare drug benefit, one that fights 
for lower prices, and keeps administrative costs low and profiteering 
non-existent.
    Honest supporters of a market approach cannot fear competition, not 
even from Medicare. There is nothing to fear but a better deal for 
people with Medicare and a fairer deal for the American taxpayer.

                                 

    Chairman JOHNSON OF CONNECTICUT. Mr. Wolfe, do you think 
you could make it in 4 minutes, and we can take you. We still 
have to come back, and we will come back for questions.
    Yes, why don't we come back. We will take the last two 
testimonies. This is a vote, two 5-minute votes, so it will be 
about 20 minutes. We will be back as soon as possible. Sorry 
about this.
    [Recess.]
    Chairman JOHNSON OF CONNECTICUT. The hearing will resume.
    Mr. Wolfe, would you begin.

STATEMENT OF BILL WOLFE, VICE PRESIDENT, MANAGED CARE, RITE AID 
             CORPORATION, HARRISBURG, PENNSYLVANIA

    Mr. WOLFE. Good afternoon, Madam Chairman, Congressman 
Lewis and Congressman Camp. I am Bill Wolfe, president of 
Managed Care at Rite Aid Corporation, which is based in Camp 
Hill, Pennsylvania. I am pleased to be here today.
    Rite aid is one of the Nation's leading drugstore chains 
and is currently operating 3,300 stores in 27 States and the 
District of Columbia, with total sales of $17.3 billion.
    Rite Aid and the chain drug industry recognize that the 
implementation of Medicare Part D was a monumental task. 
Community pharmacists were clearly front and center once again, 
demonstrating their unique and very important position in the 
health care continuum as one of the most accessible and most 
trusted health care providers.
    Given the scope of the program and some of the initial 
technological and data integrity failures, it is remarkable, in 
my opinion, how quickly the program stabilized. This would not 
have happened without the unprecedented cooperation of all 
stakeholders.
    We appreciate the time that senior staff at CMS, as well as 
congressional staff and Members of Congress, spent recently 
visiting pharmacies, learning more about tremendous efforts 
made by community pharmacists to make this program work.
    Rite Aid spent countless hours and made significant 
financial investment in systems and staff, preparing for 
Medicare Part D. We had an intense focus on educating and 
training our pharmacists. Our pharmacists and field management 
teams conducted thousands of beneficiary outreach and 
educational sessions in their communities. Through our health 
plan partnerships, tens of thousands of beneficiary educational 
sessions were conducted in our stores, and we included 
messaging in our weekly ad circulars.
    Through our preparation, pharmacists throughout the country 
were able to anticipate some of the implementation issues. 
While they struggled in the first few weeks of Part D, they 
always gave every effort to take care of their patients.
    There are ongoing issues which we think can be corrected. 
First we will speak to the enrollment lag. If a beneficiary 
applies for the Part D benefit in the last few days of the 
month, an enrollment lag is created, and pharmacists don't have 
the necessary data necessary to fill a prescription. The best 
solution would be an enrollment deadline established each month 
so there is sufficient time to process applications and enter 
billing in the system.
    We need to have standardized plan electronic messaging to 
pharmacies. Health plan messaging needs to be clear and provide 
actual information so pharmacists can promptly address a 
patient's needs. The National Association of Chain Drugstores, 
NCPA and AHIP have joined with CMS to help address this 
problem.
    Formulary issues have begun to be addressed. Many 
beneficiaries are concerned that a plan could remove the drugs 
they are taking now from the Part D plan's formulary in the 
future. That is why we think that CMS's recent decision to 
allow a beneficiary to continue taking a formulary medication, 
even if the plan changes the formulary, is good for quality 
health care and will reduce administrative burdens.
    I am concerned about the coverage gap. The concern is that 
Medicare beneficiaries do not fully understand the issues 
relating to the so-called doughnut hole and how it will affect 
their coverage. We believe that public-private sector 
collaboration to develop assistance programs for beneficiaries 
is imperative.
    Community pharmacies are held to charging the beneficiary 
no more than their discounted contract rate and therefore 
contributes directly to assisting beneficiaries in the coverage 
gap. Many beneficiaries will undoubtedly need additional 
assistance to assure their access to needed medications.
    We must also improve and reward quality. Improving quality 
under Part D by providing medication therapy management is 
important to everyone. Rite Aid has partnered with the 
University of Pittsburgh School of Pharmacy to offer medication 
therapy management services by specially trained Rite Aid 
pharmacists.
    We welcome the formation of the Pharmacy Quality Alliance, 
which CMS has indicated could lead to new pharmacy payment 
models based on optimizing the patient outcomes. Rite Aid 
supports efforts on controlling costs by paying for better care 
and improved outcomes, not by reducing payment rates to 
providers.
    While Medicaid is not in the Committee's jurisdiction, I 
feel compelled to raise concerns about changes to the Medicaid 
program as part of the Deficit Reduction Act, which will 
substantially impact community pharmacies' ability to serve 
Medicare as well as Medicaid patients.
    The DRA reduces payments to pharmacies for generic 
medications under Medicaid by about $6.3 billion over the next 
4 years. We believe that the reduction in payment will take 
away much of the incentive for pharmacists to dispense generic 
medications. This is baffling, given that most States spend 
less than 25 percent of their Medicaid pharmacy fund on 
generics, even though generics are more than 50 percent of the 
prescription volume.
    Public and private payers should be doing everything they 
can to increase, not decrease, the dispensing of generic drugs. 
Generic drug utilization is one of the most cost-effective ways 
to control prescription drug costs.
    Reductions of this magnitude in Medicaid, coupled with the 
current economic impact of the Medicare Part D program, will 
unquestionably reduce access to pharmacies. Retail pharmacy is 
an extremely competitive, low-margin industry operating on an 
average profit margin of 2 percent. We hope that you will 
support the delay or revision of these Medicaid pharmacy 
payment changes as the industry adjusts to the operational and 
economic challenges of Medicare Part D.
    Thank you very much for this opportunity to share Rite 
Aid's perspective. We will look forward to continuing to work 
with Congress and the Administration on these issue. I will be 
happy to answer any of your questions at the conclusion.
    Chairman JOHNSON OF CONNECTICUT. Thank you very much.
    [The prepared statement of Mr. Wolfe follows:]

 Prepared Statement of Bill Wolfe, Vice President, Managed Care, Rite 
               Aid Corporation, Harrisburg, Pennsylvania

    Good afternoon Chairwoman Johnson, Ranking Member Stark, and 
Members of the Ways & Means Health Subcommittee. I am Bill Wolfe, Vice 
President of Managed Care at Rite Aid Corporation, which is based in 
Camp Hill, PA. I am pleased and honored to be here today to participate 
in this important hearing on implementation of the Medicare Part D 
prescription drug benefit program.
    Rite Aid Corporation is one of the nation's leading drugstore 
chains, combining its modern store base, strong brand name, modern 
distribution centers and superior pharmacy technology with a talented 
team of approximately 70,000 full and part-time associates serving 
customers in 27 states and the District of Columbia. Rite Aid currently 
operates approximately 3,320 stores, reporting total sales of $17.3 
billion at the end of its 2006 fiscal year.

Preparing for the Medicare Part D Benefit
    Rite Aid and the chain drug industry recognize that the 
implementation of Medicare Part D was a monumental task and represented 
the most significant expansion of Medicare since its inception. We are 
pleased and proud to have played a key role in assuring that millions 
of additional seniors now have access to prescription drug coverage as 
a result of the Part D benefit. Community pharmacists were clearly 
front and center and once again demonstrated their unique and very 
important position in the health care continuum as one of the most 
accessible and trusted health care providers.
    As has been widely reported, there have been challenges for both 
beneficiaries and pharmacists in transitioning to Part D, particularly 
in the first few weeks of the program. We have all heard about the long 
wait times that many beneficiaries had at their local pharmacy, and 
about the lengthy periods pharmacists spent on hold with CMS and health 
plans, trying to get the information they needed to dispense 
prescriptions to their patients. Rather than rehashing the difficulties 
that were experienced, most of which have improved exponentially, I'd 
like to spend my time before the subcommittee discussing the steps Rite 
Aid took to prepare for Medicare Part D, review the actions taken by 
CMS, pharmacies, and plans to address some of the challenges that were 
faced, and to provide Rite Aid's thoughts on how we can continue to 
work together to improve the Medicare prescription drug benefit moving 
forward.
    Rite Aid and the rest of the chain drug industry appreciate the 
efforts of CMS, states, and health plans in working collaboratively to 
quickly address many of the initial implementation issues. Given the 
scope of the program and some of the initial technological and data 
integrity failures, it is remarkable in my opinion how quickly the 
program stabilized. This would not have happened without the 
unprecedented cooperation of all stakeholders. For example, CMS, 
pharmacies, and health plans worked together to create the ``TrOOP 
facilitator,'' a tool that allows pharmacies to electronically query a 
special database and instantaneously obtain information about the Part 
D plan in which a Medicare beneficiary has been enrolled, including the 
beneficiary's billing information. Ideally, the TrOOP facilitator also 
assists with the coordination of benefits with other payers. While 
there have been some ongoing issues with incomplete and inaccurate 
data, we hope that the TrOOP facilitator process will serve as a model 
for how the public and private sectors should work together to address 
future Medicare Part D issues. We must continue to work together to 
assure continued improvement in the process as well as data integrity, 
so that as the May 15 deadline approaches, or when we face other time 
periods with peak enrollment, we do not experience the same 
difficulties that we all faced in January of this year.
    We also appreciate the time that senior staff at CMS, as well as 
congressional staff and Members of Congress, spent in the last several 
months visiting pharmacies and learning more about the tremendous 
efforts made by community pharmacists to make this program work. I 
personally toured stores with the Region 3 HHS Regional Director from 
Philadelphia so he could interview pharmacists and observe their 
interaction with Medicare beneficiaries. I am proud of all that Rite 
Aid pharmacists--and other community pharmacists--have done to make 
sure that Medicare beneficiaries receive their prescriptions in a 
timely manner.
    Rite Aid spent countless hours and made significant financial 
investments preparing for Medicare Part D. We focused on educating and 
training our pharmacists, starting with weekly messages and information 
bulletins in April of last year. In addition, we had a chain-wide, 
computer-based training (CBT) on Medicare Part D that was mandatory for 
our pharmacists, and I'm happy to say that it achieved the fastest 
uptake of any CBT ever conducted at Rite Aid.
    Our pharmacists and field management teams conducted thousands of 
outreach sessions in malls, senior centers, and places of worship with 
education materials that we created with the help of our supplier and 
health plan partners. Through our health plan partnerships, tens of 
thousands of educational sessions were conducted in our stores, and we 
included messaging that encouraged beneficiaries to seek out 
information and signup in our circulars, which have a weekly 
circulation of fifty million.
    In addition to the many hours that our pharmacists and other 
employees spent in preparation for Part D implementation, Rite Aid also 
invested in system upgrades to accommodate TrOOP facilitation and 
coordination of benefits billing. We also installed a new state of the 
art telecommunication system and doubled the staff in our pharmacy help 
desk area in anticipation of Medicare Part D implementation.
    Through this preparation, Rite Aid pharmacists, as well as other 
chain drug pharmacists throughout the country, were able to anticipate 
some of the issues. While they struggled in the first few weeks of Part 
D, they always gave every effort to take care of their patients. In 
many cases, this meant providing needed medications without any 
assurance of compensation. As I've stated, thankfully many of the 
issues have stabilized and have been resolved. However, there are 
ongoing issues that we think can be corrected to continue to ease the 
administrative burden placed on pharmacists and to facilitate 
beneficiary access to their medications.
    Rite Aid has several suggestions on how some of the ongoing 
implementation issues can be addressed:
Addressing Part D Issues Moving Forward
    Fix Enrollment Lag: Individuals become eligible for Medicare every 
day, and dual eligibles have the option of changing plans every month. 
As a result, there is a systematic issue, commonly referred to as the 
``enrollment lag,'' that is problematic for pharmacies and 
beneficiaries.
    Currently, a Medicare beneficiary can enroll in a Part D plan at 
any time and expect their enrollment to be effective the first day of 
the following month. If a beneficiary applies for the Part D benefit in 
the last few days of the month, it is simply not possible for CMS and 
the plans to process the beneficiary's application, confirm eligibility 
with CMS, and provide the necessary billing information to the TrOOP 
facilitator so that it is available to pharmacists in time for the 
beneficiary to receive their prescriptions the first day of the next 
month.
    Unless policymakers address this ``enrollment lag'' issue, late-
month enrollment or plan switches may continue to be the single most 
challenging issue that beneficiaries and pharmacists face with Part D. 
If pharmacists don't have the necessary data, they cannot fill a 
prescription. This takes pharmacists away from serving their patients, 
and forces a series of calls to CMS and health plans to obtain billing 
and enrollment information. Pharmacists and other pharmacy staff find 
this experience very frustrating, but even more importantly, so do 
Medicare beneficiaries, who are forced to wait for extended periods of 
time at the pharmacy or return at a later date to obtain their 
prescriptions.
    A variety of options exist to address this issue, and Rite Aid and 
the chain drug industry are committed to working with CMS and health 
plans to find the best solution. CMS is trying to address this issue by 
educating beneficiaries that enrolling late in the month will result in 
delays in activation of prescription drug coverage. This is a step in 
the right direction. Optimally, there should be an enrollment deadline 
established each month so there is sufficient time to process 
applications and enter the billing information in the system. We urge 
policymakers to address this issue soon.
    Standardized Plan Messaging: Virtually 100% of all prescription 
claims are processed electronically, making pharmacy claims processing 
far more efficient than any other segment of health care. These 
efficiencies result in faster service to our customers, accuracy in our 
claims processing, and cost savings to the entire prescription drug 
delivery system.
    Despite this efficiency, lack of standardization in messaging to 
pharmacists among third party payers still results in pharmacists 
spending much of their time on administrative issues. These third party 
prescription administrative issues and the time that pharmacists must 
devote to them have multiplied significantly since the onset of Part D.
    Dozens of new Part D plans each have their own policies, processes, 
and procedures for pharmacists to follow in order to fill 
prescriptions. Some Part D plans want pharmacists to fax forms to 
physicians when they need prior authorization to fill a prescription, 
while other plans require the pharmacist to call the plan's help desk. 
Furthermore, even when plans choose the same method of communication, 
the message is not always clear. Merely telling a pharmacist that a 
drug is ``not covered'' does not give pharmacists the information they 
need. Health plan messaging needs to be clear and provide actionable 
information so pharmacists can promptly address a patient's needs.
    Once again, the pharmacy community is not just talking about the 
need, we're taking action. I'm pleased to report on another public-
private partnership to improve the Medicare prescription drug benefit. 
The National Association of Chain Drug Stores (NACDS), National 
Community Pharmacists Association (NCPA), and America's Health 
Insurance Plans (AHIP) have joined with CMS to help address this 
problem.
    Working together, these groups have started down the road of 
developing uniform, standardized messages that will be sent 
electronically to pharmacists when a prescription drug claim is 
rejected. This will provide more information to the pharmacist on why 
there might be an issue or problem with the prescription, as well as 
help the pharmacist understand what to do next. The goal is to reduce 
phone calls from pharmacists to health plans, allowing them to spend 
more time with their patients. Rite Aid commends the leadership of CMS 
and these associations for addressing this problem, and looks forward 
to working with them on this and other issues to improve the Part D 
benefit. We hope that this will serve as the first step in a broader 
effort to promote more standardization in third party prescription 
claims processing, pharmacy messaging, and procedures that would 
benefit all public and private prescription drug programs.
    Formulary Issues: There have been some difficulties for both 
beneficiaries and pharmacists with understanding Part D drug 
formularies and how they work. Many beneficiaries that come into our 
pharmacies are concerned that in the future a plan could remove the 
drugs they are taking from the Part D plan's formulary. Our pharmacists 
are also concerned about the quality of care impact of switching 
beneficiaries from a medication they have been taking for a long time 
to a different medication. There are also concerns about whether 
beneficiaries--especially low income dual eligibles--will be able to 
navigate the exceptions and appeals process. That is why we think that 
CMS' recent decision to allow a beneficiary to continue taking a 
formulary medication--even if the plan changes the formulary--is good 
for quality health care and will reduce the administrative burdens on 
beneficiaries, physicians and pharmacists to switch medications for 
Medicare beneficiaries.
    Coverage Gaps: We are rapidly approaching the middle of the year 
when many seniors may fall into the ``donut hole'' or coverage gap. We 
are concerned that many Medicare beneficiaries do not fully understand 
the issues relating to the ``donut hole'' and how it will affect their 
Medicare coverage. Many of our pharmacists are concerned that they will 
bear the brunt of beneficiary frustrations when they find out that they 
are still paying premiums while in the ``donut hole,'' but not 
receiving any coverage for their prescription medications.
    We also believe that another public-private sector collaboration to 
develop assistance programs for beneficiaries when they hit the 
coverage gap would go a long way toward improvement of the program. 
Community pharmacy is held to charging the beneficiary no more than 
their discounted contract rate and therefore contributes directly to 
assisting beneficiaries in the coverage gap. However, many 
beneficiaries will undoubtedly need additional assistance to assure 
their access to needed medications, so we believe that other parts of 
the system should step forward and do their part as well.
    Improve and Reward Quality: Improving quality in health care by 
providing chronic care management, disease management and medication 
therapy management programs is important to Rite Aid. We know that 
Chairwoman Johnson and the Members of the Subcommittee recognize the 
value of these programs in improving our health care system as well. At 
Rite Aid, we have focused on these issues by partnering with the 
University of Pittsburgh's school of pharmacy to offer medication 
therapy management services by specially trained Rite Aid pharmacists. 
These pharmacists work with patients to ensure that each is on the most 
effective drug therapy to meet therapeutic goals and avoid medication-
related side effects. Pharmacists share results with each patient's 
physician to ensure continuity of care. While this program is currently 
centered in the Pittsburgh region, we have designed it to be scalable 
and hope to continue to expand it throughout the country.
    We believe that medication therapy management services like these 
result in healthier patients. They also reduce health care costs for 
payers, and go hand in hand with other ongoing efforts by pharmacists 
to control health care expenditures, such as encouraging the use of 
lower-cost generic drugs. That's why we welcome the recent announcement 
by CMS Administrator McClellan on the formation of the Pharmacy Quality 
Alliance (PQA), a collaborative effort among the pharmacy community, 
health plans, employers, government payers, and others to improve 
health care quality. In addition to developing strategies to define and 
measure pharmacy performance, CMS has indicated that PQA could also 
lead to new pharmacy payment models based on optimizing patient 
outcomes. Rite Aid supports efforts that focus on controlling costs by 
paying for better care and improved outcomes, and not by reducing 
payment rates to providers.

Impact of the Deficit Reduction Act on Medicare
    Community pharmacy has shouldered much of the economic and 
administrative burden of implementing the Medicare Part D benefit. We 
believe that we have been an important part of the rapid correction and 
stabilization of the program. While Rite Aid and other pharmacies 
across the country are still making adjustments as a result of Part D, 
we will again be asked to shoulder an incredible burden only one year 
later when drastic changes to the Medicaid program are implemented. 
While Medicaid is not in this subcommittee's jurisdiction, I feel 
compelled to raise concerns, as the changes to the Medicaid program as 
part of the Deficit Reduction Act (DRA) will dramatically impact 
community pharmacy's ability to serve Medicare, as well as Medicaid, 
patients.
    The DRA reduces payments to pharmacies for generic medications by 
about $6.3 billion over the next four years. Beginning January 1, 2007, 
federal upper limits (FUL) for generic drugs will be based on Average 
Manufacturers Price (AMP), rather than Average Wholesale Price (AWP). 
We believe that the reduction in payment will be so severe that it will 
take away much of the incentive for pharmacists to dispense generic 
medications. This is baffling, given that less than 25% of the average 
state's Medicaid pharmacy payments are for generics, even though 
generics are more than 50% of the prescription volume. Public and 
private payers should be doing everything they can to increase, not 
decrease, the dispensing of generic drugs, since generic drug 
utilization is one of the most effective ways to control prescription 
drug costs.
    The Deficit Reduction Act also requires CMS to make Average 
Manufacturers Price data available to states and the public beginning 
in July--only two months from now. In theory, AMP reflects the average 
prices paid to manufacturers by wholesalers for drugs distributed to 
the retail class of trade, which include retail pharmacies. However, we 
are very concerned that since there are no guidelines as to how 
manufacturers should calculate AMP, the AMP data released by CMS this 
July will be inaccurate and will not reflect the actual prices that 
retail pharmacy pays for brand and generic medications. As a result, 
states, Medicare plans, and consumers could receive a misleading 
picture about the true acquisition costs of retail pharmacies. Medicare 
plans and other payers could conceivably change their pharmacy 
reimbursement based on faulty AMP data.
    This data will be publicly available for one full year before CMS 
is required to issue a rule instructing prescription drug manufacturers 
on how to calculate AMP. Because of its potential damaging impact to 
community pharmacy, we believe that this data should not be made public 
or shared with the states until AMP is accurately and consistently 
defined.
    Reductions of this magnitude in Medicaid, coupled with the current 
economic impact of the Medicare Part D program, will unquestionably 
reduce access to pharmacies. Retail pharmacy is an extremely 
competitive, low margin industry, operating on an average profit margin 
of two percent. We do not believe that policymakers have taken into 
account the cumulative economic impact that changes to Medicare and 
Medicaid will have on retail pharmacies and the communities they serve. 
We hope that you will support the delay or revision of these Medicaid 
pharmacy payment changes, as well as the public release of these 
inaccurate data, as the industry adjusts to the operational and 
economic challenges of Medicare Part D.

Conclusion
    Thank you again for this opportunity to share Rite Aid's 
perspective on the implementation of the Medicare Part D benefit. We 
look forward to continuing to work with Congress and the Administration 
on these issues. I would be happy to answer any questions. Thank you.

                                 

    Chairman JOHNSON OF CONNECTICUT. Ms. Grisnik.

   STATEMENT OF PAM GRISNIK, OWNER, RX EXPRESS, GROVE CITY, 
                          PENNSYLVANIA

    Ms. GRISNIK. Good evening, Madam Chair and other Members of 
the Subcommittee on Health. Thank you for conducting this 
hearing and providing me the opportunity to share the 
experiences with the new Medicare Part D program on behalf of 
the NCPA. The NCPA represents more than 24,000 community 
pharmacies, 55,000 community pharmacists, 250,000 employees and 
millions of patients who rely on us for their prescription 
care. The Nation's independent pharmacies dispense nearly half 
of the Nation's retail prescriptions.
    Independent pharmacists provide vital prescription services 
in both rural and urban areas, where many patients could not 
receive their prescription drugs were it not for their 
neighborhood pharmacy and the relationships they have developed 
with their local pharmacist.
    My name is Pamela Grisnik, and I am from Grove City, 
Pennsylvania. Sitting behind me is my husband Paul. We have 
both been pharmacists for 24 years, the last 16 which we have 
owned the RX Express Pharmacy in Grove City. We were also 
members of the NCPA, the International Academy of Compounding 
Pharmacists, and the Pennsylvania Pharmacists Association, of 
which my husband Paul is on the executive council. We currently 
employ 16 full-time staff people who provide personalized care 
for approximately 12,000 patients in our community. We were 
also sponsors for five pharmacy interns from three different 
schools of pharmacy in western Pennsylvania.
    We have built our practice in the face of numerous 
competitors by focusing on patient care. Our patients' health 
is our main concern.
    The change I have seen in my practice since the start of 
Medicare Part D can be summarized as follows. First, Part D 
reimbursements are too low and too slow.
    Secondly, unfortunately, the confusion around Part D 
continues. The State previously reimbursed my pharmacy on a 
weekly basis for prescriptions I filled for dual-eligibles. We 
are currently waiting a minimum of 4 to 5 weeks for 
reimbursement on these same prescriptions. Reimbursements are 
simply too slow.
    This past weekend I caught a drug interaction for a Part D 
patient. After 45 minutes of my time, consulting with a doctor 
and the patient, I finally was able to correctly fill the 
prescription for this patient. I was unable to submit the claim 
for the payment as the plan's computer system was down. Once 
the claim finally was submitted, I discovered my total 
reimbursement was $2, period, $2. That is it. Not even a 
hamburger, $2; $2 to cover the medicine, the bottle, the label, 
my technician, the rent, the utilities, not to mention the 
pharmacist's time and the counseling. This reimbursement is 
simply too low.
    Thirty-six percent of independent pharmacy owners are 
afraid that low and slow reimbursements will put them out of 
business; 29 percent have asked their wholesaler for 
assistance; 29 percent have taken out a line of credit. Cash 
flow is worse for 93 percent of independents who are waiting on 
an average of 70,000 in reimbursements from each Part D plan. 
Low and slow reimbursements are a very, very real problem.
    Secondly, the confusion of Medicare Part D does continue. 
Many patients are already hitting the doughnut hole. They do 
not understand the doughnut hole. Many pick up their 
prescriptions. They leave. This has happened many times the 
past couple of weeks. They come back. They throw their bag at 
me and say, you made a big mistake. I paid $20; this is $160 or 
$100. You have made a huge mistake, Pam. You better check your 
records.
    I try to explain the doughnut hole to them. They look a 
little confused. Somehow they maybe remember. I usually call 
the plan so they can actually hear from the representative from 
their plan the bad news from the plan directly that this is the 
doughnut hole, how much they have spent, how much more they 
need to spend to get out of it. None of them really did expect 
this yet, and few can afford the higher costs. The sudden 
changes have confused the seniors, and the confusion continues.
    Those who have not signed up are nervously eyeing the May 
15 deadline. Many have tried to navigate their array of choices 
and have really, truly been discouraged by the complexity of 
the benefit. They do come into the pharmacy. They do throw 
stacks of paper at me and say, please, Pam, Paul, will you 
please help me go through this? Will you help me sign up? They 
have been to seminars. They have been to many seminars. Some of 
them are still very, very confused.
    We are in a college town. One of our patients is a retired 
college professor. She came in to me with her Part D papers and 
said, I have a doctorate. I thought I was intelligent. 
Obviously I am not.
    The Medicare Part D benefit card should not be an 
advertising space, yet some Part D benefit cards have the 
featured logos of national chain pharmacies and retailers. Many 
of my patients do not realize that they can still continue to 
come to my pharmacy. They look at the card that has the 
advertisement. They go to that pharmacy.
    Some patients have returned to my pharmacy, but the 
confusion does continue. Sometimes when they call the third 
party, the Medicare program. They don't tell them that I am 
part of the plan even though I am.
    Many of the community pharmacies' concerns concerning Part 
D are addressed by the Jones-Berry bill, H.R. 5182. This bill 
does clarify the rules on cobranding, requires prompt payment 
for properly submitted claims, and establishes a minimum 
reimbursement on generic drugs. Chairman Cochran has also 
introduced a similar bill in the Senate. These commonsense 
improvements will ensure that Medicare Part D will deliver its 
full promise for our seniors.
    Some 15 years ago I myself was diagnosed with leukemia and 
told I had a month to live. From that experience and from my 
professional work, I do understand the importance of having 
access to quality prescription care.
    My fellow community pharmacists and I are looking forward 
to working together with you to solve these current issues and 
would like to ask for your help so that we can continue to 
provide quality prescription care to our patients.
    Thank you for inviting me to speak on this important issue. 
I will be happy to answer any questions you may have.
    [The prepared statement of Ms. Grisnik follows:]

   Prepared Statement of Pam Grisnik, Owner, RX Express, Grove City, 
                              Pennsylvania

    Good Afternoon, Madam Chair and other members of the Health 
subcommittee. Thank you for conducting this hearing and for providing 
me the opportunity to share the experiences with the new Medicare Part 
D program on behalf of the more than 24,000 community pharmacies, 
55,000 community pharmacists, 250,000 employees and the millions of 
patients who rely on us for their prescription care.
    My name is Pamela Grisnik of Grove City, Pennsylvania. Sitting 
behind me is my husband, Paul. We've both have been pharmacists for 24 
years, the last 16 of which we have owned the Rx Xpress Pharmacy in 
Grove City. We are members of National Community Pharmacists 
Association, International Academy of Compounding Pharmacists and the 
Pennsylvania Pharmacists Association, of which Paul is on the Executive 
Council.
    I am honored to testify today to give you the perspective of 
independent, community pharmacy on Medicare Part D and to testify on 
behalf of the National Community Pharmacist Association. NCPA 
represents the nation's community pharmacists, including the owners of 
more than 24,000 pharmacies, 55,000 pharmacists and over 250,000 
employees. The nation's independent pharmacies dispense nearly half of 
the nation's retail prescription medicines. Independent pharmacists 
provide vital prescription services in both rural and urban areas, 
where many patients could not receive prescription drugs were it not 
for their neighborhood pharmacy and the relationships they have 
developed with their local pharmacist.
    Most pharmacists have three years of post-baccalaureate education 
and we have extensive continuing education requirements. We consider 
ourselves to be both health care professionals and small businessmen 
and women. We take great pride in helping patients. When I decided to 
go into this profession, my thinking was not, ``what kind of small 
business can I own?'' Rather, I found a calling in helping patients 
with their vital prescription needs--my decision to own a small 
business came later. So my perspective in speaking to you today is not 
to talk about Part D as a businessperson, but as a health care provider 
who is concerned about my ability to continue to provide vital health 
services in my community.
    We currently employ 16 full-time staff people who provide 
personalized care for approximately 12,000 patients in our community. 
We are also preceptors for 5 pharmacy interns from three different 
schools of pharmacy in Western Pennsylvania.
    We have built our practice in the face of numerous competitors by 
focusing on patient care. Our patient's health is our main concern.
    The change I've seen in my practice since the start of Medicare 
Part D can be summarized as follows: First, Part D reimbursements are 
too low and too slow. Secondly, the confusion surrounding Part D 
continues.
    The state previously reimbursed my pharmacy on a weekly basis for 
prescriptions I filled for dual-eligible patients. We are currently 
waiting a minimum 4 to 5 weeks for reimbursement on these same 
prescriptions. Reimbursements are simply too slow.
    This past weekend I caught a drug interaction for a Part D patient. 
After 45 minutes consulting with the doctor and patient I was finally 
able to fill the correct prescription for the patient. I was unable to 
submit the claim for payment as the plan's computer system was down. 
Once the claim was submitted, I discovered my total reimbursement was 
two dollars, period. Two dollars to cover the medicine, the bottle, the 
label, my technician, the rent and the utilities, not to mention the 
pharmacist's time and counseling. This reimbursement is simply too low.
    36% of independent pharmacy owners are afraid that low and slow 
reimbursements will put them out of business. 29% have asked their 
wholesaler for assistance, and 29% have taken out a line of credit. 
Cash flow is worse for 93% of independents, who are waiting for an 
average of $70,000 in reimbursements from EACH Part D Plan. Low and 
Slow reimbursements are a very real problem.
    Secondly, the confusion of Medicare Part D continues. Many patients 
are already hitting the donut hole. They don't understand what has 
happened. Many will pick up their prescriptions, leave, and come back 
to the pharmacy thinking that I did not charge them correctly. ``Last 
month my pills were $20, now they're $100 . . . What happened?'' After 
explaining the donut hole, I usually call the plan so patients can hear 
the bad news from the plan directly. None of them expected this yet, 
and few can afford the much higher costs. The sudden changes have 
confused seniors. The confusion continues.
    Those who have not yet signed up are nervously eyeing the May 15th 
deadline. Many have tried to navigate the array of choices and have 
been discouraged by the complexity of the benefit. They come into the 
pharmacy, throw us a stack of papers in desperation saying, ``Please, 
can you and Paul please help me, tell me what to do.''
    We are a college town, one of our patients is a retired college 
professor. She came to the pharmacy with her Part D papers and 
declared, ``I have a doctorate. I thought I was intelligent, but I 
obviously am not.''
    The Medicare Part D benefit card should not be an advertising 
space. Yet some Part D benefit cards have featured the logos of 
national chain pharmacies and retailers. Many of my patients did not 
realize they could continue coming to my pharmacy. Some of my patients 
believed they could only patronize those pharmacies featured on the 
benefit card. Some patients have returned to my pharmacy, but again the 
confusion continues.
    Many of community pharmacy's concerns regarding Part D are 
addressed by the Jones-Berry bill, H.R. 5182. This bill clarifies rules 
on co-branding, requires prompt-payment for properly submitted claims, 
and establishes a minimum reimbursement on Generic drugs. Chairman 
Cochran has also introduced a similar bill in the Senate. These common-
sense improvements will ensure that Medicare Part D will deliver its 
full promise for our Seniors.
    Some 15 years ago I was diagnosed with leukemia and was told I had 
a month to live. Both from that experience and from my professional 
work I do understand the importance of having access to quality 
prescription care.
    My fellow community pharmacists and I are looking forward to 
working together with you to solve these current issues and would like 
to ask for your help so that we can continue to provide quality 
prescription care to our patients. Thank you for inviting me to speak 
on this very important issue and will be happy to answer any questions 
you may have.
    Neither I nor my husband, nor community pharmacists and NCPA, wish 
to give you a litany of complaints. Pharmacists and NCPA have never 
opposed the goal of Medicare Part D: providing prescription drug 
services to some patients that otherwise would not be able to acquire 
them. Others on these panels have already spoken regarding the degree 
to which that goal has been achieved. We know that this program has 
been working for some. There has also been some progress on 
implementing Part D, such as a reduction in the long wait times on our 
calls to CMS.

II. Problems with Part D
    I would be doing you and the Program disservice, however, if I did 
not address the continuing, systematic problems with Part D that 
threaten to negate what is working with the program, and what were 
designed to be cost-saving aspects of the program. A legislative fix is 
needed, and one particular one, the Jones-Berry FAST Act, fixes some of 
the on-going problems.
    In sum, those problems are: (1) delays in reimbursements hurting 
the ability of pharmacists to keep their doors open and provide 
services; (2) not getting adequate payments that reflect the costs of 
dispensing drugs, thus creating a perverse incentive to dispense brand 
name drugs; and (3) continued co-branding, which confuses seniors and 
other Medicare recipients into thinking they have to stick with the 
companies printed on the benefit cards.

A. Closures Caused by Implementation Hurt Patients and Communities
    Independent pharmacists have been the backbone of the delivery 
system for Medicare Part D. In fact, they have saved the program by 
bearing its financial and bureaucratic burdens. Secretary Leavitt has 
been quoted as saying that ``no patient should leave the pharmacy 
without their prescription.'' Unfortunately, that has happened to me in 
certain cases where the patient has been unable to wait while I am on 
hold with CMS while getting authorizations. Some patients have handed 
back filled prescriptions in anger and walked out of our pharmacy. When 
patients do leave my pharmacy without a prescription, it is not because 
of the pharmacists. Pharmacists pay for the drugs they dispense, and 
then often wait months for reimbursement by the prescription drug 
plans--despite the fact that the PDPs are paid in advance for the 
drugs, and then they sit on processing the claims. Pharmacists are 
acting as private banks to these plans while the plans hold onto 
government money--that is to say, taxpayer dollars.
    Because of the reimbursement flow problem, since the implementation 
of Part D began in January of this year, some one dozen independent 
pharmacies have already had to shut their doors. In rural areas, these 
closures have a truly harmful effect on the health care of Americans 
dependent on Medicare--particularly the elderly. Because it addresses 
this problem and the problem of adequate dispensing fees, we and NCPA 
support the bipartisan Jones-Berry FAST bill.
    In response to a NCPA survey on Medicare Part D conducted just a 
couple of weeks ago:

        1.  Over half of the respondents (53%) serve a population of 
        less than 20,000 people; and
        2.  Over 99% of the respondents currently participate in the 
        Medicare Part D program.
        3.  Of the total number of prescriptions the pharmacists 
        dispense monthly, some 34% of those are covered by Medicare 
        Part D.

    In addition, in certain urban areas, the percentage of 
prescriptions covered by Medicare and Medicaid reaches some 90%.
    Continued closures will affect many patients who will not have the 
resources to travel distances of tens of miles to the nearest community 
to get their prescription needs met. In addition, these patients will 
have lost the important face-to-face interaction with their local 
pharmacist, who often will have great knowledge about their particular 
medical histories, including allergies and other sensitivities.

B. Cash Flow Problems are Very Real
    That same survey found that:

        1.  61% have obtained outside financing--from sources such as 
        banks, wholesalers, credit unions and family members--to deal 
        with the financial shortfalls they face regarding Medicare Part 
        D.
        2.  The average current outstanding balance that is owed to a 
        pharmacy by all Part D plans is just under $70,000.

    From a survey taken a month ago,

        1.  Some 93% of all respondents have found that pharmacy cash 
        flow is worse as compared to before the implementation of 
        Medicare Part D--only 1% found it to have improved.
        2.  Of those that have worse cash flow, some 36% are concerned 
        about closing their pharmacy, 29% have asked their wholesaler 
        for assistance, and 29% have opened a line of credit.

III. Suggestions for Change:
    The Jones-Berry FAST bill addresses the cash flow problem, includes 
an adequate dispensing fee and also eliminates the harmful practice of 
co-branding.

1) There needs to be a prompt pay provision.
    Implementation of Medicare Part D has caused a major cash flow 
problem for the community pharmacies on the front line of the program. 
Part D plans are paid each month in advance by Medicare, yet most Part 
D plans are using delaying tactics to enjoy a considerable interest-
earning ``float'' on taxpayer dollars intended to reimburse pharmacies 
for serving their patients.
    There are several bipartisan bills in Congress that address prompt 
pay. Community pharmacists and NCPA most strongly support H.R. 5182 and 
S. 2563--the Jones-Berry ``Fair and Speedy Treatment (FAST) of Medicare 
Prescription Drug Claims Act of 2006'' and the Cochran/Enzi/Talent/
DeWine Pharmacist Access and Recognition in Medicare Act (PhARMA) of 
2006.'' In both bills, clean claims submitted electronically would be 
paid by prescription drug plans (PDPs), within 14 days, by electronic 
direct deposit. Other clean claims would be paid within 30 days. 
Pharmacists would also be notified within 10 days if there are problems 
with submitted claims.
    These are the minimum changes that Congress should make. In real 
life operations, the Plans in fact have the ability to make these 
transactions much earlier than the 14 and 30 day deadlines--and that 
even with passage of legislation, the Plans will continue to unfairly 
profit from a longer than necessary ``float.''

    2) Pharmacists need to receive an adequate dispensing fee
    Prompt payment will increase timely cash flow, but unless an 
adequate dispensing fee is set, independent pharmacists will continue 
to operate at the mercy of PDP ``take-it-or-leave-it'' contracts. These 
plans and the middlemen that manage them--the prescription benefit 
managers (PBMs) will continue to reap high profits.
    If dispensing fees for generic drugs are not set at an adequate 
minimum level, then pharmacists will see an increase in the number of 
Medicare Part D drugs for which they do not receive enough compensation 
to cover costs.
    An adequate dispensing fee will also insure that taxpayers will 
benefit from an increase in generic drug use, which saves both 
taxpayers and the program an average of $94 for every generic 
prescription dispensed.
    A legislative fix, such as is contained in the Jones-Berry bill, 
would encourage the use of generics, saving money and lowering health 
care costs.
    What comprises an adequate dispensing fee? True costs to dispense 
should include all reasonable costs associated with a pharmacist's time 
in checking information about an individual's coverage or performing 
quality assurance activities. The total compensation that a pharmacist 
receives for dispensing a Medicare drug should consist of an adequate 
ingredient, or acquisition cost, a technical formula that is designed 
to reflect real life market forces, and an adequate dispensing fee 
minimum, which reflects overhead costs--the costs of doing business. 
Unfortunately, PDP plans have taken advantage of individual pharmacists 
to force--on a take-it-or-leave-it basis--plans that offer an 
inadequate dispensing fee.
    An adequate dispensing fee should include, at a minimum:

        (i)    the measurement or mixing of a covered Part D drug;
        (ii)   filling the container for such a drug;
        (iii)  physically providing the completed prescription to an 
        individual enrolled in such a plan;
        (iv)  delivery;
        (v)   special packaging;
        (vi)  overhead related to maintaining the facility and 
        equipment necessary to operate the pharmacy, including, but not 
        limited to, rent, mortgage, salaries of pharmacists and other 
        pharmacy workers; and
        (vii)  geographic factors that impact operational costs.

3) The prescription cards that the plans issue should not be allowed to 
        have a company specific logo on it.
    For example, one plan puts the Wal-Mart logo on their card. That 
seems outrageous to me and will make some patients think they have to 
switch pharmacies. Pharmacists are strictly prohibited from steering 
patients but the logo of a chain pharmacy is allowed on a card? Again, 
we need in law a prohibition against this practice, not just a 
recommendation by CMS that the plan can't put a pharmacy logo on a 
patient's prescription card.
    We know we have lost patients who had the logo of a large chain 
pharmacy on their cards and thought they could not get their 
prescriptions filled at our pharmacy.
    Pull out your social security card. Is there an advertisement on 
that card? There should not be any advertising on the card that serves 
as proof of admission to Medicare Part D. This is a clear violation of 
the anti-steering provisions spelled out in the marketing guidelines 
issued by CMS.
    H.R. 5182, the Jones-Berry FAST Act--include a provision that 
prohibits co-branding, and we urge Congress to include such a provision 
in any Medicare Part D legislation that it might pass.
    We know CMS has issued a call letter in which it requests PDPs to 
not include co-branding cards in their contracts for 2007. We are glad 
that CMS recognizes that co-branding is illogical, misleading and 
harmful to patients. A legislative fix is needed, however, as the 
advisory language is not yet binding and could be changed before it 
goes into effect.
Secondary issues include:

4) Patients, doctors, and pharmacies need a standardized method of 
        dealing with the plan formulary issues.
    Right now, if a prescription is not covered, a lot of plans send 
the pharmacy a message that says ``drug not covered''. That's it. No 
explanation as to why it was not covered. So, the pharmacy has to call 
the plan and find out why the drug is not paid for and what needs to 
happen to help the patient get their medication. The pharmacist then 
has to coordinate the paperwork between the patient, the doctor, and 
the pharmacy in order to help the patient get their medicine. This can 
take hours or even days. After all that time, the patient hopefully has 
not given up on the process and decided not to take their medicine.
    There needs to be standardized messaging between all of the plans 
when they communicate with pharmacies and a standardized prior 
authorization procedure that reduces the administrative burden on 
patients, doctors, and pharmacies.

5) Enrollment period needs to be realistic
    Patients were told that they could enroll as late as the end of the 
month and be in the system by the next day. That doesn't happen and is 
not a realistic expectation by anyone in the system. The result is that 
beneficiaries are frustrated and pharmacy staff has to chase down 
claims to try to help get the prescription paid. This unrealistic 
expectation creates a chain reaction that upsets the entire benefit. 
Dual eligible patients should have a deadline of at least 15 days and 
non-dual eligibles should have at least 30 days to be entered into the 
system.

6) Standardized Contract Rate
    Pharmacies have dozens of plans offering take-it-or-leave-it 
contracts. Family owned pharmacies have no ability to engage in any 
form of legitimate negotiations. As a result we are forced to sign 
contracts that reimburse us below our cost. We believe CMS should use 
its authority to provide reimbursement guidelines to plans or there 
needs to be legislation to address the situation so that pharmacies are 
able to stay in business and continue to provide the services I have 
described here today for the American public.
    In conclusion, I would add that my husband and I enjoy being 
pharmacists and we believe we are making a difference for the thousands 
of patients who come in to our pharmacy. However, I am very concerned 
that the slower and lower Medicare payments this year on top of the 
massive Medicaid cuts that Congress passed last month will force 
thousands of family pharmacies to go out of business and strand 
millions of patients without access to the medicine they need to help 
them stay healthy.
    Thank you again for inviting me to share my experiences with the 
Medicare Part D program with you. We hope you will work with us to help 
improve the Medicare Part D program so we can continue serving our 
patients.

                                 

    Chairman JOHNSON OF CONNECTICUT. Thank you all for your 
testimony. I appreciate it very much.
    Ms. Grisnik, I would be happy to work with you on some of 
the problems that you raise. In my part of the country, most 
of, or at least in many instances, the problems that you point 
to have been worked out. I am interested that you still are--
for instance, we can looked into the payment process before 
this hearing.
    The news that we are getting is it is back down to 2 weeks, 
but 2 weeks is what these plans have always been using. It is 
what is in their contracts. It is unlikely it will come in 
lower. Now, if you get somebody who comes in on day 14, it may 
be 2 weeks plus a day.
    Ms. GRISNIK. As I left, I checked. It was still about four. 
Maybe it will shorten up in our system. It was still around 
four.
    Chairman JOHNSON OF CONNECTICUT. We will talk to the 
Administration about that, because that is unbearable.
    As to the doughnut hole, in States that have programs like 
Connecticut or Pennsylvania, there are about six States that 
have subsidy programs that rise about the 150 percent of 
poverty income, and Connecticut goes to 235. All of those 
payments count toward the doughnut hole.
    So, those people are not exposed. We are saving the State 
so much money that they can easily start a program that pushes 
that 150 percent of poverty income up. For a Federal program, 
pairing with the States, that is actually higher than many of 
the programs that we do with States. So, it was a good place to 
start, and the logic was we are going to be saving the States 
so much money not just on their Medicaid patients, but also on 
their own State employees, that they can plow some of that 
money back into a program that provides some help for those who 
need it.
    Then, of course, the bill also allows families to help with 
that doughnut hole. There will be developing community 
organizations that will help.
    It is important to have those who can afford it to pay 
their freight, because if they do, their kids don't have to. 
When you look at the salaries that are currently being paid, 
never did any of us think we would live in a world in which 
there are really obscene salaries being paid. You certainly, 
when those people retire, want them to pay, make their personal 
effort.
    So, structuring a plan for the years ahead, you have to 
take into account the seniors that are sitting there that could 
be paying if they needed to. There are 3,500. I will be one of 
them. I think we do have to structure a plan so that those who 
can carry 3,500 after the ordinary amount, because the 
threshold covers two-thirds of seniors, almost two-thirds of 
the seniors.
    With wise use of generics, it is unlikely that more than a 
third of seniors will be affected by that gap. Of that third, a 
fair percentage, I would say 50, 60, 70 percent, can actually 
afford that personal effort contribution.
    Now, I understand perfectly that there are those that 
can't. That is why we made other contributions eligible, and 
that is why I hope the States will begin to define that for 
themselves and maybe make a phase-out rather than a cliff. That 
is one of the refinements that has to take place.
    I notice that Mr. Hayes was very critical of the structure 
of the plan. Earlier the issue was raised about the plan now 
costing $800-and-something billion. That is over a different 
time frame. I would remind you that using $1.3 trillion is not 
accurate because it is not a net figure.
    The original plan that competed with ours when ours was 
$400 billion was $1.3 trillion. So, if ours has gone from $400 
billion to $8 billion, theirs would have been gone from $1.3 
trillion to $2.6 trillion.
    Having people make a personal difference is that difference 
between $2.6 and $800 plus billion. Now, that is important, 
because seniors who can afford to help need to help, otherwise 
their children have to pay higher taxes. Today, as we speak, 50 
percent of all Federal spending goes to people over 65.
    Now, we want people over 65 to be secure financially and 
secure medically, but we have to do it in a way that those who 
can afford it carry more responsibility, and we did in the 
Medicare Modernization Act raise premiums, Part D premiums, for 
those with higher incomes. This is following that pattern.
    I think we need to look at the margin; where does the 150, 
in my State it is 235 or 225--they keep pushing up. Some States 
will need to go to 250. Some need to go to 200 percent of 
poverty. We have some opportunities in the bill to do that.
    I am much more concerned with the mechanics of the plan and 
leaving independent pharmacists exposed, as you line out in 
your testimony. Mr. Wolfe, as you comment as well.
    While that is not the jurisdiction of this Committee, in 
fact, we are interested in those programs, those problems, and 
we will follow along with you and work with you to resolve 
them.
    My time has expired. Mr. Stark.
    Mr. STARK. Thank you, Madam Chair.
    Before I inquire of the witnesses, I just wanted to tell 
you that on our side, we are having so much fun that we want to 
continue this, so that we are going to invoke our rights under 
rule 11 to call witnesses to discuss Part D and have an 
additional hearing on this matter, and our letters outlined 
some of the witnesses that we would like to call.
    Having taken care of that little bit of business, I would 
like to ask Mr. Schiesser, you note in your testimony that a 
CBO study says that Part D plans should save 20 to 25 percent 
off retail, but your discounts are only 15 percent below 
typical cash prices, which I presume is retail. Why the 
discrepancy?
    Mr. SCHIESSER. I would have to look at the specifics of the 
CBO study, but my assumption is that incorporates estimates for 
savings related to formulary management and medical management. 
I would say that what we seek is to maybe create a very clear 
apples-to-apples program for you.
    Oftentimes when we go in with State Medicaid programs, our 
company does a lot of Medicaid programs, and we are about to be 
doing that in Mr. Lewis's home State of Georgia and others. We 
typically see that we are able to save about 10 to 20 percent 
versus what the State Medicaid program is providing for the 
costs of the pharmacy.
    Mr. STARK. Even in States that had the lowest price?
    Mr. SCHIESSER. Yes.
    Mr. STARK. In California, where we had Medicaid, we had a 
lowest price requirement for Medicaid drugs, and we found that 
the prices paid have been higher.
    Mr. SCHIESSER. What we are finding, sir, while I am not 
familiar with the numbers in California in particular, what I 
think we have seen nationwide is with many of the States 
stepping in and keeping their Medicaid flags on for the first 
few months of this program, and as CMS has put in place the 
demonstration project to reconcile those payments back to the 
States, one of the issues has been that typically the States 
have been paying more than the plans, and so CMS is having to 
step in to keep the States whole.
    Mr. STARK. I am looking for the numbers, but I want to say 
at the beginning of this, you are to be commended. I gathered 
that your loss ratio historically is right around 80, 81 
percent for your medical plans; is that about in the ballpark?
    Mr. SCHIESSER. For our Medicaid plan, that is correct.
    Mr. STARK. That is good, I might add.
    If you pull 5 percent, 6 percent, whatever you pull out of 
that for profit, you are still running around a 15 percent 
overhead. From my limited experience, where we used to be able 
to talk about loss ratios, that is about as good as it gets in 
the private sector.
    How do you respond then to Mr. Emanuel's previous 
suggestion that if we had Medicare offer a plan, a direct plan 
in competition, they wouldn't be in competition with your 
managed care plans, but you don't have fee-for-service plans, 
so that is ostensibly what we would offer. We would probably 
offer a three, four--you can argue what the overhead of 
Medicare is, and presumably they would be able to buy at least 
as inexpensively as you can.
    Could you compete with us?
    Mr. SCHIESSER. So, I think we compete with Medicare fee-
for-service today on the Medicare Advantage side.
    Mr. STARK. That isn't doing worth poop. The Republicans 
will give that turkey up in no time. It doesn't have, what, 5, 
10 percent of the Medicare beneficiaries signed up?
    Mr. SCHIESSER. In many of the markets in which we compete, 
Medicare health plans have more than 20 percent penetration in 
the market.
    Mr. STARK. Wow.
    Mr. SCHIESSER. In fact, in a market----
    Mr. STARK. If you were a betting man, we could bet about 
how long those turkeys would continue to fly.
    Mr. SCHIESSER. We are very bullish on Medicare, very 
candidly, even when other plans around the country were, say, 
less bullish on Medicare.
    Mr. STARK. You mean Medicare Advantage?
    Mr. SCHIESSER. Yes, sir, thank you. We have always been 
committed to the program and trying to grow.
    Mr. STARK. Well at 115 percent of what fee-for-service gets 
paid, it would take a genius to get into that and lose money. 
You are getting a 15 percent bonus over what fee-for-service is 
getting for arguably perhaps providing more limited benefits. 
So, that would be pretty tough to be in that racket and not 
make money.
    Mr. SCHIESSER. I think ours--and, please, I defer to your 
tremendous knowledge in this area, but some of the counties I 
have looked at, especially when you consider the graduate 
medical education component of the Medicare reimbursement--for 
example, Broward County was one of the ones I mentioned in my 
testimony. We are actually paid about a third of a point less 
than Medicare fee-for-service costs when you consider graduate 
medical education. I believe if you don't include it, it is 
about 99.5, so it is darn close.
    Mr. STARK. I would like to look at those figures, because 
that will be an unusual district that that would happen.
    My time has expired.
    Chairman JOHNSON OF CONNECTICUT. I would just point out 
that the legislation itself does allow the plans to circumvent 
the law that allows States to have Medicaid get the lowest 
price. So, by circumventing those State laws that guarantee the 
lowest price to Medicaid, we are seeing, as you testified, Mr. 
Schiesser, that you can get prices below the Medicaid price. We 
wouldn't have been able to get prices below the Medicaid price 
if we hadn't circumvented those State laws. We are getting 
unusually low prices for that reason.
    It is, Mr. Stark, true that the figure you are putting on 
the record of 115 percent, that was driven by the Rural Caucus 
in the Congress that pushed the Medicare reimbursement rate for 
rural areas up. So, when you average that out, it sounds 
higher. He gets lower than that because he is not--those plans 
that are not in rural areas. So, the national average figures 
make it look like there is one price being offered, but the 
reality is that those are in the rural areas where there were 
no plans, and the goal was to pull plans into the rural areas; 
not a policy I agreed with, but that has pushed the average up.
    Mr. English.
    Mr. ENGLISH. Thank you, Madam Chair.
    It is a real privilege to have you come and gone from 
Mercer County in my district and take your time to present your 
own perspective as someone who is out on the front lines, so I 
very much appreciate it.
    I have been hearing from a lot of local pharmacists that 
they have faced some special challenges in the implementation 
of this plan.
    A couple of things in your testimony I was very taken with. 
In your county, as you know, as of April 18, nearly 15,000 out 
of the slightly over 21,000 individuals over 65 have 
prescription coverage. There has been a significant number of 
people participating in this program.
    I was struck by one of your recommendations on prompt pay. 
On the face of it, it is a sensible suggestion. You suggested 
there needs to be a prompt pay legislation that would direct 
prescription drug plans to pay clean, electronically submitted 
claims within 14 days, and other clean claims within 30 days.
    I am curious. How does this compare with the payment you 
received from other non-Medicare private payers?
    Ms. GRISNIK. That is very similar.
    Mr. ENGLISH. Does the NCPA have a Part D plan, do you know?
    Ms. GRISNIK. Not that I know of. There is community----
    Mr. ENGLISH. Community Care?
    Ms. GRISNIK. Community Care. I am not certain what the 
affiliation is.
    Mr. EVERETT. What is that plan's payment policy?
    Ms. GRISNIK. Their payment policy. Now, I would have to 
double-check to make sure with my secretary, because I do not 
check all of these, but I would say it is 14 to 21 days right 
now.
    Mr. EVERETT. So, it is actually--you are not even sure that 
it would fall within the 15-day parameter.
    Ms. GRISNIK. Right, 14.1. I believe, don't quote me. I 
could double-check and let you know, Mr. England.
    Mr. ENGLISH. I would be curious. Our impression is that 
they pay more within a 30-day time frame.
    Ms. GRISNIK. I could check my records at the store and just 
let you know.
    Mr. ENGLISH. Is 30 days, in fact, an unreasonable time 
frame in which to pay claims? After all, my experience with my 
credit cards is such that a 30-day turnaround time is not 
unreasonable.
    Ms. GRISNIK. Unfortunately we must--our wholesalers 
electric fund transfer weekly, so it does put a strain on an 
independent pharmacy because we are paying our bills every 
week.
    Mr. ENGLISH. Sure.
    Ms. GRISNIK. It does put--as you are putting out, the 
faster you can get it in, the easier it is to make those 
payments to your wholesalers.
    Mr. ENGLISH. You also state in your testimony that an 
adequate dispensing fee should be set at an adequate minimum 
level. In your view, who should set that fee? Should one fee 
apply to all plans equally, or would there be geographic or 
other variations? How would you envision or your association 
would envision that fee be updated?
    Ms. GRISNIK. That I would like to double-check and get back 
to you. I do feel it needs to be an adequate fee that would 
cover a pharmacist, at least their overhead.
    As I said, with a $2 prescription, there is no way that it 
even covered the bottle and the label for me just--let alone I 
happened to be working and it is my business. If I hire a 
pharmacist, I am paying large sums per hour and my technicians. 
There needs to be some equitable fee so that we are getting 
paid for our--at least for our overhead.
    I would like to double-check. I could get back to you with 
that information.
    Mr. ENGLISH. I would welcome it.
    [The information follows: PENDING.]
    Mr. ENGLISH. Again, I appreciate your independent take on 
these things. I guess my question is if the government starts 
setting dispensing fees based on the variables you referenced 
in your testimony, they will be subject to fluctuations, which 
at various points may help or hurt the pharmacies that we are 
trying to help here. As a result, I am a little skeptical on 
how the fee structure would work.
    The other point I wanted to make, from your testimony, you 
bring up cobranding by drug plans, the use of company logos 
like Wal-Mart on beneficiary plan cards. What you found is that 
this has the potential to steer beneficiaries away from 
independent pharmacies.
    Ms. GRISNIK. It does do that indeed. I had a patient this 
past weekend who brought me his insulin that he could not buy 
from the other pharmacy. He said, I guess I will have to pay 
full price here because you do not take my card.
    Mr. ENGLISH. You also acknowledge, though, that CMS is 
attempting to address the issue. Dr. McClellan in his testimony 
states that with the beginning of fiscal year 2007 marketing on 
October 1 of this year, PDP sponsors will not be able to place 
cobranding names and logos on their ID cards.
    This seems to me to be one of those areas where CMS has 
been responsive to a lot of complaints they have heard.
    Ms. GRISNIK. Are they requiring them?
    Mr. ENGLISH. Do you have any problem with what they are 
doing?
    Ms. GRISNIK. No. Are they requiring them?
    Mr. ENGLISH. Absolutely.
    Ms. GRISNIK. Who is going to enforce it?
    Mr. ENGLISH. CMS is. It will be part of the contracting 
process.
    Chairman JOHNSON OF CONNECTICUT. Will the gentleman yield?
    Mr. ENGLISH. Certainly.
    Chairman JOHNSON OF CONNECTICUT. It is part of next year's 
standards. You can't do anything about it this year. It is next 
year's because the cards have already been issued. The next 
year's competition.
    Ms. GRISNIK. That leaves a lot of time frame though.
    Chairman JOHNSON OF CONNECTICUT. I appreciate that, but the 
cards are already out. How are you going to do that? We can do 
a better job of educating them. We will talk to them about it.
    Mr. ENGLISH. Thank you, Madam Chairman. I appreciate your 
coming from Mercer County to share.
    Ms. GRISNIK. Thank you for having me.
    Chairman JOHNSON OF CONNECTICUT. Mr. Lewis. I am glad to 
see, Mr. Lewis, that 69 percent of your seniors have signed up. 
That is more than are signed up for the Medicaid--who are 
eligible for the Medicaid program. So, that is really great.
    Mr. LEWIS. Thank you very much, Madam Chair. Thank you very 
much. Let me thank all of the witnesses for being here.
    Mr. Wolfe, Rite Aid must have customers that have already 
reached the doughnut hole. Do you think you would have a 
customer that won't be able to afford that prescription under 
the coverage gap?
    Mr. WOLFE. I am concerned about that, Congressman. That is 
where I think Madam Chairman talked about some assistance 
programs that are available in States in Pennsylvania. The 
Program of All Inclusive Care for the Elderly is looking to 
address that issue for lower-income Pennsylvanians. I think in 
other parts of the country, some private sector assistance 
programs along the lines of the manufacturer assistance 
programs could also go a long ways. I was glad to hear that 
Office of Inspector General (OIG) has set out a framework for a 
formula that would allow them to step in and offer some 
assistance in that regard.
    Mr. LEWIS. Wouldn't it hurt your business if your customers 
are not able to pay for their prescription drugs?
    Mr. WOLFE. More than their business, it would potentially 
harm the patient. Our primary concern is that the patient get 
the medications they need; but certainly, yes, it would not be 
good for our business either.
    Mr. LEWIS. Do you plan to help any of your patients pay for 
their prescription drugs during the time----
    Mr. WOLFE. Congressman, we do help with that. The 
pharmacies are held to their discounted rate that they have 
contracted with the payer and passed that to the beneficiary 
while they are in the doughnut hole.
    They do not revert back to a cash price.
    Mr. LEWIS. Ms. Grisnik, thank you for being here. Thank you 
for your testimony. We have heard many stories to back up your 
testimony that payments to pharmacists by Part D, plan sponsor, 
are too low, too slow. You have mentioned that some pharmacists 
have gone out of business.
    Ms. GRISNIK. That is my understanding, yes.
    Mr. LEWIS. Really. Could you describe, what do you mean by 
too slow and too low; they are not paying enough?
    Ms. GRISNIK. Well, the too slow, of course, is the time 
frame from the time the drug was dispensed and then you get the 
payment for the actual prescription. Too low would be as an 
example, especially with our generics, that that prescription, 
that particular prescription I spoke of that is $2, was a 
generic prescription. I can't dispense a prescription for $2. I 
can't give somebody a prescription for $2.
    Mr. LEWIS. You are independent. You are not part of a big 
chain?
    Ms. GRISNIK. I am not. We own our own pharmacy. We do have 
buying groups that help us facilitate buying so that we do get 
the best price possible. So, we buy with several others. We buy 
with large wholesalers, we buy with co-ops to get the price of 
our goods down as far as we can. I can't dispense a medication 
for $2. That is it.
    Mr. LEWIS. Do you have any idea how many other independent 
pharmacies, drugstores, will be forced to close if the pay is 
inadequate and too slow?
    Ms. GRISNIK. If the pay is inadequate, especially on 
generic, it will not be just independents, it will hit the 
chains, too. It will be devastating to the pharmaceutical 
community.
    Mr. LEWIS. Do you have any recommendation for this 
Committee, for CMS?
    Ms. GRISNIK. Well, they need to look at their payment 
structure, especially for generic.
    Mr. LEWIS. Mr. Hayes, do you have anything to add?
    Mr. HAYS. I will follow up on your question about what 
pharmacists can do when patients show up during the doughnut 
hole. I do commend many pharmacists, community pharmacists, 
chain pharmacists, who did right in January and February to 
save the day, saved the lives in many cases for many people who 
had lost their Medicaid drug coverage and were being switched 
theoretically into the Medicare drug coverage. Many really did 
help and simply gave free prescriptions. Ultimately 35 or more 
States had to come in with emergency plans to help these folks.
    I think that what we heard today, though, is that is not 
something that the pharmacists continue do to do to bail people 
out to save folks' lives. I think that is why probably most of 
us are here today to look for help from Congress.
    Mr. LEWIS. Thank you.
    Madam Chairman, my time has expired.
    Chairman JOHNSON OF CONNECTICUT. Let me just comment--never 
mind. Let me recognize my friend from Texas.
    Mr. DOGGETT. Thank you so much, Madam Chair. Thanks to all 
of you for your testimony and for staying here late with us 
through the votes.
    Mr. Hayes, we have seen, of course, this afternoon a 
tremendous amount of collective back-patting and congratulatory 
comments about what a wonderful job has been done on this 
Medicare Part D program.
    I am interested in particularly the folks that I understand 
is one of the focuses of your organization; that is, folks who 
have qualified for the so-called Extra Help program. We are now 
down to 2 weeks, less than 2 weeks before the statutory or 
official deadline of May 15. I know it has been extended for 
those folks. What portion of those who are eligible to receive 
that help, the people that are in greatest need among our 
seniors for the prescription drug program, what portion of them 
are signed up in the great success we heard about today?
    Mr. HAYS. According to most government estimates, there are 
about 8 million people poor enough to be eligible for this 
Extra Help program. These are folks who simply cannot afford to 
pay their way through the doughnut hole, who cannot afford the 
copayments and the premiums.
    Ms. Disman from the SSA this morning, or this afternoon, I 
think, reported that about 1.7 million of those 8 million folks 
had, in fact, been enrolled. I think that is 17 or 18 percent 
have enrolled up to now.
    Mr. DOGGETT. After all the great efforts and all the great 
success that we have heard about today, and the people, the 
greatest need, the success rate is about 17 or 18 percent?
    Mr. HAYS. That is correct. Even comparing it, it was even 
depressing to me to have the witnesses earlier today. To 
compare whatever, the Part D enrollment rate or, much worse, 
this low-income subsidy, also known as Extra Help program, 
enrollment rate to food stamps, Medicaid and other disgraceful 
rates that we have for other programs is somewhat infuriating, 
I think, given the amount of human need to have a program that 
goes unmet, to have----
    Mr. DOGGETT. It really is. The 17 or 18 percent is an F or 
an F minus, if there is such a grade, in my book, and that is 
the grade that applies, I think, in some other areas.
    Mr. DOGGETT. To me, it has been a big question of whether 
the taxpayer has been fleeced in this bill more than the 
seniors, but I think there is enough of a problem to go around. 
Much of that problem was also discussed by you, Ms. Grisnik, 
and it is consistent with the concerns that I have heard from 
many of the small towns that I represent particularly; and a 
little different population perhaps than you have, but similar 
concerns, where I have many people who speak most comfortably 
in Spanish and going to a community pharmacy down the block who 
can speak with them in Spanish about the counseling that they 
need and the interaction between the drugs is a big factor. as 
I talk to some of those pharmacists, some of them tell me they 
get no dispensing fee at all for doing that for an extended 
period. That has been the experience of you and some of your 
colleagues.
    Ms. GRISNIK. I'm sorry? No dispensing fee?
    Mr. DOGGETT. That they receive no dispensing fee on the 
drug that they might provide counseling to someone about it at 
all. They get zero.
    Ms. GRISNIK. That is correct. On that one prescription I 
got no dispensing fee.
    Mr. DOGGETT. Have you and your organization turned to the 
CMS people to ask that CMS intervene and try to assist on this 
dispensing fee issue?
    Ms. GRISNIK. I have not personally. Whether my organization 
has, that needs to be addressed, I am sure.
    Mr. DOGGETT. Another concern that I have had voiced from 
some of theses pharmacists is they do not get any electronic 
payments. I am sure that the plans themselves expect to get 
electronic payments from the government, but this is not 
happening to the community pharmacists.
    Ms. GRISNIK. That is correct. Some are not doing 
electronic. We get electronic payments from so many of our 
third parties. It should be all.
    Mr. DOGGETT. Basically the relationship between the 
individual pharmacists and some of these plans, the 
prescription benefit management organizations, is not 
dissimilar from that between an individual physician and a 
health maintenance organization; that all the bargaining power 
is on one side, and you are charged for making an inquiry if 
someone comes into your pharmacy and thinks they have coverage 
under a particular plan and you contact them, that you get a 
charge just for making an inquiry.
    Ms. GRISNIK. That is correct. If you transmit on line to do 
an inquiry, you do get charged. That is correct.
    Mr. DOGGETT. So, you may get charged for making an inquiry 
for someone who did not keep up their premium or was dropped 
off a plan.
    Ms. GRISNIK. Yes.
    Mr. DOGGETT. That may be on the same prescription that you 
get no dispensing fee on.
    Ms. GRISNIK. That is also correct.
    Mr. DOGGETT. Thank you so much for your testimony.
    Chairman JOHNSON OF CONNECTICUT. Thank you. Ms. Grisnik, 
how frequently does the State pay you?
    Ms. GRISNIK. Our State pays us every week.
    Chairman JOHNSON OF CONNECTICUT. Are not many of your 
patients Medicaid or dual-eligible and fall under that payment 
regimen?
    Ms. GRISNIK. Our regular access patients pay us every week, 
but some have fallen--they have routed them out to different 
HMOs and those, unfortunately, are not keeping up the same way.
    Chairman JOHNSON OF CONNECTICUT. In those instances where 
the State has stepped in and just paid while they straighten 
some of those enrollment issues out, have they paid promptly?
    Ms. GRISNIK. In the beginning, from those particular ones?
    Chairman JOHNSON OF CONNECTICUT. That was about 2 or 3 
months.
    Ms. GRISNIK. I would have to double-check and get back to 
you. Actually my office manager would know that better than I.
    Chairman JOHNSON OF CONNECTICUT. Mr. Hayes, what percentage 
of that group are on Medicaid, this 17 or 18 percent?
    Mr. HAYS. None, Madam Chairman. The people who are on 
Medicaid were automatically enrolled into the extra health 
program so the 8 million folks that have been targeted by a lot 
of our groups to go out and enroll people manually, if you 
will, those are people who are still very poor but not Medicaid 
eligible. Am I confusing that?
    Chairman JOHNSON OF CONNECTICUT. You are confusing numbers 
in the sense that when the witness from SSA testified, she was 
testifying to a very narrow group. I do not know the 
relationship between her number and the other numbers, but the 
150 percent of poverty and under presumably are in this group 
that the States and the Federal Government are transferring 
information about and hoping to work out and will not be 
affected by the May 15 deadline.
    Mr. HAYS. That is correct. The 8 million people who are 
eligible for signing up for extra help can do it May 16.
    Chairman JOHNSON OF CONNECTICUT. So, it is not right to say 
that those who need it most are not getting it. Those who need 
it most not only are getting it, but, because there have been 
problems in the system, they have no deadline.
    Mr. HAYS. No. The people who are getting extra help, the 6 
million people with Medicaid, are indeed getting that extra 
help, Madam Chairman, but they lost their--many States--better 
Medicaid coverage in the process. So, it is the people who 
really we are reaching out to----
    Chairman JOHNSON OF CONNECTICUT. I appreciate that the ones 
that need it most are the ones like--States like Connecticut 
and Pennsylvania subsidize, and other States. The State has not 
been subsidizing them and they were paying themselves because 
they mostly did not have prescription drug coverage.
    Now a lot of what we are seeing in the 8 million that did 
sign up themselves were mostly people who did have prescription 
drug coverage before. They are the ones we wanted to reach. We 
think that by the time sign-up is done, there will be 4 million 
not covered; 4 million not participating or not needing to 
participate; and of those, 2 million are expected to be in this 
group that is hard to reach, that is low income. The other 2 
million, it will not be clear exactly who they are until we get 
further down the line.
    To even be talking about 4 million or 5 million from 42 
million in 125 days is an accomplishment. That is all; I think 
it is important for the record to reflect. It is important for 
the record to reflect that we still have a job to do, and it is 
also important for the record to reflect that we have had a 
better partnership than we ever had, and that some of the 
problems with the small pharmacies are due to the contracts. As 
the Administration looks at what are going to be the 
requirements in the contracts in the future, which is what they 
are doing now, that is our chance to address contracting 
problems.
    The government has never set, to my knowledge, pharmacy 
reimbursement rates. That is usually a matter of contract, and 
a pharmacy can choose to participate or not choose to 
participate.
    It is very helpful to have your testimony about what you 
see as the problems out there in the front line. We will reread 
those just as carefully as anything else. It is a great point 
of pride that so many of you have been out there, hands on, one 
to one; because, in a new program, especially when it involves 
insurance, should be one to one. Nobody likes choosing an 
insurance plan, even if it is one their employer offers.
    I would have to say that on the Medicare Advantage plans, I 
had a senior in Waterbury, Connecticut give me a long lecture 
on why was I not talking about them more, because he was paying 
zero premium for drugs and some additional benefits, including 
copayments.
    So, these plans are offering a very good bundle of 
benefits. The reason they can do it is because they can use 
drugs in preventative health to keep people out of hospitals 
and emergency rooms, and that cuts their costs.
    So, we can learn something from them, particularly as we 
move into an era in which we need to help seniors manage an 
array of chronic illnesses. We do not need to be like them. We 
just need to learn how to provide more integrated care, and the 
systems do that.
    We have a lot of options out there. We have had some 
remarkable accomplishments. We have some problems. The only way 
to confront them is get them on the public record, which we 
have done today. We will help to work out the remaining 
problems with you. Thank you very much for being here. We 
appreciate your attendance.
    The hearing will recess for just a few minutes.
    [Recess.]
    Chairman JOHNSON OF CONNECTICUT. Before I adjourn the 
hearing, I would like to respond to the letter handed to me by 
my Ranking Member, Mr. Stark, and signed by the members of the 
minority. It is a letter notifying that they want to have a 
rule 11 hearing. It claims that we failed to include important 
witnesses necessary to enable the Subcommittee to fully examine 
the issues and they, at a minimum, would likely invite.
    Now they would like to invite a State Medicaid director. 
They had requested that such a director testify at this 
hearing, and we did not have room for that. So, that is one 
that we did not invite.
    They wanted to invite UnitedHealthcare. We did invite 
UnitedHealthcare. We also invited AARP. Both of them rejected 
the invitation.
    Mr. DOGGETT. Will the gentlewoman yield? Just on the 
UnitedHealthcare, my understanding was that they agreed to come 
and they were not invited.
    Chairman JOHNSON OF CONNECTICUT. They were invited and they 
declined to come.
    We invited AARP, who works with them, and they declined to 
come.
    GAO and the Kaiser Family Foundation were discussed, and 
then we have an e-mail dropping the request for them.
    You cite the OIG that you would like to invite, but you 
never suggested the OIG for this hearing. In the letter you 
suggest that you would like to invite retiree coverage, raise 
the issue of retiree coverage, but you did not raise that issue 
before this hearing. In the letter you asked to raise the issue 
of beneficiary membership organization, have a beneficiary 
membership organization testify. You did just have that at this 
hearing, and he did a very fine job.
    So, I wanted to put on the record that of those that you 
say you were likely to invite, some we agreed to invite and 
they declined; some you dropped, some you invited, and others 
were not brought up. Nonetheless, you have a right to have a 
hearing. We have a right to set the time. So, we are going to 
have this hearing tomorrow at 2 o'clock.
    Thank you. The hearing is adjourned.
    [Whereupon, at 6:39 p.m., the hearing was adjourned.]


                     CONTINUATION OF THE HEARING ON
                         IMPLEMENTATION OF THE
                         MEDICARE DRUG BENEFIT

                              ----------                              


                         WEDNESDAY, MAY 4, 2006

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:50 p.m., in 
room 1100, Longworth House Office Building, the Honorable Nancy 
Johnson (Chairman of the Subcommittee) presiding.
    Chairman JOHNSON OF CONNECTICUT. Good afternoon, everyone, 
and welcome to this continuation of the Committee's hearing on 
the implementation of the Medical Part D prescription drug 
benefit. I am delighted to have another opportunity to talk 
about this program that is so important in the lives of our 
seniors and to talk about the remarkable partnerships that our 
Centers for Medicare and Medicaid Services (CMS) has developed 
with the private sector, unprecedented in the effort by any 
Administration and any part of the Government to get the public 
involved in a benefit that the Congress has funded.
    Whether it is Food Stamps, whether it is Medicaid, whether 
it is Supplemental Security Income benefits, we have never seen 
such a high level of participation in 125 days as we have been 
able to generate in the Medicare prescription drug benefit, and 
that is because it is so important to the seniors of America.
    From April 20 to April 27, 36,906 seniors were signing up 
per day. From April 27 to today, 56,303 seniors per day are 
enrolling. That is because, as I have seen in my own district, 
seniors are saving hundreds of dollars, thousands of dollars; 
in one instance, a couple saving $5,000. If you lived on a 
fixed income, and that income was low or moderate, you, too, 
would want help with your prescription drugs, and I am very, 
very pleased that the Medicare Part D plan is serving seniors 
all across America, and we are on track by May 15 and the weeks 
thereafter, as low-income seniors have a right to continue 
signing up, we are on track for Medicare Part D and other plans 
that working Americans over 65 are participating in to have 90 
percent of the 42 million seniors in America with good drug 
coverage.
    Over the next few months, I believe at least 2 of those 
last 4 million will sign up. Even without them, a 90 percent 
coverage rate in 125 days of our 42 million seniors is an 
absolutely astounding record. So, I am delighted to be here 
today to talk again about this program. Of course, 
implementation challenges, we heard yesterday how those 
challenges were owned by the Government; never.
    I have served under four Presidents. I have served under 
many CMS administrators. Never have I seen the Government so 
willing to take ownership of problems, create collaborative 
relationships to solve them, and put in place the ability to 
deal with the problems, to get to the people who need the 
benefit. We heard about all the partners, over 10,000 partners 
yesterday; indeed, a remarkable performance, and one through 
which in the future, make no mistake about it, those 
partnerships are not going to service just in terms of getting 
people involved in the Medicare Part D benefit, which is 
important, but far more important than any one benefit, those 
partnerships are going to help us close the gap between 
minority and other senior groups in health care by giving us 
the means to reach out to our seniors and deliver to them the 
preventive benefits we passed the preventive benefits we have 
prepared in the Medicare Modernization Act which go directly to 
the issue of helping the seniors of America manage the chronic 
illnesses that plague their elder years.
    So, those partnerships are just the beginning of a 
relationship that is important for government to be able to 
help its constituents lead healthier lives. So, I am happy to 
be here, and I yield to my colleague, Pete Stark.
    Mr. STARK. Thank you, Madam Chair, and thank you for your 
courtesies in extending this hearing to accommodate additional 
witnesses. I want to thank the witnesses who appeared today and 
appreciate their willingness to appear on such short notice.
    Some proponents of Part D seem to believe that appearance 
may be as important as performance, but given the lives and 
dollars that are at stake, I am not sure that is an acceptable 
position. This Committee should be rigorous in its oversight, 
and we have heard time and time again about this being the 
biggest change to Medicare since its creation.
    Yet, yesterday was our first hearing, and we have a lot to 
cover. With this law affecting tens of millions of people and 
spending up to a trillion dollars in the next 10 years, I think 
our obligation to account for that spending and know what is 
happening is paramount. While, as you know, I am no fan of this 
program or the partisan process by which it was created, my 
Democratic colleagues and I I think have been very clear that 
we do not want to see it repealed. We do feel that definitely, 
changes are needed.
    The Administration and Committee leadership would like to 
chalk everything up to run of the mill implementation problems 
and suggest it is all being worked out. I do not believe that 
is the case, and neither do our constituents, objective policy 
experts, State Medicaid directors, many physicians and 
pharmacists. The problems seem to run far deeper, and while I 
must acknowledge there is not much we are likely to be able to 
do this year--we never seem to be able to do anything 
courageous in even-numbered years, but if we had to resort 
solely to parliamentary tactics, I think this would be 
unlikely.
    Once the Committee has a full and common understanding of 
the situation, I hope we can use what we have learned to 
improve the program, and today's witnesses should give us a 
broader understanding of how the law is affecting the 
beneficiaries, including those most vulnerable, for whom this 
law was allegedly targeted. The witnesses, I think, will help 
us understand why it is difficult for the beneficiaries and 
their advisors to navigate this program and help clarify the 
record with respect to drug prices, and we are going to hear 
from United, the American Association of Retired Persons, the 
largest Part D plan, and they are already covering, I think, 
4.5 million beneficiaries and have received $4.5 billion or 
thereabouts from CMS. Seems to me that they were an outstanding 
witness to hear from. We are going to hear about the importance 
of oversight and making the data publicly available.
    We have 56,000 enrollees a day. If that is the correct 
figure, we would need 130 more days to get the remaining 7.2 
million enrolled, and I did that math with my shoes and socks 
on. Yet, we only have 11 more days, so that by token, we are 
hardly going to get 560,000, 600,000 in.
    So, the next step, I believe, is to extend the deadline and 
also the corresponding late enrollment penalty. To do so at 
this hour would achieve the goal of having a deadline to hasten 
enrollment but not penalize those who have not been reached, 
were misinformed, could not navigate the system, 
procrastinated, and it would probably only bring, according to 
CMS' concern, more healthy people into the program, and that is 
exactly what we want to do. That will hold the cost down.
    So, I look forward to today's testimony and discussion to 
see if we can get closer to getting those last 7 or 8 million 
people in the program. Thank you.
    Chairman JOHNSON OF CONNECTICUT. Thank you.
    Welcome, Mr. Waxman.

 STATEMENT OF HON. HENRY WAXMAN, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. WAXMAN. Well, thank you very much, Madam Chairman and 
Members of this Committee. I am honored to have been invited to 
come to the Committee on Ways and Means and talk about the 
subject of this Medicare prescription drug benefit, but I do 
not need to tell anyone on this Committee of the problems with 
the new drug benefit. You have all been back to your districts 
and heard the complaints from seniors who cannot get the drugs 
they need, or cannot cut through the plans' complications--the 
dozens of different plans, each with different copays, 
premiums, deductibles, and formularies--to sign themselves up.
    Now, as the May 15 deadline for enrollment looms, millions 
of seniors face life-long penalties for not signing up for this 
flawed program in time. The Medicare bill is increasingly 
looking like a poor deal for too many seniors. The new program 
is incredibly complicated. Too many of our most vulnerable 
seniors are falling through the cracks, and it is costing 
seniors and the taxpayers too much.
    One of the justifications for the plan's confusing scheme 
involving dozens of private insurers is that these plans would 
be able to provide seniors with lower prices. This is simply 
not the case. The prices that the plans are charging seniors 
are way too high. They are well above prices that aggressive 
Government negotiators like the Veterans Administration (VA) 
pay. They are well above the prices that consumers pay in 
Canada. They are even higher than the prices available through 
large retailers.
    I would like to give you a few examples of the kinds of 
price differences that we are seeing. Recently, my staff looked 
at the prices offered by 10 leading Medicare insurance plans 
for 10 popular brand name drugs. The average Medicare prices 
were more than 75 percent higher than the prices negotiated for 
the Federal Government by the VA. They were almost 60 percent 
higher than prices in Canada. They were higher than the prices 
at Drugstore.com or Costco.
    With the new Medicare plans, beneficiaries pay an average 
price of $111 for the ulcer drug Protonix, but the Federal 
Government pays only $24 for the same drug, a 425 percent 
difference. Similarly, Medicare beneficiaries pay an average 
price of $129 for the heartburn medication Nexium, but 
consumers in Canada pay only $67.
    The prices offered by the Medicare drug plans did not just 
start out high. They also went up, and they did so rapidly. CMS 
began posting information on the prices offered by the Medicare 
drug plan in November 2005, and seniors began choosing plans 
and signing up in December. At this point, many were locked 
into a plan. In February, my staff looked at whether plans were 
increasing their posted drug prices for beneficiaries. They 
found that in the first two months of the Medicare program, the 
drug plans increased their prices by over 4 percent. The vast 
majority of plans increased their prices, with some plans 
increasing prices by over 10 percent.
    These price increases in the first two months of the 
program were greater than the inflation rate for all of 2005. 
They were over twice as high as drug price increases in Canada, 
and contrary to critics of the analysis, they increased even 
faster than the published average wholesale price for the same 
drugs. These massive price differences and the rapid price 
increases make little sense. For beneficiaries, they increased 
out of pocket drug costs, reduced purchasing power, and 
undercut the assistance provided by the Medicare drug benefit. 
For taxpayers, who will also end up footing the bill for higher 
drug prices, they will ultimately mean billions of dollars in 
extra costs.
    There are other problems with the Medicare drug benefit as 
well. One of the biggest complaints that we have heard from 
seniors is they are not able to get the drugs they need, and 
they are encountering hidden restrictions on drugs that are 
listed on the plan formulary. The problem is that plans are 
using additional tactics to restrict use. They require prior 
authorization before a drug can be prescribed or limit the 
quantity of a given drug that they will pay for or require that 
the beneficiaries use a different drug first.
    The use of these restrictive tactics mean that even if 
seniors have carefully researched a Medicare drug plan, they 
can still encounter obstacles in obtaining medications. While 
the use of restrictive tactics by Medicare drug plans is 
widespread, the disclosure of their terms is virtually 
nonexistent. Over two-thirds of the Medicare drug plans 
contacted in a phone survey were unable to describe accurately 
how prior approval, step therapy, or volume limits worked with 
their particular plan. Several times, plans were called twice 
consecutively and gave completely different answers to 
identical questions about whether plans restricted access to 
drugs and how these restrictions worked.
    The net result of all of this is that even if they 
carefully researched the plan, too many beneficiaries cannot 
get the medicine they need. The complexity of Medicare Part D 
is putting many seniors in a Catch 22 predicament. They are not 
able to make a fully informed choice about a Medicare drug plan 
without knowing whether the plan will limit their access to 
drugs listed on the plan formulary, but even though the use of 
these restrictive tactics is common, it is nearly impossible 
for seniors to learn their terms until they have already 
subscribed and then been denied access to the drug.
    Well, over and over, we talk to seniors; we investigate the 
facts; we come across a common theme: the Medicare prescription 
drug plan is not working for seniors. It is too complex. Many 
seniors are unable to sign up; are unable to get the drugs they 
need when they do sign up for a plan, and the plans are just 
not able to control prices and give seniors the low cost that 
they were promised.
    We need to take another look at this Medicare plan. 
Clearly, given the complexity and confusion surrounding the 
program, we should extend the May 15 deadline. Seniors should 
not be penalized because Congress passed the legislation that 
created this flawed drug benefit, and we should do all that we 
can, including letting the Government negotiate for better 
prices to guarantee that seniors and taxpayers get their 
money's worth.
    Thank you for this opportunity to make this statement, and 
I would be happy to answer any questions that Members may have.
    [The prepared statement of Mr. Waxman follows:]

 Prepared Statement of The Honorable Henry Waxman, a Representative in 
                 Congress from the State of California

    Thank you for asking me to testify today.
    I don't need to tell anyone on this Committee about the problems 
with the new drug benefit. You've all been back to your districts, and 
heard the complaints from seniors who can't get the drugs they need, or 
can't even cut through the plan's complications--the dozens of 
different plans, each with different copays, premiums, deductibles, and 
formularies--to even sign themselves up. Now, as the May 15 deadline 
for enrollment looms, millions of seniors face life-long penalties for 
not signing up for this flawed program in time.
    The Medicare bill is increasingly looking like a poor deal for too 
many seniors: the new program is incredibly complicated; too many of 
our most vulnerable seniors are falling through the cracks; and it is 
costing seniors and the taxpayers far too much.
    One of the justifications for the plan's confusing scheme involving 
dozens of private insurers is that these plans would be able to provide 
seniors with lower prices. But this is simply not the case. The prices 
that the plans are charging seniors are way too high. They are well 
above prices that aggressive government negotiators like the VA pay; 
they are well above prices that consumers pay in Canada; and they are 
even higher than the prices available through large retailers.
    I'd like to give you a few examples of the kinds of price 
differences that we are seeing. Recently, my staff looked at the prices 
offered by ten leading Medicare insurance plans for ten popular brand 
name drugs. The average Medicare prices were more than 75% higher than 
prices negotiated for the Federal Government by VA; they were almost 
60% higher than prices in Canada. And they were higher than the prices 
at Drugstore.com or Costco.
    With the new Medicare plans, beneficiaries pay an average price of 
$111 for the ulcer drug Protonix. But the Federal Government pays only 
$24 for the same drug--a 425% difference. Similarly, Medicare 
beneficiaries pay an average price of $129 for the heartburn medication 
Nexium. But consumers in Canada pay only $67.
    The prices offered by the Medicare drug plans didn't just start out 
high. They also went up--and they did so rapidly. CMS began posting 
information on the prices offered by the Medicare drug plans in 
November 2005, and seniors began choosing plans and signing up in 
December. At this point, many were locked into a plan.
    But in February, my staff looked at whether plans were increasing 
their posted drug prices for beneficiaries. They found that in the 
first two months of the Medicare program, the drug plans increased 
their prices by over 4%. The vast majority of plans increased their 
prices, with some plans increasing prices by over 10%.
    These price increases in the first two months of the program were 
greater than the inflation rate for all of 2005. They were over twice 
as high as drug price increases in Canada. And, contrary to critics of 
the analysis, they increased even faster than the published average 
wholesale price for the same drugs.
    These massive price differences, and the rapid price increases, 
make little sense. For beneficiaries, they increase out-of-pocket drug 
costs, reduce purchasing power, and undercut the assistance provided by 
the Medicare drug benefit. For taxpayers, who will also end up footing 
the bill for higher drug prices, they will ultimately mean billions of 
dollars in extra costs.
    There are other problems with the Medicare drug benefit as well. 
One of the biggest complaints that we've heard from seniors is that 
they are not able to get the drugs they need, and that they are 
encountering hidden restrictions on drugs that are listed on a plan 
formulary.
    The problem is that plans are using additional tactics to restrict 
use--they require prior authorization before a drug can be prescribed, 
or limit the quantity of a given drug that they will pay for, or 
require that beneficiaries use a different drug first. The use of these 
restrictive tactics means that even if seniors have carefully 
researched a Medicare drug plan, they can still encounter obstacles in 
obtaining medications. And while the use of restrictive tactics by 
Medicare drug plans is widespread, the disclosure of their terms is 
virtually nonexistent.
    Over two-thirds of the Medicare drug plans contacted in a phone 
survey by my staff were unable to describe accurately how the prior 
approval, step therapy, or volume limits worked with their particular 
plan. In a number of cases, plan representatives had no idea what these 
terms even meant. In a number of other cases, Medicare drug plans 
provided erroneous or conflicting information about restrictions. 
Several times, plans were called twice consecutively and gave 
completely different answers to identical questions about whether plans 
restricted access to drugs and how these restrictions worked.
    The net result of all this is that even if they carefully research 
a plan, too many Medicare beneficiaries can't get the medicine they 
need. Beneficiaries with high blood pressure are not able to obtain 
their medication in their prescribed dose. Arthritis patients have been 
denied the recommended doses of painkillers that they need. Mental 
health patients are unable to get appropriate doses of antipsychotic 
medications. These stories are heartbreaking, and they show how far 
short this program falls from what it should have been--a simple and 
dependable part of Medicare.
    The complexity of Medicare Part D is putting many seniors in a 
``Catch 22'' predicament. Seniors are not able to make a fully informed 
choice about a Medicare drug plan without knowing whether the plan will 
limit their access to drugs listed on the plan formulary. But even 
though the use of these restrictive tactics is common, it is nearly 
impossible for seniors to learn their terms until after they have 
subscribed and been denied drug access.
    Again and again, when we talk to seniors and investigate the facts, 
we come across a common theme. The Medicare prescription drug plan is 
not working for seniors. It's too complex, leaving many seniors unable 
to sign up or unable to get the drugs they need when they do sign up 
for a plan. And the plans just are not able to control prices and give 
seniors the low costs that they were promised.
    We need to take another look at this Medicare plan. Clearly, given 
the complexity and confusion surrounding the program, we should extend 
the May 15 deadline. Seniors should not be penalized because Congress 
passed the legislation that created this flawed drug benefit. And we 
should do all that we can--including letting the government negotiate 
for better prices--to guarantee that seniors and taxpayers get their 
money's worth.

                                 

    Chairman JOHNSON OF CONNECTICUT. Thank you very much, 
Representative Waxman.
    You know, in Fort Smith, Arkansas, the St. Boniface School 
sixth graders took on as their community service project 
learning to use the Pathfinder, and under instruction, with 
careful instruction, they learned to use it. One day a week, 
they dedicated to signing up seniors in their hometown, and 
they signed up 300 seniors. Ethan said to the First Lady when 
she visited down there recently to commend them, he said, this 
is a mountain out of a molehill. This is not hard.
    I tell that story because I have had many a senior call to 
my office and say, oh, this is so complicated. We say, have you 
tried it? They say, oh, no, no. In the papers, they say it is 
so complicated. I said, well, try it. Let us help you try it. 
Indeed, when they get their prescriptions written down and 
their number written down, they find it not so hard, and the 
proof is in the pudding. In the Kaiser Family Foundation 
survey, they found that 54 percent of the seniors who were 
signed up chose their own plans.
    When you put that up against the overwhelming satisfaction 
rate and the majority that either understood very well or well 
their plans, you have to say that when you use the tools that 
are provided, and you follow the directions, seniors are 
finding this a wall they can penetrate, and they are signing up 
in droves.
    You also have to consider, at least I am surprised that you 
do not take a little more time to think through the 
extraordinary partnerships that the Government has developed 
with the Hispanic community, the National Association for the 
Advancement of Colored People, black churches; well, out at 
Martin Luther King's own church, they are having yet another 
signup. At black churches throughout America, there have been 
signups. There are Hispanic hotlines, Spanish-speaking hotlines 
in many States in many areas; Meals on Wheels, it really is 
about time Government understood they need to speak to people 
where they are, and if they cannot speak to them through the 
written word or the computer word or the telephone voice, they 
need to speak to them one-on-one, person-to-person.
    That is what is different about this outreach area. You and 
I worked hard on getting the children's health plan in place, 
nothing the was extraordinarily disappointing to see the first 
year signup numbers. They were pathetic. Even after five years, 
they were pathetic. Even now, in Connecticut, with enormous 
resources dedicated to getting people into what we call Husky, 
still, in my hometown, with a Federal grant, with someone 
stationed in the emergency room, half of the, quote, uninsured 
were covered by either Medicaid or Husky.
    So, this is quite a remarkable performance that such a huge 
percentage of our seniors are going to be signed up if they 
needed to be signed up by May 15. So, I hear what you are 
saying about the problems. There have been problems. I assume 
that you were very pleased with the Administrator's 
announcement about the policy governing formulary changes 
recently, which straightens out a lot of the problems and will 
give him a chance to set down new markers in the next round of 
contract requirements.
    Mr. WAXMAN. I thought that was a good proposal to say that 
they could not take the drug off the formulary once people had 
signed up and were using that drug. There is no requirement 
that is going to keep a plan from doing that. It is simply a 
guidance. There is nothing in statute to keep them from 
changing the policy later. Second, it does not deal with the 
price increases for those drugs.
    Chairman JOHNSON OF CONNECTICUT. A point of note, though. 
The fact is that part of his announcement was that they have 
always had to come to CMS and inform CMS, but he made clear 
that CMS would only accept changes in the formulary where a new 
generic had come onto the market or safety concerns had been 
raised about a drug that was part of the formulary. So, it was 
not just that if you were on a drug you could continue taking 
it. It also very much changed the flexibility of the formulary 
during the calendar year.
    Mr. WAXMAN. It did nothing about price increases. Once you 
sign up, and you get that drug, that drug can increase in price 
quite rapidly, which is, of course, a problem for seniors, 
and----
    Chairman JOHNSON OF CONNECTICUT. I am sure my colleagues 
will have lots to say with you about the pricing. I wanted to 
limit my comments, because we do find that we really have to 
with so many Members stay within our 5 minutes, and as 
Chairman, I wanted to stay within my 5 minutes, and as 
Chairman, I wanted to stay within my 5 minutes. I agree with 
you there is a lot to be said about pricing and a lot to be 
said about the success of this program in lowering prices.
    Mr. Stark.
    Mr. STARK. Thank you, Madam Chair, and thank you very much, 
Henry, for being with us.
    I want to ask kind of a type of inquiry that I know you 
will hate, and that is to ask you to be your own devil's 
advocate for a moment and explain, if you can, if you can take 
the other side, CMS seems to dispute some of your data on 
popular drug prices and the question of Costco being lower. Can 
you explain what their objection to your analysis is and why 
you think your data is the correct way to look at the prices in 
Part D?
    Mr. WAXMAN. Well, there are some important differences 
between the CMS studies and our studies. Our pricing studies 
show that private Medicare drug plans are not obtaining good 
prices on the drugs used by beneficiaries and that other 
negotiators, like the Federal Government, could get much lower 
prices on the brand name drugs that account for the majority of 
drug costs.
    One big difference between the studies is that the CMS 
study mixed together both brand name drugs and generics, and 
this made their price savings seem bigger than they actually 
are. The most important area where seniors need to save money 
is on expensive brand name drugs, and the Medicare plans just 
are not able to provide those savings.
    Second, the CMS study inflates price savings by comparing 
Medicare drug plan prices to an inflated cash price that does 
not reflect what seniors are really paying at the pharmacy 
counter. Our study compares prices to four different 
benchmarks: the Federal negotiated VA price, the Canadian 
price, the prices at Costco and Drugstore.com. These 
comparisons show that Medicare plans are not obtaining the low 
prices. Finally, the CMS study takes into account the impact of 
the Federal subsidy for all beneficiaries who sign up for the 
drug plans, which average about $1,600 per beneficiary.
    So, the CMS study shows that seniors save money when they 
take advantage of the subsidy, but it does not show that 
Medicare plans are negotiating low prices. There are other 
flaws with the CMS study as well. For example, it fails to take 
into account the fact that Medicare drug plans can and do raise 
prices at will, and our study shows that Medicare drug plans 
are not able to obtain low prices for seniors. The CMS study 
has so many differences and so many important flaws that I 
think it fails to address this issue.
    Mr. STARK. Thank you very much.
    Thank you, Madam Chair.
    Chairman JOHNSON OF CONNECTICUT. Mr. Johnson.
    Mr. JOHNSON OF TEXAS. Thank you, Madam Chairman.
    Henry, can I quote you? You said----
    Mr. WAXMAN. Well, you can. Are you able to?
    Mr. JOHNSON OF TEXAS. Yes, I have it right here.
    Certainly, there were people who were not covered before 
who are pleased to have new benefits. Certainly, we all welcome 
success stories, and we want this benefit to work. For too many 
seniors and persons with disabilities, it has not worked. It 
has been a disaster. I wonder how you can say that when 68 
percent of the seniors in your district have signed up for this 
plan.
    Further, you said drug prices under the new Medicare drug 
plans are too high, rising too fast. The Medicare drug bill was 
written to enrich the drug companies, not to provide seniors 
with a cost-effective, new benefit, and the Bush Administration 
mismanagement and incompetence has made the problem worse.
    You know, with the number of seniors that have signed up in 
your district, I wonder if they think the prices are too high. 
I would suggest to you that our studies show that they have 
gone down, as a matter of fact, quite a bit from where we first 
estimated they will be.
    Mr. WAXMAN. Well, Mr. Johnson, I do not know whether 68 
percent of the people in my district have signed up or not, but 
the fact they signed up does not mean they are happy, or they 
are satisfied with this drug plan, especially for those people 
who signed up and then found out there were restrictions on the 
availability of drugs that they intentionally checked to be 
sure were on the plan's formulary. So, a lot of people have 
come to me and complained about that.
    I look at this whole drug program, and I do not see 
savings. I see the plans not holding down the prices at all 
especially when you compare it to situations where the prices 
are held down, where the Government negotiates for the VA, and 
I am sure you are familiar with that, or even when the 
Government used to negotiate for the Medicaid program. Or you 
look at Costco.com, and when people shopped around there, they 
often got a better price than these plans are paying.
    I am pleased that we have a step in the direction of a drug 
plan, but I think it is a flawed one, and I think we should 
learn from our experiences to see where we need to change this 
program, because the essential point of it is we were going to 
hold down drug prices through competition. There is no real 
market there. The prices are not being held down. That means 
that seniors and the Government taxpayers are overpaying for 
drugs.
    Mr. JOHNSON OF TEXAS. Well, in my district alone, there are 
25 companies offering it, and they are competing against each 
other, and the prices are down. Maybe you ought to go back and 
take a look at your district again.
    Thank you, Mr. Waxman.
    Mr. WAXMAN. Thank you. Perhaps you want to look at yours 
again, too.
    Mr. JOHNSON OF TEXAS. Thank you, Madam Chair.
    Chairman JOHNSON OF CONNECTICUT. Mr. Doggett.
    Mr. DOGGETT. You know, Mr. Waxman, thank you for your vital 
leadership.
    As I listen to your description of the way this drug plan 
has worked versus the spokespersons for the Bush Administration 
yesterday and the opening statement of our Chairwoman, it is 
almost as if you were describing two entirely different worlds. 
I find that the world you are describing is the one that is 
what my seniors throughout Texas have been telling me, what a 
pharmacist in Mission, Texas is telling me about the problems 
that he encounters, and the very personal experience--my mom is 
88 years old and seems to have kind of a pharmacy on her table 
when I go by to see her. My daughter, who is a physician, went 
to work to try to figure out which plan would work best. If she 
had gone with what appeared to be the best plan first, my 
mother would have been paying more for prescriptions than the 
huge price she was paying before this plan.
    Finally, through a lengthy process that eventually involved 
consultation with my mother's various physicians, she has what 
she thinks is a savings for my mom, and even that may have been 
lost now that my mother has been switched to some additional 
prescriptions because she has some new problems.
    I am confident that we can turn over this entire plan to 
sixth graders in Arkansas or Texas or California or Connecticut 
to punch in things. In fact, we can turn it over to preschool 
kids, and they will get people signed up. Many of them have 
more experience with computers than the seniors that I 
represent. It does not mean that they are going to get them a 
plan that saves them any money or meets their needs and 
addresses the problems that you have addressed.
    Mr. WAXMAN. Well, Mr. Doggett, I would go to a sixth grader 
to learn to use my iPod or my computer, but I would not go to 
them to pick out an insurance plan.
    Mr. DOGGETT. Well, I am sure that they can pick, but 
whether they pick one that will meet the concerns you have and 
will lower prices is quite a different question.
    My concern has been not only the treatment of our seniors--
I think some of them are being fleeced by this sort of plan--
but that the taxpayer is being fleeced also. You remember the 
history that it took a great deal of deception from the Bush 
Administration, hiding the true numbers of the cost of this 
legislation, most of all from some of the Republicans who ended 
up voting it in the middle of the night when the rules were 
twisted here, and we were here all night long to force through 
this bill through the House.
    Now, the fact that the Government is prohibited from 
negotiating on behalf of Medicare beneficiaries the way it does 
for our veterans through the VA means that ultimately, not only 
the seniors, but the taxpayers have to pay more.
    Now, I raised this concern yesterday with Dr. McClellan, 
and he questioned the study that you have done that you 
reported on today, and though he said the VA program was great 
for veterans, he was unwilling to apply this same approach to 
help our seniors and to help American taxpayers get more cost 
benefit for their tax dollar. I just wonder if you might--I 
think you are familiar with this criticism of your average 
wholesale price analysis, if you might have any response to 
those criticisms of what I thought was a very important study 
that you and your staff have provided.
    Mr. WAXMAN. The bottom line is that the survey by my staff 
showed that the Medicare plans were unable to adequately retain 
low prices for seniors. It is absurd that in the first few 
months of the program, prices went up 4 percent. Drug plans 
should not be allowed to increase prices on consumers after 
they sign up for the plan. They should not be allowed to pull a 
bait and switch on the consumers. It is good that they now are 
supposed to keep the drug on the formulary once someone is 
using it, but they should not allow the price to go up, and 
they certainly still allow that.
    Medicare price increases are likely to continue. The latest 
estimate by CMS actuaries shows that they expect drug price 
increases under Medicare plans to be higher than the inflation 
rate for the next decade. Well, that is going to affect all 
seniors. The price increases reduce their purchasing power. 
They will use up their benefits, and they will enter the 
doughnut hole much faster than anticipated.
    The statements by CMS yesterday were incorrect. My staff 
found that Medicare plan prices were going up faster than other 
benchmarks, but CMS said, well, not over the average wholesale 
price. If you look at the Canadian prices and other benchmarks, 
it is just clearly going up faster.
    Mr. DOGGETT. Finally, you performed a great service in 
requesting this Government Accountability Office (GAO) study of 
the bureaucracy that is administering this complex plan. I 
think that showed that on the most important question of what 
is the best plan for you in terms of lowest cost that CMS was 
advising either incompletely, inaccurately, or no answer at all 
60 percent of the time.
    Mr. WAXMAN. Well, they not only gave inaccurate information 
to seniors, but they gave them to sixth graders who were 
advising the seniors.
    [Laughter.]
    Mr. WAXMAN. That makes me angry.
    Mr. DOGGETT. Thank you.
    Mr. WAXMAN. Thank you.
    Chairman JOHNSON OF CONNECTICUT. Mr. Ramstad.
    Mr. RAMSTAD. Thank you, Madam Chairman.
    You know, I have been here 16 years, and I really tried to 
work in a bipartisan, pragmatic way on issues. It is really 
disappointing to see--I understand politics. I have been around 
that world a long time. To politicize, as some are doing--I am 
not referring to the witness nor to any of my colleagues 
necessarily, but I think to politicize the most important 
expansion of Medicare, the biggest entitlement since the Great 
Society programs I think is really unfortunate, and I think it 
does a disservice to this institution.
    It is one thing to be critical of the program or the 
rollout. We can all be critical of the way dual eligibles were 
mishandled at the beginning, and I think corrections have been 
made. I think to cast it in political terms, Republicans versus 
Democrats, is really unfortunate. I hope we can get away from 
that and work more in a bipartisan way to see this program 
implemented so that it does benefit the seniors of America.
    We are going to hear later from a witness, the Vice 
President of Ovations, which is a business unit of United 
Health Group, the only company, by the way, to currently offer 
the new Medicare prescription drug benefit in all 50 States and 
the District of Columbia. Since January 1, they have processed 
over 50 million prescription drug claims with beneficiaries 
yielding savings consistent--I am reading from their testimony 
now--consistent with CMS' estimate; $1,100 per year, the 
average beneficiary is saving, that is, beneficiaries who, 
prior to the benefit, lacked prescription drug coverage, had no 
prescription drug coverage.
    So, I think we have to recognize the pluses of this 
program, and I know that you have said, Mr. Waxman, previously, 
that the Government should implement a standard benefit--and 
this is a reasonable position--you said the Government should 
implement a standard benefit, with the premiums set at $35 a 
month. Well, the latest estimates of the average premiums are 
$25 a month under Part D.
    Do you want to raise seniors' premiums? Is that what the 
$35 figure suggests that you----
    Mr. WAXMAN. No, I want a standard benefit. There is no 
guarantee that those premiums are going to stay low. They can 
go up much higher next year. Low premiums this year could be an 
enticement to get people to sign up in a plan by saying, oh, we 
are going to have a low premium for you.
    Look: you are right. We have got what we have got, and I 
think the fair thing for people to do is to look at the facts. 
There are problems with this drug benefit. There are positive 
parts of it as well, but there are problems. For our colleagues 
to say what a great success it is is just not credible, because 
it is not a great success when we are hearing so many 
complaints and so many problems, partly from the rollout and 
quite a bit, I think, because of the way the whole program has 
been structured.
    Mr. RAMSTAD. Well, I could take my remaining time and tell 
you of my constituents' success stories, those who have 
benefited significantly from it, people who were previously 
uninsured, and literally, as we have said around here many 
times, had to choose at the end of the month between putting 
food on the table and buying their necessary prescription 
drugs.
    Mr. WAXMAN. That is why we need a drug plan, but let me 
just----
    Mr. RAMSTAD. The low-income seniors have certainly 
benefited the most. That cannot be denied. Also, when I hear 
how drug costs have increased, it just does not--the empirical 
data suggests that the top 20 drugs have all--the costs have 
come down as a result of this drug benefit, and we can show you 
that empirical data, so I think----
    Mr. WAXMAN. I do not think you will be able----
    Mr. RAMSTAD [continuing]. facts are stubborn things, and we 
are all entitled to our own opinions but not to our own facts.
    Mr. WAXMAN. Right, that is why I do not think you will be 
able to establish that. I think you will see that the prices 
have gone up.
    Mr. RAMSTAD. I will be glad to meet with you and share with 
you those figures.
    Mr. WAXMAN. I also want to point out that CMS' own 
actuaries say that the premiums are going to increase by 28 
percent, to $32 next year. Well, plans can choose to go lower 
or higher. There is just no way to know what they are going to 
do. They are going to be under a lot of pressure unless they 
can hold down the price of drugs, and that is something we want 
them to be able to do.
    Mr. RAMSTAD. Well, I certainly concur with that, and that 
is a key variable and a crucial variable. There is no question 
about that.
    Well, with that, I appreciate your being here, Mr. Waxman, 
and yield back the balance of my time.
    Chairman JOHNSON OF CONNECTICUT. Mr. English.
    Mr. ENGLISH. Madam Chair, thank you for the offer of time, 
but I think I will yield back in order to allow this proceeding 
to move to its inevitable conclusion.
    [Laughter.]
    Chairman JOHNSON OF CONNECTICUT. Would the gentleman yield, 
Mr. English? If you are not going to use your time, there are a 
couple of things I did want to just put in the record.
    Mr. ENGLISH. I would be delighted to yield.
    Chairman JOHNSON OF CONNECTICUT. I do want to put in the 
record the fact that your study uses average wholesale prices, 
does it not?
    Mr. WAXMAN. That is one of the benchmarks, but it also uses 
the Canadian prices, the VA prices, and the Drugstore.com 
prices. So, we have a number of benchmarks.
    Chairman JOHNSON OF CONNECTICUT. I would just point out 
that the average wholesale prices are so irrelevant to the 
actual price of drugs that we have moved away from those to 
other kinds of pricing mechanisms to try to judge market prices 
and also by excluding----
    Mr. WAXMAN. Well, we did not use it. That was the CMS 
criticism of it.
    Chairman JOHNSON OF CONNECTICUT. Also, by excluding 
generics, you do not give anywhere near an accurate picture, 
because more than half of the prescriptions that seniors use 
are generics. Then, when you extol the VA, you sort of ignore 
the fact that 20 of the 33 prescription drugs that seniors most 
commonly use are not on the VA's formulary. Part of their low 
price structure is their limited formula range.
    So, I wanted to put those facts on the table, but I will 
now recognize J.D. from Arizona.
    Mr. HAYWORTH. Madam Chairman, if I could yield to my good 
friend from Missouri.
    Chairman JOHNSON OF CONNECTICUT. Fine.
    Mr. Hulshof from Missouri.
    Mr. HULSHOF. Henry, if you will allow me to be so familiar.
    Mr. WAXMAN. Kenny, do you want to have a beer and discuss 
this?
    Mr. HULSHOF. Well, maybe we should. Actually, maybe we 
should adjourn and head down to, well, I probably should not 
name one of the lounges. I am obviously looking at my staff for 
guidance here as to where a local lounge would be.
    [Laughter.]
    Mr. WAXMAN. Well, we have our gym time coming up.
    Mr. HULSHOF. In fact, here is the point, and I want to echo 
what my friend Jim Ramstad had to say. Somewhere in that answer 
to him, you acknowledged some positives. I think that is where, 
when I hear some of the incendiary rhetoric from some, I think 
we are talking past one another. Because we acknowledge--I will 
speak for myself; I acknowledge, as I did yesterday, there have 
been glitches. We have dealt with early on some complaints from 
senior citizens. We have tried to help walk them through. We 
have focused them to--we have a very good Division of Aging 
back in Missouri who has helped sign folks up.
    I just wish there were more of an honest discussion about 
and acknowledgement that there are pluses and minuses, and so, 
that is an editorial comment you do not need to address.
    I do want to mention one thing. Your critique of CMS, one 
of the critiques that you mentioned was that they include both 
brand names and generics in these positive numbers, and that is 
a criticism or a critique that you have made. Yet, you praised 
the VA for its formulary, and in fact, the VA formulary is 
predominantly generic and some brand name.
    I point out that on the one hand, there is a critique 
because both brand name and generics are included, and yet, 
there is a lot of praise for the VA formulary when, in fact, it 
is more heavily tilted toward the generic. In fact, 20 of the 
top 33 drugs by seniors are not on the VA formulary.
    The other concern I have as far as any sort of movement 
toward the VA, in Missouri, we have five VA pharmacies. We have 
1,084 regular pharmacies. So, that is a concern.
    Mr. WAXMAN. Can I just clarify?
    Mr. HULSHOF. Sure, I will yield to you.
    Mr. WAXMAN. I certainly want generic drugs to be 
substituted. They are the same drug as the brand name drug, and 
they should be substituted. We are not talking about trying to 
discourage the use of generics.
    When they took brand name drugs and generics and put them 
together to show they were getting lower prices, it ignored the 
fact that 90 percent of the cost of the drugs for seniors is 
the brand name drugs. So, we have to look at the reductions in 
the prices of the drugs that cost the most.
    The VA, for example, the VA does not restrict people's 
access to whatever drug they need. They encourage the generics, 
as they should, when there is one, but they do not deny, nor 
did Medicaid, but they do not deny access to the brand name 
drug you need when a generic is not available. We want that 
available to people. Yet, they were able to hold the prices 
down, because they use the buying clout of the veterans to 
negotiate a lower price.
    My problem is that we have foregone that, and I think that 
already, we are seeing this claim of a market holding down 
prices not working. If it does not work, then, we are going to 
have to look for some other alternatives.
    Mr. HULSHOF. Well, the other side of the VA equation is 
that nonformulary prescriptions are approved by the VA only 
when the patient meets one of six very narrow tests, whether 
there is a contradiction to formulary drugs, adverse reaction, 
therapeutic failure, no formulary alternative exists, and 
number of these other areas.
    Let me move on in the interests of time, and we have other 
witnesses coming. We can discuss and debate the CMS critique 
that you have, and yet, I think you also quoted the Medicare 
Trustees' Report, which came out earlier this week, and quite 
frankly, the Trustees' Report essentially says that program 
costs are down 20 percent; 15 percent of that savings is due to 
lower drug costs; and 5 percent savings due to plans, private 
plans, negotiating aggressively.
    So, again, I do not want to talk past you, but I would hope 
that it is easy when you are back home, and if I wanted to have 
a town meeting, and I wanted to talk about ethanol, and I send 
a letter out to all the corn farmer constituent friends that I 
have, obviously, we are going to have a very pro-ethanol 
meeting, and if I have been talking about a flawed program and 
confusing scheme, and if I have been vehemently opposed to a 
prescription drug benefit, and if I wanted to call a town 
meeting and send out a mailing, of course, I am going to have 
people who are quite critical of the program.
    Again, that is not a comment on you or any of your 
testimony, and I appreciate your prejudice.
    Mr. WAXMAN. Well, that is a good point that you make. In 
other words, you are saying if we are criticizing the plan at a 
town meeting, people will get a negative view of it. I do not 
think they really need us to criticize it for them to get that 
negative view, because they feel they were promised a drug 
benefit under Medicare, like they get doctors paid by Medicare, 
they get the hospitals, they get the physical therapists all 
paid. It is a benefit, and it is covered.
    I think it is as if you went in to buy a Lexus, and they 
gave you a clunker. It is better to have a clunker than 
nothing, but you feel a little let down that you did not get 
what you thought you were being promised.
    Chairman JOHNSON OF CONNECTICUT. Mr. Rangel.
    Mr. RANGEL. Thank you so much for the courtesy, Madam 
Chairlady.
    When you inquired of Mr. Waxman of the number of people who 
had enrolled into this program and said it was 68, I was amazed 
at that number based on how bad I am doing in my district, so I 
asked staff to see whether they could get from CMS the same 
type of material and found out they had 76 for my district.
    So, then, I read it further, and I find out that not only 
do I have 76, but they expect to increase that to 107 percent. 
In some districts, they expected 112 percent. So, knowing that 
meant the numbers were padded, I just want to figure out how 
did they get the 76 percent? Being honest, as the 
Administration normally is, they included all sources, which 
meant that anybody who had any coverage of any kind, including 
retirees or those that are dual beneficiaries that were forced 
to go into the program because it was Medicaid, they were 
pushed into this.
    So, in fact, this number has very little to do with those 
who have enrolled. It means those who have coverage. Then, 
looking up here, it really said that: Medicare beneficiaries 
with prescription drugs coverage, which has absolutely nothing 
to do with the prescription drug program that is Part D. So, I 
know the staff probably overlooked that, but I just wanted 
Henry to know things are not any better than you thought they 
were.
    Mr. WAXMAN. Mr. Rangel, if I could say something about 
Medicaid, which is in the jurisdiction of the Energy and 
Commerce Committee----
    Mr. RANGEL. Oh.
    Mr. WAXMAN. Used to be in your jurisdiction, and who knows 
what the future will be?
    The fact of the matter is the people under Medicaid had--
they knew they got their drugs covered. It was being paid for 
under the Medicaid program, and it was also being paid for at 
the lowest price, because the States and the Federal Government 
negotiated and got that lower price. They insisted on the best 
price; there were rebates.
    So, we took them away from the Medicaid programs and 
shifted it over to Medicare. So, we do not have those 
negotiated lower prices anymore. So, we are paying more for the 
Medicaid and Medicare dual eligibles, for their drugs, and they 
have less of a certainty that their drugs are even going to be 
covered.
    That cannot be a good deal. Now, I do not want to be only 
negative about it, but that is not a good deal. If you think 
about it for a minute, if you are somebody who needs a certain 
drug, and you check with a 6-year-old or sixth-grader, and the 
sixth-grader says that your drug for high blood pressure, or 
let us say it is an antipsychotic drug is on the formulary, and 
you sign up with that drug plan to be sure you get that drug, 
and then, after you sign up, they tell you, oh, by the way, you 
cannot get that drug; you have to use another drug. Then, if 
that drug does not work therapeutically, then, you could step 
up.
    Well, they have already gone through this. To tell 
somebody, let us say, who needs an antipsychotic drug that they 
cannot get the one that is working for them any longer, you 
could see how angry they could be, not just because they did 
not have their drugs to calm them down.
    [Laughter.]
    Mr. WAXMAN. They would be angry because they thought they 
were signing up in a plan that was going to give them the drug.
    So, anyway, I think there are real problems in this. We 
ought to be mindful, all of us, Democrats and Republicans, of 
what is working and what is not and then address the problems 
where the program is not working, because we owe it to the 
American people to do better.
    Mr. RANGEL. Well, even though the Medicaid people are 
paying more under the Part D, and even though the dual 
beneficiaries pay more than they would normally pay, at least 
you know that they should be on it; that they are included as 
new enrollees in the plan.
    Mr. WAXMAN. Well, we are paying more for them, because 
Medicaid beneficiaries do not pay those co-pays.
    Mr. RANGEL. Based on your experience, could you give us one 
reason why the Government would not want Medicare to be able to 
negotiate the same way the VA does? To what advantage would be 
to the taxpayer and to the beneficiaries not to be able to 
negotiate and to get the lowest possible price?
    Mr. WAXMAN. Every insurance plan that covers 
pharmaceuticals negotiates for better prices using their buying 
clout. What we have done is lost the opportunity to have the 
Government negotiate those better prices. The only thing I can 
say in answer to you is that some people believed in this 
market theory. They think it is going to work, and I do not 
think it is going to work. The second reason is that the 
pharmaceutical companies did not want Medicare negotiating, 
because they were going to have to take less money, and there 
were a lot of people who did not want to disappoint the 
pharmaceutical companies.
    In fact, two of the people involved in the negotiation of 
the Medicare bill went off to work for the pharmaceutical 
companies. So, I think for those two reasons, I think it is 
unfortunate that we gave up the ability of the Government to 
negotiate good prices for the buying clout of seniors.
    Mr. RANGEL. There is a clear implication that the Congress, 
at least that part that controlled the Congress, wanted to do 
what was best for the pharmaceuticals rather than the 
beneficiaries.
    Mr. WAXMAN. Sad.
    Mr. RANGEL. Thank you, Madam Chairlady.
    Chairman JOHNSON OF CONNECTICUT. You are welcome.
    Given that people who have planes to catch, we are going to 
move on to the next panel, but Henry, since you are on the 
Commerce Committee and an advocate of the best price laws to 
give Medicaid the best price, you should be aware of testimony 
we had yesterday from a national insurer saying that they had 
been able to negotiate prices below the best prices in the 
State, because we in the Medicare law allowed the circumvention 
of that.
    So, the prices are very low. You can see that in the State 
payment programs. They are going to make more on this program 
than they anticipated, because their prices were higher than 
ours, and so, there are many ways in which everybody is going 
to benefit, and it is too bad that we cannot go back and forth 
about the details, but we do have another panel, and we need to 
get on to them.
    Mr. WAXMAN. Nancy, put me down as skeptical, because even 
the drug companies have suggested their prices are going to be 
higher. We will disagree on that.
    Chairman JOHNSON OF CONNECTICUT. Well, I see in your other 
statements that you are not out there saying that your members 
should not sign up. Your members should sign up, and you have 
said that very clearly.
    Mr. WAXMAN. Also, we ought to extend the deadline.
    Chairman JOHNSON OF CONNECTICUT. Thank you.
    Chairman JOHNSON OF CONNECTICUT. Next panel.
    As the next panel gathers, since for most of you, your 
testimony was in the record yesterday as you submitted it, 
would you please focus on any additions to that this, so 
hopefully, we can get through your testimony before Members 
have to leave to catch their planes?
    We have with us on this next panel, we have Leslie 
Aronovitz of the GAO; Vicki Gottlich of the Center for Medicare 
Advocacy; Mark Steinberg, Senior Health Policy Analyst at 
Families, USA; and Joyce Larkin, Vice President, Public Affairs 
and Community Relations at Ovations of United Health Group; and 
Bill Vaughan, Senior Policy Analyst at Consumers Union.
    We will start with Leslie Aronovitz.

 STATEMENT OF LESLIE ARONOVITZ, U.S. GOVERNMENT ACCOUNTABILITY 
                             OFFICE

    Ms. ARONOVITZ. Thank you, Madam Chairman and Members of the 
Subcommittee. I am pleased to be here today as you discuss the 
Centers for Medicare and Medicaid Services' implementation of 
the Medicare Part D outpatient drug benefit.
    Given the newness and complexity of the Part D benefit, it 
is critical that beneficiaries and those who advise them on 
health care decisions understand how Part D works and the 
options available. As part of its responsibilities, CMS 
provides beneficiaries and their advisors with information 
about Part D through various media, including written 
documents, the 1-800-Medicare help line, and the Medicare 
Website.
    In our report released yesterday, we evaluated the 
readability of a sample of CMS' written documents, the accuracy 
and responsiveness of CMS' 1-800-Medicare help line, and the 
usability of the Part D portion of CMS's Medicare Website.
    In summary, the written documents we reviewed were largely 
complete and accurate, but the way the information was 
presented made comprehension difficult. According to our 
contractor that has expertise in preparing written materials 
for seniors, about 40 percent of seniors read at or below the 
fifth grade level. However, we found that the reading levels 
for our sample documents ranged from seventh grade to post 
college, and once adjusted for words that CMS cannot replace 
with easier words, it still ranged from about eighth grade to 
twelfth grade level.
    Also, on average, we found that the six documents did not 
comply with about half of the commonly recognized guidelines 
for good communications. For example, although the documents 
included concise and descriptive headings, they used too much 
technical jargon and often did not define difficult terms.
    In regard to the 500 calls we made to CMS' 1-800-Medicare 
help line, 67 percent of the calls were answered accurately and 
completely; 3 percent were answered incompletely; 18 percent 
inaccurately; and 8 percent were answered inappropriately given 
the question that was asked, and I can elaborate on that later. 
Five percent of our calls were not answered, primarily because 
we were disconnected.
    I would like to note that these accuracy and completeness 
rates varied significantly across the questions we asked. For 
example, for the question on whether a beneficiary qualifies 
for extra help, customer service representatives (CSRs) 
provided an accurate and complete response 90 percent of the 
time. The correct answer would have been to call the Social 
Security Administration to find out about extra help.
    However, for a question concerning which drug plan is the 
least costly for a beneficiary with certain specified 
prescription drug needs, the accuracy rate was 41 percent. In 
35 percent of our calls for that question, CSRs inappropriately 
responded that this question could not be answered without 
personal identifying information, such as the beneficiary's 
Medicare number or date of birth, even though some CSRs 
answered our questions using CMS' Web-based prescription drug 
plan finder tool, which was the appropriate tool to use.
    Sometimes, we experienced extensive wait times before we 
could speak to a CSR. For 75 percent of the 477 calls where we 
reached a CSR--23, we did not, because we were disconnected--we 
waited less than 5 minutes. So, most of the time, we waited 
less than 5 minutes. Thirteen percent of the time, the calls 
were answered in between 5 and 15 minutes; 8 percent of the 
time, they were answered in 15 to 25 minutes; and about 5 
percent of the time, we waited more than 25 minutes.
    Finally, in regard to the Medicare Website, we engaged a 
contractor with expertise in evaluating Websites, including 
those used by seniors. We concluded that the Part D portion of 
Medicare.gov can be difficult for some to navigate. In overall 
usability tests, the site scored 47 percent for seniors and 53 
percent for younger adults. Use of tools such as the Drug Plan 
Finder was daunting, and online forms that collect information 
from users were difficult to correct if the user made an error.
    Further, in the evaluation of 137 detailed aspects of a 
Website, we found that 70 percent of these aspects could be 
expected to cause users confusion. For example, key functions 
of the drug plan finder tool, such as the continue button or 
the choose a drug plan button, were often not visible on the 
screen unless you scrolled down.
    Chairman JOHNSON OF CONNECTICUT. Would you suspend for a 
moment?
    Ms. ARONOVITZ. Sure.
    Chairman JOHNSON OF CONNECTICUT. I forgot to remind the 
witnesses that we do have 5 minutes per witness. You have 
reached your 5 minutes, but if you could just wrap up with a 
sentence, I am sure that in questions, we will give you an 
opportunity to conclude your statement.
    Ms. ARONOVITZ. I would be happy to.
    Chairman JOHNSON OF CONNECTICUT. Because people have planes 
to catch, I do want to observe the five-minute rule on the 
podiums as I have for the Members.
    Ms. ARONOVITZ. Absolutely.
    It should be noted that given the complexity of the benefit 
and the time allocated for implementation, CMS did face a 
tremendous challenge in developing its communication efforts, 
and we look forward to working with CMS as it continues to 
refine its communication tools to better serve the public.
    This concludes my statement, and I am happy to answer any 
questions.
    [The prepared statement of Ms. Aronovitz follows:]

    Prepared Statement of Leslie Aronovitz, Director for Healthcare,
                 U.S. Government Accountability Office

    Mr. Chairman and Members of the Subcommittee:
    I am pleased to be here today as you discuss the Medicare 
outpatient prescription drug benefit, known as the Part D benefit, 
which was established by the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 \1\ with coverage beginning on January 1, 
2006. Until this time, Medicare, the program that finances health care 
benefits for about 42 million elderly and disabled beneficiaries, had 
not generally provided coverage for outpatient prescription drugs. 
Beneficiaries who opt to enroll in Part D may choose a drug plan from 
those offered by private plan sponsors under contract to the Centers 
for Medicare & Medicaid Services (CMS), which administers the Part D 
benefit. These plans differ in the drugs covered, pharmacies used, and 
enrollee costs. As of April 20, 2006, more than 30 million of 
Medicare's 42 million beneficiaries were enrolled in a Part D plan or 
had other outpatient prescription drug coverage. Beneficiaries have 
until the end of the current enrollment period, May 15, 2006, to enroll 
in the Part D benefit and select a plan without the risk of penalties 
in the form of higher premiums.
---------------------------------------------------------------------------
    \1\ Pub. L. No. 108-173, Sec. 101, 117 Stat. 2066, 2071-2152 (to be 
codified at 42 U.S.C. Sec. Sec. 1395w-101--1395w-152). The MMA 
redesignated the previous Part D of Title XVIII of the Social Security 
Act as Part E and inserted a new Part D after Part C.
---------------------------------------------------------------------------
    Given the newness and complexity of the Part D benefit, it is 
critical that beneficiaries and their advisers, including members of 
their families, understand the options available to them. Understanding 
these options enables beneficiaries to make informed decisions on 
whether to enroll in the Part D benefit, and if they decide to enroll, 
which drug plan to choose. As part of its responsibilities, CMS has 
undertaken efforts to provide beneficiaries and their advisers with the 
information they need about the Part D benefit through various media, 
including written documents, the 1-800-MEDICARE help line,\2\ and the 
Medicare Web site.\3\ CMS's education efforts are important because 
widespread confusion has been reported among beneficiaries about the 
costs and coverage under the new benefit.
---------------------------------------------------------------------------
    \2\ In December 2004, we reported on the information being provided 
to beneficiaries through the Medicare help line on eligibility, 
enrollment, and benefits. See GAO, Medicare: Accuracy of Responses from 
the 1-800-MEDICARE Help Line Should Be Improved, GAO-05-130 
(Washington, D.C.: Dec. 8, 2004).
    \3\ The Medicare Web site is www.medicare.gov.
---------------------------------------------------------------------------
    You and others have expressed interest in ensuring that Medicare 
beneficiaries receive the information they need to make informed 
decisions. My remarks today will focus on (1) the extent to which CMS's 
written documents describe the Part D benefit in a clear, complete, and 
accurate manner; (2) the effectiveness of CMS's 1-800-MEDICARE help 
line in providing accurate, complete, and prompt responses to callers 
inquiring about the Part D benefit; and (3) whether CMS's Medicare Web 
site presents information on the Part D benefit in a usable manner. My 
testimony will summarize findings of a report we released yesterday 
that examines CMS's Medicare Part D benefit communications to 
beneficiaries in more detail and includes recommendations to the CMS 
Administrator for improving the quality of the agency's Part D benefit 
education and outreach materials.\4\
---------------------------------------------------------------------------
    \4\ GAO, Medicare: Communications to Beneficiaries on the 
Prescription Drug Benefit Could Be Improved, GAO-06-654 (Washington, 
D.C.: May 3, 2006).
---------------------------------------------------------------------------
    To address these issues, we interviewed CMS officials responsible 
for written documents about the Part D benefit, the 1-800-MEDICARE help 
line, and the Medicare Web site. To assess the clarity, completeness, 
and accuracy of written documents, we performed an in-depth review of a 
sample of six CMS documents describing the Part D benefit, including 
contracting with the American Institutes for Research (AIR), a firm 
with experience in evaluating written documents, to assess their 
clarity. (See app. I for a list of written documents reviewed.) We also 
placed 500 calls to 1-800-MEDICARE, posing one of five questions 
related to the Part D benefit in each call so that each question was 
asked 100 times. We evaluated the accuracy and completeness of customer 
service representatives' (CSR) responses to these questions. (See app. 
II for the questions and criteria we used to evaluate the accuracy and 
completeness of CSR responses to calls we made to 1-800-MEDICARE.) To 
assess the usability of the Part D benefit information available on the 
Medicare Web site, we contracted with the Nielsen Norman Group (NN/g), 
an expert on Web design. We conducted our work from November 2005 
through May 2006, in accordance with generally accepted government 
auditing standards.
    In summary, CMS successfully developed a large volume of 
information about the new Part D benefit and made it available to 
beneficiaries through a variety of sources, despite the challenge of 
developing this information within a short time frame. However, the 
quality of CMS's communications to beneficiaries and their advisers 
about the Part D benefit could be improved. For example, although the 
six CMS written documents we reviewed were largely accurate and 
complete, they often lacked clarity. Specifically, while about 40 
percent of seniors read at or below the fifth-grade level, the reading 
levels of the documents ranged from seventh grade to postcollege. 
Moreover, the six documents used too much technical jargon and often 
did not define difficult terms. Similarly, although 67 percent of the 
responses to the 500 calls we placed to CMS's 1-800-MEDICARE help line 
regarding the Part D benefit were accurate and complete, we nonetheless 
received a substantial number of responses that were not. Eighteen 
percent of the calls received inaccurate responses, 8 percent of the 
responses were inappropriate given the question asked, about 3 percent 
received incomplete responses, and about 5 percent of our calls were 
not answered, primarily due to disconnections.\5\ In addition, our 
review of the Part D benefit portion of the Medicare Web site showed 
that this site can be difficult to use. In usability tests that 
examined the ease of finding needed information and performing various 
tasks, we found that, for overall usability, the Web site scored 47 
percent for seniors and 53 percent for younger adults, out of a 
possible 100 percent. While there is no widely accepted benchmark for 
usability, these scores indicate that using the site can be difficult. 
Therefore, in the report we issued yesterday, we made specific 
recommendations to the CMS Administrator to enhance the quality of the 
agency's communications on the Part D benefit, including clarifying 
written materials, monitoring the accuracy and completeness of CSR's 
responses to callers' inquiries, and improving the usability of the 
Part D benefit portion of the Medicare Web site. In its comments on a 
draft of our report (see app. III), CMS said that it supports the goals 
of our recommendations and is already taking steps to implement them. 
However, CMS said that our findings did not present a complete and 
accurate picture of its Part D benefit communications activities. We 
believe that our report provides an accurate examination of the CMS 
communications mechanisms that have the greatest impact on 
beneficiaries (see app. IV).
---------------------------------------------------------------------------
    \5\ The percentages related to the responses we received to our 500 
calls exceed 100 percent due to rounding.
---------------------------------------------------------------------------
Background
    CMS has undertaken steps to educate beneficiaries about the Part D 
benefit using written documents, a toll-free help line, and the 
Medicare Web site. To explain the Part D benefit to beneficiaries, CMS 
had produced more than 70 written documents as of December 2005. 
Medicare & You--the beneficiary handbook--is the most widely available 
and was sent directly to beneficiaries in October 2005. Other written 
documents were targeted to specific groups of beneficiaries, such as 
dual-eligible beneficiaries \6\ and beneficiaries with Medicare 
Advantage or Medigap policies.\7\
---------------------------------------------------------------------------
    \6\ Dual-eligible beneficiaries are Medicare beneficiaries who are 
also eligible for Medicaid--the federal-state health program for low-
income individuals--and receive full Medicaid benefits for services not 
covered by Medicare.
    \7\ Medicare Advantage replaced the Medicare+Choice managed care 
program and expanded the availability of private health plan options to 
Medicare beneficiaries. Medigap policies provide supplemental health 
coverage sold by private insurers to help pay for Medicare cost-sharing 
requirements, as well as for some services not provided by Medicare.
---------------------------------------------------------------------------
    Beneficiaries can obtain answers to questions about the Part D 
benefit by calling the 1-800-MEDICARE help line. This help line, which 
is administered by CMS, was established in March 1999 to answer 
beneficiaries' questions about the Medicare program. As of December 
2005, about 7,500 CSRs were handling calls on the help line, which 
operates 24 hours a day, 7 days a week, and is run by two CMS 
contractors. CMS provides CSRs with detailed scripts to use in 
answering the questions. Call center contractors write the scripts, and 
CMS checks them for accuracy and completeness.
    In addition, CMS's Medicare Web site provides information about 
various aspects of the Medicare program. The Web site contains basic 
information about the Part D benefit, suggests factors for 
beneficiaries to consider when choosing plans and provides guidance on 
enrollment and plan selection. It also lists frequently asked questions 
and allows users to view, print, or order publications. In addition, 
the site contains information on cost and coverage of individual plans. 
There is also a tool that allows beneficiaries to enroll directly in 
the plan they have chosen.

Clarity of CMS Written Documents Could Be Improved
    Although the six sample documents we reviewed informed readers of 
enrollment steps and factors affecting coverage, they lacked clarity in 
two ways. First, about 40 percent of seniors read at or below the 
fifth-grade level, but the reading levels of the documents ranged from 
seventh grade to postcollege. As a result, these documents are 
challenging for many seniors. Even after adjusting the text for 26 
multisyllabic words, such as Medicare, Medicare Advantage, and Social 
Security Administration, the estimated reading level ranged from 
seventh to twelfth grade, a reading level that would remain challenging 
for at least 40 percent of seniors.
    Second, on average, the six documents we reviewed did not comply 
with about half of the 60 commonly recognized guidelines for good 
communications. For example, although the documents included concise 
and descriptive headings, they used too much technical jargon and often 
did not define difficult terms such as formulary.\8\ The 11 
beneficiaries and 5 advisers we tested reported frustration with the 
documents' lack of clarity as they encountered difficulties in 
understanding and attempting to complete 18 specified tasks. For 
example, none of these beneficiaries and only 2 of the advisers were 
able to complete the task of computing their projected total out-of-
pocket costs for a plan that provided Part D standard coverage. Only 
one of 18 specified tasks was completed by all beneficiaries and 
advisers. Even those who were able to complete a given task expressed 
confusion as they worked to comprehend the relevant text.
---------------------------------------------------------------------------
    \8\ A formulary is a list of prescription drugs covered by a health 
plan.
---------------------------------------------------------------------------
Help Line Responses Frequently Complete and Accurate, but Varied By 
        Question
    Of the 500 calls we placed to CMS's 1-800-MEDICARE help line 
regarding the Part D benefit, CSRs answered about 67 percent of the 
calls accurately and completely. Of the remainder, 18 percent of the 
calls received inaccurate responses, 8 percent of the responses were 
inappropriate given the question asked, and about 3 percent received 
incomplete responses. In addition, about 5 percent of our calls were 
not answered, primarily because of disconnections.\9\
---------------------------------------------------------------------------
    \9\ The percentages related to the responses we received to our 500 
calls exceed 100 percent because of rounding.
---------------------------------------------------------------------------
    The accuracy and completeness of CSR responses varied significantly 
across our five questions. (See fig. 1.) For example, while CSRs 
provided accurate and complete responses to calls about beneficiaries' 
eligibility for financial assistance 90 percent of the time, the 
accuracy rate for calls concerning the drug plan that would cost the 
least for a beneficiary with specified prescription drug needs was 41 
percent. CSRs inappropriately responded 35 percent of the time that 
this question could not be answered without personal identifying 
information--such as the beneficiary's Medicare number or date of 
birth--even though the CSRs could have answered our question using 
CMS's Web-based prescription drug plan finder tool. CSRs' failure to 
read the correct script also contributed to inaccurate responses. The 
time GAO callers waited to speak with CSRs also varied, ranging from no 
wait time to over 55 minutes. For 75 percent of the calls--374 of the 
500--the wait was less than 5 minutes.

[GRAPHIC] [TIFF OMITTED] T3132A.013

Figure 1: Variation in CSRs' Responses for Individual Questions

Part D Benefit Portion of Medicare Web Site Can Be Challenging to Use
    We found that the Part D benefit portion of the Medicare Web site 
can be difficult to use. In our evaluation of overall usability--the 
ease of finding needed information and performing various tasks--we 
found usability scores of 47 percent for seniors and 53 percent for 
younger adults, out of a possible 100 percent. While there is no widely 
accepted benchmark for usability, these scores indicate difficulties in 
using the site. For example, tools such as the drug plan finder were 
complicated to use, and forms that collect information on-line from 
users were difficult to correct if the user made an error.
    We also evaluated the usability of 137 detailed aspects of the Part 
D benefit portion of the site, including features of Web design and on-
line tools, and found that 70 percent of these aspects could be 
expected to cause users confusion. For example, key functions of the 
prescription drug plan finder tool, such as the ``continue'' and 
``choose a drug plan'' buttons, were often not visible on the page 
without scrolling down. In addition, the drug plan finder tool 
defaults--or is automatically reset--to generic drugs, which may 
complicate users' search for drug plans covering brand name drugs. The 
material in this portion of the Web site is written at the 11th grade 
level, which can also present challenges to some users. Finally, in our 
evaluation of the ability of seven participants to collectively 
complete 34 user tests, we found that on average, participants were 
only able to proceed slightly more than half way though each test. When 
asked about their experiences with using the Web site, the seven 
participants, on average, indicated high levels of frustration and low 
levels of satisfaction.

Concluding Observations
    Within the past 6 months, millions of Medicare beneficiaries have 
been making important decisions about their prescription drug coverage 
and have needed access to information about the new Part D benefit to 
make appropriate choices. CMS faced a tremendous challenge in 
responding to this need and, within short time frames, developed a 
range of outreach and educational materials to inform beneficiaries and 
their advisers about the Part D benefit. To disseminate these 
materials, CMS largely added information to existing resources, 
including written documents, such as Medicare & You; the 1-800-MEDICARE 
help line; and the Medicare Web site. However, CMS has not ensured that 
its communications to beneficiaries and their advisers are provided in 
a manner that is consistently clear, complete, accurate, and usable. 
Although the initial enrollment period for the Part D benefit will end 
on May 15, 2006, CMS will continue to play a pivotal role in providing 
beneficiaries with information about the drug benefit in the future. 
The recommendations we have made would help CMS to ensure that 
beneficiaries and their advisers are prepared when deciding whether to 
enroll in the benefit, and if enrolling, which drug plan to choose.
    Mr. Chairman, this concludes my prepared remarks. I would be happy 
to respond to any questions that you or other Members of the 
subcommittee may have at this time.

                               __________
          Appendix I: Sample of CMS Written Documents Reviewed
    To assess the clarity, completeness, and accuracy of written 
documents, we compiled a list of all available CMS-issued Part D 
benefit publications intended to inform beneficiaries and their 
advisers and selected a sample of 6 from the 70 CMS documents 
available, as of December 7, 2005, for in-depth review, as shown in 
Table 1. The sample documents were chosen to represent a variety of 
publication types, such as frequently asked questions and fact sheets 
available to beneficiaries about the Part D benefit. We selected 
documents that targeted all beneficiaries or those with unique drug 
coverage concerns, such as dual-eligibles and beneficiaries with 
Medigap plans.

                Table 1: Sample of Six Selected Documents
------------------------------------------------------------------------
                Document                          Target audience
------------------------------------------------------------------------
Medicare & You, Section 6: Medicare       All beneficiaries
 Prescription Drug Coverage
------------------------------------------------------------------------
Things to Think about When You Compare    All beneficiaries
 Plans
------------------------------------------------------------------------
Frequently Asked Questions about:         Beneficiaries with employer or
 Retiree Prescription Drug Coverage &      union coverage
 the New Medicare Prescription Drug
 Coverage
------------------------------------------------------------------------
Introduction to the Auto-Enrollment       Dual-eligible beneficiaries a
 Notice
------------------------------------------------------------------------
Quick Facts about Medicare's New          Beneficiaries with Medicare
 Coverage for Prescription Drugs for       Advantage b
 People with a Medicare Health Plan with
 Prescription Drug Coverage
------------------------------------------------------------------------
Do You Have a Medigap Policy with         Beneficiaries with Medigap c
 Prescription Drug Coverage?
------------------------------------------------------------------------
Source: GAO.
a Dual-eligible beneficiaries are Medicare beneficiaries who receive
  full Medicaid benefits for services not covered by Medicare.
b Medicare Advantage replaced the Medicare + Choice managed care program
  and expanded the availability of private health plan options to
  Medicare beneficiaries.
c Medigap policies provide supplemental health coverage sold by private
  insurers to help pay for Medicare cost-sharing requirements, as well
  as for some services not provided by Medicare.


                               __________
   Appendix II: Questions and Criteria Used to Evaluate Accuracy and 
               Completeness of CSR's Help Line Responses
    To determine the accuracy and completeness of information provided 
regarding the Part D benefit, we placed a total of 500 calls to the 1-
800-MEDICARE help line. We posed one of five questions about the Part D 
benefit in each call, so that each question was asked 100 times. Table 
2 summarizes the questions we asked and the criteria we used to 
evaluate the accuracy of responses.

      Table 2: Questions and Criteria Used to Evaluate Accuracy and
                              Completeness
------------------------------------------------------------------------
                                        Criteria GAO used to evaluate
  Question GAO Asked MEDICARE help     accuracy and completeness of CSR
             line CSRs                            Responses
------------------------------------------------------------------------
1. What drug plan can a beneficiary  An accurate and complete response
 get that will cover all of his/her   would identify the prescription
 [specified] drugs at a [specified]   drug plan that has the lowest
 pharmacy, have a mail-order          estimated annual cost for the
 option; and cost the least amount    drugs the beneficiary uses.
 annually with [or without] a
 deductible?
------------------------------------------------------------------------
2. Can a beneficiary who is in a     An accurate and complete response
 nursing home and not on Medicaid     would indicate that a beneficiary
 sign up for a prescription drug      can choose whether to enroll in a
 plan?                                Medicare prescription drug plan.
------------------------------------------------------------------------
3. Can a beneficiary enroll in the   An accurate and complete response
 Medicare prescription drug program   would inform the caller that
 and keep his/her current Medigap     enrolling for the prescription
 policy?                              drug benefit would depend on
                                      whether the beneficiary's Medigap
                                      plan was creditable--that is,
                                      whether the coverage it provided
                                      was at least as good as Medicare's
                                      standard prescription drug
                                      coverage--or noncreditable. The
                                      CSR response would also mention
                                      that the beneficiary's Medigap
                                      plan should have sent him/her
                                      information that outlined options.
------------------------------------------------------------------------
4. What options does a beneficiary,  An accurate and complete response
 who has retiree health insurance     would indicate that a beneficiary
 with prescription drug coverage      has two options: (1) keep current
 that is not as good as the           health plan and join the
 Medicare prescription drug           prescription drug plan later with
 coverage, have as it relates to      a penalty, or (2) drop current
 the Medicare benefit?                coverage and join a Medicare drug
                                      plan.
------------------------------------------------------------------------
5. How do I know if a beneficiary    An accurate and complete response
 qualifies for financial              would refer the beneficiary to the
 assistance?                          Social Security Administration.
------------------------------------------------------------------------
Source: GAO.


                               __________
              Appendix III: Comments from the Centers for
                     Medicare & Medicaid's Services





DATE:                     May 1, 2006
TO:                       Leslie G. Aronovitz
                          Director, Health Care
FROM:                     Mark B. McClellan, M.D., Ph.D.
                          Administrator
SUBJECT:                  Government Accountability Office's (GAO) Draft
                           report, ``MEDICARE: Communications to the
                           Beneficiaries on the Prescription Drug
                           Benefit Could Be Improved'' (GAO-06-654)


    The Centers for Medicare & Medicaid Services has reviewed the 
findings in the GAO report entitled MEDICARE: Communications to 
Beneficiaries on the Prescription Drug Benefit Could Be Improved (GAO-
06-654) regarding CMS communications on the Part D benefit. Having 
clear and effective communication about Medicare's new prescription 
drug coverage is one of the Agency's critical priorities. We have 
worked very hard to ensure that Medicare beneficiaries have the 
information they need to make decisions about enrolling in a drug plan 
that works for them. We are pleased that the millions of beneficiaries 
who have enrolled in Part D are experiencing very high rates of 
satisfaction with their coverage. Each week, tens of thousands of 
beneficiaries are enrolling in Part D, which gives them real savings 
and protections for the future.
    While we greatly appreciate the feedback from your report and have 
already worked to implement your recommendations, we do not believe 
that your findings present a complete or accurate picture of the Part D 
communication activities. We understand that the report is based on 
studies of particular aspects of some of our communications tools at 
one point in time three months ago, in January and early February 2006. 
In addition to the many ``continuous improvement'' activities we have 
undertaken to address startup issues in the drug benefit since that 
time, there are much more extensive internal and external evaluations 
of our communications activities completed before, during, and after 
that time which have different conclusions, as we note below. These 
evaluations have used well-established methods which have been clearly 
documented and reviewed; in contrast, you have not yet responded to our 
requests for information on the methods you have applied. Additionally, 
your report does not address the unique breadth and depth of CMS 
activities to educate and to reach out to people with Medicare and the 
community that supports them in their health care decisions. From the 
outset, it was clear that no single source of information would be 
adequate or preferred by all of our beneficiaries. Consequently, we 
have expanded the range of tools available and vastly expanded our 
local partnerships to help beneficiaries use them, partnering with more 
than ten thousand diverse public and private organizations around the 
country in this effort.
    Importantly, the report does not look at this broad array of 
communication tools to help Medicare beneficiaries consider their drug 
plan options. For example, the report dismisses all of the tools used 
by our customer service representatives and our website for 
beneficiaries that provide personalized identifying information to 
enable us to provide them with personally customized service. The vast 
majority of our callers provide such personal identification, yet these 
tools were not evaluated. In fact, the report misleadingly states that 
we provided the right information on a lower share of cases because 
some customer service representatives sought to get this personal 
information to serve the beneficiary more quickly and effectively. 
Where GAO did actually get information on drug costs, as thousands of 
callers get every day, customer service representatives provided 
accurate information at a much higher rate. As another example, GAO 
evaluated whether beneficiaries could calculate their out-of-pocket 
drug costs in the standard Medicare benefit by hand, using only the 
Medicare and You handbook, but very few beneficiaries have opted to use 
the handbook in this way because: (1) there are far better tools 
available for quickly and automatically calculating drug costs on the 
web, on the phone, and through our partner organizations, and (2) over 
90 percent of our beneficiaries are choosing plans with benefits other 
than the standard plan, because they prefer features like zero 
deductibles, flat copays, and coverage in the ``donut hole.'' 
Beneficiaries are overwhelmingly using other tools to make effective 
cost comparisons.
    In fact, the drug plan finder element of the website has received 
164.6 million page views between November 15, 2005 and April 26, 2006. 
The Frequently Asked Questions (FAQ) section of www.medicare.gov has 
been accessed more than one million times since January 1, 2006. CMS 
has also responded to more than 19,000 emails received through the FAQ 
section, with 93% of them being resolved satisfactorily in the first 
response.
    Finally, there is no attention in the report at all to major 
aspects of our communications activities and expenditures, such as the 
expansion of our community based education and outreach efforts through 
an extensive network of grassroots partners across the country. This 
significant emphasis on reaching people where they live, work, play and 
pray is a key component of our success in reaching millions of people 
with Medicare and those who work on their behalf. No mention is made of 
the specialized campaigns targeting African American, Hispanic, 
American Indians, Asian American and Pacific Islander and in low income 
communities. These campaigns utilize new partnerships, employ materials 
in other languages and specialized paid media campaigns. These targeted 
campaigns within the broader campaign allow us to reach all segments of 
the Medicare population, including those who might benefit from the low 
income subsidy and those with language and other cultural barriers to 
accessing information.
    We believe that there have been a number of key elements to our 
successful education campaign. First, we recognized early on that we 
would need to supplement our proven traditional communications tools, 
including the Medicare & You Handbook, the 1-800-MEDICARE line, and the 
State Health Insurance Assistance Programs (SHIPs) with additional 
advanced technology and grassroots resources, as well as use earned and 
paid media opportunities. Second, we determined that the provision of 
personalized assistance and one-on-one counseling was the key 
ingredient to success. This necessitated our building a grassroots 
network of traditional and non-traditional partners who were willing to 
be trained to provide the one-on-one counseling. We strongly believe 
this is important for beneficiaries to make confident decisions about 
their Part D plan. We knew we would have to develop a grassroots 
capacity and local networks to supplement the CMS regional structure to 
provide the necessary education and enrollment assistance at the 
community level. This would involve reaching out, not just to our 
traditional partners such as the SHIPs, but to all the groups and 
organizations that have contact with our beneficiaries on a daily basis 
``where they work, where they play, and where they pray.''
    We appreciate any and all ideas for improving our communications 
efforts, and we take very seriously the four tasks that GAO recommends 
to improve CMS' education efforts. We support the goal of these tasks 
and have already taken many steps to meet them.
    Ensure that CMS's written documents describe the Part D benefit in 
a manner that is consistent with commonly recognized communications 
guidelines and that is responsive to the intended audience needs.--CMS 
employs a wide variety of consumer research techniques, simple language 
best practices, and independent evaluations in both English and in 
Spanish documents to ensure the readability and usefulness of our 
educational materials including those describing Part D. These tests 
have demonstrated that CMS written documents follow best practice 
guidelines for written communications with the intended audiences. 
These techniques and practices are summarized in Attachment A. Because 
of the importance of this topic, we are always interested in improving 
our written products. We look forward to an opportunity to review what 
GAO used in its review and will compare them to the evaluation methods 
we are already using, as soon as GAO is willing to provide the 
methodological details.
    Determine why CSRs frequently do not search for available drug 
plans if the caller does not provide personal identifying 
information.--As discussed with the GAO reviewers, CMS has instructed 
CSRs, in cases where that information is unavailable, to perform a 
search that provides general information on the plan options available 
to the beneficiary. Our web tools have always been set up to support 
such ``unauthenticated'' searches as well.
    1-800 MEDICARE CSRs do have the ability to conduct a general search 
for callers who do not have their Medicare number. If the person 
provides personal information, the authenticated search, other 
information that may influence their decision is pulled into the 
search, e.g., low income subsidy status or coverage through a retiree 
drug subsidy. Because this path provides more robust and specific 
results, CMS has encouraged CSRs to stress the importance of an 
authenticated Prescription Drug Plan Finder search to callers. The 
importance of authenticated searches is stressed in the CSR training 
materials and scripts. We have placed warnings throughout the training 
materials about the downside of proceeding without the personalized 
information and CSRs do suggest that the person call back when they 
have it.
    Even so, we know that there are occasions in which someone may not 
want to provide this information, or another caller may be inquiring on 
behalf of a beneficiary and not have the information, or a reporter or 
analyst may be calling for information. It has been emphasized to CSRs 
that non-authenticated general information is to be shared if the 
caller is unable to provide specific information that would enable a 
more detailed search. An example of relevant CSR instructions follows. 
``If a caller indicates they are calling for someone else and just 
wants general information on plans available in their area, you do not 
need to personalize the search if the caller does not want to. You can 
provide general plan information and send a personalized booklet if 
requested.'' CMS has a comprehensive quality review process on calls 
and we will continue to monitor calls to ensure that CSRs are pursuing 
the general search when appropriate.
    At the same time, we believe that GAO presents this finding in a 
way that is incorrect and misleading. We believe that the 41% accuracy 
rate unfairly portrayed how accurately CMS answers questions on drug 
plan options without beneficiary personal identification information, 
when the GAO failed to analyze 35 out of the 41 responses. In 
actuality, when the responses are analyzed, correct answers are 
actually being provided a majority of the time. Further, the bulk of 
the responses characterized as ``inaccurate'' were related to the test 
caller's request that the CSR use only brand name drugs (i.e., no 
generic drug substitution). This request is highly unusual in our call 
experience as generic versions of a drug are identical in their 
clinical effects. However, we have subsequently modified the web tool 
used by our CSRs to make it easier to override the generic drug 
substitution logic in the tool.
    Monitor the accuracy and completeness of CSRs responses to callers' 
inquiries and identify tools targeted to improve their performance in 
responding to questions concerning the Part D benefit, such as 
additional scripts and training.--We have worked hard to ensure 
beneficiaries have access to accurate and clear information when they 
call 1-800-Medicare. Our ongoing monitoring program, which evaluates a 
random sample of hundreds of actual calls received each month, has 
found that calls to 1-800-MEDICARE in 2006 have been answered 
accurately 93 percent of the time. The high accuracy rate is reflected 
in high rates of overall satisfaction from 1-800-MEDICARE callers, 
which averaged 84 to 85 percent in February and March.
    Improve the usability of the Part D portion of the Medicare website 
by refining web-based tools, providing workable navigation features and 
links, and making web-based forms easier to use and correct.--CMS is 
continually enhancing and refining their web-based tools to provide 
Medicare beneficiaries and their caregivers the information needed to 
compare, choose and enroll in a prescription drug plan that best meet 
their needs. We summarize some of our recent enhancements below. Online 
enrollment has been highly successful, as evidenced by the 3 million 
beneficiaries who have enrolled in the prescription drug plans using 
CMS' web-based drug plan finder. Our partner organizations have used 
the web tools to assist millions more with their enrollment-related 
needs. The high level of online enrollment and use by partners 
indicates that many people have found that this resource is useful and 
effective for undertaking the most important step of enrolling in a 
drug plan, and we are pleased that thousands more are using it every 
day.
    We cannot emphasize enough CMS' commitment to continuously improve 
the communications with beneficiaries and other constituents. We want 
our websites to continue to be recognized as benchmarks for excellence. 
Attachment A outlines improvements that we have made to the website 
since the GAO review and we believe demonstrate our continued 
commitment to excellence.
    All of our communications methods, in conjunction with our far-
reaching grassroots efforts, have helped provide the important 
information about Part D needed by beneficiaries, providers and 
partners to ensure the Medicare drug program is a success. In fact, the 
vast majority of beneficiaries are using their coverage to save money 
and get protection for the future: actual premiums and drug costs are 
much lower than had been expected because of strong competition, and 
because beneficiaries are using the enrollment tools to choose plans 
that save them more (over 73 percent of beneficiaries are enrolling in 
plans stand-alone prescription drug plans with premiums below the 
average); the drug plans are successfully filling over three million 
prescriptions a day; and each week hundreds of thousands of 
beneficiaries are enrolling in the new program.
    Tab A attached provides additional details about our communications 
materials and approaches. Also attached are technical comments for your 
consideration in Tab B. We will use the findings of the GAO report 
going forward as we continue our commitment to ensure that Medicare 
beneficiaries have the information they need to make informed health 
care decisions.
Tab A

DETAILED INFORMATION ABOUT PART D EDUCATION AND OUTREACH
    Over the past two years, we have dedicated significant resources to 
the development and implementation of an extensive education and 
outreach campaign surrounding Medicare prescription drug coverage, 
including a variety of beneficiary publications and materials, the 1-
800-MEDICARE helpline, the Medicare Prescription Drug Plan Finder web 
tool on www.medicare.gov, personalized assistance via the State Health 
Insurance Assistance Program (SHIP) counseling program, and local 
enrollment events. All of these initiatives are rooted in a foundation 
of continuous quality improvement that involves identifying the 
information that needs to be conveyed, using consumer research to 
determine the most effective messages and vehicles, preparing materials 
accordingly, and measuring material effectiveness. This thorough, 
comprehensive and careful process ensures that all of our educational 
materials are as accurate, clear and informative as possible.
Handbook and other written materials
    CMS has produced and disseminated an unprecedented number of 
written communication products on Medicare prescription drug coverage. 
These materials meet their intended goal of quickly and easily 
providing action-oriented information on a variety of topics related to 
Part D. Written materials exist in the form of booklets, brochures, 
fact sheets and letters. Some key communication products are available 
in Braille and audiotape, and many have been translated into alternate 
languages to increase accessibility to information.
Medicare & You Handbook
          The Handbook is an important information source for 
        all Medicare beneficiaries on the Medicare program and their 
        medical and drug coverage. Each year, all beneficiary 
        households receive a copy and we know from our consumer 
        research that beneficiaries keep it to use as a reference 
        source. Our customer surveys of beneficiaries who read the 
        Medicare & You 2006 Handbook, conducted in January-February 
        2006, showed that 72 percent were ``very'' or ``somewhat 
        satisfied'' with the Handbook.
          For 2006, we updated the Medicare & You Handbook to 
        reflect information on the new Medicare prescription drug 
        coverage by including a summary of the new coverage and 
        information on how it can help Medicare beneficiaries in 
        different situations. In addition, we reorganized the Handbook 
        to help Medicare beneficiaries decide whether and how to choose 
        among alternative plans. For example, a prominently highlighted 
        box on the inside cover of the Handbook serves to remind 
        beneficiaries that they need to make a choice about 
        prescription drug coverage for 2006. Beneficiaries are directed 
        to the specific Handbook section that provides more details on 
        how to select a prescription drug plan.
          The Medicare & You Handbook has been designed to 
        assist beneficiaries in deciding how to choose a plan based on 
        cost, coverage, convenience and peace of mind both now and in 
        the future. In addition to general information, the Handbook 
        includes information for beneficiaries based upon their current 
        prescription drug coverage status.
          CMS uses a series of steps before, during, and after 
        printing the Medicare & You Handbook to ensure accuracy. Some 
        steps may be combined or omitted as appropriate for other 
        targeted publications and deadlines for publication.
          Before printing the Handbook, CMS conducts multiple 
        rounds of internal review by program staff experts in 
        components throughout CMS. CMS also subjects the Handbook to 
        expert review by external organizations. CMS solicits comments 
        from an extensive list of advocacy groups, academic partners, 
        industry trade organizations, Congressional staff, and other 
        interested stakeholders. CMS writers/editors do the final 
        proofing. Finally, the CMS Office of External Affairs/Graphics 
        reviews the Handbook. CMS provides a final desktop publishing 
        troubleshooting check to ensure that materials include only the 
        files (such as logos, photos, and fonts) that CMS has legal 
        rights to use.
          During the printing process, CMS reviews printer 
        ``blueline'' copies. CMS reviews first proofs from the printer 
        to ensure the publication layout is accurate. CMS has an 
        opportunity to correct printer errors (generally something that 
        was altered in the transfer from electronic file to print 
        plate) or make author's alterations (errors previously missed) 
        before printing begins. Specially trained CMS and/or GPO staff 
        go on-site to the print contractor to conduct quality assurance 
        inspections of the publication, checking for errors as the 
        Handbook is being printed.
          After printing, CMS carefully monitors and 
        investigates reports of errors in publications, including 
        tracking related feedback from representatives at 1-800-
        MEDICARE. CMS corrects publications, as needed, and issues 
        updated electronic files and/or errata sheets to accompany 
        printed publications.
          CMS is very concerned about the readability of our 
        publications. We have to balance the often competing goals of 
        explaining technical information about Medicare coverage in 
        clear and simple language while ensuring its accuracy. We go to 
        great lengths to explain terms that beneficiaries need to 
        understand to address readability concerns. For example, all 
        publications include phone numbers and web sites, in case 
        people need more information. CMS has found that this contact 
        information is nearly universally identified and understood by 
        beneficiaries.
          GAO noted readability test score findings as evidence 
        that our written documents lacked clarity. CMS doesn't 
        routinely perform readability tests like the Fry, SMOG, FOG or 
        Flesch-Kincaid on completed publications. Our writers may use 
        these tests as tools during the drafting process to provide a 
        rough estimate of the readability level and identify elements 
        such as passive sentences, which can be readily improved. These 
        kinds of tests rely largely on counting syllables per word, 
        words per sentence, and sentences per paragraph to determine a 
        ``grade level'' readability score which we do not find to be a 
        useful parameter in gauging ``readability'' of Medicare 
        materials because there are terms that may be unfamiliar to the 
        Medicare population. As such, we go to great lengths to explain 
        concepts that may be readily understood. For example, 
        ``Medicare,'' ``deductible,'' ``formulary'' and 
        ``prescription'' are all multi-syllabic words that would 
        inflate scores in these types of reading tests. However, they 
        are terms for which there are few or no simpler substitutes. 
        People with Medicare (and in health insurance generally), 
        commonly recognize most of these terms. Where they don't, as 
        with ``formulary,'' we use them with careful explanation in 
        context, which also inflates the readability test scores by 
        adding words to the sentence. Such tests would not account for 
        this phenomenon and it is not usually accounted for by omitting 
        certain words in the scoring process given how many terms for 
        which we provide detailed explanations.
          These readability test scores are somewhat misleading 
        and incomplete as a measure of the ease or difficulty of 
        materials.

                  Plain language and literary experts like 
                Roger Shuy and the Georgetown University Round Table on 
                Language and Linguistics, the Social Security 
                Administration, the Maine AHEC Health Literacy Center, 
                the Delegates Assembly of the International Reading 
                Association, and the U.S. Securities and Exchange 
                Commission state that individual's tested literacy 
                level and their ability to read and understand 
                materials written at the corresponding grade level 
                rarely match.
                  Test scores don't take into account other 
                criteria that improve clarity of message, like 
                navigational cues and graphic elements.
                  It's challenging to account for multi-
                syllabic terms like ``Medicare'' or ``prescription'' 
                that are widely-understood and/or for which there are 
                no simpler alternatives.
                  When appropriate, our publications 
                provide a glossary to help beneficiaries understand 
                words that may be new to them. The Medicare & You 
                handbook contains such a glossary, as do our other 
                large booklets. However, glossaries would mitigate the 
                goals of brief fact sheets and letters, and therefore, 
                for these types of materials, every effort is made to 
                define difficult terms in context, which can inflate 
                standard readability test scores.

          As an additional measure of clarity, GAO states they 
        used 60 ``commonly recognized guidelines'' to evaluate our 
        publications. It is difficult to sufficiently comment on the 
        findings without knowing these 60 criteria, beyond the handful 
        of examples in the report. However, it is important to note 
        that to the best of our knowledge, these guidelines were 
        compiled from multiple sources for the purposes of this 
        evaluation and are not commonly recognized as a set. We look 
        forward to the opportunity to review these guidelines and their 
        relationship to our publications in the future, to assess where 
        improvements might be made.
          To evaluate and improve the usability of Medicare 
        publications, CMS hires contractors to conduct research with 
        beneficiaries, caregivers, and other people who help 
        beneficiaries. CMS uses focus groups to help us understand what 
        information is important to beneficiaries. We also conduct 
        cognitive interviews to test how well beneficiaries understand 
        the content in our draft publications. Our drafts are revised 
        based on the feedback that we receive.
          Consumer testing for the Handbook dates back to 1998. 
        Over the years, we have qualitatively tested the Handbook with 
        over 1000 aged and disabled beneficiaries, caregivers, and 
        Medicare counselors. Each year, the basic testing is conducted 
        in two rounds to allow for iterative improvements. Lessons 
        learned from year to year are applied to each new version of 
        the book.
          Multiple methods are used to test the book. The most 
        heavily relied on method is cognitive interviews where 
        participants are given tasks ``cold,'' that is without prior 
        preparation. We've also relied on triads and focus groups which 
        allow participants to generate ideas on how to improve the 
        book.
          We also conduct ``diary groups'' where beneficiaries 
        are asked to make comments on the book as they read through it 
        at home and are then brought in for focus groups. Tested 
        content developed for particular publications is also used in 
        other publications as appropriate. This overlap ensures 
        consistency across CMS publications.
          Information collected from beneficiaries earlier this 
        year indicated that 61 percent of respondents said the Medicare 
        & You Handbook was ``very easy'' or ``somewhat easy'' to 
        understand.
          CMS elicited feedback from more than 300 
        beneficiaries on Part D materials. The Medicare & You handbook 
        language was tested by a testing contractor, BearingPoint, with 
        over 150 beneficiaries. This testing helped us simplify our 
        language and explain concepts more clearly.
          GAO used similar testing methods on a smaller scale 
        to evaluate the clarity of our written materials. We are 
        interested in reviewing the details of the 18 tasks that were 
        used in the interviews conducted with beneficiaries and 
        beneficiary advisors, and understanding which tasks correlated 
        to which tested products. GAO's report provides no details on 
        the tasks that respondents completed successfully, and 
        describes only three tasks that were difficult. These three 
        indicate that the purpose and expectations of these 
        publications may have been overlooked. The primary goal of our 
        written communications in this phase was awareness--to make 
        beneficiaries aware of the new coverage, aware that they needed 
        to take some action, and aware of the resources available to 
        help them make decisions. None of these publications were 
        intended to independently lead a reader through such complex 
        activities as computing projected out-of-pocket costs. Other 
        feedback on our publications shows they are successful in 
        meeting their intended goals.
          The National Association of Government Communicators 
        critiqued the Medicare & You 2005 Handbook for the 2004 Blue 
        Pencil Competition. The handbook received positive feedback in 
        the judges' ratings. The judges rated the handbook in 
        categories such as writing, editing, purpose, design, printing, 
        cost effectiveness, and dissemination.

                  The judges strongly agreed that the 
                writing was clear, concise, and appropriate for its 
                intended audience.
                  One judge wrote, ``Given the complexity 
                of this subject, the writing is extremely clear and 
                easy to understand. Technical terms are well explained, 
                and needed information is easy to locate.''
                  In the area of design, another judge 
                commented that, ``Choice of font, typeface, and size; 
                leading; and margins made the book attractive, while 
                ensuring accessibility for users (especially seniors). 
                Use of blue headings and other design elements 
                contributed to ease of use, as well.''
                  In the category of purpose, the judges 
                strongly agreed that the purpose of the handbook is 
                clear and that the handbook gets its message across 
                with well-supported topics. As an overall final 
                comment, a judge wrote, ``This entry is very well 
                suited to its purpose and audience.''

          CMS began preparations for the 2007 Medicare & You 
        Handbook in late December 2005. To date, staff and leadership 
        have held input meetings with key advocates and stakeholders, 
        tested early draft revisions with beneficiaries, established a 
        firm project plan, and instituted additional quality assurance 
        and proofing processes. The Handbook is currently on schedule 
        for its required mailing in the fall of this year, with a 
        comprehensive external review process ending this week and 
        extensive consumer testing scheduled in mid-May.

1-800-MEDICARE
    It is a top priority at CMS to ensure that beneficiaries have 
timely access to accurate information and receive satisfactory service 
when contacting 1-800-MEDICARE.

          Between 2004 and the beginning of the open enrollment 
        period, CMS conducted numerous activities to prepare for the 
        prescription drug benefit, including the development of a 
        comprehensive training curriculum on the prescription drug 
        benefit and the Plan Finder tool for Customer Service 
        Representatives (CSRs). Since November 15, 2005, CMS has made 
        continuous updates to scripts and reference materials for CSRs 
        to ensure they are able to communicate accurate information to 
        beneficiaries and people calling on behalf of beneficiaries.
          CMS's quality monitoring program has found that in 
        2006, calls to 1-800-MEDICARE have been accurate 93 percent of 
        the time. This quality monitoring program is conducted by 
        contractors who run the call centers. CMS monitors at least 4 
        calls per month for each of our thousands of CSRs to identify 
        improvement and training opportunities.
          These are not just mystery shopping calls, which are 
        limited to topics chosen by researchers, but actual calls which 
        are representative of the information Medicare beneficiaries 
        want to know. To ensure reliability and accuracy, all monitors 
        score a sample of calls on a weekly basis and meet to review 
        their approaches. The data is analyzed constantly and is used 
        to take immediate corrective action. This work is overseen by a 
        team within CMS dedicated to the quality of the 1-800-MEDICARE 
        call centers.
          Examples of topics receiving the highest volume of 
        inquiries at our call centers include:

                  How to enroll in a plan to obtain 
                prescription drug coverage
                  Complaints about drug coverage
                  How to apply for the limited-income 
                subsidy

          Since the beginning of the new prescription drug 
        benefit, CMS has taken many steps to help beneficiaries get the 
        information they need to select a drug plan. For example, CMS 
        acquired additional infrastructure including telephone lines 
        and workstations at call center sites.
          CMS increased the number of customer service 
        representatives (CSRs) from 3,000 in June 2004 to as many as 
        7,800 to handle beneficiary calls with minimal wait times.
          On average, from November 15, 2005 to April 12, 2006, 
        callers have experienced wait times of less than 2 minutes, 
        with longer waits sometimes occurring during peak call periods. 
        Call volume to 1-800-MEDICARE peaked around 400,000 calls per 
        day in mid-November when enrollment began, and again in early 
        to mid-January. Currently, call volume reaches 200,000 calls 
        per day on the highest volume day and levels out around 150,000 
        per day during the remainder of the week. Call volumes have 
        continued to increase slightly since then.
          CMS recognizes that not all beneficiaries are able to 
        use, or have access to, the internet, which is the platform for 
        the useful Medicare Prescription Drug Plan Finder tool. As part 
        of our outreach and communication efforts, CMS trained 
        additional staff exclusively on the use of the Medicare 
        Prescription Drug Plan Finder tool so that they could be 
        dedicated to answering calls only about the prescription drug 
        benefit and available plan options.
          We expanded responsibilities and provided additional 
        training for some CSRs and advanced training for others. We 
        required CSRs to take written exams and test calls for 
        certification before allowing them to take live calls. All CSRs 
        have one week of classroom training followed by two or three 
        additional days of practice calls, simulation, quality 
        monitoring, and follow-up coaching to ensure peak performance. 
        Finally, we monitored newly-trained CSRs and those who would 
        benefit from additional coaching at a higher level.
          This year, CMS implemented a 1-800 MEDICARE caller 
        satisfaction survey conducted by Pacific Consulting Group, an 
        independent contractor. This survey provides 1) satisfaction 
        tracking over time and 2) an early warning system that can 
        point to potential service problems. Improvements can then be 
        implemented relatively quickly to enhance caller satisfaction. 
        These CMS customer satisfaction surveys indicate that the bulk 
        of callers who interact with our CSRs, 87 percent are satisfied 
        with their experience. They are particularly pleased with how 
        courteous and patient the CSRs are (rated at 97 percent). These 
        responses came not only from people with Medicare, but also 
        friends or relatives calling on their behalf, who made up 34 
        percent of callers during March 2006.
          Currently, 500 surveys are conducted each week with 
        400 callers who spoke with CSRs and 100 callers who used the 
        Interactive Voice Response System.

    The data below depict results from weekly calls for those callers 
that spoke to a CSR. The results show the percentage of respondents in 
the weeks January 16th, February 27th and March 6th that strongly or 
somewhat agree with the statements listed below.


       Survey Metric
          Week of            January 16th   February 27th    March 6th

                                (% agree--strongly or somewhat to the
                                        following statements)
CSR was helpful             84%            89%             88%
CSR understood issue or     83%            86%             88%
 concern
CSR explained things to me  83%            86%             84%
 in way I could understand
I received all the          67%            72%             73%
 information I needed
The CSR was knowledgeable   81%            86%             85%
I received information      75%            80%             80%
 specific to my issue
Overall I am satisfied      79%            84%             85%



          Pharmacists are a key partner in the implementation 
        of the Medicare prescription drug benefit. To ensure that 
        pharmacists have access to the information they need to assist 
        beneficiaries at the pharmacy counter, CMS developed a 
        dedicated pharmacist 1-866 telephone line. Incoming calls 
        through the dedicated pharmacist line are routed to the head of 
        the queue at the 1-800 MEDICARE number, wait times are 
        substantially lower than the overall average for beneficiaries 
        and other individuals calling the 1-800-MEDICARE line. This 
        helps to relieve any burden on pharmacists, and also ensures 
        that pharmacists are able to assist beneficiaries immediately 
        at the pharmacy counter.
          CMS is well-prepared to handle increased call-volume 
        that may occur before the May 15th enrollment deadline. We have 
        increased the number of CSRs from 3,000 in June of 2004 to 
        6,000 CSRs for May enrollments. We have also acquired 
        additional infrastructure including telephone lines and 
        workstations at call center sites. We have refined our CSR 
        scripts by reducing redundant information, indexing scripts for 
        quick access, and including probing questions to help the CSRs 
        better identify callers' concerns.
          Despite our efforts, some beneficiaries will wait 
        until the deadline is near, but our top priority is to 
        encourage people to enroll now and avoid the rush.

Medicare.gov
          To ensure that the new Plan Finder tool was well-
        designed and easily used by beneficiaries and other 
        individuals, CMS worked with a professional website development 
        contractor, CGI Federal and a subcontractor, Navigation Arts.
          As the Medicare Prescription Drug Plan Finder was 
        being designed, CMS engaged in multiple rounds of consumer 
        testing to ensure its usefulness and simplicity. CMS conducted 
        three rounds of in-depth interviews with Medicare beneficiaries 
        to obtain feedback as drafts of the tool were developed 
        throughout 2005. Final interviews that focused on messages 
        tailored specifically for beneficiaries based on their 
        insurance information were conducted in September 2005. CMS 
        conducts ongoing consumer research to continue to improve 
        understandability and usability.
          CMS also conducts thorough and ongoing analyses of 
        possible outliers in data, including the Medicare Prescription 
        Drug Plan Finder plan pricing data, pharmacy network, 
        mismatched formulary identifiers (NDC codes), and other missing 
        formulary data. If problems are found with a plan's data, 
        information on the plan will be suppressed from the website 
        until CMS works with the plan to correct its information and 
        properly display it.
          We are proud to say that CMS has received a number of 
        awards for its website from independent organizations. These 
        awards include the ``eHealthcare Leadership Award'' at the 
        Ninth Annual Internet Conference, the ``2005 Pioneer Award'' at 
        the E-Gov Institute and Federal Computer Week, and the 
        ``Independent Technology Supporting Service to Our Country'' 
        award at the Eighth Annual Technology Gala to benefit Juvenile 
        Diabetes.
          We believe that the website has been extremely 
        successful in providing beneficiaries, their caregivers and CMS 
        partners with clear, accurate and timely information to help 
        them enroll in drug plans. In fact, CSRs at 1-800-MEDICARE have 
        access to the Plan Finder to help beneficiaries find the 
        information they need about choosing a plan, enrolling in a 
        plan, or other issues related to accessing their prescription 
        drug coverage. The Plan Finder also has been a critical tool 
        for SHIPs and other partners, such as the ABC Coalition and 
        Medicare Today, to use when conducting outreach to 
        beneficiaries.
          Results from a web-based customer satisfaction survey 
        conducted by MSInteractive, a subsidiary of Market Strategies 
        that specializes in web-site satisfaction research, were very 
        positive. This research, conducted in December 2005, focused 
        only on the prescription drug plan finder tool.
          The survey indicated that content, interactivity, and 
        navigability have the greatest impact on satisfaction. During 
        development of the tool, CMS contracted with a web design firm 
        to leverage their expertise on these impacts. CMS continues to 
        focus on these areas in future enhancements and updates.
          The site's ``appearance'' and ``privacy'' scored 
        highly, but had no impact on overall satisfaction.

                  66 percent of those who enrolled were 
                either ``somewhat'' or ``strongly satisfied'' with the 
                tool.
                  80 percent of those who enrolled would 
                recommend the tool to a friend.
                  70 percent of users agreed with this 
                statement, ``I know more about the Medicare 
                Prescription Drug Plans now that I've used this site.''
                  Regular internet users had higher ratings 
                of the site.
                  In January and February 2006, Abt 
                conducted a telephone survey of a random sample of 
                beneficiaries and found that:

                          14 percent of respondents used the 
                        www.medicare.gov website to get information 
                        about Medicare;
                          60 percent said it was ``very easy'' or 
                        ``somewhat easy'' to understand the information 
                        from www.medicare.gov;

                  Beneficiaries who rated their 
                satisfaction with the information received from 
                medicare.gov as ``very/somewhat'' satisfied outnumbered 
                the ``dissatisfied'' beneficiaries 71 percent to 19 
                percent. Seven percent of beneficiaries were neither 
                ``satisfied nor dissatisfied.''

          Overall, the drug plan finder element of the website 
        has received 164.6 million page views between November 15, 2005 
        and April 26, 2006. We do not have a way to differentiate 
        whether those hits were from beneficiaries or their caregivers.
          To date, 3 million beneficiaries have enrolled in 
        prescription drug plans using the Plan Finder. That indicates 
        that at least that many people were satisfied enough with the 
        information they received to undertake the most important step 
        of enrolling in a drug plan.
          The Frequently Asked Questions (FAQ) section of 
        www.medicare.gov has been accessed more than one million times 
        since January 1, 2006. CMS has also responded to more than 
        19,000 emails received through the FAQ section, with 93% of 
        them being resolved satisfactorily in the first response.

State Health Insurance Assistance Programs (SHIPs)
          While the SHIPs play a significant role in 
        beneficiary counseling and education on Part D, CMS has also 
        created a national grassroots network of more than 24,000 
        partners and 140 coalitions that rely on traditional tools to 
        help them provide personalized counseling to Medicare 
        beneficiaries every day.
          The network CMS built is diverse and committed, with 
        members from every sector, including advocacy groups, 
        government agencies, service clubs, faith-based organizations, 
        benefits counselors, trained volunteers and healthcare 
        professionals such as doctors and pharmacists.
          This extensive, grassroots-level partnership is truly 
        unprecedented for the Medicare program. It's reaching out to 
        people with Medicare all over the country . . . ``where they 
        live, work, play, and pray.'' This approach has helped 
        personalize Medicare in every corner of the country.
          Preliminary data from the State Health Insurance 
        Assistance Programs (SHIPs) shows that individual in-person and 
        telephone contacts, presentations and meetings reached a total 
        of 4.5 million clients, compared to 2.5 million in the previous 
        grant period.

Other Selected Activities
          The Mobile Office Tour has traveled 500,000 miles 
        since last fall and approximately half of the territory covered 
        and events have been in rural areas, in an attempt to reach out 
        to a variety of beneficiaries and partners at the local level. 
        We knew we would have to develop a grassroots capacity and 
        local networks to supplement the CMS regional structure to 
        provide the necessary education and enrollment assistance at 
        the community level. This would involve reaching out, not just 
        to our traditional partners such as the SHIPs, but to all the 
        groups and organizations that have contact with our 
        beneficiaries on a daily basis ``where they work, where they 
        play, and where they pray.'' We needed to involve individuals 
        and institutions: family members and friends; current and 
        former employers; churches and synagogues; financial advisors 
        and community centers, to name but a few.
          CMS is reaching out directly to beneficiaries through 
        an extensive paid and earned media campaign focusing on press 
        and radio, both of which are highly localized in informing 
        beneficiaries of special events in their neighborhoods.
          As we approach May 15, many members of the Cabinet 
        whose agencies have helped build awareness of the prescription 
        drug benefit through their own programs have joined efforts 
        with CMS, including the United States Department of 
        Agriculture, Department of Commerce, Department of Labor and 
        Housing and Urban Development.
          To minimize a possible last minute rush to enroll, 
        CMS is making a monumental effort to enroll beneficiaries well 
        before the May 15th deadline. In the past month, there have 
        been 1,000 events per week across the country to provide 
        beneficiaries with personalized help so they understand the 
        prescription drug coverage options available to them and they 
        can enroll in a plan. In our enrollment efforts, we are 
        targeting beneficiaries who may qualify for the low-income 
        subsidy and beneficiaries who live in rural areas. Our 
        enrollment events are fully coordinated with the Social 
        Security Administration (SSA) to assist beneficiaries in 
        applying for extra help, as well as to help them enroll in a 
        plan.

Tab B
TECHNICAL COMMENTS FOR FURTHER CONSIDERATION
          Regarding GAO finding for www.medicare.gov tool that 
        defaulting to generic drugs complicates a user's search for 
        drug plans covering brand name drugs:

                   CMS made a deliberate decision to default to generic 
                substitution of brand name drugs. A user is able to 
                override the default. However, because of the great 
                opportunity for beneficiary savings and the absence of 
                any medical difference between brand and generic 
                versions of a drug, we want to emphasize that generic 
                drugs are the same as the brand name drug in active 
                ingredients, dosage, safety, strength, how it is taken, 
                how it works in the body, quality, performance, and 
                intended use. Therefore, the Agency stands behind its 
                decision to default to direct generic substitution. We 
                have provided below the exact language from the 
                Medicare Prescription Drug Plan Finder website. In 
                addition, in response to a GAO suggestion, we have 
                changed the site so that if a user opts to override the 
                generic substitution, that change is persisted even 
                when the user makes other changes such as the addition 
                of drugs.
                   The language from the site is: We recommend that you 
                let us price plans in your area using the lower-cost 
                generic version of your selected drug(s). A generic 
                drug is safe and effective and it has the same risks 
                and benefits as the original brand-name drug but at a 
                lower cost.
                   Today, MOST prescriptions are filled with generic 
                drugs. A generic drug is the same as a brand-name drug 
                in active ingredients, dosage, safety, strength, how it 
                is taken, how it works in the body, quality, 
                performance, and intended use. Generic drugs are less 
                expensive because generic drug companies compete to 
                provide drugs after the drug patents end. Generic drugs 
                are thoroughly tested and must be approved by the Food 
                and Drug Administration.
                   If you choose not to use the lower-cost generic 
                drugs, we will price the drugs as you entered them. You 
                should be aware that some plans do not cover the brand 
                version of a drug if the generic is available. If you 
                purchase a drug that is not covered by the plan, you 
                will pay the full price of the drug, and the amount you 
                pay will not be counted towards your deductible or out 
                of pocket cost limits.

          Regarding 1-800-MEDICARE Average Speed of Answer:

                   CMS is staffing 1-800-MEDICARE at a level to achieve 
                an average speed of answer of 3 minutes or less as 
                measured over a month time period. We have consistently 
                achieved this goal even in the month of January where 
                we handled 5.8 million calls. During the month, there 
                will be periods of time where the call wait time is 
                under or over the 3 minute level with longer waits 
                occurring during spikes. We use an ``all hands on 
                deck'' where supervisors, trainers, etc. take calls to 
                help manage the spike periods and we change staffing 
                patterns as needed where changes in call patterns are 
                noted. In particular, over this time period, we have 
                increased staffing at the late night hours and weekends 
                as a result of increased calls in the 11 pm-1 am 
                timeframe. The actual average speed of answer for 
                recent months is listed below.

----------------------------------------------------------------------------------------------------------------
                    Month                                      Average Speed of Answer for Month
----------------------------------------------------------------------------------------------------------------
January                                        2.49 mins
----------------------------------------------------------------------------------------------------------------
February                                       0.51 mins
----------------------------------------------------------------------------------------------------------------
March                                          0.25 mins
----------------------------------------------------------------------------------------------------------------
April                                          0.50 mins

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


          Regarding 1-800 MEDICARE CSRs' inability to respond 
        with caller's personal information:

                   1-800 MEDICARE CSRs do have the ability to use the 
                non-authenticated, general search for callers who do 
                not have their Medicare number. However, CMS has 
                encouraged CSRs to stress the importance of 
                authenticated Prescription Drug Plan Finder searches to 
                callers. The importance of authenticated searches is 
                stressed in the CSR training materials and scripts. We 
                have placed warnings throughout the training materials 
                about the downside of proceeding without the 
                personalized information and CSRs do suggest that the 
                person call back when they have it.
                   While we realize the importance of authentication, 
                we have emphasized to CSRs through refresher training 
                and broadcast messages that there will be occasions in 
                which callers will be inquiring on behalf of a 
                beneficiary. It has been emphasized to CSRs that non-
                authenticated general information is to be shared if 
                the caller is unable to provide specific information 
                that would enable a more detailed search. The 
                additional reminders released state the following: If a 
                caller indicates they are calling for someone else and 
                just wants general information on plans available in 
                their area, you do not need to personalize the search 
                if the caller does not want to. You can provide general 
                plan information and send a personalized booklet if 
                requested.

          Regarding Compliance with Section 508

                   CMS submitted a copy of the Voluntary Product 
                Assessment Template (VPAT) on February 27, 2006, as 
                well as Watchfire WebXM reports on March 13 & April 24, 
                2006. The 508 findings in these reports were minor and 
                based on mostly false positive results. One issue dealt 
                with occasional missing ALT text on images and another 
                issue dealt with form labels.
                   A number of applications on Medicare.gov, including 
                MPDPF, include a tabbed interface. In MPDPF, there are 
                3 tabs: Prescription Drug Plan Finder, Learn How Plans 
                Work, and Plans in Your State.
                   To enable some Javascript code within the tabs, the 
                links are coded as a simple form (with no input 
                fields).
                   The Watchfire WebXM suite expects to see a 
                traditional form with input fields, which should always 
                have associated labels for maximum accessibility. 
                However, since there are no input fields, label tags 
                would be inappropriate in this context.
                   These reports confirm that the site complies with 
                the Rehabilitation Act Amendments of 1998 (Section 
                508).

          Regarding GAO recommendation that CMS improve 
        usability of the Part D portion of website:

                   The Medicare Prescription Drug Plan Finder has 
                monthly releases and ad hoc enhancements to provide 
                Medicare beneficiaries and their caregivers the 
                information needed to compare, choose, and enroll in a 
                prescription drug plan that is right for them.
                   The following are a few of examples of recent site 
                improvements:

                          Drug information savings 
                        functionality: This functionality allows users 
                        to save their drug information during their 
                        initial session and retrieve it easily each 
                        time they revisit the Web site with just a 
                        confirmation number and a password date. This 
                        allows them to compare plans directly without 
                        taking the time to reenter all their 
                        medications.
                          Print My Drug List functionality: 
                        This functionality allows beneficiaries/users 
                        to print out and conveniently keep a record of 
                        their medication list that they can use when 
                        needed, such as during doctor's appointments or 
                        visits to the ER.
                          Drug Details page: This page 
                        provides a complete overview of a plan's 
                        benefit, specific to the drugs the beneficiary/
                        user has entered. It provides the full cost of 
                        the drug, cost of the drug during every phase 
                        of the benefit (i.e. during the deductible, 
                        initial coverage, gap, and catastrophic phase) 
                        and coverage restriction information (i.e. step 
                        therapy, quantity limitations, and prior 
                        authorization). In a simple table format, 
                        beneficiaries/users can view and understand 
                        what their drug cost will be throughout the 
                        year and what if any restrictions exist for 
                        coverage of their drugs.
                          Improvements on the drug entry 
                        functionality: A number of improvements have 
                        been made to the drug entry functionality with 
                        the goal of allowing beneficiaries/users to 
                        easily find their medication and enter their 
                        specific dose and quantity.

                               __________
            Appendix IV: Agency Comments and Our Evaluation
    We received written comments on a draft of our report from CMS (see 
app. III). CMS said that it did not believe our findings presented a 
complete and accurate picture of its Part D communications activities. 
CMS discussed several concerns regarding our findings on its written 
documents and the 1-800-MEDICARE help line. However, CMS did not 
disagree with our findings regarding the Medicare Web site or the role 
of SHIPs. CMS also said that it supports the goals of our 
recommendations and is already taking steps to implement them, such as 
continually enhancing and refining its Web-based tools.
    CMS discussed concerns regarding the completeness and accuracy of 
our findings in terms of activities we did not examine, as well as 
those we did. CMS stated that our findings were not complete because 
our report did not examine all of the agency's efforts to educate 
Medicare beneficiaries and specifically mentioned that we did not 
examine the broad array of communication tools it has made available, 
including the development of its network of grassroots partners 
throughout the country. We recognize that CMS has taken advantage of 
many vehicles to communicate with beneficiaries and their advisers. 
However, we focused our work on the four specific mechanisms that we 
believed would have the greatest impact on beneficiaries--written 
materials, the 1-800-MEDICARE help line, the Medicare Web site, and the 
SHIPs. In addition, CMS stated that our report is based on information 
from January and February 2006, and that it has undertaken a number of 
activities since then to address the problems we identified. Although 
we appreciate CMS's efforts to improve its Part D communications to 
beneficiaries on an ongoing basis, we believe it is unlikely that the 
problems we identified in our report could have been corrected yet 
given their nature and scope.
    CMS raised two concerns with our examination of a sample of written 
materials. First, it criticized our use of readability tests to assess 
the clarity of the six sample documents we reviewed. For example, CMS 
said that common multisyllabic words would inappropriately inflate the 
reading level. However, we found that reading levels remained high 
after adjusting for 26 multisyllabic words a Medicare beneficiary would 
encounter, such as Social Security Administration. CMS also pointed out 
that some experts find such assessments to be misleading. Because we 
recognize that there is some controversy surrounding the use of reading 
levels, we included two additional assessments to supplement this 
readability analysis--the assessment of design and organization of the 
sample documents based on 60 commonly recognized communications 
guidelines and an examination of the usability of six sample documents, 
involving 11 beneficiaries and 5 advisers.
    Second, CMS expressed concern about our examination of the 
usability of the six sample documents. The participating beneficiaries 
and advisers were called on to perform 18 specified tasks, after 
reading the selected materials, including a section of the Medicare & 
You handbook. CMS suggested that the task asking beneficiaries and 
advisers to calculate their out-of-pocket drug costs was inappropriate 
because there are many other tools that can be used to more effectively 
compare costs. We do not disagree with CMS that there are a number of 
ways beneficiaries may complete this calculation; however, we 
nonetheless believe that it is important that beneficiaries be able to 
complete this task on the basis of reading Medicare & You, which, as 
CMS points out, is widely disseminated to beneficiaries, reaching all 
beneficiary households each year. In addition, CMS noted that it was 
not able to examine our detailed methodology regarding the clarity of 
written materials--including assessments performed by one of our 
contractors concerning readability and document design and 
organization. We plan to share this information with CMS.
    Finally, CMS took issue with one aspect of our evaluation of the 1-
800-MEDICARE help line. Specifically, CMS said the 41 percent accuracy 
rate associated with one of the five questions we asked was misleading, 
because, according to CMS, we failed to analyze 35 of the 100 
responses. However, we disagree. This question addressed which drug 
plan would cost the least for a beneficiary with certain specified 
prescription drug needs. We analyzed these 35 responses to this 
question and found the responses to be inappropriate. The CSRs would 
not provide us with the information we were seeking because we did not 
supply personal identifying information, such as the beneficiary's 
Medicare number or date of birth. We considered such responses 
inappropriate because the CSRs could have answered this question 
without personal identifying information by using CMS's Web-based 
prescription drug plan finder tool. Although CMS said that it has 
emphasized to CSRs, through training and broadcast messages, that it is 
permissible to provide the information we requested without requiring 
information that would personally identify a beneficiary, in these 35 
instances, the CSR simply told us that our question could not be 
answered. CMS also said that the bulk of these inappropriate responses 
were related to our request that the CSR use only brand-name drugs. 
This is incorrect--none of these 35 responses were considered incorrect 
or inappropriate because of a request that the CSR use only brand-name 
drugs--as that was not part of our question.

                                 

    Chairman JOHNSON OF CONNECTICUT. Thank you.
    Ms. Larkin.

 STATEMENT OF JOYCE LARKIN, VICE PRESIDENT, PUBLIC AFFAIRS AND 
       COMMUNITY RELATIONS, OVATIONS, UNITED HEALTH GROUP

    Ms. LARKIN. Thank you, Chairwoman Johnson and 
Representative Stark and the other Members of this 
Subcommittee. I appreciate the opportunity to testify before 
you today about the implementation of the new Medicare Part D 
drug benefit. My name is Joyce Larkin, and I am vice president 
of public affairs and community relations for Ovations, a 
United Health Group company.
    Ovations is solely dedicated to meeting the health care 
needs of individuals age 50 and over, including those who are 
Medicare eligible, those with lifelong chronic conditions, and 
those who are disabled. I should say that prior to joining 
Ovations, I spent 15 years working here on the Hill for one of 
your distinguished colleagues, Congressman Stokes of Ohio, a 
real health care champion, so it is a real pleasure to be here 
today.
    Our company has a life-long commitment to enhancing health 
care for older Americans. We do that by our participation in 
Medicare fee-for-service programs, health plans, and 
demonstration programs for frail Medicare beneficiaries. As you 
know, Ovations is the only company to offer the Medicare Part D 
benefit in all 50 States, the District of Columbia, and each of 
the U.S. territories that has Part D programs.
    Since January, we have processed approximately 50 million 
prescription drug claims. Our savings projections align with 
what CMS has projected, roughly $1,100 per year for 
beneficiaries who previously lacked coverage. As CMS also 
reported, we are the leading sponsors for both the Medicare 
prescription drug plans or PDPs and also the Medicare Advantage 
plans, which now have prescription drug coverage. We believe 
that our experience provides an opportunity to offer insight to 
this panel as you continue to evaluate the Medicare drug 
benefit.
    Before the startup of the program, we engaged in a broad 
national education campaign around Part D. Our goal was to 
ensure that individuals understood the benefit and how to 
enroll prior to the enrollment season. As part of this effort, 
we developed a consumer booklet, which became known as the Show 
Me Guide. We published the booklet at no cost to consumers in 
seven languages and distributed more than 10 million copies.
    Today, we appreciate the opportunity that we have had to 
work with some very strong advocacy groups and Congressional 
groups around education. Our partnerships have included working 
with the Congressional Black Caucus; Reverend Jackson and the 
Rainbow-PUSH Coalition; the National Kidney Foundations; the 
National Medical Association; and the American Association for 
Services and Homes for the Aging. These partnerships have 
resulted in more than 400 Medicare Part D education and 
outreach events around the country. In some States, such as 
Illinois, we have participated in more than 50 such events.
    We continue to be encouraged by the stories we are hearing 
every day about people receiving prescription drug coverage for 
the first time: beneficiaries such as Fran Cooper, a person who 
was very skeptical about the program in the beginning. She is 
now saving money, and she is going around the country educating 
other beneficiaries. Betty Noord, a Medicare beneficiary in 
Wisconsin, her choice was a Medicare Advantage plan, which now 
offers her a zero premium along with prescription drug 
coverage. She is estimating that her costs have decreased from 
$9,000 to roughly $2,000 per year.
    It is clear that implementing a program of this scale is an 
enormous task, and it does not come without challenges. For 
United, more than 4.5 million enrollees are participating in 
Part D through our program; nearly 3 million of which are 
enrolled in our stand-alone Part D plans.
    While these numbers are impressive, we share your concern 
that the system has not worked well for some beneficiaries. 
This includes some low-income individuals as well as some that 
are dual eligible. I can commit to you that we will continue to 
do all that we can to ensure that those problems and those 
issues are addressed.
    We have done things to help beneficiaries, such as 
increasing our call center staff, decreasing the time that 
consumers have had to wait for information, deeming individuals 
eligible for coverage so they did not have to leave the 
pharmacy without their prescriptions, and working with 
pharmacies, independent pharmacies, retail pharmacy outlets, to 
make sure that the Part D experience is positive for them. 
While some of our implementation challenges are behind us, we 
want to make sure that this benefit works well for every single 
consumer.
    So, I appreciate the opportunity to appear before this 
panel today and would welcome any questions that you might 
have.
    [The prepared statement of Ms. Larkin follows:]

Prepared Statement of Joyce Larkin, Vice President, Public Affairs and 
           Community Relations, Ovations, UnitedHealth Group

Introduction
    Ovations, a business unit of UnitedHealth Group, is pleased to 
submit this testimony to the Subcommittee on Health for its 
consideration. Ovations is solely dedicated to meeting the healthcare 
needs of individuals age 50 and over, including those who are Medicare 
eligible, people with lifelong chronic conditions, the frail elderly 
and people who are disabled.
    Our company has a long-standing commitment to enhancing health care 
for older Americans and other Medicare beneficiaries. In fact, we 
provide the most comprehensive array of health and well-being services 
to these populations through the traditional Medicare fee-for-service 
program, health plans, and demonstration projects for the frailest 
Medicare beneficiaries. Our participation in Medicare programs is 
fundamental to our core mission: to facilitate broad and direct access 
to affordable, high quality health care that results in improved health 
outcomes for individuals, families and communities.
    As you know, Ovations/UnitedHealth Group is the only company to 
currently offer the new Medicare prescription drug benefit in all 50 
States, the District of Columbia and each of the U.S. territories 
covered under the Part D program. A little over four months ago, 
Medicare beneficiaries who were enrolled began using the new Medicare 
prescription drug benefit.
    Since January 1 we have processed approximately 50 million 
prescription drug claims, with beneficiaries yielding savings 
consistent with the Centers for Medicare & Medicaid Services' (CMS) 
estimate of $1,100 per year for beneficiaries who previously lacked 
prescription drug coverage. As CMS recently reported we are the leading 
sponsor in terms of enrollment for both stand-alone Medicare 
Prescription Drug Plans (PDPs) and Medicare Advantage Plans with 
Medicare Prescription Drug Coverage (MA-PDs).
    With our experience in working with CMS and Congress to implement 
the new Medicare drug benefit, we believe we can continue to offer a 
valuable perspective as this Committee exercises its oversight in 
evaluating the new Medicare prescription drug program.

Early Challenges
    Implementing a program of such unprecedented size and scale is an 
enormous task and has not been without challenge. CMS has reported the 
Medicare Part D program is now contributing to the well-being of more 
than 30 million beneficiaries as of April 18, including more than eight 
million Medicare beneficiaries enrolled in PDPs who have signed up 
individually for prescription drug coverage. As of March, more than 4.5 
million enrollees were participating in Part D through our PDP and MA-
PD plans. CMS reported as of the end of April that nearly 3.8 million 
beneficiaries were enrolled in our stand-alone Part D plans. 
Approximately one-third of these beneficiaries are dual eligibles.
    While these numbers and statistics demonstrate the Medicare Part D 
program is working for millions of Medicare beneficiaries, we share the 
Committee's concern that, in some cases, the system has not worked well 
for all beneficiaries. This was especially true for low-income and 
dually eligible enrollees, largely due to unanticipated information 
gaps in the system. At the outset of the program, information on 
eligibility was not available to pharmacies for certain duals and other 
low-income beneficiaries in the way it should have been, primarily due 
to:

          Incomplete enrollment and eligibility information 
        received by the health plans and delays in its transfer among 
        CMS, health plans and pharmacies; and
          Late-month enrollments and switches from one plan to 
        another by duals and other low-income beneficiaries leading to 
        delays in posting eligibility information in the system.

    The resulting challenges in determining eligibility led to people 
not being found in the system or their temporary classification in a 
standard low-income coverage tier, making their initial co-payments 
higher than expected. It also resulted in an unanticipated surge in 
call volumes, creating delays in response to both consumers and 
pharmacists.

Responding to the Challenges
    We have done, and are continuing to do everything we can to work 
with CMS, the Social Security Administration, states, pharmacists, and 
other partners to help resolve outstanding enrollment and information 
technology system issues.
    Early on, when we recognized there was an issue with certain 
beneficiaries such as duals and other low-income individuals accessing 
their benefits, we acted quickly to ensure that these individuals would 
have immediate access to their Part D benefit regardless of whether 
they appeared immediately in the system, including:

          Activating a beneficiary's plan coverage by 
        ``assuming'' or ``deeming'' an individual's enrollment even 
        before receiving confirmation of enrollment from CMS, where 
        possible;
          Assigning beneficiaries to a subsidized co-payment 
        class even in advance of a CMS confirmation;
          Lifting on a temporary basis prior authorization and 
        step edit requirements on almost all medications in order to 
        give pharmacists and enrollees ample time to adjust to their 
        new Part D plans. We retained prior authorization on a very 
        small number of drugs for which our Pharmacy & Therapeutics 
        Committee has special safety concerns for older adults; and
          Dramatically increasing call center staff available 
        to assist beneficiaries and pharmacists by resolving issues 
        related to the program's early data problems. As a result of 
        these efforts, we are pleased to report for the month of March 
        that we received over 1.3 million calls from beneficiaries, 
        while achieving an average speed to answer of approximately 15 
        seconds and a less than 1.5% abandonment rate. Our call lines 
        dedicated to supporting pharmacists achieved similar levels of 
        performance.

    While many of these early implementation problems seem to be behind 
us, we are mindful of the challenges ahead in ensuring that the Part D 
implementation proceeds smoothly. That is why we continue to be focused 
on working more closely with pharmacists, including community 
pharmacists, on our own and through our trade association. We 
appreciate the important role that pharmacists are playing in the 
implementation of the new Medicare drug benefit. Our work with them has 
included, among other actions, making rapid improvements in call center 
operations, enhancing pharmacist support, and developing temporary 
solutions to meet the needs of low-income beneficiaries while longer-
term problems are being resolved.
    We also have understood the need to proceed gradually as we move 
beyond issues related to Part D's initial implementation. As an example 
of this understanding, we have taken a very gradual, phased approach to 
the end of the extended 90-day transition period. Our approach is to 
phase in utilization management programs over a period of months, 
beginning with requirements important to determining whether a drug 
should be billed under Medicare Part B or D. It also involves 
eliminating a number of requirements entirely and ``grandfathering'' 
beneficiaries for many medications. By grandfathering we are able to 
permit individuals who accessed certain drugs during the extended 
transition period to remain on these drugs without having to initiate 
an administrative request known under Part D as a coverage 
determination.
    Our approach to preparing for challenges also extends to our 
planning for the May 15 enrollment deadline. We are pleased to report 
that we continue to receive an extremely high volume of enrollment 
applications, by mail, telephonically, and over the internet. We expect 
these volumes to increase as the May 15th enrollment deadline 
approaches. In order to meet this continued strong demand for our 
program and ensure high levels of service, we are taking steps to 
ensure that our call centers are appropriately staffed and ready.

          We now have more than 3,600 call center 
        representatives deployed at multiple call centers. This 
        represents a 50% increase in our staffing levels from November. 
        For May 15, we are also increasing our call center staff 
        rotations, expanding our call center hours so that 
        representatives are available to assist with enrollment 
        questions 24/7, and are using our experience from January to 
        learn how to better ``load balance'' calls between our various 
        call centers. As a result of these actions, we feel very 
        confident going into May 15 that Medicare beneficiaries will 
        find enrolling in one of our plans an easy and pleasant 
        experience.

    Finally, we appreciate the continuing need to work closely with 
states as Part D's implementation continues. In this regard, we 
appreciate the steps that were taken by states in the early months of 
the program to help address gaps in coverage for low-income 
beneficiaries. We also appreciate the vitally important work that State 
Health Insurance Assistance Programs (SHIPs) continue to undertake in 
assisting Medicare beneficiaries in understanding the Part D program 
and their enrollment options. The importance of states to the Part D 
implementation and SHIP offices in particular was driven home to us a 
few weeks ago when, as many of you know, we mailed out late payment 
notices, based on a CMS model, to a number of our enrollees. While our 
intention in sending the notices was to encourage members to contact us 
with any issues or concerns about their Part D payment status or 
selected payment method, this intention was not well communicated and 
generated many calls from beneficiaries. While we ultimately spoke with 
more than half of the beneficiaries who received a notice, it was the 
SHIPs that served as the first line of defense in receiving these 
calls, and, as we have communicated directly to all SHIP offices, we 
appreciate greatly the efforts they undertook to assist our members.

Our Commitment
    Most important as we look ahead to Part D's continuing 
implementation is our commitment not just to the program, but to the 
people we serve. We have reached out to Medicare beneficiaries in 
communities across the nation to help them understand the new Medicare 
drug benefit and our campaign to do so is ongoing.
    Well before January, we engaged in a broad national educational 
campaign about Part D. The goal was to ensure that individuals eligible 
for the Part D benefit would understand their options and know how to 
access and make full use of the new prescription drug benefits 
available to them under Medicare.
    As part of this effort, we developed an educational consumer 
booklet known as the Show-Me Guide. We published the Show-Me Guide in 
seven different languages (English, Spanish, Chinese, Russian, 
Vietnamese, Korean, and Tagalog) and distributed more than 10 million 
copies of the Guide to consumers, providers, advocates, and 
governmental representatives at both the state and federal levels.
    We are honored and appreciate the opportunity to work in 
partnership with national and community-based organizations on this 
important initiative. Our partnerships have included, but are not 
limited to, Representative Donna Christensen and the members of the 
Congressional Black Caucus; Reverend Jesse Jackson and the Rainbow/PUSH 
Coalition; the National Kidney Foundation; the National Medical 
Association; and the American Association of Services and Homes for the 
Aging. These partnerships have resulted in more than 400 Medicare Part 
D education and outreach events being held. In some states such as 
Illinois, we have participated in more than 50 Medicare Part D 
education events. Many of the organizations with which we have 
partnerships have asked if we would be willing to continue to work with 
them to make certain that Medicare beneficiaries are receiving 
information on an ongoing basis.
    We continue to be encouraged by the stories we hear every day about 
people receiving prescription drug coverage for the first time and 
about seniors who are keeping more money in their pockets through the 
cost savings realized under their new Medicare Part D Plan. We have 
worked with thousands of people across the country on a one-on-one 
basis, educating them about the benefits of the Part D prescription 
drug program.
    People like Fran Cooper, a Medicare beneficiary in Nebraska who 
enrolled in the AARP MedicareRx Plan. Fran, who was initially 
skeptical, now saves money each month on her prescription drugs. Fran 
has become a Medicare Part D ``champion.'' She is participating in 
events with the Congressional Black Caucus, the National Medical 
Association and other groups to educate African-Americans and 
communities of color about the new Medicare drug benefit.
    Betty Nord is a Medicare beneficiary in Wisconsin who was attracted 
to our Medicare Complete product, one of our Medicare Advantage Plans. 
She liked the product because it offered the new Medicare prescription 
drug coverage with a zero premium. Betty is now enrolled in Medicare 
Complete and estimates that her medical costs have been reduced 
dramatically from approximately $9,000 to $2,000 per year.
    And then there is Barbara Stetson, an 81-year old Medicare 
beneficiary who lives in Maine. Ms. Stetson took the time to send a 
special ``thank you'' letter, because having the Medicare drug benefit 
is making a substantial difference to her. Before enrolling in the AARP 
MedicareRx Plan, Barbara was not taking her medications appropriately, 
simply because she could not afford to buy them. She now has peace of 
mind and the prescription medications that she needs each day.
    In addition to providing beneficiaries immediate savings, Part D 
coverage is providing seniors and others eligible for Medicare with a 
safety net in case they ever would need it. The knowledge that they 
will be protected if their situations change and their drugs costs rise 
offers Part D beneficiaries some peace of mind--a truly valuable 
benefit for both individuals and their families.
    We believe that the Medicare Part D benefit is helping to make 
affordable prescription drug coverage available to millions of seniors 
and disabled individuals, including those who previously would not have 
qualified for assistance through other federal or state programs.
    Consistent with our commitment to our enrollees is our philosophy 
regarding plan design. Ovations strove to ensure that our formulary was 
one of the broadest, most open and non-restrictive. Ovations' formulary 
as we developed it covers 100% of CMS' top 100 volume drugs without 
requiring prior authorization. It also is one of the few formularies to 
include all 178 Part D covered drugs that the Health and Human 
Services' Inspector General reports as most commonly used by dual 
eligibles. And, the Ovations formulary originally contained just 39 
drugs with prior authorization requirements and five with step therapy 
requirements. Again, as indicated, we temporarily suspended these 
requirements for all but a few drugs in order to give pharmacists and 
enrollees ample time to adjust to their new Part D plans. As mentioned, 
some of these requirements have now been removed entirely, and others 
are being gradually phased back into place.

Still More to Do
    Despite the start-up issues, there is much good news to talk about 
with respect to the Part D program. However, our work to make the 
program succeed for all beneficiaries, and very importantly to ensure 
that those who need it most are signing up, is by no means finished. We 
are resolute in our commitment to help deliver on this promise for all 
beneficiaries.
    Critical in this regard is the particular importance of helping 
lower-income individuals, especially those not eligible for Medicaid, 
understand the value of enrolling in Part D. There are an estimated six 
to eight million low-income people who should qualify for subsidies 
under Part D but are not eligible for Medicaid. These are people who 
likely have no prescription drug coverage and stand to benefit most 
from a reliable source of coverage that makes prescription drugs 
available to them on an affordable basis. To accomplish this objective, 
it is important that we join together to reach out to these 
beneficiaries, clarify any misperceptions about the program, and remove 
whatever barriers exist to their enrolling in Part D.

Conclusion
    In conclusion, we would like to say that we believe the Medicare 
prescription drug program is working well for the vast majority of 
beneficiaries. Enrollees in UnitedHealth Group/Ovation's Medicare Part 
D plans are realizing significant savings and report a high degree of 
satisfaction. And the program overall, as CMS has reported, is 
delivering access to medications for millions of beneficiaries while 
yielding significant savings.
    Ovations/UnitedHealth Group is committed to working with you, CMS, 
the Social Security Administration, states, pharmacists, and 
beneficiaries to address current and future challenges. We are 
determined to do all we can to fulfill the promise of this ambitious 
and valuable program. We hope that we can be a constructive force to 
that end and look forward to working with you in the months to come. We 
especially appreciate the Committee's leadership on this important 
matter and thank you for the opportunity to share our thoughts.

                                 

    Chairman JOHNSON OF CONNECTICUT. Thank you very much, Ms. 
Larkin.
    Mr. Steinberg.
    Mr. STARK. Madam Chair, if you could yield, I just had 
promised Mr. Ramstad that I would welcome Ms. Larkin on his 
behalf. Her company is a constituent of Mr. Ramstad's, and Ms. 
Larkin flew quickly overnight to be here. Mr. Ramstad was 
called away for another meeting, and I said I would welcome you 
and your company on his behalf.
    Ms. LARKIN. Thank you so much, Mr. Stark. Mr. Stokes sends 
his regards to you and to Mrs. Johnson as well.
    Chairman JOHNSON OF CONNECTICUT. We are glad to have you, 
and certainly, Lou Stokes was one of our most impressive 
Members for many years and still highly regarded.
    Mr. Steinberg.

  STATEMENT OF MARK STEINBERG, SENIOR HEALTH POLICY ANALYST, 
                         FAMILIES, USA

    Mr. STEINBERG. Thank you. Good afternoon, Madam Chairman, 
Mr. Stark, Members of the Committee. I thank the Subcommittee 
on Health for the opportunity to present testimony today, and 
my remarks today are going to focus on two particular issues 
with implementation. First, I want to talk primarily about 
enrollment in the low-income subsidy, which we have heard 
already some about, and then, I will turn very briefly to the 
issue of prices. I think we have discussed a great deal of that 
today, so I am not going to get into that in depth.
    First, I want to speak about the low-income subsidy. This 
should be a happy topic. I think all stakeholders on this issue 
agree that the low-income subsidy is a real step forward for 
some of Medicare's neediest beneficiaries. For those who 
qualify, the subsidy limits cost sharing for most beneficiaries 
to a very minimal amount. Others will still have some 
coinsurance, but it is still substantially less than the 
significant cost sharing that other Part D beneficiaries have 
to pay.
    Now, unfortunately, enrollment in this program has been so 
far extraordinarily disappointing. The most recent data we have 
available from the Social Security Administration shows that 
only about 1.6 million of the estimated 7 to 8 million 
beneficiaries have actually enrolled in the low-income subsidy. 
That is fewer than one out of four eligible, and this is a very 
disappointing result.
    Now, CMS has taken a positive step recently and said that 
they will permit beneficiaries who enroll in the subsidy 
subsequent to May 15 to then join a Part D plan instead of 
having to wait until the next open enrollment period at the end 
of the year, and we applaud them for doing that. However, these 
beneficiaries will still be responsible for at least a partial 
late enrollment penalty.
    Moreover, it is extraordinarily important that the Social 
Security Administration and other organizations use their 
resources to continue outreach and enrollment to low-income 
beneficiaries during this time. The other big player in this 
area are the State Health Insurance and Assistance Programs, 
the SHIPs, who have been doing work above and beyond the call 
of duty in the first few months, and they really need a great 
deal of help.
    As the Chairman commented, one-on-one counseling is the 
best way to get people into the subsidy, particularly low-
income beneficiaries; there are a lot of factors that they have 
to weigh and to have explained to them. SHIPs can do this job, 
but they need help. Right now, they are funded at less than $1 
per beneficiary, and we encourage Congress to take a look at 
that as well as to ensure that Social Security Administration 
(SSA) has all the resources it needs to do the outreach.
    In addition to doing more for outreach and enrollment, 
there are several legislative changes that we think could help 
reach low-income beneficiaries. The first, we understand, is a 
big one, but the assets test could be eliminated, if not this 
year, in the future. First of all, that would ease the 
enrollment process dramatically. It would allow automatic 
enrollment for beneficiaries, because you would simply have to 
look at their income, which is widely available through IRS 
records as opposed to having to do asset evaluations. It would 
also create a simpler application.
    Short of that, Congress, we think, could advise that Social 
Security would no longer have to evaluate the cash value of a 
person's life insurance policy, which is currently counted as 
an asset, and the value of which is only obtainable through 
calling your life insurance company. This has been a stumbling 
block for beneficiaries. Also, Social Security continues to 
count in-kind support, such as if an adult child provides 
housekeeping for an elderly parent, that counts as income under 
the Social Security rules. We would like to see that 
eliminated. We think that could ease the process significantly.
    I want to talk briefly about dual eligibles, although my 
colleague, Vicki Gottlich, will discuss that in depth. We know 
there were a great deal of startup problems at the beginning of 
2006, in January and February dealing with technical problems, 
where the computer systems simply were not talking to one 
another. Some of those problems have been alleviated, and we 
are pleased to see that, but there are a great deal of 
structural problems that remain. We heard some today already 
about the differences between the Medicaid system and the new 
Part D system, and my colleague, Ms. Gottlich, will extend more 
on that.
    Now, I would like to turn briefly to pricing, and I said I 
know we have heard a lot about it this morning or this 
afternoon, rather. We actually do not know what prices Part D 
plans have negotiated with manufacturers. That information is 
not provided. What we know is the prices that the plans then 
charge to the beneficiaries. That is what we at Families USA 
and other organizations have used to evaluate the prices that 
Part D plans have been receiving. We assume that they must be 
passing some of those savings on to beneficiaries, but it could 
be as little as one penny; it could be as much as a large 
share. We simply do not know that.
    When Families USA did a study and examined what TDPs were 
charging in November, we found that the median prices compared 
to the VA were 48 percent higher for the top 20 drugs used by 
seniors. If Medicare brought that negotiating power that the VA 
has to Medicare, we would see some comparable savings in line 
with that.
    Finally, we have seen that prices have continued to 
increase. We have looked at the top 20 drugs. We have seen a 
similar increase that really is in almost lockstep with average 
wholesale price since November. This means that plans are 
simply passing on any inflation they see to consumers, which 
suggests they are not seeing the kinds of savings that we had 
hoped they might see but have not so far.
    I want to thank the Subcommittee for the opportunity to 
present this testimony and am happy to take questions.
    [The prepared statement of Mr. Steinberg follows:]

                 Prepared Statement of Mark Steinberg,
               Senior Health Policy Analyst, Families USA

    Families USA thanks the Subcommittee on Health of the Committee on 
Ways and Means for the opportunity to submit testimony on the 
implementation of Medicare Part D, Medicare's prescription drug 
benefit. Our testimony focuses on three concerning aspects of 
implementation: enrollment in the low-income subsidy; the drug prices 
charged by the participating drug plans; and the transition of dual 
Medicaid/Medicare eligibles from Medicaid to Medicare drug coverage.

Disappointingly Low Enrollment in the Low-Income Subsidy
    For those who qualify, Part D's low-income subsidy (``LIS'') is 
potentially a very valuable help. Unfortunately, enrollment in the 
program has been a deep disappointment. According to the most recent 
data available from the Social Security Administration (``SSA''), only 
about 1.6 million of the estimated 7 to 8 million eligible 
beneficiaries have been signed up--fewer than one-fourth of those who 
qualify.
    CMS has recently taken a positive step by announcing that those who 
enroll in the LIS after May 15 will be able to join a Part D plan at 
that time, rather than waiting for the next open enrollment period. 
These beneficiaries, however, will be responsible for at least a 
partial late-enrollment penalty. Nevertheless, the potential for 
additional enrollment after May 15 makes it very important that SSA and 
other organizations, including State Health Insurance and Assistance 
Programs (SHIPs) continue their outreach and enrollment efforts 
throughout the year. One-on-one counseling such as that provided by 
SHIPs can be very effective, but it requires the investment of 
substantial time and financial resources. Congress should insure that 
SSA and the SHIPs have all the resources they need to fund aggressive 
outreach. At least one recent report suggested that SSA may be under-
equipped for its responsibilities.\1\
---------------------------------------------------------------------------
    \1\ Email from Linda McMahon, Deputy Commissioner of Operations for 
Social Security, to Social Security Administration Operations 
employees, January 21, 2006.
---------------------------------------------------------------------------
    In addition, changes to the LIS rules could ease the enrollment 
process. Eliminating the asset test entirely would go a long way 
towards streamlining eligibility determinations. It would also help 
those needy beneficiaries with limited incomes but who have managed to 
save a modest amount over their lifetimes. Short of a complete 
elimination of the assets test, Congress should make two simpler 
changes that would help the process by clarifying that: 1) the cash 
value of life insurance should not count as an asset; and 2) in-kind 
support (such as housecleaning by an adult child) should not count as 
income. These two questions slow the enrollment process and create 
additional burdens on beneficiaries.

Concerns About Plan Drug Prices
    The third issue that we would like to raise is related to drug 
prices and price stability across participating Part D plans (PDPs). 
While this is not an issue limited to program implementation, any 
failure of the plans to obtain significant price discounts and pass 
those discount on to enrollees, as well as any failure to contain drug 
price inflation, has long-term implications for program costs to 
taxpayers and beneficiaries.
    Under the law, the government is prohibited from negotiating for 
lower drug prices on behalf of Medicare beneficiaries on the premise 
that, through competition, the plans will obtain discounts comparable 
to any the government could. This assumption has not proven out.
    Plans are not required to publicly report the drug prices they 
negotiate with manufacturers--which may well be quite low. The Medicare 
drug plans do, however, report the drug prices they are charging to 
beneficiaries. Those prices are significantly higher than the prices 
the government currently negotiates with drug manufacturers through the 
Department of Veterans Affairs. In fact, a Families USA study of 
November PDP prices for drugs frequently prescribed to seniors found 
that the lowest PDP price was in nearly all cases significantly higher 
than the lowest price negotiated by the Department of Veterans 
Affairs.\2\ That study found the median price difference to be 48.2 
percent. If the government were allowed to negotiate drug prices for 
the Medicare program, given the size of the Medicare population and 
their heavy prescription drug use, it should be able to achieve prices 
at least as low as those the Department of Veterans Affairs currently 
negotiates.
---------------------------------------------------------------------------
    \2\ Dee Mahan, ``Falling Short: Medicare Drug Plans Offer Meager 
Savings,'' (Washington, D.C.: Families USA, December 2005).
---------------------------------------------------------------------------
    The drug prices charged by PDPs have a direct impact on 
beneficiaries, specifically those who do not qualify for extra help. 
Plan prices are used to determine when an enrollee meets the 
deductible, reaches the gap in coverage (the ``doughnut hole''), and 
reaches catastrophic coverage and is eligible for higher government 
subsidies for the rest of the year. These are also the prices that 
enrollees must pay out-of-pocket during the ``doughnut hole.'' PDPs' 
failure to negotiate low prices also has implications for premium 
increases in subsequent years. As a result, high PDP drug prices mean 
more costs to beneficiaries and to the program.
    However, it is not just high prices that raise concerns. Plans can 
change the prices that they charge for prescription drugs at any time. 
Since the start of the program, many plans have increased drug prices, 
in many cases these increases have been in tandem with increases in 
manufacturer prices.
    In the five months from November 15, 2005, when individuals could 
start enrolling in drug plans, to April 15, 2006, the median PDP price 
increase for frequently prescribed drugs was 3.7 percent.\3\ While 
there was considerable variation in price changes between individual 
plans, the median price change across all PDPs was nearly identical to 
manufacturer increases in average wholesale price. Beneficiaries are 
locked into a plan for a year, yet cannot rely on any sort of stability 
in that plan's drug prices, which are a key factor in plan selection. 
Furthermore, as long as the plans are routinely raising prices in line 
with manufacturer price increases, they are not exerting any bargaining 
clout that can offer consumers protection from continuing drug price 
inflation.
---------------------------------------------------------------------------
    \3\ Based on a Families USA analysis of PDP mail order prices from 
November 15 to April 15 for all plans operating in Regions 5 (Delaware, 
Maryland and DC) and 14 (Ohio). The analysis looked at the twenty drugs 
most frequently used by seniors, as outlined in Families USA's report 
``Falling Short'' (See Footnote 4 for a citation to that report). PDP 
price changes for those drugs were compared to changes in manufacturer 
average wholesale price (AWP) for the same time period. For 19 of the 
20 drugs, the median percent change in PDP price was equal to any 
change in manufacturer AWP. For one drug, the median PDP price 
increased absent any manufacturer price increase.
---------------------------------------------------------------------------
    Allowing the government to negotiate directly with manufacturers 
could both lower drug prices and bring price stability to the program. 
This would benefit beneficiaries and reduce overall program costs to 
taxpayers.

A Difficult Transition for Dual Eligibles
    Dual eligibles are Medicare's most vulnerable beneficiaries. These 
6.3 million low-income seniors and people with disabilities are the 
only beneficiaries whose drug coverage was disrupted directly as a 
result of the start of the Part D program. Under the law, dual 
eligibles who did not select a drug plan before January 1, 2006 were to 
be automatically enrolled in a Part D plan selected at random, without 
regard to their specific drug needs. Prior to the start of the program, 
state Medicaid officials, advocates, and others expressed deep concerns 
about the ability of CMS and the other involved players to implement 
smoothly a transition of this magnitude.\4\
---------------------------------------------------------------------------
    \4\ See, e.g. Vernon Smith, et al., A Medicaid Perspective on Part 
D Implementation; The Medicare Prescription Drug Program (Washington, 
Kaiser Commission on Medicaid and the Uninsured, December 2005); Andrea 
Cohen, et al. MMA and Dual Eligibles: A Transition in Crisis (New York: 
Medicare Rights Center, March 2005).
---------------------------------------------------------------------------
    Unfortunately, these concerns proved well-founded. Thousands of the 
neediest beneficiaries were unable to obtain essential medications 
during the first months of the program. Problems with data exchanges 
between states, CMS, Part D plans, and pharmacists made it impossible 
to determine which plans dual eligibles were enrolled in, and what 
their cost-sharing should be. Ultimately, at least 44 states and the 
District of Columbia stepped in to respond to the emergency and use 
their old Medicaid system to provide a flow of medications to dual 
eligibles. CMS agreed in late-January to reimburse states for their 
expenses, although as of this writing, states have not yet been 
compensated.
    Although some of the most egregious technical problems are easing, 
glitches remain. The basic structure of the Part D program will 
continue to create barriers for dual eligibles that will make them 
worse off than they were under Medicaid. First, in about half the 
states, co-payments for dual eligibles are higher than they were under 
Medicaid. Second, dual eligibles must now navigate formularies and 
utilization management rules that are generally much more stringent 
than preferred drug list policies under Medicaid. Many duals will 
likely continue to encounter problems obtaining needed drugs. The HHS 
Inspector General found, for example, that 30 percent of dual eligibles 
were assigned to plans that covered less than 85 percent of the most 
commonly used drugs.\5\ Although dual eligibles can change plans 
monthly, finding a plan that comes closest to meeting their needs 
continues to be a daunting task, especially for those with cognitive 
impairments or complex medical needs.
---------------------------------------------------------------------------
    \5\ Office of the Inspector General, Dual Eligibles' Transition: 
Part D Formularies' Inclusion of Commonly Used Drugs, OEI-05-06-00090 
(Washington: U.S. Department of Health and Human Services, January 
2006).
---------------------------------------------------------------------------
    We believe that taking action to deal with the issues and problems 
outlined in our testimony would be significant steps towards correcting 
some of the many issues that have arisen related to Medicare Part D.
    We thank the Subcommittee for the opportunity to present this 
testimony.

                                 

    Chairman JOHNSON OF CONNECTICUT. Thank you, Mr. Steinberg.
    Ms. Gottlich.

STATEMENT OF VICKI GOTTLICH, SENIOR POLICY ATTORNEY, CENTER FOR 
                       MEDICARE ADVOCACY

    Ms. GOTTLICH. Thank you, Madam Chairman, Mr. Stark, and 
Committee Members for the opportunity to testify today. I am 
Vicki Gottlich, a senior policy attorney in the Washington, 
D.C. office of the Center for Medicare Advocacy. The Center is 
a national, nonpartisan educational and advocacy organization 
headquartered in Connecticut. We represent thousands of 
individuals in Medicare appeals, respond to calls and e-mails, 
and provide support to CHOICES, the Connecticut State health 
insurance assistance program.
    Our written comments include examples of individuals such 
as the person from Florida who is not getting his HIV/AIDS 
drugs, who face problems that should not happen under CMS 
guidance. They do happen. The amount of time it takes to 
resolve problems is enormous, and not all problems can be 
resolved.
    CMS refuses to look at systematic issues, even though 
acting on systems issues might be the best way to resolve an 
issue. I would like to start with our client, Mary F. from 
Wilimantic. SSA told Mary that she was awarded the full, 100 
percent low-income subsidy. However, CMS told her plan that she 
had a partial subsidy, meaning she has to pay 15 percent 
copayments. The Center got involved. We worked with CMS. We 
thought the issue was resolved, yet, last week, Mary was asked 
to pay a 15 percent copayment for a new drug again. She is a 
low-income individual. She cannot afford to do this. 
Additionally, she has been told that it may take up to 10 weeks 
to reimburse her for the payments that she has already paid in 
excess of what she should be paying. She cannot afford do this.
    Mary is not the only one who has encountered programs, even 
when they are working with the CMS caseworkers Dr. McClellan 
described in his testimony yesterday. Yesterday, we heard from 
a 44-year-old dual eligible individual from Illinois who told 
us that he had been auto-enrolled in a plan in December, then 
disenrolled and reenrolled so many times that he does not have 
drug coverage. He actually has contacted the plan, CMS, and 
SSA; been working with them; but each program blames the other, 
and the problem is not fixed. He has no drug coverage. He has 
to pay $229 for drugs out of his $710 a month income. He is not 
better off.
    We also heard yesterday from a woman in Oceanside, 
California, whose autistic daughter, a dual, now must pay 
copayments she cannot afford to pay. She is one of the 1 
million California dual eligibles who have to pay copayments 
for their drugs for the first time. In addition to the issue of 
copayments for dual and increased costs for duals, our written 
testimony talks about the Office of Inspector General study and 
talks about studies for California Health Foundation, which 
indicate that the drug coverage in Part D plans to which duals 
have been assigned is not extensive and does not cover the 
drugs that they need.
    For some dual eligibles, enrollment in Part D means they 
may lose other health coverage. The Connecticut Department of 
Social Services (DSS) asked the Center last week about duals 
and their dependents who are losing retiree health coverage as 
a result of their auto-enrollment in a Part D plan. DSS said 
auto-enrollment results in a loss of access to health care for 
the duals, uninsured status for some family members, and 
increased cost for the State, since Connecticut will lose 
private insurance coverage to offset Medicaid.
    I was interested, Madam Chairwoman, in your comments about 
the sixth-graders who are enrolling people in the plans, 
because I have also had the opportunity to enroll people in 
plans. It takes me at least an hour and a half to go through 
the Medicare Website, because you cannot just look at the 
lowest costs. You have to look at utilization management tools, 
prior authorization, quantity limits, step therapy, which are 
not easy to find. In addition, once you go through the Web 
finder, you have to contact the plans, and we are finding 
information we get from the plans is not always the same as the 
information on the Web.
    Then, there are problems that we outline in our testimony 
about the exceptions process. The Center is one of the groups 
that worked with the American Medical Association and America's 
Health Insurance Plans to develop the standard forms. We are 
hopeful, but we understand that CMS guidance on these issues is 
not mandatory, and therefore, we are concerned that plans will 
not comply, which is really what happened with the transition 
process in the beginning of the year. We have followed CMS' 
guidance and reported the problems we encountered with plans to 
CMS.
    What we are really concerned is that CMS may not take any 
action against the plans. We would very much like Congress to 
ensure that CMS exercises its enforcement authority against 
some of the bad actors that we have seen: plans that do not 
cover drugs that are in the six required classes of drugs; 
plans that interpret a 72-hour exception deadline as 72 
business hours; plans that ignore requests for coverage 
determinations; plans that require doctors to fax a request 
form to get a request form so that they can get the exception 
request form that they need to start the appeals process.
    Our written testimony includes numerous recommendations to 
various issues that we raise. Our overall recommendation is to 
include in Part D a single standard Medicare prescription drug 
benefit, administered by Medicare that is uniform nationwide. 
Thank you again.
    [The prepared statement of Ms. Gottlich follows:]

                 Prepared Statement of Vicki Gottlich,
             Policy Attorney, Center for Medicare Advocacy

    I am Vicki Gottlich, a Senior Policy Attorney in the Washington, 
D.C. office of the Center for Medicare Advocacy, Inc. (the Center). 
Thank you for the opportunity to testify at the continuation of the 
hearing on the Implementation of Medicare Part D.
    Founded in 1986, the Center is a national, non-partisan educational 
and advocacy organization that identifies and promotes policy and 
advocacy solutions to ensure that elders and people with disabilities 
have access to Medicare and quality health care. The Center's national 
office is in Connecticut, with offices throughout the country, 
including Washington, D.C. The Center represents thousands of 
individuals in Medicare appeals each year, responds to calls and e-
mails from individuals in Connecticut as well as from all across the 
United States, and provides support to CHOICES, the Connecticut state 
health insurance program. Requests to the Center for assistance have 
increased exponentially with the advent of Medicare Part D.
    The White House and the Centers for Medicare & Medicaid Services 
(CMS), in their efforts to promote Part D, proclaim that ``the new drug 
program is working well for most seniors (sic) and pays nearly all of 
low-income beneficiaries' drug bills.'' See, e.g., ``The Medicare 
Prescription Drug Benefit: Helping Seniors and Reducing Costs,'' a Fact 
Sheet issued by the White House on March 14, 2006.
    What they do not say is that many of the beneficiaries encountering 
problems are dually eligible for Medicare and Medicaid (dual 
eligibles). The barriers to their getting drugs that were previously 
paid for by their Medicaid programs are not temporary glitches but 
result from the very design of the Part D program. The Center avers, 
based on our conversations with Medicare beneficiaries, their families 
and their advocates, that this most vulnerable population is, as a 
whole, much worse off than they were before they were shifted from 
Medicaid to Medicare drug coverage.
Problems and recommended solutions include:

       1. Dual eligibles have been randomly assigned to average-cost 
prescription drug plans, most of which do not cover all drugs commonly 
used by this population.
       To ensure no gaps in coverage when dual eligibles transition 
from Medicaid drug coverage to Medicare drugs coverage, the Medicare 
Modernization Act provides for them to be randomly assigned to plans if 
they do not choose a plan on their own. Random assignment benefits Part 
D drug plans by guaranteeing them an equal portion of the enrollment of 
the dually-eligible population, without burdening them with too large a 
portion. Random assignment does not, however, benefit beneficiaries.
       The Inspector General of the Department of Health and Human 
Services has determined that nearly one-third of dually eligible 
beneficiaries--a highly vulnerable population with unusually high 
medication needs--were assigned to drug plans that included less than 
85% of the 178 most commonly used Part D drugs.\1\ Some of the drugs 
excluded from a substantial number of plan formularies (lists of 
covered drugs) are drugs for high blood pressure, high cholesterol and 
pain relief.
---------------------------------------------------------------------------
    \1\ Office of Inspector General, ``Dual Eligibles'' Transition: 
Part D Formularies' Inclusion of Commonly Used Drugs,'' (OEI-05-06-
00090 January 2006).
---------------------------------------------------------------------------
       Only 18% of beneficiaries were assigned to plans that covered 
all 178 drugs, but this does not mean that even these plans cover all 
drugs needed by each beneficiary--only that they cover the most 
commonly used drugs. Moreover, even plans that cover all drugs may have 
quantity limits, prior authorization and other barriers to immediate 
and full coverage of an individual beneficiary's prescription drug 
needs.
       Other researchers came to similar conclusions after reviewing 
formularies of plans available in specific regions. For example, 
Jocelyn Guyer and Jeffrey S. Crowley of the Georgetown Health Policy 
Institute wrote a series of three policy briefs for the Connecticut 
Health Foundation. They found large variations in the extent to which 
the 44 stand-alone prescription drug plans available in Connecticut 
covered medications, with major and frequent shortcomings in coverage 
of critical drugs used by dual eligibles.\2\
---------------------------------------------------------------------------
    \2\ The policy briefs are available at www.cthealth.org. Judith 
Stein, Executive Director of the Center, was a research contributor to 
the policy brief on Implications for dual eligibles.
---------------------------------------------------------------------------
       A 33 year-old beneficiary from Orange Part, Florida, described 
the difficulties experienced by dual eligibles in an e-mail sent to the 
Center last week: \3\
---------------------------------------------------------------------------
    \3\ Beneficiary comments are verbatim and may contain grammar 
mistakes.

          I have been on Medicaid since 1996, and Medicare since 1998. 
        I get Social Security Disability, and I am below the poverty 
        level. Since Medicare Part D., has kicked in. I have had to pay 
        for medicines that Medicaid used to pay for, now I'm 
        responsible for the co-pays of my medicines. I am a kidney 
        transplant patient and have been a diabetic for 30 years. I 
        also have been diagnosed with HIV in 2001. I can't pay for my 
        medicine copays, because I make approximately $8,500 a year. 
        Even with the ``extra help'' that I get from Medicaid, I still 
        have to pay about $40 a month for medicines. However, my 
        medical insurance doesn't cover my transplant medications or my 
        HIV medications. These medicines cost about $400, a month. What 
        has the president done? Is there a plan to kill off the elderly 
        and sickly, or do we just have to suffer the consequences? 
---------------------------------------------------------------------------
        Thank you for letting me speak my peace.

       Center for Medicare Advocacy Recommendation: In assigning 
beneficiaries to plans they have not chosen, more attention must be 
given to matching individual beneficiaries' drug usage and pharmacy 
preferences with the formulary and pharmacy networks of individual 
plans.
          2. Getting coverage for drugs that are not on a plan's 
        formulary involves engaging in one of several complex 
        processes. The frailty of this population, including a high 
        incidence of cognitive impairments, makes navigating those 
        processes more difficult than for other beneficiaries.
       Applying for an Exception. Each plan must have a process for 
enrollees to ask for an exception to non-coverage, and each plan's 
process is different. The Center is part of a group, spearheaded by the 
American Medical Association (AMA) and working in conjunction with 
America's Health Insurance Plans (AHIP), that has developed a model 
exceptions request form. Although CMS has posted the model form on its 
website, and AHIP members may post the form on their websites, CMS does 
not require the form to be used by the plans.
       An exception request must include a doctor's statement that all 
drugs on the formulary are either less effective or harmful to the 
beneficiary or both. Some plans are requiring the submission of 
clinical notes verifying such assertions. Because each plan's process 
is different, physicians must deal with multiple processes to serve all 
their patients. Some doctors are charging for completing prior 
authorization and exception request forms. Dual-eligible beneficiaries 
who cannot pay even nominal fees for this service cannot avail 
themselves of the exceptions and appeals processes.
       The problems that arise from trying to navigate the exceptions 
process are almost too numerous to include in testimony. The issues 
brought to our attention by Medicare beneficiaries, their families, and 
their advocates include:

          Not knowing that there is a process to request an 
        exception or coverage determination;
          Not getting through to customer service offices;
          Customer service offices not being available to 
        accept emergency calls from doctors outside of normal business 
        hours;
          Not having the exception request treated as an 
        exception because the beneficiary did not use the proper term;
          Having to fax or mail to a plan a preliminary request 
        form in order to get the request form that will start the 
        coverage determination process. Without a coverage 
        determination a beneficiary cannot file an appeal;
          Plans not complying with statutory timeframes;
          Plans not forwarding cases to the independent review 
        entity as required when time frames are not met;
          The independent review entity failing to conduct a 
        new, independent review of the medical evidence.

       Changing prescriptions. Plans encourage enrollees to change from 
an uncovered drug to one on their formulary. Such a change presumes 
that there is a drug on the formulary that would work as well as the 
uncovered drug. Making such a change may involve multiple visits to a 
doctor's office, each of which may cost money in terms of 
transportation and office visit co-pays, for the doctor to first 
prescribe, and then monitor, use of the alternate drug. Duals often do 
not have the resources to pay for the transportation or the cost-
sharing for such visits. Since many use clinics, they may not be able 
to get an appointment with a doctor before their medication runs out.
       Changing to a plan that covers the drug in question. Unlike most 
Medicare beneficiaries, dually eligible beneficiaries are allowed to 
change plans whenever they want to, with their new coverage effective 
the month following their action to change. Changing plans, however, is 
difficult and not without risks. First, the number of average cost 
plans in each region ranges from six to eighteen and the systems 
available to help beneficiaries know what each plan covers require 
access to high speed Internet service and a printer. Few dual-eligibles 
use the Internet, so to make use of these decision supports, a 
beneficiary must generally get help from someone else. The programs 
that are funded to counsel beneficiaries are overwhelmed by people 
needing such assistance and by the many difficulties that have arisen 
during the first months of the program.
       Moreover, processing new enrollments in a plan is complex, 
requiring communication between the old plan, CMS, the new plan, and 
another government contractor. The information takes days to weeks to 
run through the system; a change made toward the end of the month will 
not show up in the system until later the following month, making it 
difficult to purchase drugs in the first part of the month.
       Finally, plans can change the drugs on their formularies at any 
time, with 60 days' notice to individuals taking the drugs in 
question.\4\ Even an intelligent choice of a plan covering all of a 
beneficiary's current drugs could be for naught, if the plan removed 
some or all of those drugs from its formulary two months later. An 
April 27, 2006 Memorandum from Abby Block of CMS to Part D Sponsors, 
``Formulary Changes during the Plan Year,'' suggests that plans 
continue to cover a drug for any plan enrollee who is currently taking 
the drug even after the plan removes the drug from its formulary for 
other enrollees. Unfortunately, this CMS Memorandum to exempt current 
enrollees from formulary changes involving their current drugs is not 
binding on any plans. This Memorandum, like the rest of the policy 
guidance issued by CMS to implement much of Part D, has not gone 
through the Administrative Procedure Act notice and comment rulemaking 
process, and does not have the same legal effect as the statute and the 
implementing regulations.
---------------------------------------------------------------------------
    \4\ Note that the regulations specifically allow Part D plans to 
change their formularies. 42 C.F.R. Sec. 423.120(b)(5),(6).
---------------------------------------------------------------------------
       The consequences to beneficiaries are enormous, as these client 
experiences demonstrate.

          It was extremely stressful to get a plan picked out that 
        would even cover my medicines, I'm disabled not old and every 
        step of the way has been a battle. The insurance company 
        STINKS. I have to fight for nearly every prescription. From 
        getting the right generic to one they prefer. It's almost like 
        they are my doctor, not the insurance plan. I have had to go 
        the the ER several times becuase I was forced to wait or fight 
        for meds that would have helped. I also have athsma and now 
        they are denying my singulair, suddenly some crap about needing 
        pre-approval. This is some of the worst insurance ever. 
        Medicare Part D is one of the worst things the Bush 
        administration has done.
    -- E-mail dated April 26, 2006, from a 35-year-old female in 
Hawley, Minnesota.

          My other half has AIDS and our pharmacist suggested that we 
        go with AETNA because it covers all his HIV meds as well as all 
        the other meds he's on. So we signed him up for it and now it 
        seems like each month they are not wanting to pay for certain 
        non-HIV medications. They want him to take something else. One 
        of those is to prevent him from getting pneumonia. It's 
        Bactrum. Their formulary on-line says they will pay for it, but 
        their letters keep saying they won't. After one month he's 
        already into the catastrohic coverage part because of all the 
        meds he's on. Every month it's a different story, a different 
        medication is being denied. What gives them the right to play 
        doctor with people's lives?
    -- E-mail dated April 26, 2006, from a 42-year-old male in Land o' 
Lakes, Florida

       Center for Medicare Advocacy Recommendations:

        (1)  Exceptions processes should be uniform for all plans, with 
        a single form made available to all physicians and pharmacists;
        (2)  Plans should be prohibited from removing drugs from their 
        formulary during the plan year;
        (3)  More money should be made available to programs that 
        provide individualized assistance to beneficiaries.

       3. Plans' transition policies have been difficult to get and 
difficult to enforce at the pharmacy level.
       Each plan is required to have a transition process to address 
the situations of new enrollees who are taking drugs not on the plan's 
formulary. The transition policies include special focus on the needs 
of dually eligible beneficiaries. While issues with transitions have 
been prominent in the early months of Part D because the entire program 
was ``transitioning'' into existence, transitions will occur every 
month as new enrollees join plans, and especially every January, after 
major plan shifting has occurred during the annual enrollment period in 
November and December.
       CMS asked plans to extend the transition coverage of non-
formulary drugs through the end of March, so that beneficiaries could 
get a 90-day supply. Such an extension was voluntary on the plans' 
part. And, even after the extension request, dually-eligible and other 
beneficiaries are coming away from the pharmacy with no prescription, 
or with just a few days' supply of pills.
       Moreover, the transition is merely to allow the beneficiary to 
change drugs, change plans, or request an exception so that her drug 
can be covered even though it is not on the formulary. But many 
beneficiaries are not receiving the notices they are supposed to get 
telling them what they should do next. For example,

          Center staff spent many hours during February and March 2006 
        helping a woman in California get coverage of a prescription 
        that she had been taking for 35 years for a chronic condition. 
        (Part of the problem was that the plan could find no record of 
        her enrollment until mid-February.) She contacted us last week 
        to say that, although she had received the prescription in 
        February and March, the plan was once again telling her that 
        the drug was not covered. We suspect that she got the drug in 
        February and March under the transition process, and now the 
        plan wants her to go through the exceptions process--again--to 
        get her medically necessary drug.

       A 58-year old male from Jellico, Tennessee commented to the 
Center via e-mail about the transition process:

          I Called First Premier Health (my Provider For Part D to see 
        if All My Medications Were Covered before I Signed on With 
        Them, They Assured Me They Were, After 2 Month's They Wrote Me 
        A Letter Saying that My (Pravachol) Was No Longer Covered, I 
        Had to Try Alternative Meds First, Hell I've Tried Them All, 
        Pravachol Works The Best For Me, I've Been On It For Over 4 
        Years Now!! This Does Not Make Any Sense!!! Thank You!! I Have 
        Always been Taught When Something Works Real Well For You, Stay 
        With It!!!!

       Center for Medicare Advocacy Recommendations:

        (1)  Transition policies should be uniform across plans and 
        easily made known to beneficiaries and pharmacists;
        (2)  Plan call lines, for pharmacists to get instruction to 
        override codes, should be required to operate 24 hours a day, 
        seven days a week;
        (3)  CMS should enforce contract requirements of plans.

       4. Dually eligible beneficiaries using long-term care services 
are treated differently depending on where they receive the services.
       Dually eligible beneficiaries are provided the best Part D 
subsidy available under the law. They pay no premium (for an average 
cost plan) or deductible, have no coverage gap (doughnut hole) and no 
cost-sharing at all after they reach the catastrophic coverage 
threshold. Their co-payments vary from $0 to $5, depending on income or 
place of residence.
       Dually eligible beneficiaries residing in nursing homes and 
certain other institutions have no co-payments, since they pay all but 
a very small amount of their income over to the institution that is 
caring for them. Dually eligible beneficiaries who are getting their 
long-term care services in assisted living facilities, board and care, 
and other similar community settings, however, are treated differently 
and may have co-pays as high as $5 per prescription (for typically more 
than 10 prescriptions), even though they, too, must pay most of their 
income to their care provider and even though their care needs are 
similar to those of nursing home residents.
       Center for Medicare Advocacy Recommendation: All dually eligible 
beneficiaries receiving long-term care services should be treated 
similarly and should have no cost-sharing obligations, since most of 
their income is given over to the provider of service.
       5. Dually eligible beneficiaries have lost Medicaid as secondary 
coverage.
       The most common interrelationship between Medicare and Medicaid 
is that Medicare is the first payer for services and Medicaid picks up 
where Medicare coverage stops. This is not true under Part D. Medicaid 
is prohibited from paying for drugs that are covered by Part D. For a 
state to provide the kind of ``wrap around'' coverage that is typical 
for other services, it must use its own money, without any federal 
contribution. According to the Inspector General of the Department of 
Health and Human Services, only four states have indicated they will 
provide some kind of coverage for drugs that are not on a Medicare 
plan's formulary.
       Part D imposes prescription drug co-payments for the first time 
on a substantial number of dual eligibles, including the 1 million dual 
eligibles in California (approximately one-sixth of the dual eligible 
population). While the co-payments for duals are supposed to be 
minimal, for someone living on $817 (100% of the federal poverty level 
for an individual) or less each month, $3 per prescription is a 
fortune. As a beneficiary from New York wrote to the Center recently, 
she lives on Social Security disability benefits and cannot afford to 
pay the $3 co-payment every time she goes to the pharmacy. In addition 
to California and New York--Florida, Texas and Illinois, which also 
have large dual eligible populations, are not providing any assistance 
with co-payments.
       Even when states pay co-payments for duals, the systems do not 
always work. Despite the fact that Connecticut has legislated coverage 
of Part D co-payments for duals, a nurse from Marlborough, Connecticut 
writes that her mental health clients are still being charged co-pays.

          I AM TRYING TO GET SPECIFIC INSTRUCTIONS FOR THEM TO BRING TO 
        THE PHARMACY TO RESOLVE THESE ISSUES. SOME ARE TOO COGNITIVELY 
        IMPAIRED TO DO THIS ON THEIR OWN.

       For some dual eligibles who previously qualified for Medicaid on 
a ``spenddown'' basis, the advent of Part D means they will lose all of 
their supplemental health coverage.

          A 60-year old client from Milford, Connecticut, who has 
        Hepatitis C, has long alternated between Medicaid and ConnPACE, 
        the state pharmacy assistance program, to help with 
        prescription costs during his spenddown periods. He takes 
        several very expensive medications and qualifies for the low-
        income subsidy. In fact, prior to Part D, when the entire cost 
        of his medication--including the portion paid by ConnPACE--was 
        applied against his spenddown, he usually met his spenddown 
        obligation in less than one month. With the advent of Part D, 
        only that portion which he pays--his $2 and $5 LIS co-pays--
        will count against his spenddown obligation. Our client 
        correctly perceives that he will probably never meet his $3,000 
        spenddown obligation at this rate. He currently is in need of 
        an expensive medical test that he cannot afford, and is having 
        difficulty finding a provider who will accept him as a patient 
        as he no longer has Medicaid coverage and is unlikely to obtain 
        it in the future.

       For other duals, enrollment in a Part D means loss of all of 
their retiree health coverage, not just their drug benefit. A worker 
from the Connecticut Department of Social Services contacted the Center 
last week because dual eligibles are being notified that they and their 
dependents have lost retiree health coverage as a result of their auto-
enrollment in a Part D plan. The worker wrote in her e-mail:

          In addition to the issue of health care access for our 
        recipients, former recipients, and dependents thereof, there 
        are fiscal implications for DSS. Generally, DSS likes to use 
        private insurance to offset Medicaid expenses. Using the 
        automated process to enroll dual eligibles in Medicare D for 
        recipients who have ``creditable'' prescription coverage is 
        costly DSS.
       Center for Medicare Advocacy Recommendation:

        (1)  Amend the law to provide dual eligible coverage for 
        prescription drugs, just as it exists for other health care 
        services, including federal matching funds for state 
        expenditures;
        (2)  Amend the law to allow Part D drug costs, including the 
        low-income subsidy, to count toward Medicaid eligibility based 
        on spenddown.
        (3)  Amend the law to protect duals and their families from 
        loss of retiree health coverage as a result of enrollment in a 
        Part D plan.

       6. Individuals with Medicaid will experience a gap in 
prescription drug coverage when they first become eligible for 
Medicare.
       Individuals with Medicaid lose their Medicaid drug coverage on 
the first day of the month that they become eligible for Medicare, even 
if they have not enrolled in a Part D plan. The state will transmit 
information about them to CMS when the state becomes aware of their new 
dual eligibility status. It is unclear, however, whether and when 
states will have that information. In addition, states often send 
information to CMS about new dual eligibles only once a month, 
generally at the end of the month. CMS may not be able to enroll a new 
dual into an eligible plan in time for drug coverage to begin the 
following month. CMS has indicated that Part D coverage will be 
retroactive, but it is unclear how duals will pay for their 
prescriptions while coverage and plan enrollment is being determined.
       New dually eligible individuals can use the Point of Service 
(POS) option at the pharmacy that facilitates enrollment into the point 
of service contractor. The contractor will then inform CMS so that the 
individuals can be enrolled into a plan. Under the POS option, the 
pharmacy distributes a 14-day supply of medicine to the individual, 
with the possibility of an additional 14-day refill. Individuals who 
try to get prescriptions under this option at the beginning of a month 
may not have sufficient medicine to last until they are enrolled in a 
Part D plan.
       Center for Medicare Advocacy Recommendation: Identify Medicaid 
recipients who are about to become Medicare eligible sufficiently in 
advance to auto-enroll them in a Part D plan before they lose Medicaid 
drug coverage. Alternatively, continue Medicaid drug coverage for these 
individuals until they are enrolled in a Part D plan.

Conclusion
    Many of the problems and issues described above arise from or are 
complicated by the number of plans available and the fact that each 
plan has its own design, including formulary, transition processes, 
exceptions and appeals processes. Virtually no uniformity exists or is 
required.
    Even after beneficiaries, their families, and their advocates spend 
hours and days on the phone trying to resolve issues with their Part D 
plans and with CMS, there is still no guarantee that the problem will 
be resolved. Our client, Mary F., from Willimantic, Connecticut, 
exemplifies the problem.

          Mary F. gets by on limited income, and it is not unusual at 
        the end of any month that she is down to her last $5 in 
        quarters for her laundry. She takes several medications, among 
        them a pain reliever for severe gout. She is on ConnPACE and a 
        Medicare Savings Program. She has documentation that she was 
        awarded the full 100% low-income subsidy, and thus should be 
        paying $2 or $5 for co-pays. However, Medicare has informed her 
        plan that she qualifies for a partial subsidy, with 15% co-
        pays. Mary cannot afford to pay even ConnPACE's $16.25 co-pays 
        and, therefore, has gone without a new pain medication her 
        physician prescribed a week ago. She is owed over $70 in co-pay 
        overpayments to her pharmacy and has been told it may take up 
        to 10 weeks to be reimbursed. Despite repeated efforts on the 
        part of the Center, as well as CMS's intervention in this case, 
        the problem persists.

    A Connecticut resident said it best in an e-mail from April 29, 
2006:

          I am on Ruby1 Healthnet subscriber. In 2\1/2\ months I have 
        already used up my Medicare Part D. I will have to pay $3349.56 
        out of pocket, before I qualify for Catastrophic Coverage. What 
        a scam!!, another way to get into the middle class' pockets.

    Overall Center for Medicare Advocacy Recommendations: Create a 
single, standard Medicare prescription drug benefit, administered by 
the Medicare program, that is uniform nationwide. Require CMS to 
oversee the program with mandatory due process standards.
    Thank you for the opportunity to submit this written statement. We 
look forward to working with Congress to ensure that elders and people 
with disabilities have access to a meaningful and affordable Medicare 
prescription drug benefit.

                                 

    Chairman JOHNSON OF CONNECTICUT. Thank you.
    Mr. Vaughan.

  STATEMENT OF BILL VAUGHAN, SENIOR POLICY ANALYST, CONSUMERS 
                             UNION

    Mr. VAUGHAN. Thank you, Madam Chairman, Members of the 
Subcommittee. If I could have my full statement put in the 
record, I would deeply appreciate it.
    Consumers Union is the independent, nonprofit publisher of 
Consumer Reports. We do not just test toasters; we try to help 
people with what are safe drugs and good insurance policies, 
and we do strongly support some major reforms of Part D, as my 
first paragraph in the written statement details.
    Pending major reforms, there are several key issues that 
would help make the program work better for consumers. We think 
the key to improving the current program is to make public the 
quality information that CMS should soon receive from the 
plans. This information starts coming in in 27 days, at the end 
of May.
    The required reporting is all detailed in manuals sent to 
the plans last April and finalized this January. It is about a 
12-14 page document that lists just all kinds of data that will 
be at CMS. Making this data public will let consumers make 
informed choices when selecting a plan, and this is 
particularly important this fall and next fall, when we are 
likely to see a lot of consolidation of plans. Give consumers 
information, and they will walk away from the poor plans and 
reward the good ones.
    CMS is to be congratulated for requiring an extensive set 
of data and proposing even more data for next year. Yet, data 
collected but not made public does nothing to empower 
consumers. The attachments to my testimony detail our efforts 
to nail down what data will be available and when, and we thank 
CMS for working on this at a very high level with us. On April 
25, we received a letter, and it is attachment number three in 
my statement with the CMS logo on it, and I would urge you to 
look at the bullet points in that letter. Frankly, they are 
kind of disappointing. The first bullet, the call center data, 
will be interesting, but the other three bullets mentioned in 
the letter seem, well, frankly kind of givens. Of course, those 
other three items should be happening, or a plan should not be 
allowed to continue in the program.
    So, therefore, we urge the Subcommittee to request that in 
addition to call center performance data that CMS make 
information public as soon as possible on the generic dispense 
rate, the number of grievances and appeals filed per thousand 
people, the resolution of those, pro or con the consumer, and 
the number of prior authorizations, step therapy, tier, and 
nonformulary exception requests received per thousand 
enrollees. That would really help consumers.
    We are not asking for new data. This is information that 
Medicare is already scheduled to collect starting at the end of 
the month. We are simply asking that it be made public.
    Switching subjects, we are pleased that the Administration 
frequently mentions, as Dr. McClellan did yesterday, Consumer 
Union's efforts to educate the public about safe, effective, 
and lower-cost generic drugs. This is part of our 
BestBuyDrugs.org campaign, and I have attached a sample of that 
work at the back of my statement. We hope you will let your 
constituents know about it. It is a free service, free, really 
good stuff. If you would like samples for a town meeting or 
event, we would be happy to provide them.
    As the Administration says, if people aggressively use 
these kinds of shopping guides, they can save thousands and 
thousands of dollars. That is true, whether you are in Medicare 
or out of Medicare, whether you are a 20-year-old or a 64-year-
old, it does not matter. You can save a lot of money through 
the aggressive use of generics.
    CMS is to be commended for its recent guidance designed to 
stabilize formularies while encouraging the move towards 
generics. No action was taken, however, on the serious problem 
in many plans of constantly changing costs of drugs that are on 
the formulary. We think consumers need to be told more clearly 
that if they enroll in a percentage copay plan, they are likely 
to see a great deal of instability.
    We have been monitoring five drugs in five ZIP Codes in big 
States for the last four months and are pretty shocked by the 
amount of movement. Sometimes, it is downward, which is great 
for consumers. Sometimes, it is up. There is a lot of movement, 
and I think a lot of seniors will feel that is a kind of ``bait 
and switch'' or ``gosh, why did I spend so much time shopping 
when it keeps changing on me?''
    So, if CMS could publicly say, ``In this plan, X percent of 
the drugs changed during the last year,'' it would help people 
select whether they want stability or whether they are willing 
to have an adventure when they go to the drug stores.
    Thank you very much for your consideration of these 
recommendations.
    [The prepared statement of Mr. Vaughan follows:]

                  Prepared Statement of Bill Vaughan,
                 Senior Policy Analyst, Consumers Union

    Madame Chair, Members of the Subcommittee:
    Thank you very much for the opportunity to testify.
    Consumers Union, the independent, nonprofit publisher of Consumer 
Reports,\1\ strongly supports major reform of the new Medicare 
prescription drug program (Part D). We believe that the current 
structure of the program will always be too confusing for seniors and 
people with disabilities, and be subject to plan abuse and adverse 
selection. We also believe that the program is too expensive for 
beneficiaries, taxpayers, and future generations, and that we must find 
a way to obtain lower-cost pharmaceuticals. Therefore, we support major 
amendments to the law that would provide for the option of a Medicare-
administered, dependable, reliable, standard plan in which Medicare 
negotiates (much like the Department of Veterans Affairs) to get lower-
cost pharmaceuticals.
---------------------------------------------------------------------------
    \1\ Consumers Union is a nonprofit membership organization 
chartered in 1936 under the laws of the State of New York to provide 
consumers with information, education and counsel about goods, 
services, health, and personal finance. Consumers Union's income is 
solely derived from the sale of Consumer Reports and 
ConsumerReports.org, its other publications and from noncommercial 
contributions, grants and fees. In addition to reports on Consumers 
Union's own product testing, Consumer Reports and ConsumerReports.org, 
with approximately 6.5 million combined paid circulation, regularly 
carry articles on health, product safety, marketplace economics and 
legislative, judicial and regulatory actions that affect consumer 
welfare. Consumers Union's publications carry no advertising and 
receive no commercial support.
---------------------------------------------------------------------------
    Pending those reforms, the key to improving the current program is 
to give beneficiaries the quality information that CMS should already 
be collecting from plans, so that consumers can make informed choices 
when selecting a plan. New enrollees (e.g., people turning 65) should 
have this information in order to make the best initial selection. All 
beneficiaries should have this information to use in this fall's open 
enrollment season (November 15-December 31, 2006) so that they can have 
some comparative standards by which to judge the plan they chose (or 
were auto-enrolled in). Making the full range of collected information 
public is particularly important this first year, because Medicare has 
not been able to start the consumer satisfaction survey called for in 
the law.
    CMS is to be congratulated for requiring an extensive set of data 
from the plans. The first quarter of data must be reported by the end 
of this month. The agency is also to be commended for proposing to 
improve those data requirements for plan year 2007 (see attached letter 
commenting on those proposed changes).
    Yet data collected, but not made public, does nothing to empower 
consumers.
    On January 5, we asked CMS for information on exactly what data 
would be made public and how soon. We thank CMS for a number of 
personal, high-level meetings to explore how this should be done. On 
April 25, we received a letter describing four issue areas where 
information would eventually be made public. On May 1, we responded to 
that letter (see attachments).
    As our May 1 letter mentions, Consumers Union is encouraging 
beneficiaries to report on their Part D experiences, good or bad, 
though a `Share Your Story' website (http://www.consumersunion.org/
issues/medicaredrugs.html). We have received some reports of absolutely 
abysmal service and quality. We hope to increase the number of stories 
on that website to provide ideas for administrative and legislative 
reform, and as guidance to consumers. But consumers need more than 
anecdotes, they need the CMS's large database of quality indicators to 
make the best decisions.
    We urge the Subcommittee and Congress to request that in addition 
to call center performance data, that CMS make information public as 
soon as possible on:

          the generic dispense rate;
          the number of grievances and appeals filed per 1,000 
        enrollees;
          the resolution, pro-consumer or anti-consumer, of 
        appeals;
          the number of prior authorization, step therapy, 
        tier, and non-formulary exception requests received per 1,000 
        enrollees (Section VI of the January 25, 2006 Reporting 
        Requirements).

    We are not asking for new data--this is information that Medicare 
is already scheduled to collect, starting May 31st. We are simply 
asking that this collected data be made public.
    We are pleased that the Administration frequently mentions--as Dr. 
McClellan did in his testimony before you yesterday--Consumers Union's 
efforts to educate the public about safe, effective and lower cost 
generic drugs. This is part of our BestBuyDrugs.org campaign. I've 
attached a sample of that work. We hope you will let your constituents 
know about this free service. As the Administration says, if people 
aggressively use these kinds of shopping guides they can save thousands 
and thousands of dollars--whether they are in Medicare, Medicaid, 
uninsured, or in the private sector.
    CMS is to be commended for its recent guidance designed to 
stabilize formularies (while encouraging the movement toward generics). 
No action was taken, however, on the serious problem in many plans of 
the constantly changing cost of drugs that are on the formulary. And we 
also think consumers need to be told more clearly that if they enroll 
in a plan with a percentage co-pay, they are likely to see a great deal 
of price instability. If beneficiaries want price stability during 
their year of enrollment, then they should be strongly warned to join 
plans with a set dollar co-payment (e.g., $10 per generic; $20 per 
brand) and avoid plans that offer percentage co-payments (e.g., 20 
percent of plan price for brand).
    Each month this year we have monitored all the plans offered in one 
zip code in each of five large states. Monthly, we have checked the 
price of a consistent package of five commonly used prescription drugs 
offered by 40-50 plans in these zip codes. Each month, we have seen a 
lot of price movement: sometimes down (which is good for consumers), 
sometimes up (which is disappointing). But we are continually surprised 
by the number of changes and the price volatility. We believe that many 
people sign up for a plan for a year and expect some dependability and 
stability during that year. It would help consumers pick plans in 
future open enrollment seasons if the degree of price increase (and 
formulary) instability is documented (for example, of 1,000 drugs on a 
formulary, 300 of them increased in price at one time or another). We 
urge CMS to make this kind of data available to consumers before each 
open enrollment season.
    Thank you for your consideration of these recommendations.

                               __________
Attachment 1
                                                      April 3, 2006

The Honorable Mark McClellan
Administrator
Centers for Medicare and Medicaid Services
[email protected]
Washington, DC

Dear Dr. McClellan:

    Thank you for the opportunity to comment on the Draft Medicare Part 
D Reporting Requirements for Contract Year 2007, Updated 02/23/2006.
    The key to all of these reporting requirements, of course, is that 
they be made public both quarterly and annually so that Medicare 
beneficiaries can have the latest information on the relative quality 
of the different Plans and Sponsors so they can make informed 
enrollment decisions. As per our letter of January 5, we continue to 
hope that as much information as possible will be made public before 
this fall's open enrollment season. All the reporting in the world will 
do no good, if it just sits buried in CMS files.
    Congratulations on the Draft for 2007.
    It provides some major increases in the `granularity' or detail of 
the 2006 data, and will help the public and advocates understand better 
how the low income and most vulnerable are being served in the various 
Plans. It will require important information on how well Plans deal 
with transition formulary issues (clearly a major problem this winter). 
The increased information about possible conflicts of interest in the 
plan Pharmacy and Therapeutics (P&T) Committees is important and will 
help ensure `good-for-patient formularies'--not just `good for Plan-
profits' formularies.
    The addition of information on the `number of pharmacy transactions 
rejected due to need for prior authorization' will be especially 
helpful to consumers in understanding which Plans require the least 
hassle--and which Plans to avoid.
    The additional reporting requirements for Plan Call Centers are 
excellent. The failure of Plan call centers is a major source of 
frustration, and Consumers Union has received a number of complaints 
about unbelievably poor service at these centers. Attached is one 
example sent to us from a XXX enrollee. Enrollees in other Plans have 
reported similar problems.
    We suspect that you will receive comments from Plans opposing these 
expanded reporting requirements. We hope you will stand firm with your 
Draft proposal: far too many Plans have woefully failed to prepare for 
and staff for the new benefit and they have contributed mightily to the 
rocky start of this important program. They have not earned the 
consumers' trust and therefore expanded reporting requirements are 
totally in order.
    Thank you for your consideration of these comments.

            Sincerely,

                                                    William Vaughan
                                              Senior Policy Analyst

Attachment example deleted:

                               __________
Attachment #2
                                                    January 5, 2006

The Honorable Mark McClellan, MD
Administrator
Centers for Medicare and Medicaid Services
Washington, DC 20201

Dear Dr. McClellan:

    Consumers Union is interested in what information may be available 
to consumers in the early fall of 2006 regarding the performance and 
quality of various Medicare Part D providers (including MA-PD plans).
    It would be a great help in our work if CMS could inform us exactly 
what information will be available prior to the next open enrollment 
period that will speak to consumer satisfaction, quality performance, 
etc. For example, the law calls for consumer satisfaction surveys 
(1860D-4(d)). Will they be conducted in 2006 and be made public before 
the open enrollment period? If so, what satisfaction issues will be 
measured?
    In addition, the enclosed ``Final Medicare Part D Reporting 
Requirements (Updated: 04/18/2005) lists a number of items that are to 
be reported, with many of the first quarterly reports due at the end of 
May. Will this data be made available publicly as it is received? If 
not, what data will not be publicly released?
    Thank you very much for your assistance in this request.

            Sincerely,

                                                    William Vaughan
                                              Senior Policy Analyst

                               __________
Attachment #3, CMS response to the above letter

Retyped copy of original letter, for inclusion in electronic file

CMS

DHHS
                                     CENTER FOR BENEFICIARY CHOICES
                                                      Apr. 25, 2006

Mr. William Vaughan
Senior Policy Analyst
Consumers Union
1666 Connecticut Avenue, NW, Suite 310
Washington, DC 20009

Dear Mr. Vaughan:

    Thank you for your inquiry on behalf of Medicare beneficiaries 
seeking information on the performance of Part D plans. The Centers for 
Medicare & Medicaid Services (CMS) would like to demonstrate to our 
beneficiaries that we are continually raising the bar on the level of 
quality of service we provide.
    In promoting this vision on performance improvement, we are pleased 
to announce that metrics related to the performance of Part D plan 
sponsors are being planned for the near future. These metrics will 
address four areas: effective customer service, effective exceptions/
appeals, effective data systems, and effective pricing.

          Effective customer service will address a Part D 
        Sponsor's ability to provide superior service to beneficiaries 
        and to pharmacists. Excellent performance in responding to 
        inquiries and issues helps to ensure a high level of 
        beneficiary satisfaction. Therefore, ensuring that Part D 
        sponsors are meeting standards related to low call abandonment 
        rates and a high percentage of calls answered within a short 
        time are a priority of CMS;
          Effective exceptions/appeals will be monitored via 
        complaint data and data from the Independent Review Entity 
        (IRE). Ensuring that appropriate exceptions and appeals 
        processes are being followed is crucial to providing 
        beneficiaries access to the prescription medications they need;
          Effective data systems will measure Part D sponsor's 
        ability to process data files in a timely manner; and
          Effective pricing will focus on Part D sponsors 
        ability to provide accurate pricing data for the Medicare 
        Prescription Drug Plan Finder and to ensure formulary 
        synchronicity between approved formularies and the formularies 
        displayed on the Medicare Prescription Drug Plan Finder.

    The release of these data will be completed in phases. However, 
please be assured that CMS is committed to ensuring Plans meet the 
statutory requirements as set forth by the Medicare Prescription Drug, 
Improvement and Modernization Act of 2003.

            Sincerely,

                                               Cynthia Tudor, Ph.D.
                                                    Acting Director
                                        Medicare Drug Benefit Group

                               __________
Attachment #4, Consumer Union response to above CMS letter

                                                        May 1, 2006

Dr. Cynthia Tudor
Acting Director
Medicare Drug Benefit Group
CMS
Baltimore, MD

Dear Dr. Tudor:

    Thank you very much for your letter of April 25th (copy attached) 
providing information about the schedule of the types of data that will 
be made available to help Medicare beneficiaries choose a prescription 
drug plan, either as a new enrollee or during this fall's open 
enrollment season.
    The letter is certainly helpful. Public information about the 
quality of plan call centers is certain to improve service in that 
area. A small survey we have on our Consumers Union Website where we 
ask people to `share their story' about the plans has brought us some 
dramatic examples of poor service, often centered on non- or mal-
functioning call centers.
    The other three items listed in the letter are very important, 
but--and this is said with great respect for the enormous task and 
burden the agency has been through in the last two years--they are 
fairly self-evident. The plans should be following an appropriate 
appeals process, processing of appeals should be timely, and the data 
on prices and formularies should be accurate. If a plan is failing to 
carry out these fundamentals, then we hope the plan will not be allowed 
to continue in Medicare in 2007.
    In terms of consumers making a choice, there is a great deal more 
to this program than the quality of the call centers. Medicare has been 
unable to conduct the consumer satisfaction surveys called for in the 
law, Therefore, we hope that additional plan quality information can be 
made public as soon as possible, and certainly before the 
advertisements for the new plan year (roughly October 15, 2006). 
Specifically, we hope that more information can be provided on plans:

        -- Generic dispense rate: Dr. McClellan and others in the 
        Administration have repeatedly cited a Consumers Union study 
        that showed how beneficiaries could save thousands of dollars, 
        and perhaps avoid falling into the `donut hole,' if they 
        considered the use of generics that are as effective and safe 
        as brand-name drugs. Giving consumers information on the 
        `generic dispense rate' that CMS is already collecting will 
        help beneficiaries understand which plans may provide the most 
        financial relief. This information is particularly important 
        because we note that the final version of the anti-fraud manual 
        unfortunately deletes language calling for plan pharmacy and 
        therapeutics (P&T) committees to have members who are free of 
        conflict from pharmacy benefit managers. Dropping that conflict 
        of interest ban may increase the influence of PBMs in a plan's 
        formulary, and result in the listing of brand-name drugs that 
        offer a larger rebate (profit) to the plan, rather than 
        generics that are a better bargain for consumers.
        -- the number of grievances received per 1,000 enrollees;
        -- the number of prior authorization, step therapy, tier, and 
        non-formulary exception requests received per 1,000 enrollees;
        -- the number of appeals/exceptions it receives per 1,000 
        enrollees, and
        -- the resolution of those appeals (pro- or con-consumer).

    The sooner quality information that CMS is already collecting is 
made public, the sooner plans will seek to improve their performance, 
and the sooner customers can make informed decisions when selecting a 
plan.
    Thank you for your consideration of these additional requests.

            Sincerely,

                                                    William Vaughan
                                              Senior Policy Analyst
                                                    Consumers Union

                                 

    Chairman JOHNSON OF CONNECTICUT. Thanks very much.
    Thank you very much, Mr. Vaughan, for those practical 
suggestions. I think all those things are worth our attention.
    Ms. Gottlich, just to move through quickly, do you think 
that drugs are an entitlement under Medicaid?
    Ms. GOTTLICH. Under Medicaid?
    Chairman JOHNSON OF CONNECTICUT. Yes.
    Ms. GOTTLICH. Do I think that drugs are an entitlement 
under Medicaid?
    Chairman JOHNSON OF CONNECTICUT. Correct.
    Ms. GOTTLICH. I think that health care is an entitlement to 
everyone, but----
    Chairman JOHNSON OF CONNECTICUT. I am talking about under 
the law.
    Ms. GOTTLICH. Yes, I do, actually. There are drugs that are 
required under Medicaid, and some are optional.
    Chairman JOHNSON OF CONNECTICUT. Let me make clear that 
under Medicaid that drugs are an optional benefit that States 
may offer. Let me also make clear for those of you who think 
that the State programs are so terrific that in California, you 
can have a maximum of six prescriptions a month. Think what 
that would do to seniors. Think how much better off seniors on 
Medicaid are----
    Ms. GOTTLICH. Mrs. Johnson, when we raised this issue with 
advocates across the country, they cheer when we say that 
Medicaid beneficiaries, dual eligibles are worse off. At a 
meeting of the National Academy of Elder Law Attorneys two 
weeks ago, before 300 people, when I made that statement, 
people cheered.
    Chairman JOHNSON OF CONNECTICUT. Ms. Gottlich, if you will 
suspend for a moment, I am making some comments. I want to move 
through my time and not use more than my 5 minutes.
    Ms. GOTTLICH. Okay; that is fine.
    Chairman JOHNSON OF CONNECTICUT. The point that I am making 
is that Medicaid program after Medicaid program in this country 
limits the number of prescriptions, limits the dollar value 
those prescriptions can cost. Medicare Part D is the first 
entitlement to prescription drugs that any poor group, much 
less any group, have had under a publicly funded policy, and I 
am very proud of that.
    As many of you have pointed out, it is a very important 
step forward.
    Ms. GOTTLICH. Let me point out to you that the State of 
Connecticut is one of the few States that has decided with 
State funds to reimburse----
    Mr. ENGLISH. Regular order.
    Chairman JOHNSON OF CONNECTICUT. I appreciate that, and I 
like that, but not all of the States have offered to do that. 
It is also true that our taking on the drug costs of Medicaid-
eligible seniors is going to save States a lot of money, and I 
hope they will use it to do what Connecticut and Pennsylvania 
and other States have done; that is, to accommodate the level 
at which subsidies phase out.
    So, we go above the 150 percent of poverty mark up to 225 
percent of poverty mark, and this Subcommittee made all those 
States' payments count so that none of those people are ever 
affected by the cap. That is the opportunity the States have to 
use the money we are saving them, not only under Medicaid but 
for their State retiree, State employee retiree programs, which 
we also subsidize. So, this is a big win for States. They have 
an opportunity to adjust that spend-down level, and I hope that 
they will take it.
    Now, there are a couple of other points I wanted to make. 
First of all, Ms. Larkin, thank you very, very much for the 
aggressive efforts of your company in outreach. Indeed, the 
partnerships that you have established, I think it is fair to 
say, are partnerships that United has never established in 
reaching out with their regular health care plans; is that not 
so?
    Ms. LARKIN. It is correct. One thing we found about Part D 
is----
    Chairman JOHNSON OF CONNECTICUT. Unfortunately, I have very 
little time.
    Ms. LARKIN. Okay.
    Chairman JOHNSON OF CONNECTICUT. So, I just wanted to note 
that about your testimony, that you have developed, and you 
have helped us develop, a depth and breadth of partnerships. 
You mention working with Jesse Jackson; absolutely wonderful, 
and he says over and over again on the radio, sign up.
    On the other hand, Ms. Aronovitz, I do find some of the 
things that GAO did really quite questionable, and I will only 
have time probably for one comment, but the way you judged 
readability, it seems to me inferior to the way CMS dealt with 
readability. The traditional testers of readability rely 
heavily on counting syllables: deductible, formulary, 
prescription, all those words have multiple syllables, and they 
come out poorly by those raters.
    If the test is also looked at from the kind of criteria 
that companies that specialize at looking at the clarity of 
message, navigational clues, and graphic elements, then, it is 
very clear, and the CMS has won national awards for the quality 
of their work.
    Now, unfortunately, you are not going to have time to 
answer, because as Chairman, I wanted to flip through a lot of 
comments that were made, and I have to stay to my 5 minutes. I 
will listen to the comments of others, and afterwards, I will 
be happy to listen. I do feel we have to conclude the hearing 
so that people can get on their planes.
    So, I will yield now to Mr. Stark.
    Mr. STARK. Thank you, Madam Chair.
    I did want to make some semantic corrections. Once Medicaid 
offers a prescription drug program, it cannot be revoked, and 
so, therefore, it is an entitlement, and every State in the 
union has offered drugs under Medicaid, and therefore, it is an 
entitlement. On the other hand, Part D is not an entitlement to 
drugs. It is an entitlement to purchase insurance, and there is 
a vast difference between that and the entitlements as we know 
them under Parts A and B.
    I would like to follow up with Ms. Gottlich. In terms of 
the low-income seniors, who we are mostly trying to help, do 
you think, given, as I think, the only option that we have in 
2006 is the possibility, remote as it seems now, for an 
extension of the signup period. For the very low-income, it 
looks like they will be accorded that and not have to pay the 
penalty. Is that sufficient to deal at least with the lowest 
income of our prospective beneficiaries?
    Ms. GOTTLICH. Well, Mr. Stark, Mr. Steinberg and I have had 
a conversation before the hearing began, and though CMS has 
said or indicated that the very low-income people would not 
have to deal with the penalty, we have not seen anything in 
writing from CMS, and so, if you have anything in writing from 
CMS that they would not have to pay a penalty, we would 
appreciate that.
    We are hearing from people--yesterday, I got a call from 
someone in Nevada who cannot get an appointment with his State 
Health Insurance Assistance Program by May 15, because they are 
all booked up, which means that individual may have to choose a 
plan without having the assistance he needs, and he may not be 
in the best plan for him. Extending the deadline certainly 
would help somebody like that who is making the efforts that he 
needs to make.
    Mr. STARK. Thank you.
    Ms. Larkin, Mr. Vaughan suggested, and I concur, and I hope 
the Chair would join with me in requesting of CMS that the 
nonproprietary financial information, except the other 
information that will be required from the major plans in terms 
of appeals and this sort of thing, do you see any objection to 
our having that information as part of our continuing oversight 
activities?
    Ms. LARKIN. I do not, Mr. Stark. I think because this 
program is new, the amount of information, including the 
financials and what it has taken to administer the program is 
important to this Committee, so we do not.
    Mr. STARK. Okay; do you think--my guess is, and I just want 
to make sure--that some of the plans might not be very 
comfortable with some of the income and expense requirements, 
but----
    Ms. LARKIN. I cannot answer for all----
    Mr. STARK. I do know as it would help us. I am not sure 
that is our role, but the interest that we would have and I 
think that Mr. Vaughan is suggesting is how difficult is it for 
people under appeal to get a drug that maybe they have to go 
back to their physician and come back and how much time, and 
that sort of information, as far as you are concerned, you 
would feel comfortable with our having as part of our oversight 
program.
    Ms. LARKIN. We would.
    Mr. STARK. I appreciate that answer, and I hope, Madam 
Chair, that we could get that and, as Mr. Hulshof has 
suggested, I think we could deal with it in camera if necessary 
but in a nonpartisan way to find ways where we might choose, 
after the election, to see whether there would be minor changes 
in the program.
    I wanted to ask Mr. Steinberg if you thought that the 
extension of the signup period, say, until 2007, as many of us 
have suggested, would do much to expand the participation in 
the program.
    Mr. STEINBERG. I think it would help. I think it would, if 
nothing else, make the message much easier. Right now, if we 
have enrollment for low-income people after May 15 but not for 
others, it becomes a more complicated message for 
beneficiaries. If there is a simple, clear message saying you 
have more time, everyone has more time, we could reach more 
beneficiaries, particularly the neediest, who really could be 
helped by this program.
    Mr. STARK. I want to thank you. My time is about up. Thank 
you, Madam Chair.
    Chairman JOHNSON OF CONNECTICUT. Thank you.
    Mr. Johnson, would you like to question?
    Mr. JOHNSON OF TEXAS. Yes, thank you. Thank you, Madam 
Chairman.
    I would like to ask the GAO, I know you were invited to our 
meeting yesterday, and then, the minority pulled your 
invitation. Why were you invited today?
    Ms. ARONOVITZ. Well, I am not exactly sure why I was 
invited or not, but I think we do have a very important 
message, and I think we have done a study that has very high 
integrity, and if you have a minute, I would like to respond to 
the Chairman's comment, because I do think that more 
explanation is required.
    Mr. JOHNSON OF TEXAS. In what area?
    Ms. ARONOVITZ. This is the area of the written materials, 
where there was some concern about our methodology, that we 
used a readability methodology that was one that was not 
accepted in the field. I would like to just say that we were 
very conscious of the fact that some experts do not believe 
that readability, as we defined it, was sufficient in terms of 
really looking at grade level.
    The first thing we did to make sure that we had the highest 
integrity in our work is that we adjusted for 26 words that CMS 
told us they could not substitute. So, our studies and the 
scores that we report are adjusted for making words like 
deductible, formulary, prescription, insurance, one-syllable 
words. We are treating it like it is an ``and'' or a ``the.''
    Mr. JOHNSON OF TEXAS. Are you suggesting that the American 
public does not know how to read?
    Ms. ARONOVITZ. No, I am not. I am suggesting that in 
studies where you do readability studies, one of the criticisms 
is that when you have multisyllabic words, that it complicates 
comprehension. Well, we made up for that.
    Mr. JOHNSON OF TEXAS. You are criticizing our school 
system, our educational process, not the questionnaire.
    [Laughter.]
    Mr. JOHNSON OF TEXAS. I think that is enough. I would like 
to ask a different question.
    Ms. ARONOVITZ. Okay.
    Mr. JOHNSON OF TEXAS. Of United, you also were invited and 
declined and then said you would come yesterday, and then, you 
did not. Now, can you tell me why you are here today?
    Ms. LARKIN. Well, I apologize for scheduling difficulties 
that may have occurred. Part D is important to our company, and 
so, we are pleased to be here today, and we will come back as 
often as the Subcommittee needs.
    Mr. JOHNSON OF TEXAS. I appreciate that. I appreciate your 
testimony as well.
    Consumers Union, you guys publish a magazine, do you not?
    Mr. VAUGHAN. Yes, sir.
    Mr. JOHNSON OF TEXAS. From what I can tell from some of 
your comments, you are telling people that if they buy your 
magazine, they can find out how to get cheaper drugs; is that 
true?
    Mr. VAUGHAN. No, that is a free service. The 
BestBuyDrug.org, you do not have to buy that at all. We got a 
separate grant from the Engleberg Foundation and the National 
Library of Medicine out at the National Institutes of Health to 
help take this best evidence-based medicine that is being 
developed out in Oregon Health and Science University, where 
they look at what is the safest and best drugs; they avoided 
Vioxx and that kind of thing. The reports that come out of 
there are written in doctor Greek. They are very complicated.
    So, what we do is we translate them into one-syllable 
words, and then, we match a price, a national price, and then, 
we look and say this is safe, this is effective, and this is 
the best price. If you look at the last sheet, sir, you will 
see why maybe the purple pill ads that you see on TV are not 
the best deals for you.
    Mr. JOHNSON OF TEXAS. Okay; thank you, and I would just 
like to make one other comment as concerns the extension of 
time.
    You know, yesterday, one of the guys said maybe we ought to 
extend Christmas to January 1 so we could finish our shopping 
before the deadline, and that is exactly what we have in this 
situation.
    Thank you, Madam Chairman.
    Chairman JOHNSON OF CONNECTICUT. Mr. English.
    Mr. ENGLISH. Thank you, Madam Chairman.
    Mr. Vaughan, it is a privilege to have you here, because I 
am very familiar with your publication. I do intend to review 
in detail your recommendations.
    I guess my first question is if we adopted all of your 
recommendations, what impact would that have on the pricing of 
this particular benefit, including the cost of the premium as 
you might estimate it or the cost to the taxpayer?
    Mr. VAUGHAN. All of this information is already coming in 
to CMS. The plans, when they signed up, committed to deliver 
this. These are deliverables.
    Mr. ENGLISH. So, it is really a transparency issue.
    Mr. VAUGHAN. It is a transparency issue. I think what you 
would get is you would get consumers saying well, I am not the 
only one who had trouble, and my neighbors did, but this plan 
over here is better, and there is less hassle, and I am going 
to move to that guy. Their generic dispense rate is better, and 
it is a better deal. You would have informed consumers 
rewarding the good players and avoiding the turkeys.
    Mr. ENGLISH. Well, as someone who supports a choice-based 
model for health care and who thinks that providing choices for 
people, provided that they get the consumer information is a 
preferable model and allows people to customize their benefits, 
I like your suggestion, and I am very much going to follow 
through with it and also consider following through with CMS on 
it.
    Mr. VAUGHAN. Thank you.
    Mr. ENGLISH. I guess my other questions have to do with--
your contention is that the benefit is costing seniors money at 
some level is my reading of your testimony. How do you react to 
the recent figures showing that on the average, seniors will 
save $1,100 under the benefit? Do you support the figures that 
we have that suggest that those eligible for low-income 
subsidies will save about $3,700 on the average? Are those 
savings not fairly substantial for a benefit of this sort?
    Mr. VAUGHAN. Absolutely, sir. I think those numbers are 
correct. The question is that within 24 months, this 
Subcommittee, under Title VIII of the Medicare Modernization 
Act (P.L. 108-173), is going to have to vote for major, major, 
major cuts in Medicare. We think you can get a better price for 
pharmaceuticals, a better drug program, and as you face this 
Title VIII forced vote because of the 45 percent rule, please 
do not shift more costs onto the seniors and the disabled, when 
we can get a better price for drugs than we are currently 
getting, that is what we are urging.
    Mr. ENGLISH. I take your point, but I also do not think 
that that is the draconian choice that we are facing. I really 
think there are a number of ways that we can deal with it.
    I also am curious about your reaction to the fact that 
premium costs are clearly substantially below what the original 
estimates were. We were operating off of an estimate that 
premium costs were going to be in the range of $37 per month, 
and in fact, they have turned up at $25 a month, and in some 
cases, people are eligible for--particularly in the low-income 
category, for savings, like I said, around $3,700 with no gaps 
in coverage.
    I wonder, is that not a fairly comprehensive benefit?
    Mr. VAUGHAN. Well, absolutely, but again, this is a new $8 
trillion unfunded liability in the long run. Could we get a 
better deal? We are trying to get consumers and taxpayers the 
best buy.
    Mr. ENGLISH. I take your point. Honestly, Mr. Vaughan, 
given the fact that we have set up a benefit in which the 
networks themselves are seeking discounts, in which they are 
going to be under market pressure to generate savings? They are 
able themselves to engage the pharmaceutical companies.
    You know the curious thing about this whole debate is the 
notion that there is no negotiation going on. In fact, there is 
evidence of lusty negotiation. We have hospitals now who are 
lobbying us to be guaranteed the same prices that these plans 
have been able to leverage out of the networks. So, I guess 
what I see out of this is some expect points, some excellent 
points consistent with the difficulty of implementing this 
comprehensive plan, consistent with the experience that not a 
lot of people have this length of institutional memory, not 
even Mr. Waxman, but it seems to me that back in the 1960s, 
when we were implementing the original Medicare plan, we have a 
lot of the same pains, and that was not really an argument 
against Medicare itself.
    Do you have any other comment on that?
    Mr. VAUGHAN. I think all large Federal programs have a 
rocky start, and it is a matter of trying to get them to work 
better very quickly. Oversight hearings like this are key to 
it, because it does catch the agency's attention, and I commend 
you for it and hope you can do more.
    Mr. ENGLISH. Thank you for your recommendations.
    Mr. VAUGHAN. Thank you.
    Mr. ENGLISH. Madam Chair.
    Chairman JOHNSON OF CONNECTICUT. Mr. Doggett.
    Mr. DOGGETT. Thank you.
    Ms. Aronovitz, thank you so much for your professionalism 
and the way that your study was conducted. If I understand, one 
of the findings that you made that has not received attention 
here today on what I consider to be perhaps the most critical 
and basic question: when calls were made by the GAO to Medicare 
to ask the simple question of which plan will offer the lowest 
cost for individuals who have a given list of drugs, if I 
understand your findings, in about 60 percent of the cases, the 
vast majority of the cases, the information that they received 
from Medicare was either incomplete, inappropriate or 
inaccurate when you add all the subtotals.
    Ms. ARONOVITZ. That is correct.
    Mr. DOGGETT. I find that to be really troubling. You know, 
until some of the comments that were made here this afternoon, 
I thought that all of those who professed an interest in a 
nonpartisan, objective, professional, exploration of this 
problem were talking about you and your study, because the GAO 
is that independent, nonpartisan group that does studies like 
this.
    Yesterday, I asked Dr. McClellan about this. By the way, 
under your process, unlike me and the Members who requested 
this, Dr. McClellan has had weeks in which to respond to your 
study, has he not?
    Ms. ARONOVITZ. Well, actually, we----
    Mr. DOGGETT. He has a letter in here, in your report.
    Ms. ARONOVITZ. Yes, he does have a letter. CMS was very, 
very good about responding very quickly. We wanted to be able 
to have the report ready.
    Mr. DOGGETT. He has had a chance to see your findings and 
to react to them.
    Ms. ARONOVITZ. Yes, and we did discuss them with him, yes.
    Mr. DOGGETT. Okay; and he has, I think, about a 12-page 
response here to your report.
    Ms. ARONOVITZ. That is the part we printed, yes.
    Mr. DOGGETT. I guess what bothers me the most is just the 
total state of denial at Medicare that they have a problem. It 
looks to me like a 61 percent failure rate in answering the 
question that not some senior who is suffering from illness and 
some form, perhaps, of debilitation who is trying to struggle 
through Medicare but people who were trained to make these 
inquiries, they got the wrong answer the majority of the time, 
the vast majority of the time, and we find at Medicare and with 
its apologists and defenders of the bureaucracy and here on the 
Subcommittee, an unwillingness to look at your findings, 
because the first way to solve this problem is a recognition 
that there has been a failure and then to reach out and make 
the changes to try to do it.
    Let me ask you this: part of this state of denial that we 
heard yesterday was that, well, gee, a significant number of 
people, 87 percent, think that they are happy with the way--
they are satisfied with Medicare. How does that number, which 
sounds so happy and so consistent with the kind of pollyannish 
attitude that has been brought about this legislation, how does 
that square with what you found? Because it seems to be just 
the opposite.
    Ms. ARONOVITZ. Well, actually, I was very surprised at Dr. 
McClellan's comment yesterday that he thought that the problems 
that we found have been fixed. I had actually been dealing with 
high level officials in his agency, because they were very 
anxious to get the detailed results of our report. People in 
his office were very anxious to look at our report and try to 
fix things.
    So, it did surprise me, to say the least, to hear him say 
that things were fixed. One of the criticisms that he 
particularly mentioned yesterday was about the question that 
you talk about: 60 percent could not get an answer when we 
called, out of 100 calls, for the lowest drug plan. Dr. 
McClellan said that 35 percent--the category that we call 
inappropriate--that we were not fair in reporting that, because 
when you pick up the phone and call 1-800-Medicare, the fact 
that the Center for Scientific Review insisted on having 
personal information before they would answer your phone call, 
Dr. McClellan said we should not hold that against the agency.
    In fact, there is no difference between the information 
that you should be able to get through a general search----
    Mr. DOGGETT. Of course.
    Ms. ARONOVITZ [continuing]. Than if you were to give your 
personal information. The only difference, really, is that the 
system would know whether you had prior drug coverage or not.
    So, we feel that we are trying to be objective, and we have 
no reason to try to do anything but use very accepted 
methodology.
    Mr. DOGGETT. Thank you, and if there is another round of 
questions, I would like to hear more from you, because I think 
this study really tells us about the actual current state on an 
objective, professional basis of what is happening in Medicare, 
even though there seems to be a general state of denial about 
it.
    Ms. Larkin, just in a word, does United agree with what Mr. 
Steinberg was saying, that it would be desirable to eliminate 
the assets test or significantly simplify it so we could help 
more of the people that rely on this low-income subsidy?
    Ms. LARKIN. We are finding that seniors are struggling to 
complete the paperwork. We have been working with organizations 
like the Medicare Rights Center, who have expertise in helping 
people get through the paperwork. So, that is an area that we 
are concerned about.
    Mr. DOGGETT. You would like to see the change made on the 
assets test.
    Ms. LARKIN. Well, again, that is a decision for CMS and 
this body to make, but we would be willing to be helpful in 
that way.
    Chairman JOHNSON OF CONNECTICUT. Thank you. I am sorry. The 
time has expired.
    Mr. English.
    Mr. DOGGETT. Thank you.
    Chairman JOHNSON OF CONNECTICUT. Mr. Hayworth.
    Mr. HAYWORTH. Thank you, Madam Chairman, and again, thanks 
to all the witnesses.
    Mr. Vaughan, I appreciated your evaluation, and visiting 
with my friend from Pennsylvania, that most major Government 
programs get off to a rocky start. I read with interest one of 
your comments earlier this year, quote, January is going to be 
very, very tough on some of the most vulnerable people in our 
society, you told the Nation's Health. That was your 
evaluation.
    Now that winter has moved to spring and that events do not 
occur in a vacuum, have there been positive steps, or is this 
just uniformly a horrible situation that continues to subject 
seniors to tests draconian in nature to give----
    Mr. VAUGHAN. No, of course not. Things do get better.
    Mr. HAYWORTH. Good.
    Mr. VAUGHAN. January was tough, and as Vicki and Mark are 
saying, there is still----
    Mr. HAYWORTH. I thank you for that, and that leads to a 
larger question, because listening to some of the testimony 
today, which offered some constructive criticism and some 
evaluations that can only be described as shrill, let me just 
simply ask for a show of hands, who among you would like to see 
the prescription drug program under Medicare abolished?
    Let the record show that not a single hand went up.
    Let me also point out in closing my brief comments that 
while we appreciate informational hearings, we also should 
recognize, and indeed, we would be naive in ignoring another 
fact; that is, the essence of political theater. Brother Aesop 
offered a fable not dealing so much with a medical condition 
but perhaps something that is even shown in policy analysis 
about sour grapes.
    While we hear about the inadequacies of the program and how 
horrible it is going to be, I dare say that it is my 
evaluation, both in terms of public policy and politics, that 
oftentimes, constructive criticism gives way to a simple matter 
of sour grapes, and with that culinary observation here, Madam 
Chairman, I will yield back my time.
    Chairman JOHNSON OF CONNECTICUT. Mr. Hulshof.
    Mr. HULSHOF. Thank you, Madam Chairman.
    Ms. Aronovitz, let me ask, I have tried to find the cut-off 
date for which GAO received data or at least written documents, 
and I think what I can find is the critique is of written 
documents in existence as of December 2005; is that right, or 
am I missing something?
    Ms. ARONOVITZ. No, no, that is correct. Those are the 
documents that were used primarily to communicate the program.
    Mr. HULSHOF. Obviously, you have to have a cut-off point at 
some time so you can begin to formulate the report that you 
have been asked to comment on, so any improvements that CMS 
might have made, say, for instance, in February or beyond would 
not have been included necessarily in this report? Is that 
fair?
    Ms. ARONOVITZ. CMS had written and produced 70 documents by 
the time of December 2005, and it was really gearing up, and it 
had a big job. It had substantially finished its communication 
materials, and those were the ones that were communicated. Now, 
of course, they could have developed something since.
    Mr. HULSHOF. All right; thank you.
    I am told that reality shows are popular, and so, a couple 
of real world--I am told simply because, Madam Chairman, you 
drive such a hard-charging Committee that we do not have time 
to watch the networks out there. So, just really a couple of 
real world observations. Number one would be I guess I am the 
most junior Member on this Committee; in other words, the 
closest one to election back nine years and five months ago, 
and I am only thankful that I did not have someone looking over 
my shoulder to see my constituent mail service two months after 
I became a Member of this Body. Hopefully, over these nine 
years, things have been ironed out.
    Mr. Vaughan, I reference and I applaud your testimony, the 
written part, that you are encouraging beneficiaries to report 
on their Part D experiences, good or bad, with your Share Your 
Story Website. Again, perhaps, a real world observation, at 
least from the political lens, my guess is you are going to 
have more negative responses than positive.
    Mr. VAUGHAN. Absolutely. There are some real horror stories 
that hopefully we can get fixed.
    Mr. HULSHOF. Because if you open up the opinion page of my 
hometown newspaper, there are some fairly critical observations 
from time to time about yours truly, and so, I always know when 
I am not doing a good job, because you are motivated to write. 
So, again, I applaud that, but the caveat I would have is that 
you are probably going to get mostly a negative bit.
    Mr. VAUGHAN. I do think that to the extent that we finally 
get a scientific sample that is large enough that we can then 
identify X, Y, Z plans and problems that need to be fixed. The 
issue of people thinking they are joining a relatively cheap 
plan and then finding out that they were enrolled in one that 
is much more expensive and it is being withheld from their 
paychecks that I believe has been referred to the Inspector 
General, that may be a pattern that you ought to penalize and 
criminalize, because there is a bunch of that out there, I 
think.
    Mr. HULSHOF. Thank you.
    Again, just a real world observation. I think I am one of 
the few Members of this Committee, the full Committee, the tax-
writing Committee that does my own taxes for our family and for 
our family business; a family friend who is an accountant his 
head at that very fact. Quite frankly, regarding this May 15 
deadline and comparing it to the tax deadline, I cannot recall 
a year that I ever filed my taxes early.
    So, again, we have got a few days left, and we will see how 
that resolves itself, but let me ask Ms. Larkin, you, 
specifically, since you are representing a company that is 
actually providing some of these plans, my colleague from Texas 
asked you about the assets test. Do you, on behalf of your 
company, have an opinion about whether that May 15 deadline 
should be extended?
    Ms. LARKIN. No, we are going to respect the right or 
respect the opinion of CMS and this Congress. We are doing 
everything that we can to assist beneficiaries with this 
enrollment process. It includes things like making sure that 
our call centers are open 24 hours a day, that we are properly 
staffed, so that people who are enrolling, whether they are 
enrolling telephonically online or with paper application can 
be accommodated.
    Mr. HULSHOF. My last final little real world observation. 
In our household, Ms. Gottlich, I have a six-year-old and a 
three-year-old, and every night, they are back in Missouri, and 
we talk on the telephone, and I ask my six-year-old, who is 
quite verbose, to share with me her high point of the day and 
low point of the day. So, as we sort of bring this hearing to a 
conclusion momentarily, you have shared with us some of the 
horror stories and negative stories. How about sharing with us 
a positive story.
    Ms. GOTTLICH. My father-in-law took my advice, and even 
though he has only a $13 generic drug payment each month, he 
signed up this week for the lowest cost plan in New York. Now, 
if you knew my father-in-law, and you knew that he does not 
take anybody's advice, this is really a high point in Part D.
    [Laughter.]
    Mr. HULSHOF. Thank you.
    Thank you, Madam Chair.
    Chairman JOHNSON OF CONNECTICUT. I thank the panel.
    I am going to recognize a Member of the Committee who is 
not a Member of the Subcommittee, Mr. Pomeroy.
    Mr. POMEROY. I thank the Chair, and I am delighted to 
participate in this hearing.
    Gosh, Congressman Hulshof, I cannot imagine where your six-
year-old got that verbosity trait.
    [Laughter.]
    Mr. POMEROY. You know, I will give you a good, new story, 
too. I sat down with my 85-year-old mother, and we worked this 
through, and she is going to save about $2,000 out of her 
$4,000 drug bill. You sign up to this thing; most are going to 
save money. That is what makes the takeup rate, in my opinion, 
so revealing.
    Paying your taxes, working on tax returns--that is a pain 
in the neck. If you do not get it done by the 15th, there is an 
extension. It is easier doing when you know you have a refund 
at the end of it. Well, everybody signing up, nearly everyone, 
is going to get a benefit under this thing. Still, the takeup 
rate is really quite low, about 40 percent in North Dakota, and 
that is better than most of the country, in part, because 
Republican and Democratic officials, we have worked together to 
try to get the word out, try to get the people signed up. I was 
doing an event just about a week ago with Commissioner of 
Insurance Jim Poolman, an elected Republican. We together want 
to make this work. The Governor's office has done some good 
work in trying to get people enrolled.
    Forty percent on a program that is offering some very real 
benefit, in fact, a benefit that we are now finding is going to 
cost about double what we thought to the Treasury when we 
passed it, well, that tells me there is too much complexity. I 
think if we were running an insurance program and had takeup 
rates when we were trying to give away benefit, and they are 
not applying for it, it would tell us, whoa, something is 
terribly wrong about our market interface here. We have got to 
have a better takeup rate than this.
    So, that is what I think we need to concentrate on. Look at 
these macro numbers. The macro numbers tell us we have got work 
to do. I think we obviously want this program to work. I think 
there is bipartisan agreement in that one. Here we are, days 
before the 15th; we have got these low sign-up rates.
    It would seem to me that we ought to conclude a couple of 
things: the program is too complex; we need to make it simpler, 
and in light of the complexity, which has obviously played a 
huge role in suppressing the takeup rate, the rate at which 
seniors are applying for this, we ought to give them an 
extension. It is the cleanest, easiest thing to do. Some are 
suggesting keep the May 15 date but drop the penalty. My 
opinion, that just adds to this confusion, and by golly, there 
is plenty of confusion out there already.
    My own view, and I have spent quite a bit of time on this 
thing, is we ought to extend that May 15 date. I think people 
are going to--once they get through the signup, they are going 
to like this program.
    Now, Ms. Larkin, I have got a question for you, because 
what we learned about the bill and implementation, we realized 
that there were some things that frankly reflected, I think, 
bad judgment. I think it was bad judgment of Congress to pass a 
law that--by the way, I voted for; unique to the minority, I 
voted for this thing--but I did not quite understand how this 
Medicaid dual eligible enrollment was going to work and that 
people would be randomly assigned to plans whether it covered 
the prescriptions they were on or not, and I am wondering what 
you did with your company when you find somebody automatically 
enrolled in something that no longer covers what they need.
    Ms. LARKIN. Well, one of the things that we have been doing 
with the dual eligibles in particular is meeting with them to 
understand they understand the new drug benefit, and 
communities and States like Florida, New York, Illinois, we 
have actually been sitting down with dual eligibles, having 
Town Hall meetings and making sure they understand how to use 
the new benefit. We have partnered with pharmacies so that when 
dual eligibles come into the pharmacy, they can help understand 
how the drug benefit works.
    Mr. POMEROY. Is there anything that you do for those that 
you find have been kind of randomly enrolled in one of your 
low-end plans that does not cover the drugs that they have been 
taking for years and have been paid for under Medicaid for 
years?
    Ms. LARKIN. Well, our plans, we have a standard benefit, 
but the dual eligibles do have the option of changing plans. 
They do have that opportunity.
    Mr. POMEROY. Right, and does your information outreach 
advise them of that, if they need something covered that the 
plan that they have been randomly assigned to does not cover 
it?
    Ms. LARKIN. We try to make sure that they understand what 
is covered with our plan, how to use the new benefit and how 
to, at the pharmacy level, how to also use the benefit. They 
are informed of the----
    Mr. POMEROY. We should never have passed something that is 
sticking people--known, identified individuals with known, 
identified prescriptions, because we have all that in the 
Medicaid program, sticking them into programs that do not cover 
what they are taking. That was just, in my opinion, done.
    You know, I appreciate very much the efforts that the State 
Government in North Dakota, working with the nursing homes, 
working with others to try to make sure that people won't find 
themselves no longer covered get into a program that covers 
what they are doing, and I think this is a glitch that we all 
need to work on.
    I would encourage all providers that are finding, those 
that have got coverage by virtue of being dual eligibles, but 
the coverage that they have got is not responding to their 
need, very specific feedback in terms of how they might move 
and get into something that covers their need.
    Madam Chairman, I thank you for allowing me to ask that 
question of this panel, and thank you for----
    Chairman JOHNSON OF CONNECTICUT. Thank you. I also will 
give the Gentleman from North Dakota a letter that is more 
detailed on these issues from Dr. McClellan, and I urge you to 
have a briefing from CMS on this. You get a glimpse of it 
through Ms. Larkin, but first of all, yesterday, Dr. McClellan 
did go into it in some detail, although it is much more 
interesting when you have the one-on-one situation of the 
computer interface issues and the transmission, the transfer of 
information issues, the problems they had between the State 
banks and the Federal banks and the private sector banks and 
how much of that they have worked out.
    When we look at what works and what does not work, we may 
have to have a delay between the time you enroll and the time 
your benefit starts, because some States sort of enrolled 
people, and then, one State dumped 40,000, changed 40,000 from 
one plan to another on December 30th. Well, of course, by 
January 1, they were not in the pharmacy's bank.
    So, there are problems that we now know and that do have to 
be worked out and may require changes in the law as well as 
procedures. How much of that they will be able to change 
through Executive Branch authority and what they will need to 
change with us, this is one reason we need to observe the 
deadline May 15. We need for these plans to operate, and we 
need to see how, then, of the slower pace of entering all those 
low-income people who now have no deadline, whether or not we 
have got the problem straightened out or not.
    So, we will need to watch what we learn after May 15, when 
the low-income people can continue to be brought into this 
system and look at yesterday, I do not remember whether it was 
during the hearing or before, the representative of the Social 
Security Administration went through how they deem asset 
compliance. Actually, she seemed very satisfied. So, today, we 
get a little different view.
    Those kinds of things, we will have to look at, because we 
do not want to ever go through again what we went through in 
January, February, and March. The other thing that is 
impressive is that for the first time, people in Meals on 
Wheels--the outreach was extraordinary. We have never 
accomplished that before, and if we had not had trouble with 
the people in our own State computers, I think we could have 
concentrated on those who were not in the State Medicaid or 
dual eligible programs and been able to do a better job on the 
ones just outside of that box who are harder to reach, because 
they do not qualify for most of our subsidy programs out there. 
Most of them do not qualify for Food Stamps or fuel assistance. 
They are just above that level, and they are fairly isolated 
seniors.
    So, that is why reaching out to family members was so 
important. This deadline, you are seeing a lot of people; I am 
seeing people walking up to me saying gee, I did not know my 
mother was on so many drugs. I am amused to hear my colleagues 
talk about their family members. I had to do it for my own 
sister. Somehow, she takes some pretty expensive drugs on a 
pretty limited income. So, we do have to help one another. 
There is no question about it, and we do have to make sure that 
the system is--the problems are solved so that November 15, 
they do not start again, and January 1, they do not start 
again. There are problems with pharmacists that we also have to 
look at, and we have gotten some very good suggestions from 
some of you today, and we thank you for being here.
    I will conclude the hearing and thank you.
    [Whereupon, at 4:55 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

                                            Alamosa Dialysis Center
                                            Alamosa, Colorado 81101
                                                     April 29, 2006

To the Committee;

    For the past three and a half years, I have been the social worker 
for the only dialysis unit in the San Luis Valley of south central 
Colorado.I have assisted all of our forty patients in enrolling in 
Medicare Part D prescription drug plans.
Almost all of these patients were already receiving good prescription 
        drug coverage through Medicaid.
    Now, however, they are facing multiple problems including plans not 
covering their medications; physicians too busy to help them with their 
appeals to the drug plans; pharmacists on TOTAL OVERLOAD trying to deal 
with these changes; and (worst of all) the prospect of the ``doughnut 
hole,'' when they all will have to pay out-of-pocket for all their 
medications after they reach the designated dollar amount of coverage.
    Not one of my patients was afforded thirty days' worth of a 
medication they had already been taking but which was no longer 
covered. In fact, almost all of the pharmacists, and plans, DENIED that 
they were obligated to provide this. These are poor, elderly people for 
whom this change was devastating.
    Here in the San Luis Valley, the bright idea Congress had of online 
``shopping'' for, and enrollment in, a Medicare Part D drug plan is 
considered laughable. NONE, not one, of my forty elderly patients has 
experience with, or interest in, using the internet. NONE HAS A 
COMPUTER. Many have bad eyesight.
    Everybody knows that the elderly are the least likely subsection of 
our population for doing anything online. WHO THOUGHT THEY COULD ENROLL 
ONLINE???? What a stupid idea. Without my help, most of them would have 
done nothing. My patients only have a social worker (me) because they 
are on dialysis. What did other elderly do? They had no idea how to 
pick or join a drug plan, and so got assigned to a drug plan which 
probably did not cover their meds.
    The architects of this MISGUIDED AND DEVASTATING CHANGE obviously 
had no meaningful contact with low-income elderly people. Why not?? The 
beneficiaries of this horrid new system are the insurance companies. 
NOT the elderly. Medicare Part D is shameful.

                                              Fran Koski, MSW, LCSW
                                    Licensed Clinical Social Worker

                                 
            Statement of the American College of Physicians

    The American College of Physicians (ACP)--representing 119,000 
physicians of internal medicine and medical students--is the largest 
physician specialty organization in the United States. Our members 
provide medical care to the majority of Medicare beneficiaries and the 
College has advocated for many years for the addition of prescription 
drugs to the Medicare benefit. The passage by Congress of the Medicare 
Modernization Act of 2003, which added prescription drugs to Medicare 
through a Part D benefit, and the implementation of the Part D benefit 
by the Centers for Medicare and Medicaid Services (CMS) in January of 
this year have gone a long way to bring affordable life-improving and 
life-saving prescription drugs to the aged and disabled members of our 
society. The College believes that this expanded benefit will have a 
significant positive effect on the long-term healthcare of the nation.
    The College recognizes that the implementation of a program of this 
dimension, perhaps the most significant change in Medicare since its 
inception in 1965, would reasonably experience some glitches and 
``growing pains.'' CMS has done a commendable job addressing a number 
of the early problems, which included:

          Many beneficiaries having difficulty making use of 
        CMS informational resources--addressed by increasing the number 
        of operators on 1-800-Medicare, making user-friendly 
        modifications to the www.medicare.gov website and providing 
        increased funding to the State Health Insurance Programs 
        (SHIPs).
          Many dual eligibles finding that they were not 
        successfully auto-enrolled in a Part D plan--addressed by 
        establishing a pharmacy point-of-service eligibility and 
        enrollment procedure.
          Many beneficiaries finding that their current 
        medications were not in their Part D plan formulary and not 
        having enough time to either have their physician prescribe a 
        therapeutically equivalent drug or request an exception- 
        addressed by temporarily expanding the transition period from 
        30 to 90 days.
          Many states having to continue to provide their dual 
        eligible beneficiaries with medications after Part D program 
        implementation due to the problems these beneficiaries were 
        encountering--addressed by establishing procedures to ensure 
        that CMS reimburses these states for their accrued expenses.

    However, through this statement, the College wants to inform the 
Subcommittee of several continuing problematic features of the Part D 
program that need to be addressed by CMS and may require some 
assistance from Congress. The College makes the following specific 
requests:

          The College recommends that CMS use the full extent 
        of its contractual authority to ensure the use of a 
        standardized exceptions/appeals (coverage determination) 
        request form by all drug plans participating in the Part D 
        program.
          The College recommends that additional fair and 
        effective guidelines regarding the use of drug plan utilization 
        management tools be developed and implemented. It is further 
        recommended that these guidelines be developed by a panel of 
        stakeholders, including representatives of the physician 
        organizations, pharmacists, drug plans and patient advocates.
          The College recommends that both Congress and CMS 
        consider extending the enrollment deadline for the Medicare 
        Part D benefit if there remain a large number of un-enrolled 
        beneficiaries after May 15, 2006.

    The fact that as of the end of April over 27 million beneficiaries 
are directly benefiting from the prescription drug program--with 8 
million having voluntarily enrolled in a Part D plan and another 
approximately 9 million having at least creditable coverage--reflects 
positively on the program and its implementation. Nonetheless, there 
remain aspects of the program that are problematic to the physicians 
that must prescribe these medications and to their patients. The 
College strongly recommends that the Subcommittee urge CMS to address 
the following issues:

          The need for increased standardization in the 
        exceptions/appeals processes employed by the drug plans.

    The average physician has anywhere from 10-20 organizations 
providing prescription drug plans to their patients. Each organization 
requires different information to be supplied and different forms to be 
completed by the physician as part of their exceptions/appeals process. 
The expectation for physicians and their staff to respond differently 
to each of the organizations is unreasonable. It places an excessive, 
unnecessary burden on the practices, and provides an inappropriate 
incentive to avoid filing such exceptions/appeals.
    Recently, an American Medical Association (AMA) work group, which 
included ACP, other provider organizations and patient advocate group 
representatives, and representatives of the healthcare insurance 
industry, developed a standardized exceptions/appeals (coverage 
determination) form that can be used for all covered Part D drugs 
except biotech and other high-cost specialty drugs. Acceptance of this 
form by all drug plans would significantly improve this situation. 
While CMS has designated this form as a ``best practice,'' the College 
recommends that CMS use the full extent of its contractual authority to 
ensure the use of the standardized exceptions/appeals (coverage 
determination) request form by all drug plans participating in the Part 
D program.

          There is a need to establish additional guidelines 
        that limit the inappropriate use of drug plan utilization 
        management tools (e.g. prior authorization, step therapy, 
        quantity limits).

    The experience of our members during the first four months of the 
Medicare Part D implementation is that these drug utilization 
management tools are being excessively utilized. Members are 
complaining of having to process multiple prior authorizations or step 
therapy requests each day. At a minimum, the large number of Medicare 
beneficiaries now covered under the Part D benefit radically increases 
physician exposure to these drug utilization management procedures. 
Furthermore, our members have the impression that the Part D plans are 
employing these cost-containing techniques at a much higher level than 
had previously been used in the commercial market.
    The use of these tools results in increased physician workload 
through requiring the physician to engage in lengthy phone calls with 
the Part D plan or to complete various forms. The effects of these 
additional hurdles also cause dangerous delays in patients getting 
needed medications and they take clinical time away from other 
patients. Finally, these procedures provide an inappropriate incentive 
for physicians not to prescribe the drugs requiring these additional 
procedures.
    While CMS has already developed a set of guidelines for the use of 
these utilization management tools, the College believes that the 
current guidelines are not sufficient. The College recommends that 
additional fair and effective guidelines regarding the use of drug plan 
utilization management tools be developed and implemented that ensure 
the accessibility to beneficiaries of medically necessary medications, 
that are respectful of the needs of the providers, and are responsive 
to the cost efficiency considerations of the plans. It is further 
recommended that these guidelines be developed by a panel of 
stakeholders, including representatives of physician organizations, 
pharmacists, drug plans and patient advocates.

          The possible need to extend the Medicare Part D 
        enrollment date past the current May 15, 2006 deadline.

    The College believes that Congress and CMS need to seriously 
consider extending the Medicare Part D enrollment date past the current 
May 15, 2006 deadline. This issue potentially could have a profound 
affect on the ability of large numbers of beneficiaries to enroll and 
take advantage of the new prescription drug benefit. Congress and CMS 
must maintain focus on the best interests of the beneficiaries.
    Despite the large number of Medicare beneficiaries that are 
currently taking advantage of the Part D benefit, there remain over 7 
million beneficiaries (as of the end of April) without creditable 
coverage who have not yet enrolled. While some portion of this group 
may still enroll prior to the May 15 deadline, there may remain a large 
number of the elderly or disabled who do not enroll in a timely 
manner--and will thus incur a significant financial penalty if they 
choose to enroll in the future. This penalty may make it prohibitive 
for them to enroll in the program in the future. Our members report 
that a large number of these current non-enrollees remain confused 
about the Part D plan--it is extremely complex and their lack of 
understanding makes them fearful of making a poor drug plan choice. 
This observation is confirmed by a recent Kaiser Family Foundation poll 
that found that one of the most frequent reasons provided by 
beneficiaries without current drug coverage for not enrolling in a plan 
is it is ``too complicated.'' \1\ The College requests that both 
Congress and CMS consider extending the enrollment deadline for the 
Medicare Part D benefit if there remain a large number of un-enrolled 
beneficiaries after the May 15, 2006 deadline. This extra time could 
allow additional beneficiaries to consult available informational 
resources, further discuss the issue with their physicians and loved 
ones, and work through their problems with understanding the new 
benefit. Providing time to allay beneficiaries' confusion and fear is a 
good reason to eliminate this barrier to improved availability of these 
important medications.
---------------------------------------------------------------------------
    \1\ Kaiser Family Foundation. Kaiser Health Poll Report Survey: 
Seniors' Early Experience with the Medicare Prescription Benefit. April 
2006. Available at www.kff.org.
---------------------------------------------------------------------------
    The American College of Physicians is pleased that the Health 
Subcommittee is reviewing the implementation of the Medicare Part D 
prescription drug benefit. The addition of prescription medicine to the 
Medicare benefit is long overdue, and the College intends to continue 
to work with Congress and CMS to ensure the effective implementation of 
this very important program.

                                 
        Statement of the American Medical Directors Association,
                           Columbia, Maryland

    The American Medical Directors Association (AMDA) represents more 
than 7,000 medical directors, attending physicians, and others who 
practice in nursing facilities. On average, AMDA physicians see 100 
nursing facility patients per month (which constituted approximately 
8.5 million visits in 2000, or 42 percent of the total number of 
nursing facility visits that year). AMDA physicians also care for 
patients in other venues in the long term care continuum, which 
includes home health care, assisted living settings, hospice and other 
sites of care for the frail elderly. The majority of members (59 
percent) also maintain a private practice outside of their long term 
care responsibilities. Our comments reflect that experience, as well as 
the commitment to provide the best quality of care to our patients.
    Since Part D implementation on January 1, AMDA has been relaying 
member problems and concerns regarding the new Part D drug benefit to 
the Centers for Medicare and Medicaid Services (CMS) in weekly 
conference calls and frequent e-mails. Despite CMS efforts, we are 
still seeing significant problems for physicians in obtaining medically 
necessary drugs for their patients.
    Time is a critical issue for our physicians. Over 38 percent of 
AMDA members who responded to a recent survey report spending 4-7 
uncompensated hours per week trying to get appropriate medications for 
their patients under Part D.i Nearly 13 percent reported 
spending 8 or more hours per week. That is time spent largely taking 
care of paper, rather than taking care of patients. Requirements for 
prior authorizations are of particular concern, with 70 percent of 
respondents reporting frequent or very frequent problems. Exceptions 
requests also present problems, with 55 percent reporting frequent or 
very frequent difficulties.
---------------------------------------------------------------------------
    \i\ Preliminary results of May, 2006, survey.
---------------------------------------------------------------------------
    Many physicians are having problems accessing particular drugs or 
types of drugs, with 23 percent citing problems obtaining drugs to 
treat Alzheimer's disease. Some drug plans require prior authorizations 
for all drugs to treat dementia, a disease which affects 40 percent of 
all nursing facility residents. A member from Maine told us, ``The 
hurdles created are resulting in a lower level of care being provided 
for nursing home patients. They are now less likely to be prescribed 
uncovered medication even if the alternative is inappropriate because 
it takes too much time and effort for everyone involved.''
    The problems are exacerbated by the myriad drug plans and drug plan 
options with which physicians must deal. Each drug plan maintains its 
own formulary, policies and procedures, with no uniformity among them. 
Our members have seen light use of the standard form that CMS has 
requested drug plans to use. Only 16 percent of respondents indicate 
that the majority of drug plans with which they work are using the 
standard form.
    Recurrent problems our members report include:

    Lack of Critical Information about the Drug Plan

          The drug plans have often not made available correct 
        information regarding contacts and policies, despite CMS 
        requests since January to do so.
          Drug plans have not provided clear information 
        regarding procedures for exceptions and appeals, as well as 
        prior authorizations. Likewise, there is a lack of access to 
        drug plan forms that physicians must complete for exceptions 
        and appeals, as well as for prior authorizations.
          Each plan develops its own procedures and forms. 
        Although CMS is promoting use of a standard coverage 
        determination process, its use is not mandated.
          Apparently most drug plans do not provide information 
        on formulary alternatives when they deny coverage of a drug. 
        The physician is often hard-pressed to discover what 
        alternatives may be substituted.
          Our members continue to report lengthy delays in 
        telephone access; frequent problems getting through to plans at 
        all (e.g., busy signals, referred to other numbers; long 
        waits). We receive frequent reports of delays of 30 to 45 
        minutes, after which the call is simply terminated by the drug 
        plan.

    Lack of Access for Emergency Medications

          In at least some instances, drug plans have not been 
        available on a 24-hour basis for coverage determinations on 
        emergency medications. In such cases, CMS is advising 
        physicians and pharmacists to rely on the 1-800-Medicare number 
        for emergency access, but problems have been reported with that 
        system as well.
          We received reports of lack of access to influenza 
        medications that may be required on an emergency basis to 
        prevent influenza outbreak in long term care facilities. The 
        Centers for Disease Control have approved antivirals 
        oseltamivir (TamiFlu) and zanamivir (Relenza) to treat 
        influenza this year. Some physicians report having difficulty 
        obtaining oseltamivir because it is not on some plan 
        formularies, while drugs that are on formularies to treat 
        influenza are contraindicated for patients with seizures or 
        Alzheimer's disease.
          We also received reports of drug plans that require 
        prior authorization for all drugs to treat influenza. This is a 
        special problem in long term care, where prompt treatment and 
        prophylaxis is crucial to prevent an influenza outbreak.
          In other instances, drug plans authorized appropriate 
        drugs but with quantity limits that were sub-therapeutic.

    Onerous Administrative Requirements

          Members are reporting a wide array of requirements imposed on 
        physicians by Part D plans in order to have prescriptions 
        honored. Many requirements entail personal contact by the 
        physician with the drug plan, or access to the enrollee's 
        health record, which is often not accessible to the physician, 
        as it remains at the long term care facility. Drug plan 
        communications with the physician sometimes leave the nursing 
        facility completely out of the loop. Some requirements seem 
        designed simply to deter physicians from requesting prior 
        approvals or exceptions. For example, one physician last week 
        reported that her nursing facility worked with the drug plan 
        for more than four hours and still could not obtain the drug 
        the patient needed.
          As noted above, prior authorizations present serious 
        challenges for long term care physicians. Prior authorizations 
        are extra hurdles that physicians must jump in order to access 
        drugs that are on a drug plan's formulary.
          One member noted, ``I am spending a lot of time on prior 
        authorizations, sometimes 14 a day, and some alternative drugs 
        are the cheap ones which cause harm. I have had patients on 
        some of these drugs for years and have already tried the viable 
        alternatives.'' Another told us, ``Many patients are being 
        forced to change their medications, even after years of 
        success.'' And another physician reports that ``Almost anything 
        non-generic has become a problem.''
          Specific problems our members have encountered include but 
        are not limited to:

                  Requiring personal telephone calls from 
                physicians by some plans, rather than accepting faxes 
                or e-mails for prior authorizations or exceptions 
                requests. This is a major problem that consumes 
                significant amounts of the long term care physicians' 
                time and delays access to medications. The problem is 
                exacerbated by the fact that patients' medical records 
                remain in the nursing facility and may not be available 
                to the physician when he or she finally gets through to 
                the drug plan.
                  Requiring prior authorization for all drugs 
                in a class (e.g., drugs to treat Alzheimer's disease 
                and influenza).
                  Requiring additional documentation as part of 
                prior authorization (e.g., requiring a mini-mental 
                status score for drugs for Alzheimer's, even of 
                patients who are too ill to take such an exam).
                  Requiring prior authorizations for 
                inexpensive drugs.
                  Requiring physicians to complete a form in 
                order to obtain the correct form to complete for prior 
                authorizations or exceptions.

    Additional problems:

        Some additional problems include:

                  Lack of recommendations by the drug plan for 
                alternative drugs when a prescribed drug is not on the 
                formulary. Physicians often do not have access to 
                patient records or drug plan formularies when they are 
                called regarding adverse coverage determinations, and 
                the suggestion of appropriate alternative drugs that 
                are on formularies could expedite the prescribing 
                process.
                  Omission of all forms and doses of formulary 
                drugs from drug plan formularies. Long term care 
                patients may require alternative strength doses or 
                alternative delivery system (liquid, sustained release, 
                intravenous, etc.) for medical reasons, such as no 
                longer being able to chew or swallow, but physicians 
                are sometimes required to pursue exceptions for such 
                different forms and dosages of drugs that are on the 
                plan formulary.

          There seems to be little understanding on the part of drug 
        plans of the requirements regarding unnecessary drugs contained 
        in the CMS Conditions of Participation for nursing facilities 
        (42 CFR 483.25(1)(1), 483.25(1)(2)(i)), or of the extensive 
        related guidance to surveyors regarding unnecessary drugs and 
        drugs whose use may be contraindicated in elderly patients. 
        That federal guidance, contained in CMS' State Operations 
        Manual, recognizes that some drugs are simply inappropriate for 
        use in frail elderly patients. We have heard of numerous 
        incidents in which drug plans formulary drugs are medications 
        that are considered potentially harmful in the elderly.
          Finally, we are extremely concerned with the incredible 
        burdens the new drug benefit is imposing on physicians. 
        Physicians are reporting spending up to an hour trying to 
        obtain just one drug for just one of their patients. Sometimes 
        it seems that if physicians pursue problems high enough up the 
        drug plan chain of command, problems are resolved, but our 
        current system for providing and paying for care does not 
        support that level of physician involvement.
          In at least one instance when a physician could not obtain 
        emergency authorization for drugs to treat an outbreak of 
        influenza in a nursing facility and prevent the transmission to 
        other patients, the physician had to argue for one day and 
        discuss his willingness to speak to the press about the need to 
        obtain the medications to prevent patient deaths in order to 
        obtain the necessary drugs. Physicians simply should not have 
        to go to such lengths to obtain medically necessary medications 
        for their patients. Nor do Medicare physician payments 
        encompass such an increased amount of work.
          Right now, our members are taking on the drug plans to fight 
        for the medicines they believe their patients need. But the 
        current level of effort of 4 or more extra hours per week is 
        not likely to be sustainable. The result may be that physicians 
        have to defer to the drug plan formulary choice, regardless of 
        whether it is the best drug for their patient.
          In one such case, a physician was unable to convince the drug 
        plan to approve his choice of antibiotic for some of his 
        patients, arguing that the formulary alternatives would not 
        adequately treat the patients' infection. The patients grew 
        sicker on the drug plan's choice of antibiotics and required 
        hospitalization for pneumonia. One nursing facility reported 
        that some patients went without their medications for days. It 
        seems that the pharmacy did not refill the prescriptions 
        because prior authorizations were needed, but no one had told 
        either the attending physician or the nursing facility
          We are extremely concerned that the impediments to medically 
        appropriate medication that many of our members are now 
        experiencing will result in increased adverse drug interactions 
        in our frail, elderly patients, as well as increase reactions 
        between drugs and patients' other medical problems. We ask for 
        your assistance in preventing more of these situations.

    AMDA Recommendations

          Congress should consider how to reshape the Medicare drug 
        benefit to simplify the program for Medicare beneficiaries and 
        for administration. Simplification could make the program more 
        attractive to beneficiaries, ease the administrative burden on 
        physicians and health care providers, and reduce the cost of 
        the program.
          In the meanwhile, several steps could be taken that would 
        immediately improve implementation of the drug benefit, 
        including:

                  Legislation should require CMS to mandate 
                drug plan use of one uniform procedure and form for 
                exceptions, prior authorizations and appeals. This step 
                is urgently needed to reduce inordinate amount of time 
                physicians are spending trying to deal with myriad drug 
                plan procedures and forms. As one member told us, ``It 
                is incumbent on the Medicare program to develop 
                universal minimum standards and hold the providers to 
                them''. The current system of voluntary compliance 
                simply is not working.
                  Legislation should specify that CMS will 
                provide clinical direction and clarifications as needed 
                to drug plans to ensure prompt access to medically 
                necessary medications. Clinical directions should 
                include, among others:

                          Requiring drug plans to include 
                        on their formularies, without prior 
                        authorization or quantity limits, drugs that 
                        CDC recommends to treat influenza each year;
                          Requiring drug plans to provide 
                        formulary alternatives, without prior 
                        authorization requirements, for formulary drugs 
                        that are considered inappropriate for use in 
                        the elderly, particularly those listed as 
                        inappropriate in CMS guidance to long term care 
                        surveyors.
                          Prohibiting prior authorization 
                        requirements for all drugs in a class;
                          Requiring drug plans to offer 
                        medications alternatives when they refuse to 
                        cover a drug;
                          Requiring prior authorizations to 
                        be provided for one year, with timely renewal 
                        notices to physicians and nursing facilities;
                          Prohibiting inappropriate and 
                        onerous requirements for drug utilization 
                        programs (such as prior authorization for 
                        inexpensive, safe, common medications, 
                        requiring prior authorizations for all drugs to 
                        treat Alzheimer's' disease, and requiring 
                        completion of one form in order to receive a 
                        second form which must be completed for drug 
                        plans to decide whether to cover medications).

                  Congress should require greater CMS oversight 
                of drug plans with quarterly public reports, and prompt 
                application of sanctions against non-compliant drug 
                plans.
                  Congress should amend the Medicare drug 
                benefit to eliminate co-payments for all dual-eligible 
                beneficiaries who receive long term care services. 
                Currently, nursing facility residents are not required 
                to make Part D co-payments, because they pay all but a 
                small portion of their incomes to the institution that 
                is caring for them. But dual-eligibles residing in 
                assisted living facilities, or who are enrolled in the 
                APCE program or receiving home can community-based long 
                term care services, are required to make co-payments, 
                although they also must also pay most of their income 
                to their care provider

    The Medicare Part D drug program was based on a managed care model 
which may work well for younger, healthier, ambulatory individuals. 
However Part D requires more flexibility in dealing with the needs of 
clinically fragile long term care patients with multiple drug therapies 
and multiple co-morbidities. A member told us, ``Watching the process 
unfold for the past 5 months it is becoming clear to me that nursing 
home patients are simply being treated like community dwelling Medicare 
recipients. As a result, we are now seeing signs of a system failure 
and patients not getting their medications on time or not at all.''
    Long term care physicians need your help in making the Medicare 
drug benefit work for their patients, and preserving the quality of 
medication therapy that they were previously receiving.
    Thank you for the opportunity to share our experiences with you.

                                 

                                      Campaign for America's Future
                                     Sherman Oaks, California 91423
                                                     April 30, 2006

To the Committee on Ways and Means

Dear Congressmen and women,

    I am a 36 year old disabled citizen. I was run over by a car at age 
7 and have lived my life in terrible pain and disability. To survive my 
pain I require quarterly injections into my implanted intrathecal 
morphine pump, plus daily doses of powerful narcotics to allow me to 
deal with my situation which will never improve but just get worse with 
age. When I received the information about Medicare Part D I was very 
skeptical because of the corruption I heard went on in Washington to 
get this bill made into law. The bribing of officials, the drug and 
insurance companies writing the laws, but being disabled and this being 
the law I had no choice but to accept it.
    Living in California there are many choices. I spent weeks pouring 
over the programs, but almost every one had me spending over $22,000 
per year for my meds. At that rate why have insurance? My meds are 
Generic except for the pump medication which is simple morphine anyway. 
Your system is highway robbery. It is a total slap in the face of every 
single decent American and my true belief is that every man or woman 
who worked to make this a law will rot in hell for eternity. This is 
not a benefit but a curse. And not only is it a curse, but you will 
punish those who refuse to hop along and support your crimes against 
the elderly.
    All of you in Washington must have had parents at one time, but I 
guess you have made enough money from your backroom deals that you do 
not need to worry about these things. Your health insurance is the best 
in the nation, so these issues mean little to you, but I can tell you 
one thing. Your greedy corrupt actions are turning America into a third 
world nation where Grandmas and Grandpas have to decide between food or 
medicine. When their northern and southern cousins across the border 
can buy the same meds for pennies on the dollar, the almighty American 
Congress rapes it's own.
    I don't know if there is a God in Heaven or if Satan is in Hell, 
but by God if they do exist I know where all of you are going on 
account of the so called work you do in Washington.

            Sick of your corrupt ways,

                                                         Cary Brief

                                 
          Statement of the Center for Medicare Advocacy, Inc.

    The Center for Medicare Advocacy, Inc. (the Center) submits this 
testimony to be included in the record of the hearing on Implementation 
of Medicare Part D, held before the Health Subcommittee of the 
Committee on Ways and Means on Wednesday, May 3, 2006.
    Founded in 1986, the Center is a national, non-partisan educational 
and advocacy organization that identifies and promotes policy and 
advocacy solutions to ensure that elders and people with disabilities 
have access to Medicare and quality health care. The Center's national 
office is in Connecticut, with offices throughout the country, 
including Washington, D.C. The Center represents thousands of 
individuals in Medicare appeals each year, responds to calls and e-
mails from individuals in Connecticut as well as from all across the 
United States, and provides support to CHOICES, the Connecticut state 
health insurance program. Requests to the Center for assistance have 
increased exponentially with the advent of Medicare Part D.
    The White House and the Centers for Medicare & Medicaid Services 
(CMS), in their efforts to promote Part D, proclaim that ``the new drug 
program is working well for most seniors (sic) and pays nearly all of 
low-income beneficiaries' drug bills.'' See, e.g., ``The Medicare 
Prescription Drug Benefit: Helping Seniors and Reducing Costs,'' a Fact 
Sheet issued by the White House on March 14, 2006.
    What they do not say is that many of the beneficiaries encountering 
problems are dually eligible for Medicare and Medicaid (dual 
eligibles). The barriers to their getting drugs that were previously 
paid for by their Medicaid programs are not temporary glitches but 
result from the very design of the Part D program. The Center avers, 
based on our conversations with Medicare beneficiaries, their families 
and their advocates, that this most vulnerable population is, as a 
whole, much worse off than they were before they were shifted from 
Medicaid to Medicare drug coverage.
Problems and recommended solutions include:
       1. Dual eligibles have been randomly assigned to average-cost 
prescription drug plans, most of which do not cover all drugs commonly 
used by this population.
       To ensure no gaps in coverage when dual eligibles transition 
from Medicaid drug coverage to Medicare drugs coverage, the Medicare 
Modernization Act provides for them to be randomly assigned to plans if 
they do not choose a plan on their own. Random assignment benefits Part 
D drug plans by guaranteeing them an equal portion of the enrollment of 
the dually-eligible population, without burdening them with too large a 
portion. Random assignment does not, however, benefit beneficiaries.
       The Inspector General of the Department of Health and Human 
Services has determined that nearly one-third of dually eligible 
beneficiaries--a highly vulnerable population with unusually high 
medication needs--were assigned to drug plans that included less than 
85% of the 178 most commonly used Part D drugs.\1\ Some of the drugs 
excluded from a substantial number of plan formularies (lists of 
covered drugs) are drugs for high blood pressure, high cholesterol and 
pain relief.
---------------------------------------------------------------------------
    \1\ Office of Inspector General, ``Dual Eligibles'' Transition: 
Part D Formularies' Inclusion of Commonly Used Drugs,'' (OEI-05-06-
00090 January 2006).
---------------------------------------------------------------------------
       Only 18% of beneficiaries were assigned to plans that covered 
all 178 drugs, but this does not mean that even these plans cover all 
drugs needed by each beneficiary--only that they cover the most 
commonly used drugs. Moreover, even plans that cover all drugs may have 
quantity limits, prior authorization and other barriers to immediate 
and full coverage of an individual beneficiary's prescription drug 
needs.
       Other researchers came to similar conclusions after reviewing 
formularies of plans available in specific regions. For example, 
Jocelyn Guyer and Jeffrey S. Crowley of the Georgetown Health Policy 
Institute wrote a series of three policy briefs for the Connecticut 
Health Foundation. They found large variations in the extent to which 
the 44 stand-alone prescription drug plans available in Connecticut 
covered medications, with major and frequent shortcomings in coverage 
of critical drugs used by dual eligibles.\2\
---------------------------------------------------------------------------
    \2\ The policy briefs are available at www.cthealth.org. Judith 
Stein, Executive Director of the Center, was a research contributor to 
the policy brief on Implications for dual eligibles.
---------------------------------------------------------------------------
       A 33 year-old beneficiary from Orange Part, Florida, described 
the difficulties experienced by dual eligibles in an e-mail sent to the 
Center last week: \3\
---------------------------------------------------------------------------
    \3\ Beneficiary comments are verbatim and may contain grammar 
mistakes.

          I have been on Medicaid since 1996, and Medicare since 1998. 
        I get Social Security Disability, and I am below the poverty 
        level. Since Medicare Part D., has kicked in. I have had to pay 
        for medicines that Medicaid used to pay for, now I'm 
        responsible for the co-pays of my medicines. I am a kidney 
        transplant patient and have been a diabetic for 30 years. I 
        also have been diagnosed with HIV in 2001. I can't pay for my 
        medicine copays, because I make approximately $8,500 a year. 
        Even with the ``extra help'' that I get from Medicaid, I still 
        have to pay about $40 a month for medicines. However, my 
        medical insurance doesn't cover my transplant medications or my 
        HIV medications. These medicines cost about $400, a month. What 
        has the president done? Is there a plan to kill off the elderly 
        and sickly, or do we just have to suffer the consequences? 
---------------------------------------------------------------------------
        Thank you for letting me speak my peace.

          Center for Medicare Advocacy Recommendation: In assigning 
        beneficiaries to plans they have not chosen, more attention 
        must be given to matching individual beneficiaries' drug usage 
        and pharmacy preferences with the formulary and pharmacy 
        networks of individual plans.
       2. Getting coverage for drugs that are not on a plan's formulary 
involves engaging in one of several complex processes. The frailty of 
this population, including a high incidence of cognitive impairments, 
makes navigating those processes more difficult than for other 
beneficiaries.
       Applying for an Exception. Each plan must have a process for 
enrollees to ask for an exception to non-coverage, and each plan's 
process is different. The Center is part of a group, spearheaded by the 
American Medical Association (AMA) and working in conjunction with 
America's Health Insurance Plans (AHIP), that has developed a model 
exceptions request form. Although CMS has posted the model form on its 
web site, and AHIP members may post the form on their web sites, CMS 
does not require the form to be used by the plans.
       An exception request must include a doctor's statement that all 
drugs on the formulary are either less effective or harmful to the 
beneficiary or both. Some plans are requiring the submission of 
clinical notes verifying such assertions. Because each plan's process 
is different, physicians must deal with multiple processes to serve all 
their patients. Some doctors are charging for completing prior 
authorization and exception request forms. Dual-eligible beneficiaries 
who cannot pay even nominal fees for this service cannot avail 
themselves of the exceptions and appeals processes.
       The problems that arise from trying to navigate the exceptions 
process are almost too numerous to include in testimony. The issues 
brought to our attention by Medicare beneficiaries, their families, and 
their advocates include:

          Not knowing that there is a process to request an 
        exception or coverage determination;
          Not getting through to customer service offices;
          Customer service offices not being available to 
        accept emergency calls from doctors outside of normal business 
        hours;
          Not having the exception request treated as an 
        exception because the beneficiary did not use the proper term;
          Having to fax or mail to a plan a preliminary request 
        form in order to get the request form that will start the 
        coverage determination process. Without a coverage 
        determination a beneficiary cannot file an appeal;
          Plans not complying with statutory time frames;
          Plans not forwarding cases to the independent review 
        entity as required when time frames are not met;
          The independent review entity failing to conduct a 
        new, independent review of the medical evidence.

       Changing prescriptions. Plans encourage enrollees to change from 
an uncovered drug to one on their formulary. Such a change presumes 
that there is a drug on the formulary that would work as well as the 
uncovered drug. Making such a change may involve multiple visits to a 
doctor's office, each of which may cost money in terms of 
transportation and office visit co-pays, for the doctor to first 
prescribe, and then monitor, use of the alternate drug. Duals often do 
not have the resources to pay for the transportation or the cost-
sharing for such visits. Since many use clinics, they may not be able 
to get an appointment with a doctor before their medication runs out.
       Changing to a plan that covers the drug in question. Unlike most 
Medicare beneficiaries, dually eligible beneficiaries are allowed to 
change plans whenever they want to, with their new coverage effective 
the month following their action to change. Changing plans, however, is 
difficult and not without risks. First, the number of average cost 
plans in each region ranges from six to eighteen and the systems 
available to help beneficiaries know what each plan covers require 
access to high speed Internet service and a printer. Few dual-eligibles 
use the Internet, so to make use of these decision supports, a 
beneficiary must generally get help from someone else. The programs 
that are funded to counsel beneficiaries are overwhelmed by people 
needing such assistance and by the many difficulties that have arisen 
during the first months of the program.
       Moreover, processing new enrollments in a plan is complex, 
requiring communication between the old plan, CMS, the new plan, and 
another government contractor. The information takes days to weeks to 
run through the system; a change made toward the end of the month will 
not show up in the system until later the following month, making it 
difficult to purchase drugs in the first part of the month.
       Finally, plans can change the drugs on their formularies at any 
time, with 60 days' notice to individuals taking the drugs in 
question.\4\ Even an intelligent choice of a plan covering all of a 
beneficiary's current drugs could be for naught, if the plan removed 
some or all of those drugs from its formulary two months later. An 
April 27, 2006 Memorandum from Abby Block of CMS to Part D Sponsors, 
``Formulary Changes during the Plan Year,'' suggests that plans 
continue to cover a drug for any plan enrollee who is currently taking 
the drug even after the plan removes the drug from its formulary for 
other enrollees. Unfortunately, this CMS Memorandum to exempt current 
enrollees from formulary changes involving their current drugs is not 
binding on any plans. This Memorandum, like the rest of the policy 
guidance issued by CMS to implement much of Part D, has not gone 
through the Administrative Procedure Act notice and comment rulemaking 
process, and does not have the same legal effect as the statute and the 
implementing regulations.
---------------------------------------------------------------------------
    \4\ Note that the regulations specifically allow Part D plans to 
change their formularies. 42 C.F.R. Sec. 423.120(b)(5),(6).
---------------------------------------------------------------------------
       The consequences to beneficiaries are enormous, as these client 
experiences demonstrate.

          It was extremely stressful to get a plan picked out that 
        would even cover my medicines, I'm disabled not old and every 
        step of the way has been a battle. The insurance company 
        STINKS. I have to fight for nearly every prescription. From 
        getting the right generic to one they prefer. It's almost like 
        they are my Dr, not the insurance plan. I have had to go the 
        the ER several times becuase I was forced to wait or fight for 
        meds that would have helped. I also have athsma and now they 
        are denying my singulair, suddenly some crap about needing pre-
        approval. This is some of the worst insurance ever. Medicare 
        Part D is one of the worst things the Bush administration has 
        done.
    -- E-mail dated April 26, 2006, from a 35 year old female in 
Hawley, Minnesota.

          My other half has AIDS and our pharmacist suggested that we 
        go with AETNA because it covers all his HIV meds as well as all 
        the other meds he's on. So we signed him up for it and now it 
        seems like each month they are not wanting to pay for certain 
        non-HIV medications. They want him to take something else. One 
        of those is to prevent him from getting pneumonia. It's 
        Bactrum. Their formulary on-line says they will pay for it, but 
        their letters keep saying they won't. After one month he's 
        already into the catastrohic coverage part because of all the 
        meds he's on. Every month it's a different story, a different 
        medication is being denied. What gives them the right to play 
        doctor with people's lives?
    -- E-mail dated April 26, 2006, from a 42 year old male in Land o 
Lakes, Florida

       Center for Medicare Advocacy Recommendations:

        (1)  Exceptions processes should be uniform for all plans, with 
        a single form made available to all physicians and pharmacists;
        (2)  Plans should be prohibited from removing drugs from their 
        formulary during the plan year;
        (3)  More money should be made available to programs that 
        provide individualized assistance to beneficiaries.

       3. Plans' transition policies have been difficult to get and 
difficult to enforce at the pharmacy level.
       Each plan is required to have a transition process to address 
the situations of new enrollees who are taking drugs not on the plan's 
formulary. The transition policies include special focus on the needs 
of dually eligible beneficiaries. While issues with transitions have 
been prominent in the early months of Part D because the entire program 
was ``transitioning'' into existence, transitions will occur every 
month as new enrollees join plans, and especially every January, after 
major plan shifting has occurred during the annual enrollment period in 
November and December.
       CMS asked plans to extend the transition coverage of non-
formulary drugs through the end of March, so that beneficiaries could 
get a 90-day supply. Such an extension was voluntary on the plans' 
part. And, even after the extension request, dually-eligible and other 
beneficiaries are coming away from the pharmacy with no prescription, 
or with just a few days' supply of pills.
       Moreover, the transition is merely to allow the beneficiary to 
change drugs, change plans, or request an exception so that her drug 
can be covered even though it is not on the formulary. But many 
beneficiaries are not receiving the notices they are supposed to get 
telling them what they should do next. For example, Center staff spent 
many hours during February and March 2006 helping a woman in California 
get coverage of a prescription that she had been taking for 35 years 
for a chronic condition. (Part of the problem was that the plan could 
find no record of her enrollment until mid-February.) She contacted us 
last week to say that, although she had received the prescription in 
February and March, the plan was once again telling her that the drug 
was not covered. We suspect that she got the drug in February and March 
under the transition process, and now the plan wants her to go through 
the exceptions process--again--to get her medically necessary drug.
       A 58-year old male from Jellico, Tennessee commented to the 
Center via e-mail about the transition process:

          I Called First Premier Health(my Provider For Part D to see 
        if All My Medications Were Covered before I Signed on With 
        Them, They Assured Me They Were, After 2 Month's They Wrote Me 
        A Letter Saying that My(Pravachol) Was No Longer Covered, I Had 
        to Try Alternative Meds First, Hell I've Tried Them All, 
        Pravachol Works The Best For Me, I've Been On It For Over 4 
        Years Now!! This Does Not Make Any Sense!!! Thank You!! I Have 
        Always been Taught When Something Works Real Well For You, Stay 
        With It!!!!

       Center for Medicare Advocacy Recommendations:

        (1)  Transition policies should be uniform across plans and 
        easily made known to beneficiaries and pharmacists;
        (2)  Plan call lines, for pharmacists to get instruction to 
        override codes, should be required to operate 24 hours a day, 
        seven days a week;
        (3)  CMS should enforce contract requirements of plans.

       4. Dually eligible beneficiaries using long-term care services 
are treated differently depending on where they receive the services.
       Dually eligible beneficiaries are provided the best Part D 
subsidy available under the law. They pay no premium (for an average 
cost plan) or deductible, have no coverage gap (doughnut hole) and no 
cost-sharing at all after they reach the catastrophic coverage 
threshold. Their co-payments vary from $0 to $5, depending on income or 
place of residence.
       Dually eligible beneficiaries residing in nursing homes and 
certain other institutions have no co-payments, since they pay all but 
a very small amount of their income over to the institution that is 
caring for them. Dually eligible beneficiaries who are getting their 
long-term care services in assisted living facilities, board and care, 
and other similar community settings, however, are treated differently 
and may have co-pays as high as $5 per prescription (for typically more 
than 10 prescriptions), even though they, too, must pay most of their 
income to their care provider and even though their care needs are 
similar to those of nursing home residents.
       Center for Medicare Advocacy Recommendation: All dually eligible 
beneficiaries receiving long-term care services should be treated 
similarly and should have no cost-sharing obligations, since most of 
their income is given over to the provider of service.
       5. Dually eligible beneficiaries have lost Medicaid as secondary 
coverage.
       The most common interrelationship between Medicare and Medicaid 
is that Medicare is the first payer for services and Medicaid picks up 
where Medicare coverage stops. This is not true under Part D. Medicaid 
is prohibited from paying for drugs that are covered by Part D. For a 
state to provide the kind of ``wrap around'' coverage that is typical 
for other services, it must use its own money, without any federal 
contribution. According to the Inspector General of the Department of 
Health and Human Services, only four states have indicated they will 
provide some kind of coverage for drugs that are not on a Medicare 
plan's formulary.
       Part D imposes prescription drug co-payments for the first time 
on a substantial number of dual eligibles, including the 1 million dual 
eligibles in California (approximately one-sixth of the dual eligible 
population). While the co-payments for duals are supposed to be 
minimal, for someone living on $817 (100% of the federal poverty level 
for an individual) or less each month, $3 per prescription is a 
fortune. As a beneficiary from New York wrote to the Center recently, 
she lives on Social Security disability benefits and cannot afford to 
pay the $3 co-payment every time she goes to the pharmacy.
       For some dual eligibles who previously qualified for Medicaid on 
a ``spenddown'' basis, the advent of Part D means they will lose all of 
their supplemental health coverage. A 60-year old client from Milford, 
Connecticut, who has Hepatitis C, has long alternated between Medicaid 
and ConnPACE, the state pharmacy assistance program, to help with 
prescription costs during his spenddown periods. He takes several very 
expensive medications and qualifies for the low-income subsidy. In 
fact, prior to Part D, when the entire cost of his medication--
including the portion paid by ConnPACE--was applied against his 
spenddown, he usually met his spenddown obligation in less than one 
month. With the advent of Part D, only that portion which he pays--his 
$2 and $5 LIS co-pays--will count against his spenddown obligation. Our 
client correctly perceives that he will probably never meet his $3,000 
spenddown obligation at this rate. He currently is in need of an 
expensive medical test that he cannot afford, and is having difficulty 
finding a provider who will accept him as a patient as he no longer has 
Medicaid coverage and is unlikely to obtain it in the future.
       Center for Medicare Advocacy Recommendation:

        (1)  Amend the law to provide dual eligible coverage for 
        prescription drugs, just as it exists for other health care 
        services, including federal matching funds for state 
        expenditures;
        (2)  Amend the law to allow Part D drug costs, including the 
        low-income subsidy, to count toward Medicaid eligibility based 
        on spenddown.

       6. Individuals with Medicaid will experience a gap in 
prescription drug coverage when they first become eligible for 
Medicare.
       Individuals with Medicaid lose their Medicaid drug coverage on 
the first day of the month that they become eligible for Medicare, even 
if they have not enrolled in a Part D plan. The state will transmit 
information about them to CMS when the state becomes aware of their new 
dual eligibility status. It is unclear, however, whether and when 
states will have that information. In addition, states often send 
information to CMS about new dual eligibles only once a month, 
generally at the end of the month. CMS may not be able to enroll a new 
dual into an eligible plan in time for drug coverage to begin the 
following month. CMS has indicated that Part D coverage will be 
retroactive, but it is unclear how duals will pay for their 
prescriptions while coverage and plan enrollment is being determined.
       New dually eligible individuals can use the Point of Service 
(POS) option at the pharmacy that facilitates enrollment into the point 
of service contractor. The contractor will then inform CMS so that the 
individuals can be enrolled into a plan. Under the POS option, the 
pharmacy distributes a 14-day supply of medicine to the individual, 
with the possibility of an additional 14-day refill. Individuals who 
try to get prescriptions under this option at the beginning of a month 
may not have sufficient medicine to last until they are enrolled in a 
Part D plan.
       Center for Medicare Advocacy Recommendation: Identify Medicaid 
recipients who are about to become Medicare eligible sufficiently in 
advance to auto-enroll them in a Part D plan before they lose Medicaid 
drug coverage. Alternatively, continue Medicaid drug coverage for these 
individuals until they are enrolled in a Part D plan.

Conclusion
    Many of the problems and issues described above arise from or are 
complicated by the number of plans available and the fact that each 
plan has its own design, including formulary, transition processes, 
exceptions and appeals processes. Virtually no uniformity exists or is 
required.
    Even after beneficiaries, their families, and their advocates spend 
hours and days on the phone trying to resolve issues with their Part D 
plans and with CMS, there is still no guarantee that the problem will 
be resolved. Our client, Mary F., from Willimantic, Connecticut, 
exemplifies the problem. She gets by on limited income, and it is not 
unusual at the end of any month that she is down to her last $5 in 
quarters for her laundry. She takes several medications, among them a 
pain reliever for severe gout. She is on ConnPACE and a Medicare 
Savings Program. She has documentation that she was awarded the full 
100% low-income subsidy, and thus should be paying $2 or $5 for co-
pays. However, Medicare has informed her plan that she qualifies for a 
partial subsidy, with 15% co-pays. Mary cannot afford to pay even 
ConnPACE's $16.25 co-pays and, therefore, has gone without a new pain 
medication her physician prescribed a week ago. She is owed over $70 in 
co-pay overpayments to her pharmacy and has been told it may take up to 
10 weeks to be reimbursed. Despite repeated efforts on the part of the 
Center, as well as CMS's intervention in this case, the problem 
persists.
    Overall Center for Medicare Advocacy Recommendations: Create a 
single, standard Medicare prescription drug benefit, administered by 
the Medicare program, that is uniform nationwide. Require CMS to 
oversee the program with mandatory due process standards.
    Thank you for the opportunity to submit this written statement. We 
look forward to working with Congress to ensure that elders and people 
with disabilities have access to a meaningful and affordable Medicare 
prescription drug benefit.

                                                       Judith Stein
                                                 Executive Director

                                                    Patricia Nemore
                                             Senior Policy Attorney

                                                     Vicki Gottlich
                                             Senior Policy Attorney

                                 
          Statement of Shannon Collins, San Rafael, California
    I am writing to give testimony regarding my experience with 
Medicare Part D.
    I became disabled 15 years ago due to back problems. I found myself 
in the Medicare system at an early age, coming from excellent health 
insurance that was paid for by my employer. As a disabled person my 
Medi-gap options were severely limited. Given the few choices I had, 
Kaiser's Senior Advantage Plan was my best option.
    Prior to the start of the Medicare Drug Plan, Kaiser already 
included a drug benefit as part of their Senior Advantage Plan. It has 
changed form during the time I've been a member, but for the past two 
years (2004 and 2005) the plan consisted of unlimited generic brand 
coverage at a cost of $10 for a 100 day supply. (This cost was the same 
whether the drugs were picked up at a Kaiser pharmacy or obtained 
through mail order.)
    With the advent of the Medicare Drug Plan my monthly membership 
premium increased from $70 to $101. The co-payments for generic drugs 
tripled to $30 for a 100 day supply if picked up at the pharmacy. If 
obtained through mail order, the cost is $20 for a 100-day supply--
still twice as much as it cost last year.
    Although brand-name coverage has been added, the copayments are 
quite steep--$120 for a 100-day supply if picked up at the pharmacy, 
and $80 if obtained through mail order. Unfortunately, Kaiser has also 
added the infamous ``doughnut hole'' so I am doing my best to avoid 
brand-name drugs because their higher price will put me on the fast 
track into that hole.
    Diazepam is one of the generics I take. It's in a class of drugs 
known as the ``benzodiazepines.'' I've used diazepam for many years to 
help with muscles spasms and migraine headaches. I'm intolerant of many 
drugs, and this one has been a lifesaver for me. Until this year I was 
always able to get it through the Kaiser pharmacy. However, for 
questionable reasons, Medicare has opted to exclude the benzodiazepines 
from their formulary. Rather than wade through the appeals process, I 
am purchasing the drug at Costco (the cheapest source I've found).
    When I contacted Kaiser about my rate increases they blamed 
Medicare. When I contacted Medicare, they blamed Kaiser. In fact I'm 
not certain who is responsible; I just know I'm paying two to three 
times more for my prescriptions than I did last year--and I know I'm 
not alone. Although some people are benefitting from this plan, 
millions are not.
    I would like to see the enrollment deadline for Part D extended 
through the end of this year. Then I would like to see the plan 
overhauled, starting with making Part D a part of traditional Medicare 
where drug prices are negotiated and the doughnut hole eliminated. 
Perhaps then, this mess that's been called a benefit, might be on it's 
way to truly becoming one.

                                 
                      Statement of Therese Emerick

    Thank you for the opportunity to submit my testimony regarding the 
implementation of the Medicare Part D prescription drug program. I 
appreciate the steps that Congress and the administration has taken to 
ensure that people with Medicare have access to medically necessary 
medications, including the extension of the 2006 transition period and 
the special enrollment period for people who qualify for the Extra Help 
low-income subsidy program.
    While I do not officially represent an organization, but I know 
that I am not alone in my sentiments or experiences. The comments below 
arise from my own experiences with the new Medicare prescription drug 
program.
    At the age of nine, I began having grand mal seizures. For the next 
eight years, I tried numerous anti-convulsants, none of which 
controlled my seizures. Once, I even had a toxic reaction to a then 
commonly prescribed anti-convulsant. At age 17, my seizures were 
finally controlled by the following regimen: Dilantin Dispense as 
Written (DAW), Tegretol (DAW), and Phenobarbital. With these medicines, 
I was able to go about my life in a normal way. I graduated high school 
and completed my bachelor's degree from Wayne State University in 
Detroit, Michigan.
    At age 31, I sustained a traumatic brain injury on the job leaving 
me unable to continue working. Shortly thereafter I was deemed eligible 
for Social Security Disability and Supplemental Security Income (SSD/
SSI) making me eligible for Medicaid and two years later Medicare. My 
monthly income is approximately $620.00 per month which includes my SSD 
and SSI. In addition to that, I receive approximately $100.00 per month 
in food stamps, and currently hold a Section 8 housing voucher.
    I am one 6.2 million people moved overnight from Medicaid 
prescription drug coverage to a private Part D prescription drug plan.
    Prior to January 1, I had good, affordable, reliable health 
insurance coverage through Medicare and Michigan Medicaid.
The Transition to Part D
    In July 2005, I received a form letter from the Michigan Department 
of Community Health (MDCH form B 05-05) that read:

          ``The Federal Government is changing how your drugs will be 
        covered. Starting January 1, 2006, Medicare will pay for your 
        drugs instead of Medicaid. Look for information that Medicare 
        will mail to you. Your costs will depend on which plan you are 
        enrolled in. Later this fall Medicare will assign you to a drug 
        plan. You can then:

                  ``1) Stay in the plan that Medicare assigns to you; 
                or
                  ``2) Pick a different plan that covers your drugs.
                  ``Help is free and a phone call away.
                  ``The letter then referred any questions to 800 
                numbers to the following agencies:

                          ``Michigan Medicare/Medicaid Assistance 
                        Program, Medicaid Beneficiary HelpLine,
                          1-800-MEDICARE or the Medicare Web site at 
                        www.medicare.gov.''

    I contacted of the all agencies listed in the letter. I looked at 
the Medicare Web site. I received no clear answers about how this would 
affect prescription coverage under Medicaid.
    When I asked my caseworker, she told me that ``We are still waiting 
for the details of how this is going to work.'' When I contacted my 
state and federal representatives and I similarly was told that the 
details have not been worked out.
    In November, I received a letter notifying me that I was enrolled 
in PacifiCare's Part D plan. Per the letter's instructions, I called 
the plan repeatedly to determine whether or not my prescriptions would 
be covered, but I was unable to get through to a counselor.
    When I finally did speak to a representative, I was told that I had 
to check my medicines on the plan's Web site. At the time, my computer 
was being repaired, and, access to the Internet at the public library 
is restricted, leaving me unable to check my medicines with those 
listed on my assigned plan's formulary.
    Further complicating this transition, in December, I caught a virus 
that had the symptoms of a severe cold. Even though I was sick, I 
continued to call the Medicare helpline and my plan repeatedly to find 
out more about the Part D coverage that I was assigned to. Again, there 
were long hold times. In many instances, I hung up in frustration. I 
tried calling these help lines at different times of the day in order 
to reach a real person, but I was unsuccessful.
    Finally, I went to the Family Independence Agency and discussed the 
situation with my caseworker. With her help, I reached a plan 
representative who explained I would be receiving a card in the mail.
    I did not receive my card until the first week in January, a couple 
of days after I had called in my prescriptions for January. The 
pharmacy needed to see my membership card before they would dispense my 
medicines so I had to wait two days until my enrollment packet arrived 
in the mail. Luckily, I had stockpiled some of my medicines, so I did 
not have to go without.
    The thought that I might have to go without my medicines was 
terrifying.
Currently under Part D
    For now, I am receiving all of my prescriptions through my Part D 
plan. I pay $8.00 in copayments every month. That amount is more than I 
paid prior to the transition. Previously, I paid $1.00 per 
prescription. The increase in price may seem like a small amount to 
most. Due to the amount that I receive monthly ($620.00 SSD/I), I have 
had to make hard choices including, but not limited to, paying my 
utilities bills late or making partial payments (resulting in my 
incurring repeated late charges), eating and medicine.
    I will not go without the necessary medicines that is needed to 
control my epilepsy. The consequences of going without could invoke a 
condition called ``status eppillepticus.'' Status epillepticus is non-
stop seizures that require immediate hospitalization. It is often 
fatal.

Recent Correspondence From PacifiCare
    I recently received an Explanation of Benefits (EOB) from 
Prescription Solutions from PacifiCare. It reads in part:

          Amount Paid For Prescriptions

    ``You and/or others who have paid for your prescriptions have spent 
$334.47 in co-payments and/or co-insurance this year. In addition, this 
amount also includes any extra help that you get paying for your drugs. 
This amount may include payments made by your current or former 
employer/union, other insurance plan or policy. This counts toward your 
initial coverage limit.
    Prescription Solutions from PacifiCare has paid $288.67. These 
payments count toward your initial coverage limit.
    Together $623.04 has been paid by Prescription Solutions from 
PacifiCare, you and/or others. This is the total that counts toward 
your initial coverage limit.''
    The different amounts listed cause me a great deal of concern. I 
have received information from multiple sources providing me 
conflicting information about whether or not I will fall into the donut 
hole--pay 100% of my prescription drug costs.
    I do not understand why three different amounts are listed in the 
correspondence from PacifiCare. Nor do I understand other terminology 
that is being used in the letter and how it applies to me.
Solutions
    Part D needs to be reformed so all that are eligible will receive 
the medically necessary prescriptions at an affordable cost.
    First, an extension in the enrollment period is needed for those 
who are eligible. Determining which of the many plans offered best suit 
their needs and budget require a detailed understanding of computer/
internet use, the technicalities of pharmaceuticals and the regulations 
on each policy. In addition, those who are eligible for Part D should 
not be forced into choosing a program that may not suit their needs out 
of the fear of increased premiums, or lack of coverage until the next 
enrollment period. Finally, an example of the penalty information was 
listed on the medicare.gov Web site as opposed to the penalty formula. 
(http://www.startribune.com/484/story/400980.html)
    Second, the donut hole must be eliminated. Michael Leavitt, 
Secretary of Health and Human Services, gave a reason for the 
elimination of the donut hole. He recommended that ``insurance 
companies to allow patients to have more than a month's supply of 
prescription drugs on hand at a time, in case of emergency.''
    (http://www.casperstartribune.net/articles/2006/03/11/news/wyoming/
0af12a4b085e81da8725712e000501c8.txt)
    It is impossible for those on a fixed income after they reach the 
donut hole, to obtain their medicines, as their prescriptions are 
unaffordable.
    Third, the heavy reliance on ``step therapies'' that were described 
in reports by Rep. Henry Waxman should be not applicable to those who 
have a documented medical history in which step therapies prolonged an 
illness.
    Fourth, the insistence on the use of generic drugs must be waived 
if it has previously been documented in one's medical history that 
generics do not alleviate symptoms of a serious medical condition. A 
second reason for this is the situation that many prescription drugs do 
not have a generic equivalent. Yet another reason would be if a person 
had previous medical documentation of a sensitivity/allergic reaction 
to a generic drug. Extensive medical expenses can be incurred in 
determining if, in fact, any other type of medication/a different 
course of treatment would suffice.
    Fifth, the appeals process needs to be streamlined and 
standardized, with the goal of its elimination. Many who currently have 
Part D have been taking the same medications for years. Sudden changes 
or withdrawals from certain medications can cause serious health risks 
that can be fatal.
    Part D must provide coverage for all necessary medications. It is 
not the place of any insurance carrier to second-guess medical advice. 
It is the function of a Part D insurance carrier to provide reliable 
prescription coverage at an affordable price.
    According to a BBC report, dated June 27, 2003, President Bush made 
the following claim. ``Seniors have waited too long for more choices 
and better benefits, including prescription drug coverage, similar to 
the kind now enjoyed by federal employees and members of the 
Congress.''
    (http://news.bbc.co.uk/2/hi/americas/3026856.stm)
    Due to the five restrictions/limitations on Part D, it is not 
similar to the benefits and prescription coverage ``now enjoyed by 
federal employees and members of the Congress.''
    Elected officials are public servants, representing their 
constituents. In effect, their constituents are their employers. One of 
the essential functions of a job description could read: to represent 
the will of the people in this country and to vote their concerns on 
issues that have a direct impact on their health and well being.
    Taking that analogy a step further, it is necessary to ask a 
question. Why should the employee be compensated with a better health 
care package that is paid for, in tax dollars, by the employer, with 
many of the employers having substandard, if any health coverage?
    The answer is that establishing a single payer health care system, 
including prescription, dental, and vision/optical coverage is 
necessary. This would result in the savings of approximately $286 
billion in paperwork alone, according to Physicians for A National 
Health Program (PHNP). (http://www.pnhp.org/news/2004/january/
national_health_insu.php)
    The ideal single payer health care system would not require prior-
authorizations for prescriptions, would eliminate pre-existing 
conditions and/or other regulations that interfere with the best 
medical advice of his/her physician when determining the necessary 
course of treatment.
    To achieve the goal of a single-payer health care system, it is 
necessary to recall the words of the late Walter Reuther, to the 
American Public Health Association, in 1968:
    ``We must first free ourselves of the illusion that we really have 
a health care system in America. What we have is a disorganized, 
disjointed, antiquated, obsolete non-system of health care. Consumers 
are being required to subsidize a non-system that fails to deal with 
their basic health care needs and the cost of that system is continuing 
to skyrocket.'' (http://www.uaw.org/atissue/atstory.cfm?atId=129)

                                 
  Statement of Linda Fullerton, Social Security Disability Coalition, 
                           Rochester New York

    Disabled and senior citizens definitely need a prescription drug 
plan under Medicare, but Part D as it is now, is a failure. Under my 
HMO Part D plan, I pay more now for each drug I need, than on my HMO 
provided drug plan before Part D took effect. My monthly HMO premium 
doubled, and I still have additional co-pays for each drug, with less 
choices. I recently got major sticker shock when I went to my pharmacy. 
I was told that one drug I was just prescribed would cost me over $100 
since it was not on my drug plan's formulary. I was instantly forced to 
make a decision that I never had to before. Do I not eat for 2 weeks, 
go without health insurance for two months, or do without two other 
medications I need for a year? Since I am on Social Security 
Disability, my only choice was to do without the $100 medicine and walk 
out. As a result of this experience and many other horror stories that 
I have heard I have come to the following conclusions:
    Currently disabled Americans are forced to wait 2 years to be 
covered under Medicare A, B, or D. That needs to change. Coverage under 
all parts of Medicare must start immediately for them, upon disability 
date of eligibility.
    There should never be penalties for those who do not enroll in 
Medicare Part D or any other portion of the Medicare program. Medicare 
is supposed to be there to keep people healthy, not force them into 
having coverage, and penalize them into poverty for the rest of their 
lives, if they miss a sign up deadline. Medicare should be a healthcare 
program that rivals any private insurance coverage offered, and one 
that people would rush to sign up for on their own without the fear of 
penalties.
    Give Americans continuous TOTAL drug coverage by removing these 
deductibles and gaps in coverage:

          Currently you pay 25% of your yearly drug costs from $250 to 
        $2,250, and your plan pays the other 75% of these costs.
          Then you pay 100% of your next $2,850 in drug costs.
          Then you pay 5% of your drug costs (or a small copayment) for 
        the rest of the calendar year after you have spent $3,600 out-
        of-pocket.

    These sorts of stipulations are very confusing and harmful to those 
who desperately need life saving prescription medicines, especially 
those with terminal or chronic illnesses that can least afford it.
    Revise the Part D plan to allow Medicare beneficiaries to enroll in 
a SINGLE drug plan provided directly by Medicare so that premiums, 
deductibles, and co-payments, would be the same for everyone. This drug 
plan would be the same as the one currently in place for all other 
Medicare benefits. Those who want to enroll in a private plan for drug 
coverage could still do so, just as is allowed for other Medicare 
benefits. Under this proposed plan Medicare could only remove drugs 
after one year and must set up simplified appeals procedures so 
doctors/patients would always be guaranteed access to ALL medicines 
required to insure proper healthcare for patients.
    HMO's are getting huge drug contracts under the current plan but 
not passing on the savings to consumers. Many are even paying more for 
their drugs than they were before Part D took effect when co-pays and 
premiums are factored in. They are also forcing their subscribers to 
use their Part D plans or lose their health insurance coverage in their 
HMO plan. This practice should be made illegal as it restricts a 
patient's ability to shop for the best Medicare Part D plan to suit 
their needs.
    The current Medicare Part D plan is is an outrageous sell out 
(pharmaceutical payola) to the drug companies as there is no provision 
for Medicare to shop for the best drug prices. That needs to be changed 
to allow Medicare to freely shop for the most cost efficient medicines 
and increase the types of medicines available on the Part D formulary. 
Medicare must also work with the FDA to lower the amount of time that 
drug companies can hold patents so that more generic drugs are 
available in the marketplace which would lower drug prices across the 
board.
    Congress should also pass Federal regulations (similar to those 
governing the tobacco industry) that prohibit the pharmaceutical 
companies from advertising their ``prescription only'' products to the 
general public, as this has greatly driven up the price of medicines in 
order to pay for these types of ``commercials.''
    During the Medicare Part D sign up campaign there has not been 
enough properly trained staff to answer questions accurately or in a 
timely manner. Congress needs to fund this program properly so more 
well trained staff are put in place to handle the increased work load 
that the Medicare Part D implementation has imposed on the Medicare and 
Social Security programs. These increased staff levels must be 
maintained for Medicare as a whole and Social Security, even after the 
intial signup dealine has passed, since the number of people eligible 
for these benefits is only going to increase over time as the American 
population ages at a faster pace compared to decades of the past.
    Many disabled and elderly citizens are still having to decide 
whether or not to eat, pay heat/utility bills, give up other 
necessities in life, or go without their medicines instead. This is 
America, and there's no excuse for anyone in this country, to be forced 
into making those sorts of agonizing choices. In closing please keep in 
mind, as we will be sure to, that this is a crucial election year for 
many Congressional positions. Your ability to reform this vital 
healthcare program in an expedient manner, will be a very important 
factor in our voting decisions come November. Thank you for your time.

                                 ______
                                 
    Sign the Social Security Disability Reform Petition--read the 
horror stories from all over the nation:

           http://www.petitiononline.com/SSDC/petition.html

    Social Security Disability Coalition--offering FREE knowledge and 
support with a focus on SSD reform:

           http://groups.msn.com/SocialSecurityDisabilityCoalition

    Please check out my website at:

           http://www.frontiernet.net/lindaf1/bump.html

    ``I am disabled and my vote counts too!''

                                 

                                       Durham, North Carolina 27707
                                                        May 2, 2006

To the Honorable Members considering ``D''

    I am 69 years old, born January 26, 1937, supposedly retired, still 
working, even with Social Security, because I believe those who have 
been more blessed must help those less advantaged.
    After I turned 60, like most folks, my health began to deteriorate, 
although it is improving since January 2005; I've lost 62 pounds on the 
South Beach Diet and I swim 30 laps every two days. By doing this, and 
thanks to daily doses of Beta Blockers, HCTZ, Lipitor, Colazol, 
Lisinopril, Protonix, Plavix, Aspirin, and Coreg I have been able to 
eliminate the Insulin, Glipizide, and Metformin I was taking for my 
Type II Diabetes and reduce my cardiovascular medicines by 50%, despite 
the fact I had a very irreguler cardio rhythm in 200 that required 
Cardio-version, that's when they give you general anasthesia, hit you 
with a 100 volts stopping your heart; it took them 200 volts to start 
it back.
    On January 1, 2006 I chose to drop the AARP J Pharmaceutical 
Supplement (50% Co-pay up to $3,000) and pick up D. On March 5, 2006 I 
hit the ``doughnut''; that day three of my drugs for 30 days cost me 
almost $400.00; this month they'll cost me close to $1,000. It turns 
out that the most expensive drug, Colazol, manufactured right here in 
the RTP by Salix Pharmceutical costs me and medicare about $2.00 for a 
750mg capsule; the same drug, purchased by my sister, married to a 
British Diplomat at The Conseil d'Europe, is less than one third of a 
Euro, about $0.40. Now folks, there is no reason for America to pay 
four times what every other country in the world pays for drugs made in 
our own back yard. Think about it; it is just stupid to allow this 
Administration not to be forced to demand equal to lowest global price 
purchasing.
    Gentlemen, please, stop taking contributions when you run for 
Congress from the Pharma Lobbiests; wake up and smell the roses. Come 
November there will be retribution for this really unfair 
pharmaceutical pricing to the American elderly.
    If Bush and Cheney are not working hand in glove with the 
petrochemical cartel to allow ridiculous pricing on imported oil there 
is not a cow in Texas; everyone knows his family is in partnership with 
the Saudi rulers and Aramco as well as with the Emir of Kuwait. If you 
think the dollar is in trouble now, just wait; in three months several 
major middle eastern producers will be demanding payment in Eoros and 
will not accept dollars. The day that happens the dollar will exchange 
at about $4000 for E100! Our purchasing power in global markets will be 
nil. It is really amazing how we could have again be sucked into a 
ground war in Asia that we can not win; we did not learn a thing from 
either the British or the Russians; people that don't read history, or 
listen to their own intelligence assets or analysts, are doomed to 
repeat all the old, dumb, mistakes.
    By the way, if you were to slap a 10% surcharge on net taxable 
income above $360,000 up to $600,000; and a 20% surcharge on 
incremental earned and investment income above $600,000, re-instate a 
10% inheritance tax on estates with FMV above $2,000,000; and increase 
Capital Gains taxes to 20% on assets held less than 5 years, and 
eliminate Social Security and Medicare Taxes, your pro-form Federal 
Budget for fiscal 2007, including free basic medical and Rx for all, 
and doubling Veterans' benefits, would go from a trillion dollar 
defecit to a $500 billion dollar surplus. Do what is right and not what 
is politically expedient to pay off your major contributors.
    Thank God and the United States Congress that this great nation 
requires that our Metropolitan, Regional, and Community Trauma Centers 
and Emergency Rooms must give free timely treatment to all sick and 
injured people irregardless of whether they have any money or medical 
insurance, but please, again, wake up and smell the roses. These City 
Class A Trauma and disease centers are overwhelmed. 40% of their 
incoming case load has zero insurance, and a large majority of the 
balance is either on Medicare or Medicaid.
    For God's sake NOW PROPOSE AND PASS A NATIONAL FEDERAL 100% 
PHYSICIAN MANAGED NATIONAL HEALTH INSURANCE BASIC DIAGNOSTIC AND 
TREATMENT COMPREHENSIVE CARE SYSTEM. DEMAND THAT THE ADMINISTRATORs, 
SUPERVISORS, and AUDITORS ONLY ARE PAID 10% IN TOTO FOR MANAGING THE 
PROGRAM. FUNDED IT WITH INCOME TAX ONLY. GIVE THE MONEY TO THE STATES, 
DISTRIBUTED BY POPULATION, STATE BUDGET INCREASE MODIFICATIONS BASED ON 
UNPREDICTABLE NATURAL AND CIVIL DISASTERS. PLEASE, JUST TELL THE 
PHARMAS THE UNITED STATES WILL ONLY BUY PHARMACEUTICALS AT THEIR LOWEST 
MATCHED PRICE SOLD ANYWHERE IN THE WORLD.
    BAN CONFLICTED ``GIFTS'' TO CONGRESSIONAL LEADERS, MEMBERS, 
SENATORS, AND COPY THE FRENCH WHEN IT COMES TO CAMPAIGN REFORM. THE 
GRAFT, and PAYBACKS, SMELL!!!

            Have a Great Day. Good Luck!

                                                  W.M. Harrison Jr.

                                 
 Joint Statement of Health and Disability Advocates and Make Medicare 
                   Work Coalition, Chicago, Illinois

    Created shortly after the passage of the Medicare Modernization Act 
of 2003, the Make Medicare Work Coalition (``MMW'') is headed by three 
principal partners headquartered in the Chicagoland area: Health & 
Disability Advocates, AgeOptions (formerly known as the Suburban Area 
Agency on Aging) and the Progress Center for Independent Living. The 
Make Medicare Work Coalition was organized to respond to the 
significant challenges posed to states, Medicare consumers and health 
care providers by the Medicare Modernization Act of 2003. The MMW's 
goal is to marry public policy development with targeted education, 
outreach and enrollment efforts. In addition to the three principal 
partners, the Make Medicare Work Coalition includes over 500 service 
providers representing thousands of individual advocates in Illinois, 
all of whom have been assisting Medicare beneficiaries on a daily basis 
in navigating the new Part D benefit.
    Together, our membership has counseled and advised hundreds of 
thousands of Medicare beneficiaries on Part D throughout the state of 
Illinois. In addition, the policy group has been involved in all major 
public policy issues involving implementation of Part D on a local and 
national level. This includes working to assure a smoother transition 
for dual eligibles to Medicare Part D, the continuation of Patient 
Assistance Programs, assisting AIDS Drug Assistance Programs nationwide 
in changing their programs to work with Part D, and supporting the 
efforts of the state of Illinois in its design of coordination and 
implementation of Illinois Cares Rx (the qualified State Pharmaceutical 
Assistance Program in Illinois) with Medicare Part D.
    It is through this direct experience of working together to assist 
Medicare beneficiaries throughout Illinois that we submit the following 
observations and recommendations on improving the Medicare Part D 
benefit:

          1. CMS should extend the May 15 deadline for enrolling in 
        Medicare Part D. Or, in the alternative, all late penalties for 
        the calendar year of 2006 should be waived.
          The roll-out of Medicare Part D is the largest expansion of a 
        public benefit since the 1960's. While there are strong 
        differences of opinion on many issues regarding Medicare Part 
        D, all agree that it is important for beneficiaries to make an 
        informed choice about enrolling in a Medicare Part D plan. Our 
        Coalition is working with Medicare beneficiaries everyday to 
        assure that these informed choices are being made. But, at an 
        average investment of 1 hour of uncompensated time per 
        beneficiary, we are running out of time. And, we have not 
        reached everybody.
          Six and a half million of the sixteen million or 40 percent 
        of Medicare beneficiaries who lacked prescription drug coverage 
        prior to January 1, 2006, still have not enrolled in a 
        prescription drug plan. Given these numbers, our job is not 
        done. By extending the deadline, our Coalition and others like 
        us throughout the country can reach more beneficiaries. 
        Naturally, beneficiaries are hesitant to sign up for a benefit 
        that is as complex as Medicare Part D is. Indeed, studies have 
        shown that even much simpler programs, such as food stamps, are 
        unable to sufficiently reach all of those that are eligible.\1\ 
        We owe it to our Medicare beneficiaries to allow them more time 
        to navigate this system. It will only lead to increased 
        enrollment and a more robust program.
---------------------------------------------------------------------------
    \1\ Access to Benefits Coalition, Pathways to Success: Meeting the 
Challenge of Enrolling Medicare Beneficiaries with Limited Resources 
(Washington: National Council on Aging, 2005) (citing several studies 
on enrollment numbers in other public programs).
---------------------------------------------------------------------------
          If the enrollment deadline is not extended, the late 
        enrollment penalties should be waived the remainder of this 
        calendar year. Seniors and individuals with disabilities should 
        not be punished for failing to sign up for Medicare Part D this 
        year. That is unfair. Since its roll-out, Medicare Part D has 
        experienced many implementation problems, which is to be 
        expected. The problems experienced by dual eligibles and others 
        have been widely reported in the press and elsewhere, which is 
        also to be expected. Given this environment, it is inevitable 
        that many beneficiaries would be hesitant at this point to 
        enroll.
          The only appropriate course of action at this point is to 
        institute a penalty grace period during this tumultuous 
        transition. The purpose of the penalty is to encourage 
        enrollment. This only works if individuals are aware of the 
        penalty. Right now, we would speculate that most individuals 
        who are not signing up for Part D don't even understand the 
        basics of the Part D program and certainly don't understand the 
        penalty provisions. Therefore, a lifetime penalty for failing 
        to enroll in the midst of all of this confusion is both unduly 
        harsh and nonsensical.
          2. CMS has recently provided a Special Enrollment Period to 
        individuals who qualify for the Low Income Subsidy after May 
        15, 2006. If the May 15 deadline is not extended, CMS should 
        also provide this Special Enrollment Period to individuals who 
        qualify for State Pharmaceutical Assistance Programs such as 
        Illinois Cares Rx after May 15, 2006.
          Recently, CMS has extended a Special Enrollment Period for 
        individuals determined eligible for the low-income subsidy 
        after May 15, 2006. CMS is to be commended for doing this. In 
        effect, this allows us more time to reach the hundreds of 
        thousands of individuals eligible for the low-income subsidy 
        and get them enrolled into the Part D Program.
          The low income subsidy is one way in which individuals with 
        low-income can access Medicare Part D at an affordable price. 
        In Illinois, we have a second program that assists individuals 
        with Medicare Part D cost-sharing. It is the qualified State 
        Pharmaceutical Assistance Program (``SPAP'') called Illinois 
        Cares Rx. Illinois Cares Rx has more generous income and no 
        asset eligibility guidelines and, therefore, offers many more 
        low-income seniors and individuals with disabilities affordable 
        coverage under Part D.
          Just as CMS has recognized that more time is needed to 
        identify and enroll individuals into the low-income subsidy 
        program and Part D, more time is also needed to identify and 
        enroll Medicare beneficiaries who qualify for Illinois Cares 
        Rx. In Illinois, enrollment in a Part D is not sufficient. To 
        maximize the benefit to low-income seniors, they have to be 
        enrolled in a plan that coordinates with the Illinois SPAP and 
        individuals should know that their enrollment is approved 
        before they are locked out of changing to one of these plans. 
        CMS did this to assure that low-income Medicare beneficiaries 
        are getting the comprehensive benefit to which they are 
        entitled. By extending the Special Enrollment Period to those 
        determined eligible for Illinois Cares Rx and other qualified 
        SPAPs, CMS would be assuring that even more low-income Medicare 
        beneficiaries are getting the most comprehensive benefit to 
        which they are entitled.
          3. Congress must address the discontinuation of the 
        pharmaceutical company Patient Assistance Programs for Medicare 
        beneficiaries.

           ``But with the disappearance of the Patient Assistance 
        Plans, I will not be able to afford my cocktail. I will be like 
        I was when I was diagnosed with full-blown AIDS. I will start 
        losing weight. I will become very sick. My weight got down to 
        less than a hundred pounds at that time. I looked like a 
        walking corpse. . . . I will just be honest with you. I don't 
        think Alan Greenspan or Warren Buffett could figure out how to 
        make that $2200 a month work with what Plan D is saying that I 
        have to work with, and what I have to do.''

                 James Hayes, Medicare Beneficiary and PAP enrollee

           ``And right now, I am depending on Patient's Assistance, 
        which I have been told after May 15th will cease. I have 
        received the letters from the pharmaceutical companies. . . . 
        With high gas bills, electric bills, gasoline, and just general 
        living, you just have to make a choice. And right now, the 
        choice is okay, but a few months down the road, it is really 
        one that--what are you going to be able to do?''

                       Mr. D, Medicare Beneficiary and PAP enrollee

          Prior to implementation of Medicare Part D, there was a 
        significant population of Medicare beneficiaries that relied 
        upon the pharmaceutical company Patient Assistance Programs. 
        These Programs provided reduced or no cost medications to 
        individuals who could not otherwise afford them. These Programs 
        are a critical lifeline to many Medicare beneficiaries living 
        with HIV, Multiple Sclerosis, cancer, mental illness, and other 
        conditions with high drug costs.
          In November 2005, the U.S. Department of Health and Human 
        Service Office of Inspector General issued guidance that warned 
        the pharmaceutical companies about liability arising from how 
        their Patient Assistance Programs interact with Part D. In 
        effect, the guidance stated that if the current Patient 
        Assistance Programs were counted toward Medicare Part D cost 
        sharing, this may run afoul of anti-kickback and anti-fraud 
        laws. The guidance DID NOT forbid the Patient Assistance 
        Programs from assisting Medicare beneficiaries altogether. It 
        just told them that they must put certain assurances in place 
        in future operations of their Patient Assistance Programs. 
        Further guidance issued in April re-iterated that Programs 
        could continue. Some pharmaceutical companies, including Abbot, 
        Merck, Roche, and Schering-Plough have continued their Programs 
        for at least some Medicare beneficiaries.
          Unfortunately, many other pharmaceutical companies have 
        decided to drop their Patient Assistance Programs. This will 
        have a devastating effect on the health of individuals quoted 
        above because Medicare Part D will not pick up the coverage in 
        the same way nor for the same income groups that the Patient 
        Assistance Programs did. For James, Dallas and Mr. D, Medicare 
        Part D is unaffordable without some help from the Patient 
        Assistance Programs. Their income is too high to qualify for 
        Medicare Part D ``extra help.'' And, their drug costs under 
        Part D are too high to be affordable. In some months throughout 
        the year, their monthly drug bill under Medicare Part D will 
        exceed their monthly income.
          Prior to Medicare Part D, James and Mr. D were able to access 
        their life saving medications at affordable rates. Ironically, 
        as a direct result of Medicare Part D, they will no longer be 
        able to afford these medications.
          4. All dual eligibles should be guaranteed a drug coverage 
        benefit that is equivalent to what is provided by Medicaid.
          Dual eligibles in Illinois, and throughout the country, 
        received a comprehensive Medicaid drug benefit prior to January 
        1, 2006. These populations, in general, had the most to lose 
        from the shift to Medicare Part D and many of them are now 
        worse off than when they were before. Many of these low income 
        disabled and elderly individuals have now been automatically 
        enrolled into a Medicare prescription drug plan that does not 
        cover the medications they were on; imposes more restrictions 
        on the dispensing of their medication than under Medicaid; and 
        is costing them more in co-payments than they can afford.
          The HHS Office of Inspector General found that many dual 
        eligibles in every state were auto-enrolled into PDPs that 
        covered far less than 100% of the most commonly used drugs. 
        These formularies and benefit structures are inequitable 
        especially as applied to populations who are least able to 
        choose on their own.
          At a minimum, dual eligibles should have a drug benefit under 
        Medicare that is no worse than what they had under Medicaid. 
        Congress should mandate that PDPs offer a standard dual 
        eligible formulary and uniform benefit management tools. In 
        addition, Congress should exempt dual eligibles from the 
        Medicare co-payments which in many cases are significantly 
        higher than Medicaid.
          5. AIDS Drug Assistance Programs (``ADAP'') should be allowed 
        to use funds to ``wrap around'' Part D and those expenditures 
        should count toward the out of pocket expenses needed to reach 
        catastrophic coverage.
          ADAPs throughout the country have provided needed medications 
        to individuals living with HIV since their inception. With the 
        implementation of Medicare Part D, these Programs have been 
        assisting the Medicare enrollees in understanding Part D and 
        creating new program policies for interacting with Part D. ADAP 
        Programs were given the option to cover Medicare Part D 
        premiums, co-payments, and cost sharing. However, if ADAP does 
        pick up these costs, none of the cost sharing can count toward 
        reaching the Medicare Part D catastrophic coverage. Only SPAP 
        expenditures can count toward true out-of-pocket expenses.
          Given these restrictions, the AIDS Foundation of Chicago, in 
        collaboration with the Make Medicare Work Coalition, advocated 
        for the passage of Illinois House Bill 4302, which is awaiting 
        the Governor's signature. HB 4302 expands eligibility for 
        Illinois Cares Rx, the SPAP, to include the ADAP formulary 
        drugs. In doing this, the state can cover the cost sharing for 
        Medicare beneficiaries and it will assist them in reaching 
        Medicare Part D's catastrophic coverage and a more 
        comprehensive benefit. To date, Illinois is the only state to 
        expand its SPAP in this manner, although some other states 
        already included HIV coverage in their original qualifying 
        SPAP.
          While Illinois has taken the lead to do this, we still 
        strongly believe that this is not the ideal route to assist 
        individuals living with HIV. This route requires transferring 
        individuals to another new program, extensive education and 
        outreach to those individuals and state agency staff, and drug 
        coverage is spread across one federal and two state agencies 
        rather than one agency. It also involved the time and effort to 
        pass legislation. Ultimately, we believe it was worth it 
        because individuals will receive a more comprehensive drug 
        benefit under Medicare Part D by counting that assistance to 
        reach catastrophic coverage. But, there is much simpler way to 
        do this.
          The law should be amended to allow ADAP expenditures to count 
        toward TROOP. In this way, ADAP coverage can assist individuals 
        in reaching catastrophic Part D coverage without having to jump 
        through all of the hoops associate with creating or amending an 
        SPAP. The quickest way to a point is a straight line. Here, 
        that straight line is ADAP coverage, not the complications 
        involved in setting up and transferring individuals to an SPAP.
          6. Many of the difficulties experienced by Medicare Part D 
        enrollees in accessing needed medications are a direct result 
        of the Prescription Drug Plans failing to follow CMS guidance, 
        regulations, and the MMA Act itself. Strong and swift 
        enforcement action must be taken against the Plans to assure 
        that CMS guidance is followed.

                  ``I am just one person who took the time for these 
                two people. The emergency room physicians don't have 
                time for this. Most doctors don't have time for this. 
                So what happens in the meantime is that patients don't 
                get their medications. . . . We finally got to where 
                people understand you have got to take your medicine 
                the way we say take it or you do everybody a 
                disservice. And now what happens? Boom. You can go to 
                the pharmacy and leave without your medications.''

          Dr. O, physician, describing her ordeal with two different 
        insurance companies

          Since its inception, widespread problems have been reported 
        in accessing medications under Part D. These problems include 
        charging of the wrong and higher co-payments, failure to 
        provide necessary medications during the transition period, 
        failure to provide medications that CMS has required all plans 
        to carry, difficulty in understanding benefit management tools 
        or how to comply with them and many other access issues. To us, 
        the problems have been too numerous to be considered ``isolated 
        incidents.'' Rather, we believe that they are evidence of a 
        larger systematic problem with the Medicare Part D system.
          To put it simply, CMS has no control over what the 
        Prescription Drug Plans are doing because of the structure of 
        the contractual relationships between the plans, the government 
        and the Medicare Beneficiary. Over and over again, CMS issues 
        guidance and it is ignored. CMS assures individuals that 
        certain actions are not allowed, such as denial of medications 
        in certain classes. Time and time again, denials of these 
        medications occur. Because the contract for insurance is 
        between the plan and the Medicare Beneficiary, CMS claims that 
        it cannot enforce its recommendations and leaves advocates and 
        CMS with only the ability to solve one Medicare beneficiary's 
        problem at a time. Service providers report ``fixes'' in one 
        case and then the same exact wrongful action taken against 
        another a couple of days later.
          When we discover a plan violating the law or guidance, we 
        report the issue to CMS. CMS staff have worked with us, one 
        person at a time, in resolving the issues. Unfortunately, 
        rather than acting with any authority or power to compel 
        compliance, it appears that CMS staff have the same exact 
        difficulties in resolving a plan's violation that we do. In one 
        case, a Coalition member worked with a CMS staff person for 
        over a week to get a plan to recognize a beneficiary's 
        automatic enrollment. Day after day, all this CMS staff person 
        could do is call the plan and make a request, just as we had. 
        The plan seemed no more inclined to listen to the CMS staff 
        person than it did the beneficiary or service provider. The 
        major advantage of the CMS staff person may be a greater range 
        of phone numbers.
          With the introduction of so many plans at once, it is very 
        difficult to assure that each individual plan is following the 
        rules. But, CMS must. Just as CMS will enforce late enrollment 
        penalties against beneficiaries who fail to sign up for Part D 
        by May 15, we should expect that CMS demand compliance with its 
        guidance, the plans and the law that created Part D. It is not 
        enough to resolve issues one beneficiary at a time with simple 
        requests to the plans from CMS staff to follow guidance, which 
        has been CMS's operating mode for the first six months of this 
        program. Not only does this require hours of advocate and CMS 
        staff time, it provides no enforcement power in the future. 
        Rather, CMS must come up with clearer enforcement mechanisms to 
        implement and compel compliance with its guidance. It is not 
        sufficient to make suggestions and hope for the best, it 
        requires clear rule making, clear authority and clear and 
        efficient penalties to invoke when plans do not adhere to those 
        rules. If CMS could deal with plan violations quickly and have 
        a retinue of compliance measures related to the response of 
        those that violate those rules not just to one Medicare 
        Beneficiary but over all their enrollees, it would not be long 
        before these plan violations would decrease.
          7. Congress has spent decades creating a cash assistance and 
        health care system for people with disabilities that encourages 
        employment. In its current form, Medicare Part D's extra help 
        eligibility discourages people with disabilities from seeking 
        employment and increasing their self-sufficiency.
          Through the Ticket to Work and Work Incentives Improvement 
        Act (``TWWIIA'') and previous legislation, Congress, CMS, and 
        the Social Security Administration have created an elaborate 
        system of work incentives that encourage individuals with 
        disabilities to gain and maintain employment. For many 
        individuals with disabilities, loss of health care benefits is 
        the most often cited concern about returning to work. Because 
        of this, the TWWIIA and other legislation addressed the 
        continuation of healthcare for individuals returning to work 
        through extended Medicare and Medicaid eligibility and allowing 
        states to create Medicaid Buy-In Programs.
          Unfortunately, Medicare Part D's extra help program as it is 
        currently constituted will provide a disincentive for some 
        (many?) individuals to gain employment. Unlike other health 
        care programs, the provisions of Medicare Part D's extra help 
        income forces some individuals to choose between employment and 
        health coverage. An increase in income from employment can 
        cause someone to lose ``extra help'' eligibility, forcing them 
        to use all or most of that employment income to pay Medicare 
        Part D cost sharing. In this environment, individuals will 
        choose to forgo employment to keep their ``extra help'' 
        eligibility.
          For example, Jim is a 40 year old Medicare beneficiary living 
        with mental illness. He currently has a monthly income of $900 
        from Social Security. He qualifies for Medicare Part D's full 
        ``extra help'' and receives his 7 medications for $35 per 
        month. Prior to Part D, he received his medications from 
        Patient Assistance Programs, with a retail value of about $1000 
        per month. Jim has been seeking employment and found a job that 
        will pay him $1000 per month. Under current Medicare Part D 
        ``extra help'' rules, if he accepts this position, he may lose 
        his eligibility for ``extra help'' in January of 2007. If he 
        loses this ``extra help,'' his monthly medication costs plus 
        premium under Part D may, during part of the year, be as high 
        or higher than his earned income. Given this choice, Jim may 
        decide not to work at all.
          The current law should be amended so that Medicare Part D's 
        extra help mirrors Public Law 99-643's two special provisions 
        known as 1619(a) and 1619(b). Under these provisions, SSI 
        beneficiaries who lose their SSI due to work income are still 
        able to qualify for Mediciaid until their work income meets a 
        state specific threshold. In the same manner, individuals 
        enrolled in ``extra help'' should be able to maintain that 
        ``extra help'' eligibility until their earned income reaches 
        that same threshold. By doing this, Medicare Part D will fall 
        in line with the rest of the public benefit system that is 
        removing barriers to employment and encouraging individuals 
        with disabilities to gain and maintain employment.

                                 
 Statement of Barbara Kennelly, National Committee to Preserve Social 
                         Security and Medicare

    Madam Chairman and Members of the Subcommittee:
    The National Committee to Preserve Social Security and Medicare 
represents 4.6 million members and supporters. Our primary mission is 
the preservation of these two critical programs for seniors, and 
support for other programs that improve our country's retirement 
security.
    The National Committee has advocated for adding a prescription drug 
benefit to Medicare for many years. We agree with President Bush and 
Congress that modern medical practice has evolved to include a robust 
use of prescription drugs, which keeps seniors out of much costlier 
hospitals and nursing homes and results in a higher quality of life. 
However, while we agree with Medicare coverage of prescription drugs, 
we heartily disagree with the method the President chose to implement 
this form of modernization. After listening to our members over the 
years, we have concluded that the simplest and least expensive method 
of adding prescription drug coverage to Medicare would be to simply 
expand Part B to include prescription drugs--much as Medicare has been 
expanded over the years to cover many procedures as they were adopted 
into medical practice.
    Since January 2004, when the Medicare Modernization Act (MMA) began 
to phase in, we have heard from over 650,000 of our members, who have 
signed over 1.8 million letters and petitions asking Congress to 
overhaul the legislation. They are frustrated, confused and angry about 
both the privatized Part D drug plan and about the impact of the MMA on 
the rest of the Medicare program. What they want and need is a 
traditional Medicare prescription drug plan which would provide them 
simple, cost-effective coverage and affordable drugs.
    What they got instead is a privatized prescription drug plan so 
confusing and complex that millions of seniors have not enrolled. A 
prescription drug plan which actually prohibits Medicare from offering 
a drug benefit directly and negotiating for the lowest prices possible 
for seniors. We applaud the Administration for alleviating the most 
egregious effects of the ``lock-in'' provision by preventing drug 
companies from dropping or changing the cost of a drug for 
beneficiaries currently using the drug. However, Part D continues to 
lack a guaranteed benefit, and insurance companies can still drop 
medications seniors believed would be covered when they enrolled. They 
can also raise prices even though seniors are locked into the plans for 
an entire year. What seniors got when the Medicare Modernization Act 
was signed into law was a prescription drug plan designed by and for 
the insurance and drug industries, not this nation's seniors.
    Despite how much the Administration attempts to pump up its 
enrollment numbers by counting millions of seniors who have not 
actually enrolled in Part D (e.g. those who already have better 
coverage from another source), or who have been automatically enrolled, 
the new program is clearly a case study in what can happen when a 
privatized program is imposed upon seniors. While this is not the bill 
we would have written, the National Committee has always accepted the 
view that some seniors would benefit from this program, despite its 
many flaws. For this reason, we have made intensive efforts to inform 
seniors of the benefit, educate them on its intricacies, and provide 
materials designed to guide them through the decision-making process. 
We have done this through repeated mailings to our members, public 
meetings, the creation of a Frequently Asked Questions booklet for 
distribution, and through other materials both in print and on our 
website. Despite these efforts, however, only about one-half of our 
members who have responded to our surveys are enrolling in Part D.
    The reasons for this are varied. Some seniors already have better 
coverage through previous employers. Others are still confused about 
the benefit, unsure which plan best suits their needs. They and are not 
receiving the information they need from either the plan sponsors or 
from CMS. The GAO report released yesterday offers a litany of 
enrollment problems, including long wait-times at phone centers and 
inaccurate information from both CMS and the plan information lines. We 
have heard similar horror stories from our members as well.
    But a significant number of seniors have done the math and realize 
Part D is very expensive and inadequate. They simply cannot afford to 
spend the extra money it would cost them to enroll. Proponents of Part 
D are working particularly hard to pressure these low-utilization 
seniors into the program, whether or not it makes sense for them 
financially, because they are an essential part of the insurance risk 
pool.
    That is clearly the primary reason the Administration has, to date, 
refused to extend the Part D enrollment date beyond May 15th. Millions 
of seniors will either be pressured into enrolling in a program that 
does not suit their needs or will face late enrollment penalties for 
the rest of their lives, simply because proponents persist in promoting 
a privatized drug benefit. Instead of acknowledging that these seniors 
may be justified in refusing to participate in a program that is too 
expensive and complex, the Administration appears determined to 
pressure them into enrolling with the threat of lifelong penalties.
    Despite how inadequate the drug benefit appears to many seniors 
today, this is its high water mark, because coverage will become more 
expensive with time. The lack of meaningful drug cost containment will 
allow drug prices to continue growing faster than the economy in future 
years. This makes it increasingly hard for seniors, many of whom rely 
on Social Security as their primary source of income, to keep up. 
According to the new 2006 Trustees Report, the national average Part D 
premium is expected to reach almost $60 per month by 2015, and the 
prescription drug deductible will grow from $250 to $475 per year. In 
addition, CBO has estimated the $5,100 threshold for catastrophic 
coverage will almost double, to over $9,000, in seven years.
    The National Committee believes these problems can be avoided by 
overhauling the program to allow seniors the choice of staying with 
traditional Medicare for their prescription drug coverage. Relying on 
the strength of Medicare beneficiaries' purchasing power to directly 
negotiate prices would keep costs low. The Federal Government has a 
long history of negotiating significant price discounts on prescription 
drugs for both veterans and Medicaid beneficiaries. One study by the 
Congressional Budget Office found that, on average, the Veterans 
Administration pays only about 42 percent of the Average Wholesale 
Price (AWP)--otherwise known as the suggested list price--for brand-
name drugs. Similarly, the Medicaid Rebate Program negotiated by the 
Federal Government with drug manufacturers, pays only about 51 percent 
of the AWP for brand-name drugs.
    Several studies have shown that private Part D plans cannot deliver 
the same low prices found in other federally-negotiated programs. One 
study by Families USA found that the VA negotiated substantially lower 
prices for 19 of the top 20 drugs prescribed to seniors, compared with 
private Part D plans. Another study by the Minority staff at the House 
Government Reform Committee found that the average drug prices offered 
by the ten leading Part D plans were 84 percent higher than federally 
negotiated prices (Federal Supply Schedule). A third study by the 
Prudential Equity Group forecasted that drug companies could receive up 
to $2 billion in extra profits in 2006 alone because private Part D 
plans cannot match the low prices that the Medicaid program paid for 
prescription drugs. Based on this study, a pharmaceutical economics 
professor at the University of Minnesota has concluded that drug 
companies could stand to gain $40 billion in extra profits over the 
next decade unless Medicare is permitted to negotiate lower prices just 
as the VA does.
    But the MMA is not only a mechanism for enacting a drug program 
that provides considerable financial benefit to the drug and insurance 
industries. In passing the MMA, the President and Congressional 
majority used the lure of prescription drug coverage as a smokescreen 
for passing legislation intended to ultimately privatize all of 
Medicare--a goal that the debate on Social Security shows us might not 
have been supported by the American public had it been proposed 
explicitly. This was done despite the success and popularity of the 
traditional fee-for-service Medicare program, and despite the failure 
of past privatization efforts such as Medicare + Choice. Not only is 
the prescription drug benefit delivered only by private stand-alone 
prescription drug plans or private Medicare Advantage plans, but the 
law threatens traditional Medicare by providing numerous subsidies that 
favor private companies over the traditional program and by 
establishing a ``premium support'' demonstration that places the two in 
head-to-head competition over price in a few short years.
    The subsidies built into the MMA create an uneven playing field 
that will siphon away healthier and wealthier beneficiaries into 
private plans, while our country's most vulnerable seniors--those who 
are among the oldest, poorest and sickest--are left in the traditional 
Medicare program, where costs will keep rising. Although proponents of 
privatization have argued that private companies can provide health 
services to seniors less expensively than Medicare, actual experience 
with private plans in Medicare has been unequivocal--private plans do 
not reduce Medicare's cost, they increase it. And these extra costs 
have been confirmed by the government's own estimates, as Medicare's 
Actuary has estimated that overpayments to private plans under the MMA 
would total $46 billion in the first decade alone.
    Subsidizing private plans exacerbates the fracturing of the 
insurance risk pool that has been essential to the success of the 
Medicare program. It creates a downward spiral as increased costs--
including the costs of the subsidies themselves--are spread over a pool 
of seniors that continues to shrink as younger, healthier beneficiaries 
are enticed into the more profitable managed care plans. Because the 
subsidies are mostly hidden from view, many seniors are unaware that 
they are helping pay for the process that is undermining the only 
universal, affordable health insurance they can rely upon throughout 
their retirement.
    The National Committee strongly believes that beneficiaries who 
choose to remain in the traditional Medicare program should not be 
asked to subsidize the inflated costs of private Medicare plans, nor 
should they unknowingly be required to contribute to the dissolution of 
the Medicare program. We also strongly believe that traditional 
Medicare can outperform the private sector when allowed to compete on a 
level playing field, using the purchasing power of America's 43 million 
seniors to lower costs and to create broad risk pools that spread the 
insurance burden among all beneficiaries. Savings achieved through a 
strengthened traditional Medicare program should be used to reduce 
costs to participants or further enhance benefits.
    We urge Congress to revisit the Medicare Modernization Act before 
this year's adjournment and implement the following four changes: 
modify Part D so seniors can receive their prescription drug coverage 
directly from Medicare and require Medicare to negotiate the lowest 
possible drug prices; eliminate the lifetime penalty for seniors until 
this confusing plan is overhauled; eliminate the ``lock-in'' by 
prohibiting insurance companies from dropping medications or raising 
prices while seniors are locked into their plan; and repeal the 
government subsidies to private plans, using the savings to improve the 
drug benefit for seniors.
    Thank you, Madam Chairman.

                                 

                                            Kewanee, Illinois 61443
                                                     April 25, 2006

Dear People:

    I am a disabled 56 year woman who has multiple disabilities, 
including depression, fibromyalgia and 3 kinds of arthritis. I take 
drugs for ERT, Depression, Restless Leg Syndrome, constant pain, all 
kinds of vitamin and mineral supplements (which are not included in any 
reimbursement program, even though I need them medically after having 
had Roux-en-Y gastric bypass surgery) and ADD And, to top it all off, I 
have developed hypoglycemia as a direct result of the gastric bypass 
and must eat certain food (which do not include anything that is less 
expensive . . . I cannot eat rice, pasta or bread). Since I am 
disabled, and not yet 55, my choices for help (both for RX and medigap) 
are very limited to two or three companies. I have had Humana Gold, and 
I have one primary care (at $20 a visit), and each specialist (6 of 
them) are $35 a visit. I have been on several of the drug companies 
``helping hand'' programs, where I got my drugs for nothing or a small 
fee. All of those programs have been discontinued because of Medicare 
D. The Humana program is covering most of the drugs for a $5, $30 or 
$60 copay. My tests are 20% of charge copay. When I reach the 3rd tier 
for the drugs, it will be even more expensive. I am spending, between 
doctor's visits, drug copay and test co-pay, almost $400 a month. I am 
between a rock and a hard place and have had to dip into my 401K and 
will have to pay taxes on my withdrawals next year, and have no idea 
where I will get that money. I also have very little 401K left, so have 
only about 2 more months of payments to make easily, then I will be 
struggling to make ends meet. As it is, I do not go out much, and when 
I do, my brother and sister-in-law usually pay my way, and I feel like 
I cannot take care of myself (and after a lifetime of not depending on 
anyone, it is a blow.)
    So, the upshot is that this new program is unacceptable. It is 
confusing (to say the least) and intolerably convoluted at best. I am 
not sure who actually invented this program, but I am sure it was 
someone who was either brilliant (we are talking Einstein here) and 
wanted everyone else to know how brilliant, as he (or she) would be the 
only ones to be able to figure it out, or someone who was tied to drug 
companies to make it as complicated as possible, so they would end up 
with more money.
    Because I had to wait two years for Medicare to kick in, I was in 
great financial straits trying to pay for all the medical needs I had, 
but was so relieved when Medicare kicked in. I am not so relieved 
anymore. ``D'' has made it impossible for me to continue on the free 
(or low cost) individual drug programs I was on. Humana has changed 
their formulary twice in the last 3 months, and I have to tell you, I 
am almost positive that once the 15th of May comes along, and we are 
not able to switch, the formulary on every single Medicare ``D'' 
insurer will change again. This is probably the worst system you could 
have implemented.
    I urge you, at the very least, to please extend the May 15th 
deadline. I urge you to follow through and actually simplify (not 
complicate) the program to an extent that everyone can understand it. I 
have a BS degree, and even with having a degree in BS, I cannot make 
out what was the ultimate goal of this program.
    I am also worried about those of us who are confused or forgetful 
or challenged with mental illness not under control with medication. 
Mine is under control (at least at the moment when I can afford my 
meds), and I do not understand these ill-defined rules and regulations, 
so there is no hope for those who are the slightest bit confused.
    Please, I urge you:

        1.  Extend the deadline for sign up to August at least.
        2.  Do not penalize those who have not signed up with a 
        ``forever'' monetary penalty.
        3.  Revise this mess and make it comprehensible, and easy to 
        interpret.

    Thank you for your time. If you have any further questions or wish 
any further comments, please feel free to contact me below.

                                                   Alice Rose Kieft

                                 

                                         Salt Lake City, Utah 84106
                                                        May 1, 2006

House Ways and Means Committee

    I am not an enrollee in this plan. I have no immediate plans to 
enroll. This plan was hastily and poorly constructed along partisan 
lines with significant special interest pressure placed on House and 
Senate members by the powerful pharmaceutical industry.
    The Plan is complicated and complex. All legislative members should 
learn a simple lesson from the computer programming industry in their 
very powerful and simple acronym--K.I.S.--simply translated as ``Keep 
it Simple.'' Often they add another ``S'' to the expression--standing 
for ``Stupid.'' Very appropriate for the outcome of this terrible piece 
of legislation, which ultimately hurts constituent citizens, but 
certainly enriches the pharmaceutical firms.
    The Plan was written the way it was, I believe, to continue the 
pharmaceutical companies' continued political contributions support to 
many if not most of the Nation's elected representatives. This is 
obvious to me as there is no provision to negotiation of pricing. The 
pharmaceutical firms will charge what they wish. This is a major 
weakness which I hope will be overcome. Until it is, we will continue 
to see many more States taking the position of implementing their own 
plans, thereby weakening any centralized attempt to potentially benefit 
the entire citizenry of the Nation.
    I resent the undue influence of special interests which predominate 
in all phases of the House and Senate business. It is about time that 
all of our elected representatives get back to the basics--governing 
our Nation with the interest solely being that of the Nation and its 
citizenry, and not their desire to be re-elected with special interest 
funding.

            Sincerely,

                                                 George J. Mierisch

                                 

                                         Huntington, New York 11743
                                                     April 28, 2006

Representative Nancy L. Johnson
House Ways and Means Committee
Health Subcommittee
1100 Longworth House Office Building
U.S. House of Representatives
Washington, D.C.

Dear Representative Johnson:

    I am a twenty-eight year old woman with cognitive and psychiatric 
disabilities living in Long Island, New York. I would like to share my 
experiences regarding the Medicare Part D benefit as part of the May 3, 
2006 hearing. As a ``dual eligible'' receiving benefits from both 
Medicare and Medicaid, I have experienced numerous difficulties 
stemming from the new benefit.
    I fervently wish that Part D had not come into existence. I take 
ten prescription medications, and was much better off when they were 
covered by Medicaid. During the many years when I received drug 
coverage through Medicaid, I fell into a special category and thus paid 
no copays at all. My sole sources of income are SSI and SSDI, and even 
the small copays required under Part D have forced me to rearrange my 
budget, leaving less money available for such necessities as groceries 
and clothing.
    While I am in fact losing money under Part D, the government has 
arbitrarily determined that I am saving money. As ``everyone'' is 
``obviously'' ``benefiting,'' my food stamps have been reduced. The 
judgment that I can afford this was arbitrary. Evidently, I am being 
``lumped'' into a category with many others, with no effort to 
investigate my situation. My need of a subsidy to help pay for Part D 
hardly implies that I need no further assistance from the government.
    Since my Medicaid prescription drug coverage ended December 31, 
2005, my participation in Part D was made mandatory. Were I have opted 
out of Part D, I would have lost my Medicaid benefits, though I was 
better off beforehand. How can people like me obtain independence if 
the option to pick and choose individually appropriate benefits is 
removed? The government automatically enrolls dual eligibles in a plan 
with a premium below their region's benchmark. A plan is randomly 
selected; no regard is given to the medications taken by the enrollee 
or the pharmacy s/he uses. Not surprisingly, the plan into which I was 
auto-enrolled included neither my pharmacy in its network nor covered 
all of my medications, so I was forced to switch. It seems to me that 
the government is not particularly concerned about placing dual-
eligibles in plans suiting our needs. Rather than make the effort to 
assist people like me with appropriate placement, officials have merely 
ducked their responsibilities and have decided to funnel us into plans. 
If we are not happy with them, it is our responsibility to change, 
because the government has ``taken the easy way out.''
    Meanwhile, I was making phone calls and conducting research. Even 
though I had automatically eliminated plans above the benchmark, I 
still had many others to investigate. I had a great deal of difficulty 
sorting out the information. The process took me three or four months 
due to the complexity of the situation and the problems I encountered. 
For instance, I found that the CMS Formulary Finder often listed a drug 
as covered by a plan and was thus at odds with the plan website. In 
other instances, there was a discrepancy between the two regarding the 
use of drug utilization management techniques (quantity limits, step 
therapy, prior authorization) for a drug. I had to create numerous 
charts and lists of my own in order to keep track of all the 
information.
    Some of the plans had to be rejected because their formularies 
indicated that they did not cover some of my antipsychotic or 
antidepressant medications, even though CMS has determined that all of 
these medications must be covered. Other plans did cover them, but used 
drug utilization management techniques to manage their use. It is my 
understanding that plans are not permitted to apply these techniques to 
drugs in certain categories (including antidepressants and 
antipsychotics), with few exceptions. Since CMS supervises and manages 
Part D, it is responsible for ensuring that the plan sponsors adhere to 
the regulations it establishes.
    Since I am eligible for a full subsidy, I called plans in order to 
determine my copays. Many plan websites did not include the 
information. Some were not even working as of November 15, the first 
date of enrollment. Due to a misunderstanding, I mistakenly believed 
that I would have different copays under different plans. Many of the 
people I spoke to did not know how much I would pay, or the information 
differed from plan to plan or even between two representatives of the 
same plans. The matter was eventually clarified. Additionally, when 
discrepancies between the Formulary Finder and plan websites 
necessitated a phone call, different representatives from the same plan 
would supply me with different information. This is indicative of a 
lack of coordination between CMS and the private insurance plans, as 
well as among the plan employees themselves, and that is inexcusable.
    Once I had selected a plan, the United Healthcare-sponsored 
Medicare MedAdvance, I enrolled online. Although I received a letter 
from the plan shortly after, I did not receive my plan identification 
card until midway through January 2006. No attempt was made to 
prioritize the applications of dual eligibles such as myself, even 
though the benefit started for me on January 1st, 2006, as my Medicaid 
drug coverage ended on December 31, 2005. In contrast, non-dual 
eligibles did not need to start using Part D on January 1st. It took a 
phone call to MedAdvance--during which I was placed on hold for forty-
five minutes, though federal requirements state phone calls must be 
answered within a reasonable time period--to confirm that CMS had not 
yet finished processing my application! Fortunately, the representative 
eliminated a major worry by informing me that I could use the letter 
from the plan as proof of (pending) membership. I should not have had 
to go to such lengths to confirm the letter's validity just to ensure 
that I could obtain my medications even without my identification card.
    In addition, I am frustrated about the lack of attention given by 
MedAdvance to maintaining its website. A newsgroup e-mail alerted me to 
a change in coverage regarding two prescription forms of niacin. 
Originally deemed ineligible for coverage because they are vitamins, 
CMS has changed its mind because these medications can be covered at 
the plan's discretion because they are used to treat high cholesterol. 
I should like to discuss taking one of these medications with my 
doctor, but I wanted to determine whether or not the plan covers them. 
The section of the MedAdvance website detailing formulary changes has 
not been updated since March 2006, while permission for coverage of the 
drugs was granted by CMS in April 2006. In terms of efficiency, 
especially considering the wait time during phone calls to MedAdvance, 
obtaining the information via website is usually easier than making a 
phone call. However, the website information is not current. 
Additionally, I am having some difficulty trusting the plan 
representatives to provide current and accurate information, given my 
experiences with various personnel while I was choosing a plan in which 
to enroll.
    Based on my own experiences, I have determined that Medicare Part D 
is not a boon but a blight upon our country. Although I was able to 
research and choose a plan of my own, I experienced a great amount of 
difficulty while doing so, and have had further problems with the 
prescription drug benefit. I would like to point out that many 
individuals were not and are not able to research and choose plans 
themselves, nor to navigate the maze after enrollment. Many seniors are 
uninformed or lack my computer skills; dual-eligibles may often have 
impairments too severe to enable them to effectively advocate for 
themselves in this particular situation.
    If the level of civilization within a society is gauged according 
to the treatment given its vulnerable populations--both the disabled 
and the elderly may be considered as such--then Part D is a mark 
against the United States Government and against the insurance and 
pharmaceutical companies of America. In the future, more attention must 
be paid to the individual needs of beneficiaries. Efforts should be 
made by both the government and the insurance and drug companies to 
improve communications within and between companies and the government, 
and with beneficiaries. The government ought to cease to dictate terms 
to the disabled and the elderly through regulations purporting to be in 
our best interests, therefore robbing us of the independence to which 
we are entitled.
    Thank you for your time and attention.

            Yours truly,

                                                     Jessica Miller

                                 

                                              Muncie, Indiana 47304
                                                     April 27, 2006

    Medicare part D's 1 percent penalty per month for late enrollment 
is of great concern to me. I already know and my pharmacist has 
confirmed; I will be throwing my money away paying premiums now to 
protect me in the future from the 1 percent penalty. I am not eligible 
for the Social Security extra help because of assets exceeding $11,500. 
Also, I am not eligible for the Medicare Hoosier RX program solely 
because I am under 65. More than likely there are others out there who 
are in the same position I am in. It is my hope that the House Ways and 
Means Committee will be able to do something to permanently eliminate 
this 1 percent penalty.

            Sincerely,

                                           Linda A. Muckway, B.S.W.

                                 
  Statement of Andrew Sperling, National Alliance on Mental Illness, 
                          Arlington, Virginia

    Chairwoman Johnson, Representative Stark and Members of the 
Subcommittee, the National Alliance on Mental Illness (NAMI) thanks you 
for holding this important and timely hearing. As the largest national 
organization representing individuals with severe mental illnesses and 
their families, we place a high priority in full and effective 
implementation of the new Medicare drug benefit.
    As you know, NAMI supported the Medicare Modernization Act (MMA) 
when it passed Congress in 2003. Through our 1,200 affiliates, we have 
worked hard to make sure that the program is smoothly implemented--
especially for the low-
income Medicare beneficiaries living with chronic illnesses--the 
population most in need of strong and stable prescription coverage.
Overall CMS Performance and Assistance to Vulnerable Beneficiaries
    The MMA represents the most far reaching changes to the Medicare 
program since its inception in 1965. The Part D program alone has 
involved enrollment of nearly 30 million people into new coverage over 
a very short period of time. Without question, any effort to initiate 
new coverage of benefits and shift such an enormous volume of 
beneficiaries into new coverage (especially the 6.2 million dual 
eligible beneficiaries) will result in disruption in coverage and 
administrative problems.
    From NAMI's perspective, even a single vulnerable beneficiary 
experiencing problems in enrollment or initial transition is a problem. 
At the same time, it is important to recognize the tremendous progress 
that has been made since January and February. The problems that were 
experienced by beneficiaries early in 2006--long waiting times at 1-
800-MEDICARE, inability to accurately confirm plan enrollment at the 
pharmacy counter, frustration with transition refills, lack of 
compliance by drug plans with formulary coverage requirements, etc.--
have improved significantly in recent months. NAMI would like to 
commend the hard work of senior management and the staff at CMS in 
effectively addressing many of these problems. The staff at CMS has 
been extremely accessible and responsive to NAMI and many other groups 
representing beneficiaries and their family members.
    NAMI is concerned that the Government Accountability Office (GAO) 
study released earlier this week on education and outreach efforts at 
CMS fails to capture the improvements that have been made since January 
and February. For example, we understand that wait times at 1-800-
MEDICARE have shrunk significantly since the time period measured in 
the GAO study.
    Further, the GAO study appears to be overly inclusive in 
classifying information provided by CMS staff as inaccurate or 
incomplete. In fact, information provided by CMS is designed to be 
specific to the individual beneficiary (or their family member) that 
have called in--not general information about the program. CMS should 
be judged on how it meets the needs of actual beneficiaries with their 
specific needs and the GAO report appears to have missed this key 
performance measure.
    Medicare Part D has been in effect for barely 120 days. While it is 
important for the GAO to continue to provide oversight and investigate 
the performance of CMS the private sector plans that offer drug 
coverage, it should be recognized that this report is only a snapshot 
taken in the earliest days of the program. By contrast, Part D will be 
with the Medicare program for many years to come. NAMI--like all other 
groups representing beneficiaries--are in this for the long haul.
Transition of Dual Eligibles to Part D
    NAMI continues to be concerned about the performance of Part D drug 
plans in meeting their responsibilities with respect to ``continuity of 
care'' for dual eligibles with severe mental illness and other 
disabilities and chronic illnesses. By ``continuity of care'' NAMI is 
referring to the critical issue of ensuring that dual eligibles with 
severe mental illness do not have their ongoing care interrupted. The 
consequences of interrupted access to medications for duals with mental 
illness can be severe. Treatment for diseases such as schizophrenia, 
bipolar disorder and major depression is complicated and typically 
involves the prescribing of multiple medications and significant co-
morbidities. Lack of coverage to any medication, even for a short 
period of time, can have disastrous results. Further, most of the 
medications commonly prescribed to treat these disorders (including 
anti-psychotics, anti-convulsants and anti-depressants) are NOT 
clinically interchangeable.
CMS Formulary and Transition Guidance--Critical Protections for Dual 
        Eligibles
    NAMI has therefore been especially concerned that protections be in 
place on an ongoing basis to ensure that all Medicare beneficiaries 
with mental illness--especially dual eligibles--are able to make a 
smooth transition to Part D and maintain access to the specific 
medications prescribed to them over the long-term. In response to both 
of these concerns, CMS has issued guidance to all Part D plans. These 
include:
    Transition Guidance--This guidance requires Part D plans to 
continue covering all medications prescribed to a beneficiary in any 
initial transition period. CMS has now extended this guidance for the 
2007 contract year. NAMI applauds CMS for keeping this key protection 
in place. This will be especially important for dual eligibles who must 
go through random assignment to a Part D plan again in 2007.
    Formulary Guidance--This requires all Part D plans to cover ``all 
or substantially all'' of the medications commonly prescribed to treat 
mental illness including anti-psychotics, anti-depressants and anti-
convulsants. NAMI is extremely pleased that CMS has renewed this 
guidance for 2007. This requirement for broad formulary coverage is 
essential to making the benefit work for beneficiaries with severe 
mental illnesses.
    NAMI is extremely grateful to CMS for renewing both of these 
guidance requirements for all PDPs and MA plans for 2007. Continuation 
of these protections will ensure that prescription drug coverage is 
effective and uninterrupted for those who need it most--Medicare 
beneficiaries living with chronic illnesses with complicated treatment 
needs and high drug costs.
    Beyond the critical protections in the CMS formulary and transition 
guidances, NAMI is extremely concerned that some drug plans are 
increasingly using ``safety edits'' as ``cost edits.'' These safety 
edits are typically used as quantity or dosage limitations, and in some 
cases, to outright deny coverage. NAMI respects that drug plans need to 
ensure that a medication prescribed for an enrollee is clinically 
appropriate. At the same time, these safety edits should never be 
applied against a dosage or quantity of a medication (especially for an 
antipsychotic medication prescribed to treat schizophrenia) for which a 
beneficiary has previously achieved clinical stability.
Providing Additional Guidance to Allow Manufacturer Sponsored 
        Assistance Programs to Supplement Part D
    Mr. Chairman, as you know there has been a great deal of confusion 
around the current status of pharmacy assistance programs (PAPs) 
offered by drug manufacturers for low-income Medicare beneficiaries. In 
response Part D, some of these programs have either shut down, 
suspended enrollment, or plan to cease operations at the end of the 
Part D open enrollment period (May 15, 2006). This is situation is 
further complicated by confusing guidance that was put forward by the 
HHS Office of Inspector General (IG) in November 2005. This guidance 
calls into question whether PAPs can legally supplement coverage under 
Part D for low-income beneficiaries who do not qualify for the Part D 
low-income subsidy (LIS). CMS claims that these programs can offer 
assistance outside of Part D, yet the IG's guidance creates enormous 
legal and administrative barriers to the development of creative 
approaches that would clear the complex legal standards set forth by 
the IG.
    This is an especially important issue in NAMI's view since there 
are likely millions of low-income Medicare beneficiaries who are close 
to (and in some cases below) the 150% of poverty upper limit for LIS 
eligibility who are now worse off under Part D. This is occurring 
because they are failing the asset test for LIS eligibility and 
simultaneously losing access to a manufacturer-sponsored PAP that 
offered them coverage for their medications at little or no cost prior 
to Part D.
    In NAMI's view, the complex legal and administrative issues 
preventing this problem from being resolved must be overcome. While we 
respect the IG's independence, NAMI would encourage this Subcommittee 
to make every effort to persuade all sides involved--especially the 
IG--to resolve this matter as quickly as possible. This is especially 
urgent with the end of the open enrollment period looming just a little 
more than 10 weeks away. There is absolutely no reason why legal and 
administrative roadblocks cannot be removed so that PAPs and charitable 
organizations can make assistance available to low-income 
beneficiaries. This should include assistance for:

        1.  Dual eligibles living on SSI facing a serious financial 
        burden even with cost sharing as low as $1 for a generic and $3 
        for a brand name (many dual eligibles living in group homes or 
        assisted living facilities have disposable income as low as $15 
        to $20 per week),
        2.  Low-income beneficiaries who failed to qualify for LIS 
        solely because of assets above the limit who cannot afford 
        monthly premiums and annual deductibles, and
        3.  Individuals below 200% of poverty who end up in the 
        doughnut hole coverage gap.

    In each of these cases, NAMI agrees with CMS that assistance should 
be linked to enrollment in a Part D plan. It is critically important 
that any assistance from a PAP or charitable organization not serve as 
an inducement to not sign up for coverage--and assessment of a late 
enrollment penalty in future years.
    In recent weeks, a few manufacturers have received blessing from 
the IG to initiate PAPs that will operate independent of Part D by 
offering free medications to qualified individuals that have signed up 
for Part D coverage. This is an encouraging step forward. However, NAMI 
would nonetheless encourage this Subcommittee to continue to press CMS 
to issues such as cost sharing for dual eligibles and assistance with 
premiums and deductibles for beneficiaries below 150% who failed to 
qualify for LIS because of the restrictive asset test. Accessing free 
or deeply discounted medications would obviously be helpful for them, 
but not a substitute for the assistance they need to fully participate 
in Part D coverage.
Repeal of ``Non-Interference'' and Restricting Beneficiary Choice
    There has been a great deal of discussion in Congress about repeal 
of the so-called ``non-interference'' provision in the MMA that limits 
the authority of the HHS Secretary to engage in direct negotiations 
with drug makers over cost and access. NAMI is concerned that changing 
this critical piece of the Medicare Part D benefit and allowing the 
Secretary to negotiate a single national structure for access to 
medications could be extremely disruptive for beneficiaries. In short, 
NAMI is concerned that repeal of the ``non-interference'' provision 
will inevitably lead toward these PDPs and MA plans having to follow a 
single national structure for access and coverage.
    Further, it is NAMI understands that both the CMS Office of Actuary 
and the Congressional Budget Office (CBO) have concluded that repeal of 
the ``non-interference'' provision would not result in any additional 
savings beyond the discounts from manufacturers that the multiple 
private sector plans have already been able to achieve through the 
competitive process that CMS has put in place. Our experience with the 
VA, state Medicaid agencies and other public sector payors makes clear 
that a single governmental authority negotiating for a single price and 
formulary structure deals to restrictive formularies that in the end 
hurt the most vulnerable beneficiaries.
Congress Needs to Address Cost Sharing for Duals and Benzodiazepine 
        Coverage
    Mr. Chairman, as you know a broad range of legislation has been 
introduced in the House this year to address concerns with the new 
Medicare drug benefit. They range from proposals to completely suspend 
the benefit to replacing the new program with a government managed 
program. NAMI believes that in many cases action on legislation to 
completely overhaul the new benefit is premature at this point. As you 
know, the President has made clear that he is firmly opposed to any 
major structural reforms, much less the scrapping of the entire 
benefit.
    At the same time, NAMI believes that there are several bipartisan 
bills that make minor adjustments to Part D that would resolve specific 
narrow problems with the new benefit, while still allowing CMS to 
proceed with the new program. Two specific bipartisan proposals that 
NAMI would recommend this Subcommittee give serious consideration to 
are proposals that would address cost sharing for certain dual 
eligibles and the mandatory exclusion of benzodiazepines.

          Duals Cost Sharing (S 2234)--The proposal, introduced 
        by Senators Gordon Smith (R-OR) and Jeff Bingaman (D-NM), would 
        require Medicare drug plans to waive cost sharing for dual 
        eligibles in certain community-based residential programs such 
        as licensed group homes and other residential treatment 
        settings (just as the law currently requires for dual eligibles 
        in nursing homes and psychiatric hospitals).
          Benzodiazepine Coverage (HR 3151)--The proposal, 
        introduced by Representatives Ben Cardin (D-MD) and Jim Ramstad 
        (R-MN), would repeal the current requirement for Medicare drug 
        plans to exclude coverage of medications known as 
        benzodiazepines (klonopin, ativan, xanax, etc.) and allow drug 
        plans to cover them at their discretion. It should be noted 
        that the vast majority of states are covering these medications 
        for dual eligibles as allowed by CMS.

    NAMI strongly supports both of these proposals and would recommend 
them as part of any technical or incremental changes that may be moving 
forward later this year.
Conclusion
    Thank you for convening this important hearing. We share your 
commitment to making sure that the Medicare drug benefit reaches its 
full potential to assist seniors and people with disabilities who need 
coverage for critical prescriptions.

                                 
     Statement of the National Association of Health Underwriters,
                          Arlington, Virginia

Relative to Experience with Medicare Part D
    (Arlington, VA)--The National Association of Health Underwriters 
(NAHU) is very puzzled with the GAO report issued this week on Medicare 
Part D implementation. ``The 20,000 members of NAHU are involved on a 
daily basis enrolling seniors in Part D all across America. Our 
experience has been very positive, and the service our members report 
receiving from Medicare.gov and 1-800-Medicare is excellent,'' said 
Janet Trautwein, Executive Vice President and CEO.
    ``Our members have told us that the people they counsel have been 
greatly helped by this new benefit, and that they were enrolled with 
relative ease. Here is just a sampling of some of their responses:

          ``Being a senior myself and previously without Rx coverage, 
        this is a wonderful thing that all seniors should be elated and 
        telling the world about--it's the greatest.'' Marina del Rey, 
        CA
          ``The actual enrollment did not take much time and went very 
        smoothly. In fact, I did it later in the day on December 31st--
        I didn't want to rush into it! Even thought it was so very 
        late, I did not experience difficulties with the enrollment. 
        The Medicare website has continued to evolve. I find it more 
        helpful each time I check into it.'' Omaha, NE
          ``I have enrolled MANY people in Medicare D. Honestly, it is 
        not difficult at all. In the state of North Carolina, we have 
        16 companies selling Medicare Part D. I studied many of them 
        and picked the companies I felt had good formularies, value for 
        their price, and could help ANYONE from those who are on no 
        medication to people who take numerous medications daily.'' 
        Kernersville, NC
          ``My father, who is 79 years old and just short of 80, went 
        through the process with his retirement trust and it was a 
        breeze for him. He actually started cancer treatment yesterday 
        and needed prescriptions, for which all he used was the letter 
        from Medicare and the pharmacy took the letter with no problem. 
        All went very well.'' Tualatin, OR
          ``I was amazed at just how well the Medicare.gov website 
        worked! There just isn't any better way to assure you are 
        picking the right plan for the right reasons. Needless to say, 
        I have a great deal of credibility on the line with my clients 
        if the site isn't accurate.'' Corinth, MS
          ``I speak to people every day who are calling to thank me for 
        saving them money on their scripts. As for the Medicare 
        Advantage plans, those enrollees are saving significant amounts 
        of money. I am seeing a minimum of $1400/year saved. I see in 
        our future a lot of seniors with more disposable income. To 
        quote Martha, `that's a good thing.' '' Lincoln, NE
          ``. . . my parents and uncle live in Wyoming. I enrolled them 
        online on December 31. By Saturday, January 7, they had all 
        received their cards and the following Tuesday, January 10, 
        filled some of their prescriptions at the local pharmacy and 
        all went very smoothly. Because of the plan we entered them in, 
        the drugs they received did not cost them anything. They were 
        very surprised and `shocked' as to how easy things went for 
        them.'' Larkspur, CO
          ``I am only on one medication, but I enrolled in a Part D 
        plan as a precaution. It is just like having insurance on my 
        car and my jewelry--I have to have it for myself.'' Deerfield, 
        IL
          ``The daughter of a Medicare beneficiary reports that she 
        consulted with her broker, who helped enroll her mother in the 
        Blue MedicareRx Value Plan. This process went very smoothly and 
        took little time. On January 2, her mother needed to fill a 
        prescription, and the process was very simple as well. Although 
        they did not yet have an acknowledgement letter, the pharmacist 
        verified their information and her mother received her 
        prescription. Her acknowledgement letter arrived shortly 
        afterward. They are very pleased with the savings provided by 
        Medicare Part D--all four current medications are covered and 
        without prescription drug coverage she would pay $162 for one 
        of the medications alone.'' Schaumburg, IL
          ``Our clients loved it.'' Orlando, FL
          ``I have assisted several seniors with this process. I did 
        not find it confusing. The most time-consuming part was 
        determining which vendor offered the coverage best suited to 
        the individual's needs.'' Maumee, OH
          ``My grandmother is on a Secure Horizon Medicare plan through 
        PacifiCare in Colorado. I have worked with employee benefits 
        for more than 15 years. When I called my grandmother knowing 
        that I would need to assist, she told me that PacifiCare sent 
        her a letter advising her that she is automatically enrolled 
        and it was already taken care of. Of course I could not believe 
        that it would be so simple. After creating much more work than 
        necessary with several phone calls and finally a conference 
        call, it was true. It was automatically handled. I was amazed 
        and grateful at the same time.'' Denver, CO

    ``Any time a new benefit begins where many people are eligible, 
whether a government program or a private sector offering, there will 
be initial snags,'' added Trautwein. ``What is amazing is how quickly 
issues have been addressed, and the high level of enrollment we have 
already seen in Part D. Our members look forward to continuing our work 
with beneficiaries on an ongoing basis to be sure they are aware of the 
wonderful new opportunities in Medicare. Unfortunately, inaccurate 
reports alleging difficulty in signing up for Part D may discourage 
people from taking the first step towards protecting their health with 
coverage for prescription drugs. We hope that in the future more care 
will be taken before such inaccuracies are reported as fact. The fact 
is that problem areas were identified early on and were taken care of. 
The fact is that 30 million people have enrolled in Part D and more are 
enrolling every day. The GAO report does not apply to the current 
situation and to characterize it as such is inaccurate and 
irresponsible.''
    The National Association of Health Underwriters represents over 
20,000 health insurance agents, brokers, consultants and professionals. 
Our members serve employers and individual consumers in accessing and 
purchasing affordable health insurance and related products. For more 
information, please contact Brandi Travis, manager of communications.

                                 
   Statement of the National Home Infusion Association, Alexandria, 
                                Virginia

    Chairman Johnson and Members of the Subcommittee, the National Home 
Infusion Association (``NHIA'') is pleased to present this written 
statement for the record in connection with the Subcommittee's May 3, 
2006 hearing on implementation of the Medicare outpatient prescription 
drug benefit.
    NHIA is a trade association that represents and advances the 
interests of organizations and individuals that provide infusion and 
specialized pharmacy products and services to the entire spectrum of 
home-based patients.
    As reflected in the testimony presented at the hearing, the new 
Part D drug benefit already has been providing access to prescription 
drugs to seniors who had limited or no coverage prior to enrollment in 
Part D. Notwithstanding some initial implementation problems, as a 
retail drug benefit, Part D seems to be working fairly well.
    One group of beneficiaries who are not being adequately served by 
Part D, however, is those in need of home infusion therapy. The problem 
stems from the fact that the Centers for Medicare and Medicaid Services 
(``CMS'') has interpreted and implemented the Part D benefit largely as 
a retail drug benefit. Unfortunately, the structure that can work well 
for dispensing pills and other prescriptions at the retail pharmacy 
level is not feasible for more complex intravenous therapies that 
require more extensive clinical services, care coordination, equipment, 
and supplies for proper administration. This is particularly true with 
respect to home infusion therapy, which private sector health plans 
typically cover as a comprehensive medical benefit rather than a 
pharmacy benefit.

What is Home Infusion Therapy?
    Home infusion therapy involves administering medications into the 
patient's bloodstream. It is prescribed when the patient's condition is 
so severe that it cannot be treated effectively by oral medications. 
Infusion drugs must be:

          Compounded in a sterile environment;
          Maintained in appropriate conditions to ensure 
        sterility and stability;
          Administered at exactly the right dose and on the 
        right schedule;
          Administered using the appropriate vascular access 
        device (often a long-term device) which is placed in the 
        correct anatomical location based on the expected duration of 
        therapy, the pH, osmolarity, and osmolality of the medication;
          Administered using an appropriate drug delivery 
        device;
          Flushed with the proper flushing solution between 
        doses; and
          Monitored for adverse reactions and therapeutic 
        efficacy.

    The range of variables that must be managed by the infusion 
pharmacy to ensure safe and appropriate administration has led 
commercial payers to treat home infusion therapy as a medical service, 
reimbursed under their medical benefit (rather than the prescription 
drug benefit) and paid for using a per diem for clinical services, 
supplies, and equipment and a payment for nursing visits. It also has 
led most commercial payers to require that infusion pharmacies be 
accredited by nationally recognized accreditation organizations. 
Commercial payers have used this model aggressively to reduce overall 
health care costs while achieving high levels of patient satisfaction.
Home Infusion Pharmacy Services Differ from Retail Pharmacy Services
    To ensure safe and proper administration of infusion drugs as 
outlined above, home infusion pharmacies provide the following 
services:

          Comprehensive assessment that considers patient 
        history, current physical and mental status, lab reports, 
        cognitive and psychosocial status, family/care partner support, 
        prescribed treatment, concurrent oral prescriptions, and over-
        the-counter medications;
          Maintenance of appropriate procedures for the 
        compounding and distribution of sterile infusion products as 
        outlined in the national standards and state and federal 
        regulations;
          Drug interaction monitoring and identification of 
        potential drug, dose or drug-catheter incompatibilities;
          Comprehensive admission procedures that include 
        patient education of medical and disposable equipment use, 
        medication storage and handling, emergency procedures, vascular 
        access device management, recognition and reporting of adverse 
        drug reactions;
          Comprehensive care planning that considers actual or 
        potential drug or equipment-related problems, therapy 
        monitoring with specific patient goals, and coordination of 
        activities with other providers such as home health agencies 
        and physicians;
          Ongoing patient monitoring and reassessment 
        activities to continually assess for response to treatment, 
        drug complications, adverse reactions, and patient compliance;
          Laboratory report reviews, as applicable, and 
        subsequent consults with care professionals to adjust 
        medication orders if necessary;
          Maintenance of appropriate physical facilities for 
        storage, preparation, dispensing, and quality control of all 
        infusion medications and equipment;
          Ongoing employee education and competence validation 
        activities; and
          Performance improvement programs that include 
        collection of clinical outcomes data, patient perception data, 
        trending and analysis of these and other performance 
        measurement data, and root cause evaluations of all sentinel 
        events.

    Most retail pharmacies are not designed or equipped to provide all 
of the above services.

Home Infusion Therapy is not a Good Fit under Part D
    CMS's final Part D rule limits coverage of infusion therapy to the 
cost of the drugs alone and a retail-like dispensing fee. The 
regulation expressly disallows coverage for the professional services, 
supplies, or equipment necessary to safely provide home infusion 
therapy that typically represent more than half the cost of caring for 
these patients. This fundamental coverage shortfall, as well as the 
general inapplicability of the retail benefit design to home infusion 
therapies, has adversely affected the care of Medicare beneficiaries in 
several ways.
    Dual-eligible beneficiaries typically had full coverage of home 
infusion therapy under Medicaid prior to their enrollment in Part D. 
Once enrolled in Part D, however, many dual-eligible beneficiaries 
initially experienced a disruption in care due to the states' 
uncertainty as to their role in providing Medicaid ``wrap-around'' 
coverage to fill in the gaps left by the drug-only coverage offered by 
Part D. CMS has been working to clarify the states' role and resolve 
these issues, which has helped to minimize disruptions in care. 
However, dual-eligibles continue to be adversely affected by restricted 
formularies, cumbersome prior authorization processes, inadequate 
coordination of care, and a lack of access to qualified providers in 
Part D home infusion networks. These issues have led to unnecessary 
hospital admissions and hospital discharge delays that continue to this 
day.
    It has been our experience that Part D enrollees who have no 
Medicaid or supplemental insurance have little or no access to home 
infusion therapies or qualified home infusion therapy pharmacies 
through Medicare Part D. Since the non-covered home infusion supplies, 
equipment, and professional services constitute over 60 percent of the 
costs associated with home infusion therapy, these Medicare 
beneficiaries are effectively denied access to home infusion. They are 
being forced to seek treatment in hospitals and skilled nursing 
facilities at a significantly higher cost to Medicare and at much 
greater inconvenience to the patients.
    In addition, Part D coverage limitations pose a very real threat to 
health and safety. There are reports that non-infusion pharmacies have 
sent non-compounded intravenous drugs by mail to beneficiaries, without 
educating the patients on how to mix and administer the drug, without 
any clinical oversight that should be provided based on community 
standards of care, and without the necessary supplies and equipment 
that are integral to the drug's safe and proper administration. CMS has 
been quick to recognize the serious safety concerns and is taking steps 
to minimize or eliminate these occurrences. While these efforts have 
helped to address the worst abuses observed during the early weeks of 
Part D, the root causes of poor quality of care remain intact: a 
fundamental coverage shortfall, a lack of appropriate quality 
standards, and an alignment of incentives that do not foster quality 
patient care.
    Since the Part D benefit went into effect on January 1 of this 
year, the following issues have arisen and remain with respect to the 
coverage and provision of home infusion therapy under this benefit:

          The absence of coverage for the professional 
        services, supplies and equipment has discouraged the 
        participation of qualified home infusion pharmacies in Part D.
          A disturbing number of PDPs have omitted home 
        infusion drugs from their formularies and have not implemented 
        a timely exceptions process that permits infusion patients who 
        have acute needs to access these drugs.
          Other PDPs are genuinely concerned and frustrated 
        about Part D's incomplete coverage for home infusion therapy 
        and are waiting for CMS or Congress to correct this situation.
          Part D does not provide quality standards applicable 
        to home infusion therapy. Consequently, Medicare beneficiaries 
        are at risk of receiving infusion drugs from entities that do 
        not meet well-established standards of care.
          Many Medicare Advantage enrollees who had 
        comprehensive home infusion therapy coverage under a Medicare + 
        Choice (Medicare Advantage) program prior to January 1 have 
        actually lost this coverage and are now exposed to the same 
        quality and coverage shortfalls as described above.

Proposed Solution:
    CMS believes that it does not have the authority to cover infusion 
therapy services, supplies, and equipment. Yet, CMS acknowledges openly 
that its policies leave ``gaps in coverage'' for home infusion. These 
gaps are jeopardizing patient safety and are actually adding costs to 
the Medicare program to the extent that patients are forced into more 
expensive treatment settings or are receiving inappropriate care. As 
long as Congress allows incomplete coverage of and access to home 
infusion therapy in Medicare, the program will not realize the 
efficiencies, cost-savings, and quality improvements employed in the 
private sector, where home infusion has been utilized and fully covered 
for decades.
    We believe strongly that home infusion therapy coverage should be 
consolidated under Part B as a separate medical benefit. This can be 
accomplished through legislation that provides permanent, complete 
coverage for home infusion therapy under Part B or authorizes a 
demonstration project to provide such coverage.
    Why Part B? Some home infusion drugs already are covered under Part 
B. Part B was designed to cover multi-faceted therapies and procedures. 
It is the most logical part of the Medicare program in which to 
consolidate coverage for home infusion therapy because it could 
accommodate the various aspects of the therapy--the services, supplies, 
equipment and drugs. Thus, infusion therapy could be defined and 
covered accurately under Part B. By contrast, even if Congress were to 
amend Part D to require full coverage for home infusion, it would 
remain an awkward fit since the entire Part D administrative apparatus 
is designed for a drug-only benefit and is not one that can easily be 
adjusted to accommodate what CMS acknowledges to be a complex medical 
benefit.
    Every day that passes without complete Medicare coverage of home 
infusion therapy is a missed opportunity to bring cost-effective care 
in the most convenient setting to beneficiaries. Medicare beneficiaries 
have a legitimate expectation that they now can obtain home infusion 
therapy through the Medicare program. We stand ready to work with 
Congress to fulfill this expectation for our seniors. Thank you for 
your interest in overseeing and improving the implementation of this 
important benefit.
                                 
          National Kidney Foundation, Inc., New York, New York

    The National Kidney Foundation (NKF) is the nation's oldest and 
largest voluntary health agency serving the needs of kidney patients 
and the health care professionals who care for them. The National 
Kidney Foundation's clinical practice guideline development program, 
known as the Kidney Disease Outcomes Quality Initiative, or KDOQI, has 
facilitated enhanced care for Medicare beneficiaries with chronic 
kidney disease (CKD). The Medicare Prescription Drug Program should 
enable Medicare beneficiaries to realize KDOQI recommendations if drug 
plans provide access to medically necessary treatments for chronic 
kidney disease.
    Chronic Kidney Disease (CKD) affects 20 million people in the U.S., 
with another 20 million Americans at potentially increased risk.\1\ 
Between 1992 and 2002, the percentage of Medicare beneficiaries with a 
diagnosis of CKD, including, but not limited to, those who receive 
benefits under the Medicare End-Stage Renal Disease (ESRD) Program, 
increased from 3.1% to 6.8%. In 2003, Medicare patients with CKD 
consumed 23.6% of the Medicare budget.\2\ Moreover, the number of 
Americans with kidney failure (ESRD) who are treated either with 
dialysis or transplantation, and, therefore, become entitled to 
Medicare without regard to age, is expected to increase 85% between 
2000 and 2015.\3\ Oral medications can prevent or slow the progression 
of CKD to kidney failure, as well as limit the consequences of the 
complications of CKD (anemia, bone disease, heart disease) for those 
covered by Medicare who do not yet require dialysis or a kidney 
transplant to survive. They can also reduce morbidity and mortality 
experienced by Medicare beneficiaries with ESRD. Therefore, it is 
important that Medicare prescription drug plans provide affordable 
access to the spectrum of medications needed by beneficiaries with CKD, 
so that this Medicare population is not discouraged from enrollment or 
inclined to disenroll in Part D plans.
---------------------------------------------------------------------------
    \1\ K/DOQI Clinical Practice Guidelines for Chronic Kidney Disease: 
Evaluation, Classification and Stratification. Am J Kidney Dis 39:S1-
S000, 2002 (suppl 1).
    \2\ United States Renal Disease System 2005 Annual Data Report.
    \3\ D. T. Gilbertson, et al., Projecting the Number of Patients 
with End-Stage Renal Disease in the United States to the Year 2015. J 
Am Soc Nephrol 16: 3736-3741, 2005.
---------------------------------------------------------------------------
    The implementation of the Medicare Prescription Drug Program has 
raised a number of concerns in the kidney community.
Enrollment
    One plan has mailed misleading letters to people with ESRD stating 
they are not eligible to enroll in a stand-alone drug plan because they 
have ESRD. Although the communication was the result of a programming 
change in the letter template, patients may assume the letter is 
correct and discard their enrollment packet and ID card. CMS should 
approve or reject templates of letters before they can be mailed to 
applicants and members.
    Some people who applied online and have confirmation of enrollment 
have waited months to learn if applications were approved. Some have 
been told that computer glitches held up enrollments. Without any Part 
D ID, these patients have been unable to use Part D to get prescribed 
drugs. CMS states that plans must approve applications made in one 
month by the first of the next month. CMS should require plans to track 
the time it takes them to approve applications made through the 
Medicare website. This would allow outlier plans to be identified and 
procedures developed to help them process applications in a timely 
manner so patients would be able to use Part D when promised.
    Some who applied for plans in 2005 received plan IDs and enrollment 
materials and were using those plans. However, because of facilitated 
enrollment, they were placed in different plans in April. There should 
be a better way to cross-check plan enrollment and utilization to avoid 
enrollments into two plans which could result in disenrollment from the 
plan the patient prefers.
    Some who enrolled in plans and were using them received notice that 
their plan enrollment was terminated without explanation. No one at the 
Medicare helpline or the plan could explain why. CMS should require 
that every disenrollment notice include the reason for disenrollment 
and appeal rights.
    Some people with kidney disease who are dual eligible never 
received notice of plan enrollment and were not auto-enrolled in plans. 
Reportedly this related to communications problems between databases. 
Even with a Medicare ID and active Medicaid cards, they were not 
enrolled in Wellpoint, the fallback plan, because pharmacists did not 
know about the fallback plan or did not trust they would be reimbursed. 
Patients were shuttled back and forth between Medicare and Medicaid 
without problem resolution. Many were charged full price for drugs that 
should have been covered by Part D. CMS is working on database 
communications. There should be alternate ways to communicate with 
pharmacists since all were not aware of the safety net procedures in 
place.
Premium Payment
    Some people requested that premiums be deducted from Social 
Security checks. Some who applied in January had never had premiums 
deducted by May. Many worry that their coverage will be terminated for 
nonpayment. It would help if people could be notified that their 
request for deduction of premiums had been received. Also, CMS provided 
information indicating that only a maximum of three month's premiums 
would be deducted and that plans could bill if outstanding premiums 
covered a longer period of time. There should be some assurance that 
duplicate payments will not result.

Part B vs. Part D issues
    Pharmacists continue to have difficulty knowing whom to bill for 
immunosuppressants needed to prevent rejection of transplanted organs 
and when to bill Part D or whether they should bill Part B. Doctors 
should be encouraged to write Part B or Part D on prescriptions to help 
pharmacists. If a drug is covered by Part D, the pharmacy should bill 
Part D. However, if the drug is covered by Part B and the pharmacy does 
not have a Medicare provider number to bill Part B, CMS should require 
the pharmacy to tell the patient to consult with his/her transplant 
program about where he/she can get drugs under Part B rather than 
trying to bill Part D. Problems with Part B vs. D have placed patients 
at risk of losing transplants due to delays in getting essential 
immunosuppressants.

Drug Utilization Limits
    Prior authorization requirements have been imposed on Medicare 
beneficiaries who have received solid organ transplants and are 
entitled to Part D coverage for immunosuppressant medications. This has 
occurred despite the promise of access to all or substantially all of 
these immunosuppressant drugs under Part D. Prior authorization has 
placed a paperwork burden on busy physicians and created delays in 
patient access to essential medications. Plans should have to abide by 
the requirement that those who have been treated with these medications 
under Medicaid drug programs or with other third-party payment should 
not be subject to prior authorization requirements.

Excluded Drugs
    The statutory exclusion of prescription vitamins and mineral 
products, except prenatal vitamins and fluoride preparations, has 
proved problematic. Oral iron is needed by patients with CKD, other 
than in-center dialysis patients, to treat the anemia that accompanies 
chronic kidney disease. (In-center dialysis patients receive iron 
supplements intravenously.) Dialysis patients need special vitamins 
because dietary restrictions limit their intake of essential vitamins 
and minerals, the dialysis procedure removes essential vitamins and 
minerals, and because most standard vitamins contain high levels of fat 
soluble vitamins and certain minerals that rise to toxic levels in 
people with impaired kidney function.

Formularies
    Not all plans provide coverage for the spectrum of medications that 
are effective in addressing problems of bone and mineral metabolism 
experienced by Medicare beneficiaries with CKD. Disturbances in mineral 
and bone metabolism are common in patients with CKD. These patients 
have bone pain, increased incidence of bone fractures and deformity, 
myopathy and muscle pain and ruptures of tendons. Elevated blood levels 
of PTH exert significant adverse effects on the function of almost 
every organ and may require parathyroidectomy. Furthermore, there is 
growing concern about the long term effects of these derangements on 
soft tissue calcification. All of these conditions can be managed with 
appropriate pharmacological interventions but clinicians must have 
access to as wide an array of medications as possible to individualize 
therapy for these multiple conditions and avoid harmful drug 
interactions.

CMS Formulary Guidance
    CMS has published guidelines that the agency will use in reviewing 
prescription drug plan formularies and procedures and thus, fulfill the 
requirement of the Medicare Modernization Act to assure that drug plans 
do not discriminate against any particular types of beneficiaries. 
However, CMS needs to operationally define when enrollment is 
considered to be ``substantially discouraged'' as well as develop a 
program to identify and compare actual Part D enrollment by 
beneficiaries with CKD as opposed to expected enrollment. Furthermore, 
CMS should track formulary changes, including drug utilization limits 
affecting beneficiaries with CKD during the course of the benefit year, 
as well as the number of beneficiaries with CKD who drop out of the 
program.
    The following comments concern the draft formulary guidance that 
CMS published in March, 2006.

P & T Committee Review
    Because of the size of the Medicare population with CKD, and the 
extent of Medicare program expenditures associated with this condition, 
there should be a requirement that P & T committees include members 
with expertise regarding the pharmacological needs of kidney patients.
Drug List Review

          Problems of access to the drugs that prevent 
        transplant rejection were noted above. Unfortunately, the CMS 
        formulary guidelines for 2007, as drafted, will not resolve 
        these problems. While the relevant section on page 7 of these 
        draft guidelines, reads as follows: ``CMS will continue to 
        require Part D plan formularies to include all or substantially 
        all (immunosuppressants),'' on page 4 it is stated that, if a 
        USP formulary key drug type is primarily covered under Part B, 
        CMS will not expect these drugs to be represented on 
        formularies. (Immunosuppressants are primarily covered under 
        Medicare Part B.) Finally, on page 3, it is stated that plans 
        that use a classification system that is consistent with USP's 
        will have a safe harbor. Regrettably, USP has deleted 
        immunosuppressant drugs for transplant recipients from its 
        model formulary for 2007. Unless these inconsistencies are 
        addressed, transplant recipients enrolled in Part D will 
        continue to experience problems in accessing the drugs they 
        need to protect their transplants and avoid the need for re-
        transplant. Immunosuppressants, and other drugs that are 
        primarily covered under Part B, must be included in Part D 
        formularies in order to minimize confusion and insure that 
        patients will not be placed in a life-threatening situation 
        when their prescriptions cannot be filled.
          CMS should utilize the analysis of the USP model 
        formulary that was developed by ESRD Network 8 in evaluating 
        whether plans are providing appropriate access to necessary 
        drugs for those with kidney disease and kidney failure, 
        including those with kidney transplants.
          Formularies should contain separate pharmacologic 
        classes for fixed dose combinations of antihypertensive drugs 
        to promote adherence of patients to regimens that can prevent 
        or delay the progression of chronic kidney disease and/or its 
        complications.

Prior Authorization, Step Therapy, and Quantity Limits
    Plans should be reminded that once a request for coverage 
determination is approved, it covers the plan year, as long as the 
doctor prescribes the drug, the patient takes the drug, and the patient 
is still on that plan. Some plans are requiring doctors to provide 
prior authorization multiple times per year.

Long Term Care Accessibility
    With regard to accessibility for Medicare beneficiaries in long 
term care facilities, many of these patients require unit dose 
packaging and CMS should require PDPs/MA-PDs to make this service 
available.
Conclusion
    Thank you for the opportunity to provide these comments on the 
implementation of the Medicare prescription drug program. The National 
Kidney Foundation is available to assist the Centers for Medicare and 
Medicaid Services in developing strategies to assure that Medicare 
beneficiaries with chronic kidney disease have access to high-quality, 
cost-effective drug coverage.

                                 

                                               Mill Creek, WA 98012
                                                        May 1, 2006

Dear Committee Decision Makers:

    I wish to state my total opposition to the implementation of this 
egregious legislation that does not guarantee ``best drug pricing'' 
negotiations, customer flexibility or reasonable customer choice and 
which seems meritorious only to the pharmaceutical and insurance 
companies! This legislation was also improperly and possibly even 
illegally brought to fruition in a manner that in itself warrants 
investigation and negation of this legislation! I urge reconsideration 
of this benefit as a whole with new drug pricing negotiating 
legislation included at a cost which is more in line with what was 
presented & voted on (but inaccurate & woefully (possibly criminally) 
misrepresented) at the time.

            Sincerely,

                                                    Toniann Reading

                                 
     Statement of Elena Rios, National Hispanic Medical Association
    Congresswoman Johnson and the Members of the Subcommittee on 
Health, Ways and Means Committee, it is an honor to provide testimony 
to discuss the Medicare Part D program and its impact on the Hispanic 
community.
    I am representing the National Hispanic Medical Association, a non-
profit organization representing licensed Hispanic physicians in the 
U.S. The NHMA mission is to improve the health of Hispanics and other 
underserved. We believe that the Medicare Part D program represents a 
major step forward in expanding Medicare and in improving quality of 
life for American elderly and other eligible beneficiaries.
    We are here today to discuss the continued concerns from NHMA that 
need to be addressed to improve the implementation of Medicare Part D 
in order to increase access to prescription drugs for Hispanic 
beneficiaries.
    Medicare represents 43 million Americans who need help in moving to 
the new Part D Drug Plan by May 15, 2006--84 percent White, 7 percent 
Black, 6 percent Hispanic, and 3 percent for all others. Among the 
disabled, 11 percent are Hispanic. At this point, we also need help in 
reducing the penalties for not enrolling by this deadline, which will 
become a deterrent to many.
    As we know from the Agency for Healthcare Research and Quality 
Health Disparities Report, Hispanics have the worst record when it 
comes to indicators for access to health care services, in general. 
Thus, we can expect that our community requires extra attention in the 
implementation of health programs in order to increase use by the 
group.
    What is key for Hispanics is first, they are a group with low rates 
of enrollment in Medicare compared to Blacks and Whites. They have the 
greatest proportion of lack of insurance in America and, thus, as a 
group, have major challenges for the system to include them in any 
health care service.
    Some of the challenges that we must address for Hispanics include 
low educational attainment and low literacy rates; less ability to 
follow drug label instructions; the strong Spanish language use; the 
importance of culture and health beliefs; the lack of trust of the 
system and the lack of awareness of the public health programs and 
healthcare services in general; the critical lack of Hispanic 
physicians and healthcare providers; and the importance of Latino 
community-based services for information.
    In terms of access to needed medical care, enrollment in Medicare 
and now Part D, is key for disabled Latinos and, especially, for the 
elderly Latinos with multiple chronic diseases--diabetes, heart 
failure, ESRD, cancer, glaucoma, Parkinson's disease, Alzheimer's 
disease, etc.
    Hispanics also represent the largest immigrant group in the U.S. 
One in nine U.S. residents is foreign born, one in seven workers is 
foreign born, as is one in four low-wage workers. The Urban Institute 
recently released an eight year study on ``Assessing the New 
Federalism: Eight Years Later'' and studied immigrants vs. non-
immigrants. It found that immigrant families participate at a 
substantially lower level than their native counterparts in such 
benefit programs as TANF, food stamps, and housing assistance. After 
welfare reform, benefit use declined not only among legal immigrants 
whose eligibility was restricted by the law but also among refugees, 
citizen children, and other populations whose eligibility was not 
restricted. Given the new interest from Congress in immigration reform, 
there is a critical need to include health care education and 
enrollment for immigrants into health care services.
    The MMA Law has major challenges--a major one being the transition 
of the 6.1 million Dual Eligibles, with a third being Hispanic and 62% 
of those are under 150% of Federal poverty level, relying only on 
Social Security. Despite planning for the past year of CMS and the 
States, we now know about several glitches that have occurred with the 
transition of Dual Eligibles to Medicare drug plans--some due to 
technology and staff errors and some due to the inadequate customer 
service and some due to the challenges of Hispanics and health care.
    CMS reports that even after successful application, there are 
problems identified in processing the applications--with only one in 
four applications for Low Subsidy Benefit being successfully executed, 
delaying the enrollment from our communities further.
    Literature shows the impact of Medicare and Medicaid drug 
prescriptions with minorities:

        1.  Medicaid Managed Care and Racial Disparities in AIDS 
        Treatment, Health Care Financing Review, 2004, showed Blacks 
        still face barriers in access to care, even after Medicaid 
        assured financial access--under both FFS and managed care.
        2.  Racial and Ethnic Disparities in Prescription Coverage and 
        Medication Use, HCFR, 2003, showed that with Hispanic and Black 
        Medicare beneficiaries without drug coverage used 10-40 percent 
        fewer medications than Whites with the same illness, and spent 
        up to 60 percent less in total drug costs.
        3.  The same study showed that Medicare beneficiaries with the 
        same disease and type of prescription coverage found that 
        minorities tend to get less of chronic medication compared with 
        Whites.
        4.  The same study showed that Hispanics tended to use more 
        expensive drugs which might be an example of loyalty to brands.

    Literature about Medicare and minorities with a focus on the ESRD 
program:

        5.  Daumit study of 1999 was an analysis of patients who gained 
        Medicare coverage through the ESRD program and found a three-
        fold difference in the use of clinical procedures by patient 
        ethnicity nearly disappeared following the acquisition of the 
        special ESRD Medicare coverage.

Medicare Part D
    Despite the plan to have at least two drugs in each class provided 
to patients in a drug plan; pharmacy and therapeutic committees, CMS 
evaluation of formularies and benefit management tools, there are major 
areas of variance for all Medicare beneficiaries:

          Prescription drugs covered
          How much you have to pay
          Which pharmacies you can use

    Dual Eligibles plan included random enrollments in plans, with more 
chance for mismatch of needed meds.
    CMS is to be commended for its Hispanic media outreach efforts--
targeting Hispanic dense metropolitan areas and working with national 
and local partners as well as the coalition development that NHMA is 
involved in. NHMA is also working in partnership with United Health 
Group/Ovations and mailed Medicare Part D information to 33,000 
Hispanic physicians.
    But NHMA has continued to receive many calls from physicians having 
problems with the transition of dual eligibles, confusion of our 
community elderly. Two examples from San Diego area--Ophthalmologists 
in private practice--From January 3rd to 6th--129 dual eligible 
patients were seen and 60% were in drug plans that did not cover their 
ophthalmic medications. A cancer patient was refused her pain 
medication by the new drug plan which would have resulted in fatal drug 
withdrawal.
    Another issue from callers includes the lack of ability of small 
pharmacies in our communities being able to compete with the chain drug 
stores using their branding on labels for the Medicare Part D benefit 
prescriptions. Latinos have thought they could only go to these chain 
drug stores now.
    Thus, CMS and its partners need to do more comprehensive education 
and reinforcement of marketing to increase enrollment in our hard to 
reach communities, especially minority and the poor.
RECOMMENDATIONS

        1.  Research on prescription medications and Hispanic patterns 
        of use
                a.  Closing the gaps in medication use by race and 
                ethnicity--it becomes important to study the extent to 
                which the differences are due to provider or 
                beneficiary behavior amenable to change
                b.  Loyalty to brands for Hispanics and drug plan 
                selection
                c.  Affordability and simple enrollment procedures

        2.  Build upon the CMS public health campaign to correct 
        misperceptions about the importance of treatment adherence, 
        targeted to Hispanics
        3.  Increase culturally designed education media programs with 
        Spanish media

                a.  About the importance to enroll in Medicare Part D 
                managed care vs stand alone plans--need to be discussed 
                in detail with our communities
                b.  How to use medications and how to use them as a 
                part of your daily activities
                c.  Identify activities that work and share them

        4.  Support demonstrations with Hispanic physicians and patient 
        communication and compliance and lessons learned for the non-
        Hispanic physicians and providers in our communities
        5.  Train public health leaders about Hispanics and health, 
        based on this Medicare experience
        6.  Require cultural competency in licensure CME and encourage 
        more physicians to understand Hispanic patient needs, 
        challenges
        7.  Health care facilities--hospitals, nursing homes need 
        standards for cultural competence and language services and use 
        of community workers to help with education (promotoras)
        8.  Include new efforts at developing symbols on signs 
        (``Hablamos Juntos'' RWJF program) for LEP patients in Medicare 
        Part D program development
        9.  Reforms needed--

                a.  Dual Eligibles need a longer transition with 
                monitoring and report to Congress on the progress and 
                the challenges to address
                b.  Simple co-payments messages needed and less 
                variability in ``basics'' with drug plans--to decrease 
                the confusion for elderly
                c.  Formulary monitoring at the Federal level--couldn't 
                there be a direct pharmaceutical company to Medicare 
                ``stockpile'' that can provide medications to be 
                purchased by the drug plans for extra drugs needed that 
                were not on their formulary (to decrease patients 
                falling through the cracks due to glitches in the 
                system)
                d.  Pharmacies should be able to continue dispersing 
                without drug plan coverage, allowing for the transition 
                issues--perhaps with a monitoring by the Federal 
                Government
                e.  Eliminate penalties for those who didn't enroll by 
                the May 15th deadline

        10.  Quality of care--needs to include incentives to make the 
        system more responsive to Hispanics and their families.
        11.  Increase outreach payments for rural, inner city and 
        teaching hospitals and other safety net providers
        12.  Consider the programs that could be developed in Medicare 
        GME funding--Incorporate Medicare information into medical 
        education so that residents and medical students can explain 
        the program to patients.
        13.  Lastly, the Office of Minority Health at DHHS should 
        increase the participation of all national minority health 
        organizations with the effort and link CMS education efforts at 
        their national conferences, websites, newsletters, etc. More 
        community help is needed in addition to the phone hotlines and 
        online counseling supported by CMS to outreach to Hispanics 
        about Medicare Part D.

                                 ______
                                 
References

    Kaiser Family Foundation Analysis of 2002 Medicare Current 
Beneficiary Survey Cost and Use File and A Profile of African 
Americans, Latinos, and Whites with Medicare, November 2005
    Urban Institute New Federalism Report, 2005
    Health Care Financing Review articles on racial disparities with 
Medicare, CMS searches.
    CMS Hispanic Media Project Fact Sheet, January 17, 2006
    Agency for Healthcare Research and Quality, U.S. DHHS, Health 
Disparities Report, January, 2006
                                 

                                       West Valley City, Utah 84170
                                                        May 2, 2006

    This statement is meant to clarify for the Committee on Ways and 
Means the horrendous and confusing chaos caused by the recent 
implementation of the Medicare Drug Benefit Program, and to beg the 
Committee's review and recommended revision of the Medicare Drug 
Benefit Program so that it benefits the people it was meant to help, 
rather than the drug companies and the insurance sellers who are 
currently cleaning house at the expense of the U.S. Government and the 
Medicare Trust Funds.
    Currently, the Medicare Drug Benefit Program is so desperately 
fragmented and unreliable because the Plan does not allow control by 
Social Security or Medicare, but rather allows private insurance 
companies and drug entities to set the rules and the standards under 
which this huge and complicated program is run. Instead of placing this 
program under the responsibility and control of the government agencies 
footing the largest portion of the bill, the Administration simply 
opened the doors to private contractors who cannot or will not take 
responsibility for the responsible handling of the program in a manner 
that satisfies the public need.
    Billions of tax dollars are being poured into this program, but the 
public continues to suffer indignities and hardships because in passing 
this law, the Administration took away many of the excellent drug 
benefit plans many seniors and disabled persons enjoyed, and laid in 
their place this convoluted, incomprehensible, and unreliable program 
that has left a large number of its intended beneficiaries without drug 
coverage for months on end, without the simple ability to contact 
Medicare or SSA to straighten out simple technical problems, and 
without any support system to help them find their way through this 
mess!
    I see the way this program works because I am involved in a very 
intimate way with the people it so greatly affects (and disadvantages). 
I am a front line service representative for the Social Security 
Administration, and have worked in this capacity for over a quarter of 
a century. In the entire time I have worked with SSA and Medicare, I 
have never before witnessed a more ridiculous, incomprehensible and 
just plain stupid set of circumstances as this new Medicare Drug 
Benefit Plan presents.
    Medicare and Social Security have been the cornerstones of the 
programs that seniors, survivors, and disabled persons have come to 
rely on over the past seventy years; a grouping of beneficial programs 
run by responsible federal employees who have been thoroughly trained 
in the concepts of the body of laws governing the programs. People have 
come to respect and trust those of us who administer these programs, 
and now they have come up against a new ``Medicare'' program like none 
other before it . . . geared to the profiteering of large companies who 
see another way to suck billions of dollars off the current 
Administration's desire to ``contract out'' government activities.
    It is a free-for-all, clear and simple, and now our elderly and 
disabled beneficiaries are actually receiving confusing, unwelcome 
solicitation calls from these companies, frightening them and confusing 
them all in the hopes of getting a new customer to buy their product. I 
speak with dozens of people a day who come to Social Security and wait 
an hour or two in our waiting rooms in an attempt to ``get this mess 
straight''. But SSA does not have any input into this mess, because we 
are not in the loop. We are told to refer these poor souls to 1-(800) 
Medicare. (Or the drug insurance providers.) These people come to us 
because we are the ones who have always been there to fix the messes, 
but we can't fix this. And we can't do anything but point them along to 
another source.
    I have called Medicare in behalf of dozens of these poor souls who, 
in their 80's or mentally unable to cope with confusion, are forced to 
call a voice-recognition call answering machine that ``sorts'' the 
calls by category, and forwards the calls to the ``proper component''. 
I have called the 1-(800)-MEDICAR number, and managed to get through to 
the lines, then I am sent to a ``disenrollment specialist'' line, where 
I am told ``call counts are currently heavy. Please call back at 
another time''. Or, after going through fifteen minutes of talking to a 
computer, I am sent to a ``problem specialist'' who tells me that she 
will ``e-mail CMS Regional Office'' with the problem, because she has 
no way to help the person, since she is simply a call center employee 
who cannot take any action or give any real answers, and we must wait 
three to five days for a Medicare person to call the beneficiary back.
    If this is the service that Medicare is currently giving to these 
persons, I can see why they are crowding into SSA offices to try to get 
help which we cannot render.
    I feel that the new program drops the ball completely. There is 
nothing but ``buck-passing'' happening between the Medicare call 
centers and the providers. Since SSA is not even in the loop here, I am 
amazed that these people have the temerity to tell beneficiaries that 
they must contact SSA when the drug premiums are deducted from their 
Social Security checks after they have already paid the premiums by 
personal check after receiving a threat that they will be disenrolled 
for non-payment.
    Under this program, Medicare sends SSA notice to begin deducting 
premiums from checks, (which is about our ONLY involvement here) while 
the drug insurance providers are busily sending bills to the 
beneficiaries for the very same premiums! SSA cannot do anything but 
continue to deduct the premiums until CMS orders us to stop. We now 
hear that it is taking CMS up to 90 days to change enrollments for 
people who are not satisfied with the providers, or cannot get the 
drugs they require from the providers. In the meantime, we are still 
taking premiums out for the OLD provider, while the beneficiary is 
being billed for services from the NEW provider. (And neither provider 
is furnishing the expected discounts.)
    Many times, the providers have been changed without notice to the 
beneficiary, and these poor folks cannot get their prescriptions from 
either provider! I have had many elderly beneficiaries tell me that 
they have gone without life-preserving drugs for up to three months at 
a time because ``something'' was wrong with their enrollment 
information, or the provider did not have them listed, or what-have-
you. When I have called the drug Program provider shown on our records 
from CMS, the provider simply says, ``We don't have proper 
authorization and we cannot give them their drug discounts until CMS 
gets the computer records fixed''. Calling CMS results in the answer 
``the provider is not giving us the proper information''.
    This is the MOST irresponsible way of handling the Medicare Drug 
Benefit Program that could possibly have been hatched by a bunch of 
people who have absolutely NO concept of what they are doing.
    Instead of giving this program to SSA, and saying ``make it work,'' 
the Administration simply handed it over to the private sector, and the 
bidding wars began. And only after the program bankrupts the Medicare 
trust funds will the Administration admit that this was not such a neat 
plan, after all. Perhaps there will be a new Administration in place 
when that happens, and we can start over. Hopefully the American people 
will not have been completely fleeced by that time, and there will 
still be a trust fund to rely on.
    Yes, there is a great need for this program, BUT NOT AS IT IS NOW. 
The American people deserve better treatment. We do not need a program 
that uses taxpayer's money to further subsidize the profits of huge 
drug companies and insurance providers. They make enough profit with 
their price gouging as it is!
    The VA dickers with drug companies over the prices they must pay 
for medicines for the millions of veterans they serve. Medicare is not 
allowed to do that. Before this new program, many drug companies were 
expected to give a percentage of FREE drugs to millions of Americans on 
limited income. Now they can make money off these needy folks by 
billing the government for the same drugs they once gave for free. This 
is a program crafted by profiteers for other profiteers. It is a 
travesty of what it should be.
    I know that this is not the time for semantics and emotions, but it 
IS the time for a realistic review of the inadequacies and 
disappointing inequity of this huge and expensive pork barrel. It is 
time to listen to the people this program is so greatly affecting, and 
turn the reins over to a tried and true administration whose employees 
have been handing social insurance programs for nearly three quarters 
of a century, and who have no personal interest in making a quick 
profit at the taxpayers' expense.
    Get this program into the proper hands, and get it running right! 
Give SSA the people they need to run it, and you will find that it can 
be run in a manner that will make sense, and have a positive impact on 
the people it was meant to serve, by cutting out the confusion, the 
waste, and the sheer ponderous stupidity of it all.
    You are all well aware (or you should be by now) that SSA's 
overhead expenses are less than 1% of income. What private organization 
can boast that kind of conservatism? In this age of pushing for 
``smaller government,'' the Administration is gearing the system for 
disaster. Touting to the public that private industry can handle this 
type of program better than seasoned government agencies is like 
shouting out that wolves make the best babysitters!
    So please take this opportunity to scream for help. And scream in 
the right direction, because the wolves are at the door here, and the 
babies need your intervention!
    Thank you for considering this statement. I trust that you will 
open your minds to this information, and present it in the near future 
to those who need to hear from private citizens, and not just big 
business interests.

                                                     Frances Romney

                                 
                                                  Sandy, Utah 84094
                                                        May 3, 2006

Distinguished Members of Congress:

    I am 69 years old and hold a PhD. from MIT. The last bit of 
information is provided as some indication that I can probably 
understand and digest difficult concepts.
    I have attended five presentations for seniors by insurance 
companies. These presentations were advertised as being about Medicare 
Part D drug plans they offer. There are about 40 such plans offered in 
my area, so I've barely been able to scratch the surface. In each case 
10 percent or less of the presentation was about the drug plans 
offered. The remainder was a pitch for the company's Medicare Advantage 
Plans, some of which include drug coverage and some of which do not. 
The point here is that the insurance companies are using Medicare Part 
D as a lure to get seniors to buy their Advantage Plans. That is not 
terribly surprising in the world of ``privatization.''
    As these presentations continued through the touted Advantage Plans 
seniors were confronted with perhaps hundreds of data points--
copayments, deductibles, network participants, formularies, out-of-
network coverages, etc.--most of which differ from one plan to another. 
Seniors are inundated with numbers, most of which have little to do 
with the drug coverages offered, or not offered, by the insurance 
companies.
    I understand that you, as members of Congress, have excellent 
health benefits. But even those seniors who have never been elected to 
Congress have little or no experience in comparing health insurance 
plans. That was usually done for them by their employers. As it is 
presented, the amount of data that appears to have to be absorbed to 
make an intelligent choice (an underlying cornerstone of the free 
enterprise system in action) is overwhelming.
    I implore you to at least give seniors more time to make a choice 
of a Medicare Part D plan without being penalized. A better solution 
would be to fold the entire prescription drug coverage under 
traditional Medicare and use the buying power of the Medicare program 
to negotiate lower drug costs with the drug manufacturers. As far as I 
can tell the insurance companies have only been negotiating with 
pharmacies, not manufacturers.

            Thank you.

                                                  Arthur Sutherland

                                 
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