[Senate Hearing 109-233]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-233
 
                      MONITORING CMS' VITAL SIGNS:
                     IMPLEMENTATION OF THE MEDICARE
                       PRESCRIPTION DRUG BENEFIT

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

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
                 THE FEDERAL WORKFORCE AND THE DISTRICT
                        OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 5, 2005

                               __________

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                      Amy B. Newhouse, Chief Clerk


   OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE 
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                  GEORGE V. VOINOVICH, Ohio, Chairman
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
NORM COLEMAN, Minnesota              CARL LEVIN, Michigan
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

                   Andrew Richardson, Staff Director
              Richard J. Kessler, Minority Staff Director
            Nanci E. Langley, Minority Deputy Staff Director
                       Tara E. Baird, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Akaka................................................     3
    Senator Levin................................................     4
    Senator Lautenberg...........................................     6
    Senator Carper...............................................     7
    Senator Pryor................................................    29
Prepared statement:
    Senator Coburn...............................................    41

                               WITNESSES
                         Tuesday, April 5, 2005

Hon. Mark McClellan, M.D., Ph.D., Administrator, Centers for 
  Medicare and Medicaid Services.................................    10
Marcia Marsh, Vice President for Agency Partnerships, Partnership 
  for Public Service.............................................    32
Ann Womer Benjamin, Director, Ohio Department of Insurance.......    34

                     Alphabetical List of Witnesses

Benjamin, Ann Womer:
    Testimony....................................................    34
    Prepared statement...........................................    85
Marsh, Marcia:
    Testimony....................................................    32
    Prepared statement with attachments..........................    64
McClellan, Hon. Mark, M.D., Ph.D.:
    Testimony....................................................    10
    Prepared statement...........................................    42

                                Appendix

Questions and answers submitted for the record from Dr. McClellan    94
Question and answer submitted for the record from Ms. Marsh......   107


                      MONITORING CMS' VITAL SIGNS:
                     IMPLEMENTATION OF THE MEDICARE
                       PRESCRIPTION DRUG BENEFIT

                              ----------                              


                         TUESDAY, APRIL 5, 2005

                                 U.S. Senate,      
                Oversight of Government Management,        
                       the Federal Workforce, and the      
                     District of Columbia Subcommittee,    
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:07 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Akaka, Levin, Carper, 
Lautenberg, and Pryor.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Good morning. The Subcommittee on 
Oversight of Government Management, the Federal Workforce, and 
the District of Columbia will come to order. Good morning and 
welcome to today's hearing, entitled ``Monitoring CMS' Vital 
Signs: Implementing the Medicare Prescription Drug Program.'' 
This hearing will provide an opportunity to continue our 
examination of the management challenges confronting the 
Centers for Medicare and Services and ensure that the agency 
has the financial and human capital resources it needs to get 
the job done.
    There is much at stake. For many, access to prescription 
drug medications is a matter of life and death and a decent 
quality of life. Today, conditions that used to require surgery 
or in-patient care can now be treated on an out-patient basis 
with prescription drugs. However, often times the cost of these 
medications is prohibitive. We have to ensure seniors have 
access to these life-saving medications and take advantage of 
the new benefit. If it is properly administered, the new 
Medicare benefit in my opinion will result in the most 
significant improvement in public health since 1965 when 
Medicare came into existence.
    CMS has learned many lessons during the recent 
implementation of the new Medicare drug discount card, which 
will assist it as it continues with implementation of the full 
prescription drug benefit. While I do believe there are still a 
number of hurdles the agency must overcome before the launch of 
that full Medicare drug benefit in 8 months, we would be remiss 
not to recognize the success CMS and Dr. McClellan have had in 
the past year.
    Since the last hearing I held on this topic in April 2004, 
CMS has successfully enrolled more than 6.2 million seniors in 
the discount drug card program. These seniors are saving 
between 12 and 21 percent of the cost of their prescription 
medication. In addition to those savings, I believe the most 
important part of the discount drug card is the transitional 
assistance for low-income seniors--those under 135 percent of 
the Federal poverty level. These individuals received $600 in 
2004 and 2005 to help pay for prescription drugs.
    I am pleased that 1.75 million low-income seniors have 
taken advantage of the transitional assistance to date. Getting 
these seniors enrolled took considerable work, and I saw this 
first hand. I am proud to say that I join with CMS and the Ohio 
Senior Health Insurance and Information Program (OSHIIP), the 
Ohio Area Agency on Aging, and other community groups that 
traveled around Ohio last year. We held 14 roundtables and 
training sessions to educate and encourage seniors without drug 
coverage, especially those with low incomes, to sign up for the 
card. Together, my staff held an additional 426 sessions 
throughout Ohio. I want to thank CMS and the OSHIIP program in 
Ohio for participating and assisting us in efforts to get 
Ohioans signed up for the program.
    And, Mark, I want to thank you for coming on two occasions 
to Ohio to help us get the job done. In fact, we went to the 
training session together for an hour.
    It has paid off for some 279,000 seniors in Ohio who have 
signed up for the drug card. These individuals are expected to 
save about $134 million on the cost of their drugs in 2005. 
Ohio's low-income beneficiaries, who enrolled in the program by 
the end of 2004, will have access to $73 million in direct 
financial assistance with drug costs. While these seniors will 
be able to take advantage of these savings until the full 
benefit begins, it is now time to turn our attention to the 
full drug benefit.
    Using the experience of the implementation and the ongoing 
enrollment in the discount card over the past years, it is the 
responsibility of Congress and the Administration to make 
certain that CMS has the means to implement the much larger and 
more complex, full drug benefit in an efficient and effective 
manner.
    Preparing to administer the program in the tight 2-year 
time frame is quite a challenge. However, from what I have 
witnessed, CMS is well on its way. On January 21 of this year, 
CMS took a crucial first step toward fulfilling the Act by 
publishing the final regulations for the new drug benefit and 
the enhanced health coverage options through the Medicare 
Advantage program. I understand that the agency has an 
ambitious timeline to review and approve potential plan 
sponsors, work with employers and retirement systems that 
choose to apply for the retiree subsidy, assist States in 
adapting their prescription savings plans to help their 
beneficiaries further benefit from the new Federal coverage, 
and, of course, communicate and educate Medicare beneficiaries 
about their options and ultimate enrollment in the plans. 
Having the right people at CMS is the key to successful 
implementation of this program.
    And even before the passage of the Medicare Modernization 
Act, CMS--and this is what we are here to talk about today--was 
coping with administrative challenges. For example, a 2002 
report by the National Academy of Social Insurance highlighted 
the fact that between fiscal years 1992 and 2002, benefit 
outlays increased 97 percent and claims grew by 50 percent; 
however, program management funds increased only 26 percent, 
and authorized full-time equivalent positions grew by 12 
percent.
    Currently, 18 percent of CMS' workforce is eligible to 
retire, and the number is significantly higher, 30 percent, in 
the Senior Executive Service. In addition, over the past 3 
years, CMS has lost a quarter of its career executives to 
retirement. If that does not seem like enough of a daunting 
challenge, 46 percent of the existing CMS workforce will be 
eligible for regular retirement by 2009. These statistics will 
sound familiar to anyone knowledgeable of the Federal 
Government's human capital challenges.
    Before I introduce the witnesses, I would like to remind my 
colleagues that the purpose of this hearing is not to discuss 
the details nor the merits of the program. I know there is 
still some controversy about the program. We are here to 
determine if the agency has the wherewithal to get the job 
done, to get it out on the street. I understand some have 
concerns surrounding the program. However, it is the law. We 
are here today to ensure CMS has the resources and personnel 
capacity to ensure that the benefit is implemented as Congress 
has directed.
    I would now like to call on Senator Akaka for his opening 
statement.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman. I have 
long supported efforts to establish a meaningful Medicare 
prescription drug benefit for the elderly and disabled, and I 
remain committed to improving the Medicare prescription drug 
benefit so that seniors are able to obtain all of the 
medication that they need.
    However, I voted against the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 because it offers a 
false promise to all seniors. Under the MMA, new prescription 
drug plans will be available to individuals covered by Medicare 
beginning in January 1, 2006. The Center for Medicare and 
Medicaid Services (CMS) recently issued the final regulations 
implementing this benefit.
    MMA coverage, in my mind, could actually, I feel, harm many 
seniors. For example, Hawaii's seniors who have incomes below 
100 percent of the poverty level and obtain their medication 
through Hawaii's Medicaid program will be worse off under this 
plan because they will have to make co-payments for their 
prescription medications. I fear that too many low-income 
seniors will not be able to afford these co-payments. Creating 
a barrier that will prevent some low-income seniors from 
obtaining needed medications will likely increase overall 
health care costs. Denying necessary medication could lead to 
more hospital visits and other health-related costs.
    Mr. Chairman, I intend to introduce legislation shortly to 
remove the co-payment requirement for dual-eligible 
beneficiaries, and I hope my colleagues will support me in this 
effort.
    Mr. Chairman, I am also concerned that Medicare and 
Medicaid dual-eligible seniors may have to alter their existing 
treatments because of the formularies imposed by prescription 
drug plans. For example, HIV and AIDS patients and individuals 
in nursing homes may be forced to alter the physician 
prescription because their formularies for their Medicare 
prescription plans are too restrictive and are less generous 
than their existing Medicaid drug coverage. More must be done 
to protect the ability of beneficiaries to obtain for 
themselves the best possible treatment, rather than being 
subject to arbitrary formulary determinations.
    Senator Voinovich, I thank you for calling today's hearing 
to discuss with our witnesses the implementation of Medicare 
Part D. This portion of Medicare will be difficult to 
administer due to the complex design of the prescription drug 
benefit plans and low-income subsidies. In particular, I look 
forward to discussing today what steps will be taken to ensure 
that seniors will have access to the information necessary to 
make informed choices among private plans and utilize the 
benefits for which they may be eligible.
    This is a complicated task. Different communities have 
diverse needs and challenges that must be met to make sure that 
underserved populations will not be unfairly denied access to 
assistance. It will be critical that access not be denied to 
seniors because of language or cultural barriers or to those 
who do not have access to the Internet, or even a telephone. We 
must take steps to ensure that even those in isolated 
communities, such as those on the island of Molokai, are 
provided with the information necessary to utilize all of the 
benefits that they may be entitled to under the MMA.
    I look forward to the testimony, and I want to add my 
welcome to Mark McClellan, Marcia Marsh, and Ann Benjamin.
    Thank you very much, Mr. Chairman.
    Senator Voinovich. Thank you. Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you, Mr. Chairman, and thank you for 
holding this important hearing. As we all remember, a few years 
ago we had a vigorous debate about the future of Medicare and 
the best way to deliver an affordable, voluntary, universal, 
and guaranteed prescription drug benefit to our seniors. Many 
seniors, retirees, were skeptical of the Medicare bill that was 
enacted in 2003, and, quite frankly, so was I. Now, 2 years 
later, we are beginning to get some answers which I hope we 
will hear about today. For example, what is the increased cost 
of the drug benefit since the Department of Health and Human 
Services is apparently barred from negotiating lower prices for 
Medicare beneficiaries? How many retirees will lose the solid 
prescription drug coverage that they now have?
    These were major concerns back in 2003. The law has given 
the Centers for Medicare and Medicaid Services, or CMS, the 
authority to fashion implementing regulations that could 
possibly ease some of the problems. I hope to hear today about 
what CMS is planning to do with that authority.
    The Administration has been less than forthcoming in 
providing accurate information to Congress about the cost of 
the Medicare drug benefit. In 2003, while the Administration 
was publicly stating that the drug benefit would cost no more 
than $400 billion over 10 years, the chief actuary for CMS, 
Richard Foster, had internal documents predicting costs closer 
to $534 billion. When Congress asked Mr. Foster to provide 
those estimates during the House and Senate debate on the bill, 
the former CMS Administrator refused to make either Mr. Foster 
or those estimates available. New budget documents now project 
a cost in the neighborhood of $720 billion.
    The huge increase in the cost of this program in just 2 
years from the original $400 billion price tag goes beyond 
sticker shock. Accurate cost information and honest cost 
projections are critical as the drug benefit is implemented 
early next year and Congress begins to evaluate both the 
program and possible changes to it. CMS needs to satisfy the 
people of this Nation that it will provide accurate cost 
information.
    A related issue is the CMS decision to use critically 
needed administrative resources to produce covert broadcast 
materials to try to promote the new Medicare drug benefit. Last 
year, CMS distributed a videotape on the program benefits in 
the guise of an actual news report, when in reality the 
reporter was a paid actor.
    CMS is not alone in this. Political consultants and 
commentators were paid hundreds of thousands of dollars to 
promote Department of Education policies and tens of thousands 
to promote a program at the Department of Health and Human 
Services. This type of covert journalism is just plain wrong. 
And although last year the Government Accountability Office, 
the GAO, concluded that this practice violated Federal law, a 
memorandum by the Administration released just last month 
states that the Executive Branch is ``not bound'' by GAO legal 
advice. Disguising the hand of government in broadcast 
materials is not only against the law, it undermines the 
operation of a free press. Government should be protecting a 
free press, not trying to buy it. It is my hope that CMS will 
tell us today that it will end the use of covert broadcasting 
materials to promote the Medicare drug benefit and to use those 
critically needed resources for administration of this program.
    I want to especially commend Senator Lautenberg for his 
early blowing of the whistle on these abuses and for his 
persistence in this matter. It has been brought to the 
attention of the public as an abuse which must be corrected, 
and I salute him for it.
    I would like to thank Dr. McClellan for appearing here this 
morning and for his public service over the years, and I look 
forward to his testimony as well as the testimony of the other 
witnesses.
    [The prepared statement of Senator Levin follows:]

                  PREPARED STATEMENT OF SENATOR LEVIN

    Thank you, Mr. Chairman, for holding this hearing. I know that many 
seniors and retirees are skeptical of the Medicare bill that was 
enacted in 2003, and quite frankly, so am I.
    As we all remember, we had a vigorous debate 2 years ago about the 
future of Medicare and the best way to deliver an affordable, 
voluntary, universal, and guaranteed prescription drug benefit to our 
seniors.
    Now, 2 years later, we are beginning to get some answers, which I 
hope we will hear about today. For example, what is the increased cost 
of the drug benefit since the Department of Health and Human Services 
is apparently barred from negotiating lower prices for Medicare 
beneficiaries? How many retirees will lose the solid prescription drug 
coverage they now have. These were major concerns of mine in 2003. The 
law has given the Center for Medicare and Medicaid Services or CMS the 
authority to fashion implementing regulations that could possibly ease 
some of the problems. I hope to hear today about what CMS is planning 
to do with this authority.
    Another concern that needs to be aired today is the fact that, from 
the beginning, this Administration has been less than forthcoming in 
providing accurate information to Congress about the cost of the 
Medicare drug benefit. For example, in 2003, while the Administration 
was publicly stating the drug benefit would cost no more than $400 
billion, the chief actuary for CMS, Richard Foster, had internal 
documents predicting costs closer to $534 billion. When Congress asked 
Mr. Foster to provide those estimates during the House and Senate 
debate on the bill, the former CMS Administrator refused to make either 
Mr. Foster or those estimates available. New budget documents from the 
Administration now project a cost in the neighborhood of $720 billion.
    The huge increase in the cost of this program in just 2 years from 
the original $400 billion price tag goes beyond sticker shock. Accurate 
cost information and honest cost projections are critical as the drug 
benefit is implemented early next year, and Congress begins to evaluate 
both the program and possible changes to it. CMS needs to satisfy the 
people of this nation that it will provide accurate and honest cost 
information.
    A related issue is the policy decision to use covert broadcast 
materials to try to promote the new Medicare drug benefit. Last year, 
CMS distributed a videotape on the program benefits in the guise of an 
actual news report when, in reality, the reporter was a paid actor. 
Political consultants and commentators were paid hundreds of thousands 
of dollars to promote Department of Education policies and tens of 
thousands to promote a program at the Department of Health and Human 
Services. This type of covert journalism for hire is plain wrong. And 
although last year, the Government Accountability Office (GAO) 
concluded that this practice violated two Federal laws, a memorandum by 
the Administration released just last month states the Executive Branch 
is ``not bound by GAO legal advice.''
    Disguising the hand of government in broadcast materials is not 
only against the law, it undermines the operation of a free press. 
Government should be protecting a free press not trying to buy it. It 
is my hope that CMS will tell us today that it will end its use of 
covert broadcasting materials to promote the Medicare drug benefit. I 
commend Senator Lautenberg for his early blowing the whistle on these 
abuses and his persistence in this matter.
    I would like to thank Dr. McClellan for appearing here this 
morning. I look forward to his testimony as well as the testimony of 
the other witnesses.

    Senator Voinovich. Senator Lautenberg.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. Thanks, Mr. Chairman, and thanks, 
Senator Levin, for mentioning the fact that I had been 
following this trail of what I will call propaganda very 
arduously. And, Dr. McClellan, you have been on the job long 
enough to look back longingly, I assume, and wonder which job 
was a more welcoming one. But you have the intelligence and the 
backbone to do these things, so we are not going to take it 
easy on you, I promise.
    It has been almost a year and a half since President Bush 
signed this law that is going to make such profound changes in 
the Medicare program, and we have since learned that the 
information given the Congress during the debate on this bill 
was false. The cost was understated by hundreds of millions of 
dollars, and, unfortunately, the deception did not end there. 
Since the bill was passed, the Administration has engaged in 
illegal propaganda, defined by the GAO, in what I will call an 
attempt to sell this bill of goods to the American people. And 
it was done by producing the video news releases, as mentioned 
by Senator Levin, distributed to local television stations for 
use in their news programs. And as someone who saw these videos 
on their local stations, they could believe that they were 
listening to a valid news commentary instead of a sales pitch.
    In fact, at one point they featured a fake news reporter 
paid for by the government and reading a script prepared by the 
government. And it is not news. It is government propaganda. 
But the viewers who were exposed to this material on TV 
stations around the country had no way of knowing that. These 
videos were produced with money from the Medicare trust fund. 
Three propaganda releases were produced, two in English and one 
in Spanish. And in one script, the Administration suggested 
that the local news anchor in doing the video concluded her 
remarks by being identified as Reporter Karen Ryan, and she 
helped sort through these details. That was described by the 
news anchor. But Karen Ryan was not working for a news 
organization that was part of our free press. She was working 
for the government and getting paid to say what they wanted her 
to say. And, again, that is not news. That is propaganda.
    On May 19, 2004, the Government Accountability Office 
issued a legal opinion that HHS and CMS had violated the law by 
using taxpayer dollars to fund covert propaganda.
    Now, I asked GAO to investigate this matter further to 
determine exactly where the Administration had crossed the line 
between legitimate information and political propaganda. And it 
is wrong to pull the wool over the American people's eyes. And 
if you try to do it with their own money, it is illegal.
    But that was not the end of the matter. Basically, HHS and 
the Centers for Medicare and Medicaid Services thumbed its nose 
at the law. It is bad enough that the Administration crossed 
the line between information and propaganda, but it is even 
worse to ignore a legal opinion from the Government 
Accountability Office. When you do that, you are telling the 
American people that we are not accountable. And I ask what 
kind of an example that sets.
    Mr. Chairman, if the Administration or the White House, can 
say those laws do not apply to us, well, what laws do apply to 
them? I think all laws apply to all of us, and one of the 
things that I want to do is make sure that redress can be 
sought in the courts by organizations to break through the 
sovereign immunity proposition. To question that in the courts 
we should not have to do that, and normally one would not be 
able to do it. But we have to find an opportunity to give the 
public an honest account on this.
    Mr. Chairman, I look forward to hearing from Dr. McClellan.
    Senator Voinovich. Thank you, Senator Lautenberg. Senator 
Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman.
    To Dr. McClellan, welcome. It is good to see you, and we 
thank you for your continued service in this role.
    I just want to follow up briefly on Mr. Lautenberg's 
comments. There is obviously a difference between propaganda 
and information that is really meant to inform seniors as they 
try to make what can be difficult decisions between now and the 
beginning of next year. And the key is, as in most things, to 
find the right balance. And in our own State, as one who voted 
for the Medicare bill--a tough decision, maybe the toughest 
that I have cast here in my first 4 years in the Senate--I have 
a strong interest--and I know it is shared by our at-large 
Congressman, Congressman Castle--that we do the best job we can 
to figure out how to take the State's drug benefit--we have a 
State drug benefit that we signed into law during my time as 
governor--and how do we really wrap these two benefits together 
so that we have a State benefit and a Federal benefit, that 
they complement each other, and we derive the very best 
benefit, not complex but as comprehensive as we can, for our 
seniors.
    And in the end, I think back on my own Mom, who recently 
passed away, and how confusing things like this are to her and, 
frankly, to all of our mothers, grandmothers, and grandfathers. 
We need to focus real hard--and we are certainly trying to do 
that in my own State with our own congressional delegation--on 
making sure that older folks and their children understand what 
their options are and make the right choices.
    Having said that, Mr. Chairman, I would just reiterate, as 
others have, that we are pleased to have this hearing today. We 
are grateful to you for calling us together. This legislation 
signed into law is obviously an important one for our country 
and an important one for a lot of our citizens. The policies 
that we have adopted obviously cannot be implemented if CMS 
does not have the resources and the staffing that you need. We 
understand that, and we want to be supportive to meeting your 
needs.
    I again want to congratulate Dr. McClellan for the job that 
he has done so far in getting this historic piece of 
legislation off the ground. Obviously, there is a lot to be 
done, but I appreciate the complexity of the task that has been 
presented to CMS and believe that you and your colleagues have 
done a good job so far.
    I think that the next 8 or 9 or 10 months will in large 
part dictate whether this program is going to be successful. 
The launch and all kinds of things--my friend here, Carl Levin, 
is from Detroit. They worry a lot about the auto industry, and 
I do, too. We have got a couple of big auto plants in my State. 
We worry about launching new public sector. We are going to 
launch a new Pontiac, Solstice, from our GM plant in Wilmington 
later this spring. The launch has to be perfect in order to 
help ensure the future of that car and, frankly, help ensure 
the future of the company.
    Having said that, the launch of this Medicare drug benefit 
will in large part, I think, help to determine whether it is 
going to be around for a while and whether it is going to 
realize the potential and promise that it has.
    We need to make sure that all stakeholders have access to 
the information that they need and that they understand the 
changes that are to come. We need to be able to present this 
information to people so that folks the age of my mother, who 
died in her 80s last week, can come close to understanding it 
and that their children and others around them can understand 
it if their loved ones cannot.
    We need to make sure that States, for example, receive 
ample assistance from CMS to identify the dual-eligible 
population, and I think this is vitally important. Seniors who 
comprise this dual-eligible population often have special 
needs, and we must make sure that this population is 
transitioned smoothly into the new benefit, or as smoothly as 
possible. We need to make sure that doctors, pharmacists, 
nursing homes, and other providers understand the new benefit 
and how it will affect their patients. And, finally, we must 
ensure that CMS has the resources that are needed to oversee 
the many plans that we hope will participate.
    CMS is responsible for ensuring that plans do not 
discriminate against beneficiaries, that their formularies 
include a sufficient array of drugs so that seniors can get all 
the medications that they need, and that the plans have 
appropriate safeguards in place to deal with the complaints and 
appeals and other disputes that are sure to come.
    Again, I just want to repeat how important it is that we do 
this right, get it right the first time out, and I am committed 
to seeing that this historic new benefit is implemented as 
smoothly as possible, and I hope that CMS will continue to do 
the good work that you have begun in this regard.
    Mr. Chairman, thank you.
    Senator Voinovich. Thank you, Senator Carper. That is 
exactly why we are here today. We want to make sure this thing 
is launched properly and that people take advantage of it.
    I would like to welcome Dr. Mark McClellan today. Dr. 
McClellan has been serving as CMS Administrator since March 25, 
2004. It has not even been a year since Dr. McClellan has taken 
over. He succeeded Tom Scully, who left the agency before the 
program he promoted was launched, leaving you perhaps in the 
lurch a bit. But Dr. McClellan is used to taking on daunting 
challenges.
    Prior to taking this post, he served the Bush 
administration in the Food and Drug Administration and in the 
White House as a member of the President's Council of Economic 
Advisers. Success at any agency is the result of strong 
leadership, and that begins at the top. I have been impressed 
with Dr. McClellan's drive and dedication. I look forward to 
hearing from him about the challenges he has identified and the 
steps the agency has taken to address them in order to ensure 
that all 43 million Medicare beneficiaries have the opportunity 
and information they need to take advantage of the drug 
benefit.
    Testifying on our second panel of our witnesses today are 
Marcia Marsh from the Partnership for Public Service and Ann 
Womer Benjamin from the Ohio Senior Health Insurance 
Information Program, and she is the Director of the Department 
of Insurance of Ohio. Both Ms. Marsh and Ms. Benjamin have 
partnered with CMS throughout the past year to help the agency 
advance different aspects of the drug benefit. They will 
provide valuable insight about the agency's progress and 
thoughts on how CMS might better position itself to ensure the 
successful implementation of the benefit.
    It is the custom of this Subcommittee, Dr. McClellan, and 
the other two witnesses, that you are sworn in. Will you stand 
and I will administer the oath. Do you swear that the testimony 
you are about to give this Subcommittee is the truth, the whole 
truth, and nothing but the truth, so help you, God?
    Dr. McClellan. I do.
    Ms. Marsh. I do.
    Ms. Benjamin. I do.
    Senator Voinovich. Let the record show they answered in the 
affirmative. Dr. McClellan, welcome.

       TESTIMONY OF HON. MARK McCLELLAN, M.D., PH.D.,\1\ 
   ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES

    Dr. McClellan. Mr. Chairman, thank you.
---------------------------------------------------------------------------
    \1\ The prepared statement of Dr. McClellan appears in the Appendix 
on page 42.
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    Chairman Voinovich, Senator Akaka, and distinguished 
Members of the Subcommittee, I want to thank all of you for 
inviting me to provide an update on the implementation of the 
Medicare Modernization Act of 2003 and, in particular, on 
bringing critically needed help with drug costs to all Medicare 
beneficiaries. With the important new hiring and management 
provisions and the support for our agency that were included in 
the Medicare law, we are on track to provide new prescription 
drug coverage and new Medicare Advantage plan options to our 43 
million beneficiaries to help them both prevent diseases and 
keep their medical costs down. Millions of low-income 
beneficiaries, almost a third of our beneficiaries, will 
receive comprehensive prescription drug coverage at little or 
no cost.
    Mr. Chairman, you and your colleagues have long emphasized 
the importance of healthy and up-to-date government 
organizations to provide effective, up-to-date government 
services. Thanks to your leadership, the Medicare law has given 
us new authorities to reform our agency, to bring new expertise 
and perspectives to our dedicated professional staff, to meet 
our new responsibilities in providing these up-to-date benefits 
in Medicare. And I want to thank this Subcommittee, and 
particularly you, Mr. Chairman, for providing CMS with the 
flexibilities needed to hire individuals quickly with the 
skills required to implement the new Medicare law. Using the 
new authorities that you have provided, we have undertaken 
nothing less than what has been called an extreme makeover of 
our most important resources at CMS--our human resources.
    We have revamped our entire human capital management plan 
and our hiring process, and we have realigned our functional 
groups inside of CMS. Through this strategic process, we have 
been building a staff that possesses new talents aligned with 
our new services, including individuals with expertise in drug 
benefits, in pharmacy services, including the specialized 
pharmacy services provided in nursing homes, in retiree health 
benefits, in contracting with health plans, in disease 
management and prevention, in quality measurement and quality 
improvement programs, and in many other areas related to 
helping our diverse population of seniors and population with 
disabilities get more up-to-date, prevention-oriented, 
personalized care. In fact, we have brought some of these 
talented people out of retirement.
    We appreciate the additional resources provided by Congress 
and the flexibilities in our hiring process, especially our 
management staff authority. Aided by the direct hiring 
authority and the Federal Career Internship Program, CMS has 
hired a total of 345 new employees. We are on track to a 
commitment of about 400 in place right now, and we expect close 
to another 100 beyond that.
    We have also restructured within CMS to improve our ability 
to use these human resources to meet the requirements of the 
Medicare law. Using our new hires and our updated agency 
structure and business processes, we have worked to develop an 
effective system for providing reliable access to quality 
prescription drug plans and to Medicare Advantage plans 
throughout the country. We have combined the expertise and 
experience of our staff with that of the experts who have 
joined the agency, including leaders from the Federal Employees 
Health Benefits Program, pharmacists, or other health 
professionals and benefit managers from the private sector. 
Much like FEHB, we have sought to develop a transparent process 
that provides predictable and sensible oversight. And we have 
augmented our own capabilities by listening carefully to ideas 
and perspectives from many diverse outside groups through an 
extensive public comment process about our regulations and 
guidances and application materials and other support 
documents.
    For example, as part of our work with the potential 
prescription drug plan and Medicare Advantage sponsors, we held 
four conferences around the country. Sponsors found the 
opportunity to meet with our leadership and our subject area 
experts extremely valuable. March 23, as you mentioned, was the 
deadline for sponsors to submit applications to participate in 
the program in 2006, and we are holding a similar conference in 
Baltimore today to make sure that we are very clear about the 
requirements for the final bids that are due on June 6.
    I am pleased to say that we have seen a very strong 
response from organizations interested in participating in the 
Medicare Advantage and prescription drug plan programs, clear 
evidence that our new hires and our restructuring are getting 
the job done. Based on the high interest level, CMS is 
confident that throughout the country beneficiaries will have 
access to prescription drug plans on schedule on January 1, and 
we do not think we will need the so-called fallback provision 
because all areas of the Nation are on track for having 
sufficient health plans.
    In fact, we have already seen an unprecedented response to 
our implementation of the new Medicare Advantage program in 
2005. We have received over 130 new Medicare Advantage plan 
applications this year, including 50 plans completely new to 
the Medicare program and around 80 new preferred provider 
organizations, PPOs. And we have received more than 70 
proposals for expanded service areas.
    As a result, we are headed for 49 States participating in 
the Medicare Advantage program this year. Based on the 
applications that have come in, we expect well over 90 percent 
of all Medicare beneficiaries to have access to these lower-
cost health plans in 2005, and that is the highest level ever 
in Medicare's history. And it is not just in the big cities 
anymore. Three-fourths of rural beneficiaries will have access 
to a Medicare Advantage plan.
    These much improved health plan options are really 
important because they enable beneficiaries to get better 
benefits and to lower their health costs more than ever. Based 
on the benefits that are available now, Medicare beneficiaries 
can save an average of almost $100 a month when they enroll in 
a Medicare Advantage plan compared to traditional Medicare with 
its gaps in coverage or to buying an individual Medigap plan to 
fill in these gaps. And with our increased use of risk 
adjustment that targets additional payments to Medicare 
Advantage to beneficiaries with chronic diseases, there are 
greater opportunities than ever for beneficiaries with chronic 
illnesses to save through the comprehensive benefits and better 
coordination of their care. In fact, more than 40 plans are 
offering special needs programs, that is, programs specifically 
targeted to our beneficiaries who are frail and have multiple 
illnesses, this year, and we expect well over 100 special needs 
plans next year.
    But we know that providing up-to-date benefits is not 
enough to lower health care costs and improve health for our 
seniors. For this reason, we are developing and implementing a 
comprehensive education and outreach campaign, including 
unprecedented collaboration with other government and private 
organizations, to support our beneficiaries in getting help 
with Medicare's new coverage.
    The three phases of this education campaign focus first on 
awareness and the sources of help; second, on education to make 
an informed choice; and, third, on targeting those who have not 
made a choice yet, to help them understand the benefits of the 
program later in 2006.
    Our central office and our ten regional offices are working 
with the Social Security Administration, the Administration on 
Aging, with other Federal agencies, with States, with State 
Health Insurance Assistance Programs (SHIPs), plans like the 
one you mentioned, with employers, unions, national and 
community-based organizations, and private organizations to 
educate beneficiaries and their caregivers and others at a 
grass-roots level to give them the support they need to make an 
informed choice. So, Senator Carper, that is very important, as 
you said.
    And, of course, we appreciate the support of Members of 
Congress, like all of you, to help educate beneficiaries about 
how they can get this help to lower their medical costs. Groups 
like OSHIIP in Ohio and the Access to Benefits Coalition and 
you, Mr. Chairman, have been very important assets for seniors, 
and it has been extremely helpful in getting us moving in the 
right direction for implementing the law effectively.
    We are working hard at CMS, and we have made a tremendous 
effort to move toward full implementation of the new benefits 
created under the Medicare law on schedule. So, again, I want 
to thank you for the opportunity to update you on our progress 
in implementing the Medicare prescription drug coverage and for 
your support in making sure we have the strongest possible 
organization to take advantage of the tremendous opportunities 
provided by the Medicare law. I want to thank all the Members 
of this Subcommittee who may want to add to the Medicare 
benefit legislatively and bring in even more coverage, but who 
are also working with us constructively to make sure that we 
are using the Medicare law that we have now to get the most 
help to seniors.
    Thank you very much, and I would be happy to answer any 
questions you all may have.
    Senator Voinovich. Thank you, Dr. McClellan.
    All of us are interested in having our people take 
advantage of the program. I know in my State we have 650,000 
people that are at or below 150 percent of poverty. Many of 
those people today, most of them, have no drug coverage. This 
new plan will provide them with drug coverage. For a generic 
drug they will pay $3. For a name brand drug it will be $5. So 
it is really important that these folks get all the information 
they need to take advantage of this wonderful benefit that is 
being made available to them.
    A new Congressional Research report on beneficiary 
information concluded about the program, the temporary card, 
``The outreach and education experience of the discount card 
program can offer lessons for implementing the Medicare 
prescription drug benefit beginning in 2006. Then decisions 
beneficiaries must make are likely to be more complex and the 
stakes higher for not enrolling or selecting a prescription 
drug plan that does not target an individual's needs as well as 
alternative plans.''
    What I would like to know is what lessons have you learned 
thus far in implementing the card, the temporary card, that are 
going to accrue to the benefit of fully implementing this 
program.
    Dr. McClellan. Mr. Chairman, as you know, the Medicare 
discount drug card program was a temporary program that we 
implemented quickly to provide help to seniors who were paying 
the highest prices for their medicines, and especially seniors 
who were having to choose between drugs and other basic 
necessities. That drug card, as you mentioned, is now providing 
assistance to almost 6.5 million beneficiaries. Those millions 
of beneficiaries are getting billions of dollars in drug 
savings.
    Let me talk about two types of lessons we have learned. One 
is on the operational side, and the other is on the outreach 
and educational side.
    On the operational side, we found some challenges when drug 
discount providers had only a limited amount of time to get an 
application together and get it in to us. So with the drug 
benefit we are taking advantage of the additional time we have. 
It is not a lot of time, but it is more than we had to 
implement the drug card, to have some discussions between the 
potential drug plan sponsors and the Medicare program. We have 
modeled this on the way the Federal Employees Health Benefits 
Program successfully does business. We have an exchange of 
information to help make sure that we have answered questions 
and overcome obstacles with the drug plans being developed, 
that they meet all of our standards and that they do so in a 
way that provides the best deal for beneficiaries. That is 
paying off with the tremendous response that we have seen for 
participating in the drug benefit next year.
    The next part is on outreach, and we have seen that direct 
interactions with beneficiaries over a prolonged time period 
can really help in informing them about new benefits. This is 
not just a new finding with the drug card. We have known for 
every low-income assistance provision that the Department of 
Health and Human Services ever implemented, as well as other 
changes in Medicare benefits. The more we give seniors and our 
beneficiaries clear and simple information and the earlier we 
can start, the better.
    We have taken several steps to do just that. For example, 
we have worked with the Social Security Administration to 
develop and finalize a low-income subsidy eligibility 
application, which is being field-tested right now, and in the 
next month or so will be sent out nationally to everyone who 
may be eligible for the low-income subsidy. That gives us even 
more time to get low-income beneficiaries enrolled. Previous 
low-income assistance programs often took a decade to get up to 
50 percent participation, we are going to try and overcome that 
by using simpler forms, by getting them out earlier, and by 
relying on much more extensive grass-roots support.
    Senator Voinovich. Are the number of plans going to be less 
than the number of cards available under the old program? The 
problem is that so many seniors just had too many options 
available and it made it very difficult for them. In addition 
to that, many of them are not computer literate. Maybe 15 years 
from now it will be fine, but the fact is they are not computer 
literate. Have you done anything to try and reduce the number 
of options that these individuals will have available to them?
    Dr. McClellan. Senator, we do not know exactly how many 
drug plans are going to be available. I am confident that we 
are going to have a significant availability of drug coverage 
in every area of the country. I don't think it is going to be 
anything like the overall numbers with the drug card. But we 
have also learned----
    Senator Voinovich. Well, are you going to put people into a 
program? If you recall, at the end, because we were very upset 
because so many low-income people were not taking advantage of 
it, you identified people that were eligible and sent them the 
information. At that stage of the game they were in a program, 
and then if they did not want to, they could opt out of it.
    Dr. McClellan. Right. We are going to get our identifiable 
low-income beneficiaries into drug coverage. So for the dual-
eligible beneficiaries, people who are in Medicaid drug 
coverage now and are going to transition to Medicare drug 
coverage in January, we are working with the States to identify 
all dually-eligible beneficiaries early. Additionally, we are 
working to ensure they are notified in early October about the 
plan that they will be assigned to in January, if they do not 
make a choice on their own. That gives them, their caregivers, 
their institution, if they are in a facility, and their health 
plan 3 months to prepare for their transition. They can also 
switch month to month.
    In addition, for other low-income beneficiaries, as long as 
we can identify them, we are going to make sure they get drug 
coverage by the end of the open enrollment period. The key is 
getting that low-income subsidy application filled out. For 
people who we have identified because they are in one of the 
limited Medicaid benefit programs, the so-called Medicare 
saving programs, like SLIMB and QMB, we will work with the 
States to identify those people, enroll them automatically in 
the low-income subsidy, and get them into drug coverage.
    But the other group that we want to reach are those low-
income seniors that you mentioned, Senator, who are not getting 
any help with their drugs or other medical costs. In many 
cases, we have been able to get them signed up for the drug 
card and the $600 in assistance and the wrap-around subsidies. 
Those people we do need to get enrolled in the low-income 
subsidy so that they can then be subsequently enrolled in the 
drug card if they do not make a choice on their own.
    So, yes, we are planning on enrolling many of these 
beneficiaries automatically in the drug benefit, and that is 
why we are starting this process so early this time. This is 
something that we learned from the drug card experience, that 
we want to take advantage of all the time we have because these 
populations can be very challenging to reach.
    Senator Voinovich. Thank you. Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Dr. McClellan, there are approximately 60,000 dual-eligible 
HIV/AIDS patients along with 6 million other dual-eligible 
beneficiaries in the United States. The final regulations have 
no grandfather clause covering drugs that dual-eligibles have 
been stabilized on under Medicaid. The question is: How will 
CMS avoid forcing beneficiaries to change their medications if 
the drug plans do not provide the same coverage as Medicaid?
    Dr. McClellan. Senator, the first thing we are going to do 
is require the drug plans to provide beneficiaries access to 
all medically necessary treatments. And we have worked 
extensively with advocacy groups for our vulnerable Medicaid 
beneficiaries who often have illnesses that requires them to 
depend on particular medicines for AIDS, for mental illnesses, 
and for other sensitive and complex conditions.
    As a result, we issued not only this regulatory requirement 
for access to medically necessary treatment, but we have backed 
it up with further regulatory guidances. Let me give you an 
example of a couple of those.
    One of those is our guidance on formulary coverage for the 
drug benefit, and the formulary coverage is very explicit 
about----
    Senator Voinovich. Dr. McClellan, you keep using the word 
``formulary.'' Could you explain what a formulary is, please?
    Dr. McClellan. A formulary, Mr. Chairman, is a list of 
drugs that are covered under a particular drug plan, those 
drugs get the most favorable subsidies from the drug plan and 
can be obtained at the lowest cost by the beneficiaries in the 
plan. Drug plans are also required to have an exceptions and 
appeals process for access to off-formulary drugs that are 
medically necessary. And we have tried to make that process 
quicker, faster and simpler as a result of the regulations and 
the input that we have received. But the main goal is to have a 
smooth process for people to get access to the drugs that they 
need within their drug benefit, and that is why in our 
formulary guidance, we explicitly said that HIV and AIDS drugs, 
and other important types of drugs, must be adequately covered. 
In particular, for the HIV and AIDS drugs, we said that 
substantially all or all must be covered. That is the test in 
our CMS formulary review. And we are further requiring that the 
coverage reflect the kind of coverage that is widely available 
in some of the best private plans and Medicaid plans today.
    So, for example, the most popular plans in the Federal 
Employees Health Benefits Program cover typically, on 
formulary, 25 or more HIV/AIDS drugs because the beneficiaries 
need access to those particular drugs because of the complexity 
of their disease. And we are going to require the same kind of 
oversight for the drugs offered in the Medicare program.
    Second, when there are requirements for a drug transition--
and I think these are more likely to be when you transition, 
for example, one cholesterol-lowering drug to another. 
Beneficiaries can get much lower prices when you can negotiate 
and get people switched to another drug that meets their needs 
as effectively. The plans must also meet well-established best 
practices for any medication transitions. That often involves 
giving a patient more time on a particular medicine as well as 
making sure that the medicine that is the subject of the 
transition is likely to meet the beneficiary's needs. If the 
beneficiary has already tried a drug and it has not worked, we 
are not going to make him go back to that.
    So there is formulary guidance, there is transition 
guidance, and there is our regulatory oversight to require 
plans provide access to needed drugs. And we are relying on the 
best practices of existing drug plans to do that.
    Senator Akaka. Thank you for your response. My time is 
almost up. I hope we have another round, Mr. Chairman. Thank 
you.
    Senator Voinovich. Senator Levin.
    Senator Levin. Thank you, Mr. Chairman. Thank you again, 
Dr. McClellan. I want to talk about the statement that you made 
that you expect that in all of the regions there will be at 
least two private plans that will be offered to beneficiaries 
and, therefore, there will be no fallback triggered, so that 
there will not be provisions by Medicare itself or the offer of 
a plan by Medicare itself. That means that you are budgeting 
next year, I assume, for no costs for that fallback. Is that 
correct?
    Dr. McClellan. Well, that is correct, but we are planning 
for all contingencies, and what I can tell you now is that 
based on the response that we have seen, if we are able to stay 
on the track that we are on now, we will get those drug plans 
available everywhere, and we will not need the fallback.
    Senator Levin. And I take it that is your goal.
    Dr. McClellan. Absolutely, and I think we are on track to 
achieve that goal.
    Senator Levin. So the goal is not to trigger a fallback.
    Dr. McClellan. Well, the goal is to trigger access to up-
to-date coverage for all of our beneficiaries in all areas.
    Senator Levin. With private plans?
    Dr. McClellan. And it looks like the health plans are going 
to be able to deliver that coverage everywhere.
    Senator Levin. Is the goal to have private plans deliver 
that type of prescription drug benefit?
    Dr. McClellan. The main goal, Senator, is to get drug costs 
down for seniors right away and to make sure that their 
coverage does not fall behind again, like it has over the last 
several decades. And the health plans are going to enable us to 
do that.
    Senator Levin. All right. Now, what are the ways in which 
you will try to avoid the cherrypicking problem? Since the 
premium and the co-pay is within the discretion of the company, 
the private company--there is no limit on those and, therefore, 
they can have a very high co-pay and cherrypick healthier 
seniors mainly through using a high co-pay. How are you going 
to be sure that there are not only two plans or more in each 
region but that at least one of those plans is an affordable 
plan for people who are sicker?
    Dr. McClellan. Well, Senator, our main focus is on making 
sure all of our beneficiaries have access to the drugs they 
need, and I have already talked about some of the regulatory 
requirements that we are imposing to make sure that plans 
provide access to coverage.
    Now, I talked about the formulary requirements a minute 
ago, and I want to make clear that our oversight and our 
regulatory guidances apply to other tools used by the drug 
plans, like how they structure their co-pays and which drugs 
are preferred drugs on their formularies. And we will be 
enforcing the rules to make sure that there is not 
discrimination against any particular type of beneficiary.
    Once again, there are good examples of how you can do this 
from the private sector, and we will be looking to make sure 
that those kind of co-pay structures are used to prevent 
discrimination against any type of our beneficiary.
    Beyond that, there are actuarial requirements that the drug 
plans have to meet. They cannot require high co-pays on every 
drug. They must meet the actuarial standards in the law for a 
75-percent subsidy between drug spending at $250 and $2,250 
where most seniors have much of their drug spending. They must 
all provide catastrophic coverage for beneficiaries who have 
high out-of-pocket costs. And they must provide comprehensive 
benefits to low-income seniors.
    So through all of those steps--our regulatory oversight, 
our requirements that the plans meet the strong benefit 
intended by the law--we are going to make sure that the plans 
do not discriminate against any type of beneficiary.
    Senator Levin. The co-pay, though, is left up to the 
private company.
    Dr. McClellan. Within our oversight. They can, just like 
they do now in mainstream health insurance plans, in retiree 
plans, like for your automakers in the Detroit area, have tiers 
and have preferred drugs and non-preferred drugs. The 
requirement, though, is that they cannot discriminate against 
any types of beneficiaries in the process. We will be comparing 
the co-pay structure and the other tools used by the drug plans 
to widely used best practices and retirees plans and the 
Medicaid plans to make sure that does not happen.
    Senator Levin. And those regulations have been written?
    Dr. McClellan. The regulations have been written, and not 
just the regulations but we have issued specific guidances on 
our formulary oversight, on our oversight of co-pays and other 
tools used to manage drug costs, on drug transitions. You name 
it. We are trying to cover comprehensively based on the input 
we have received from a lot of groups who are very concerned 
about making sure we address this problem effectively.
    Senator Levin. I am less optimistic than you are about 
avoiding the cherrypicking problem, but you are telling us that 
you then are designing your regulations and you will predict 
for us that problem will be addressed and that there will not 
be cherrypicking so that all seniors across the level of 
fragility will be participating, not just being offered plans.
    Dr. McClellan. The intent of the regulations----
    Senator Levin. If the plans are not affordable for 
everybody, you are saying that it is your goal--and you predict 
you will achieve this goal--that seniors of different levels of 
sickness will participate in these plans. Is that what you are 
telling us?
    Dr. McClellan. That is right, and we think the plans are 
going to be particularly attractive to beneficiaries with 
chronic illnesses where using these drugs can help them avoid 
other medical complications and costs. So we will be 
implementing our regulations, we are applying our regulatory 
guidance now to applications that have come in to make sure 
that they reflect, again, widely used best practices in 
formularies and drug benefit management.
    Senator Levin. I understand. If I could conclude this, Mr. 
Chairman, with just one more question.
    What percentage of seniors do you predict will participate 
in these plans that will be offered now in every region by the 
private sector? You said you believe that there will be at 
least two or more offered in every region. What percentage do 
you believe will participate? Do you have an estimate of that?
    Dr. McClellan. Well, there are actuarial estimates out from 
the Congressional Budget Office, from our own independent 
actuaries, and other sources, and those have projections of 
very high participation levels.
    Senator Levin. Give us the percentage that you are 
predicting.
    Dr. McClellan. I think their participation rates are close 
to 90 percent, something in that range. I think Senator Carper 
mentioned the issue of how you think about launching a new 
product, and this is something that is new. It is new for 
Medicare. It is new for seniors. And it is a topic that is 
complicated and that seniors are going to have to spend a 
little time understanding because it is so important for their 
health.
    What I think that means is that we are not going to see 
dramatic sign-ups overnight, that over time, by letting seniors 
know what is coming, by making them aware of the details in 
ways that are very relevant and understandable to them this 
fall, by seeing what their experience is in the first months of 
the program, we will see more and more sign-ups. We are 
definitely expecting tens of millions of seniors to enroll in 
this program, to get help. No matter how they get their drug 
coverage now--through retirement benefits, through State-
sponsored plans, through Medicare Advantage plans--we are 
expecting tens of millions to enroll, and that is the big 
focus, on making sure that those beneficiaries are informed 
about their opportunities to save next year.
    Senator Levin. Thank you. Thank you, Mr. Chairman.
    Senator Voinovich. Senator Carper.
    Senator Carper. Speaking of product launches, yesterday was 
the launch of the baseball season, and Senator Levin and I are 
big Detroit Tigers fans, and we got out of the starting gate in 
pretty good fashion yesterday, 11-2.
    Senator Levin. We are in first place.
    Senator Carper. First place. This is the team that, I 
think, 2 years ago was second to the New York Mets, was the 
all-time losing baseball team in America. This year we are 
going to vie with the Cleveland Indians for the Central 
Division crown in the American League. So we will see how those 
Indians came out of the starting gate yesterday as well.
    I have two questions, Dr. McClellan. I want to go back on 
one of them to something that Senator Voinovich raised a minute 
ago, I think. And just take a minute and just talk with us 
again. How does CMS plan to ensure that, to the best of the 
ability of the States, they identify all the dual-eligibles? 
How can you help them do that? It is a tall order.
    Dr. McClellan. This is a very important issue. We want to 
make sure that there is a smooth transition, and the way to do 
that is to ensure that it does not happen between December 31 
and January 1 but, rather, it begins early and it has a smooth 
process to get beneficiaries in the new plan in January. There 
are many facets to this, and in the limited time I am just 
going to give you a few examples.
    One is that we are working with States right now to make 
sure that we have all of their dual-eligible beneficiaries 
identified. States are sending us lists of those beneficiaries 
now, and we are preparing to start contacting them and their 
caregivers about the changes that are coming.
    Second, by early October we are going to let them know what 
plans are available in their areas that they will be able to 
choose for free and that they will be able to get access to for 
no premiums, no gaps in coverage, and, as Senator Voinovich 
said, just a few dollars in co-pays, we are going to assign 
them to a plan if they do not choose one on their own by 
January 1. We are going to do that by early October so that the 
plan, working with the beneficiary and the beneficiary's 
caregivers, can start planning for a smooth transition.
    Beneficiaries who are dual-eligibles can change anytime. 
They do not have to stick with the plan that we assign them to. 
They can go to a different one that is available in their area. 
In fact, even after the benefit starts, they can change month 
to month if there is a benefit that they think would be a 
better fit for their personal needs.
    In addition, we have developed a guidance for the 
transition of beneficiaries in Medicaid programs, and we are 
working with the States and the health plans to make sure that 
they follow that guidance. The guidance focuses on issues like 
medication transitions to make sure that if there are any 
medication transitions they are handled appropriately, combined 
with our guidance on access to medically necessary treatments. 
We think many of the beneficiaries are going to be able to 
continue the drugs that they are on, especially since many of 
these formularies are going to be pretty broad and the co-pays 
for these dual-eligible beneficiaries are very low, just a few 
dollars. So those are some of the steps that we are taking.
    Another step involves using electronic health systems to 
help support this effort. We are planning for the contingency 
that, in spite of all of the effort we undertake, there are 
going to be people who are on Medicaid who show up at their 
pharmacy in early January and say, ``I want a refill,'' and are 
not going to know any of these specific details. We are 
implementing an electronic coordination of benefits system so 
that a pharmacist sitting right there at the counter, as long 
as this person knows their name and their date of birth, just 
some basic information, they will be able to tell that 
individual what plan they are in, what their coverage is, and 
get those prescriptions filled appropriately.
    Finally, there are steps that States can take to help make 
the transition work better. For example, we have notified 
States that, at their option, if they want, they can fill 3-
month prescriptions in December that would effectively extend 
the transition period through March, and they will get the full 
Federal match for those provisions. Senator Rockefeller has 
talked about legislation along these lines, and we can do 3 
months administratively at State option.
    We are having specific contacts with States about this. We 
have a major conference sponsored by the National Governors' 
Association coming up later this month in Chicago to go over 
the specific transition issues, and we are going to have a 
specific team in place with each State to make sure that they 
are keeping up with the checklists of the things that need to 
be done for a smooth transition.
    Senator Carper. But other than that.
    Dr. McClellan. We are trying to keep busy.
    Senator Carper. Good enough. My second question deals with 
the number of personnel, the kind of resources, personnel 
resources you are able to apply to, I guess, reviewing all the 
plans that are being proposed. I understand as many as a couple 
thousand are going to be submitted. I have heard that you may 
have as few as 10 full-time personnel to actually review all of 
those and I think over maybe a month-and-a-half period, which 
is not much time and is a lot of work in order to do it well.
    First of all, is there any basis to what I have heard?
    Dr. McClellan. Well, I do not know about the couple of 
thousand plans. We have received a lot of applications, but I 
think that number is on the high side. And that gets back to 
the earlier point about the importance of having time to do 
this effectively. We have divided the process of getting the 
bids in and getting the plans provided into several steps. We 
had early notices of intent with the plans back in February. 
That led to some preliminary discussions to make sure that the 
plans knew exactly what we were expecting in terms of 
applications. We had an application deadline on March 23, which 
included a lot of the details about formularies and where the 
service areas are going to be. And then the final bids are due 
in June.
    What we have effectively done is have this multiple-step 
process so that we can spread out the work, deal with issues 
earlier, and make sure that we can provide some close oversight 
and coordination with the plans so that they are meeting our 
objectives and our requirements for offering a Medicare drug 
benefit. At the same time not only does the plan have a clear 
idea about what to expect, we have a smoother workload flow in 
process. This is the way the FEHB has done business 
successfully for many years, back and forth a dialogue at each 
step in the process.
    Beyond that, we have a team of individuals assigned to 
reviewing each and every application. It is not 10 people 
versus 2,000. We have a lot more staff at CMS that are meeting 
this workload, and we have been tracking this very closely. We 
have a very clear idea about the maximum number of bids that we 
are going to receive because we have all the applications in 
now. The staff is meeting the workload burden of reviewing the 
applications, and we are planning ahead for the actuarial, 
technical, and other reviews that are going to go along with 
the final bids when they come in.
    Senator Carper. Any idea how many applications you have 
received?
    Dr. McClellan. I do not have an exact number now. The 
deadline was just a week and a half ago, and I want to divide 
the applications into those that look complete and serious and 
likely to meet all of our requirements and those that may not 
be so promising. But we will try to get you the numbers on that 
as soon as we can.
    Senator Carper. All right. And in closing, I would just ask 
that you keep in mind, whether it is 2,000 or 1,500, whatever, 
that is a lot, and to make sure that you have the adequate 
resources to vet it well. Thank you.
    Dr. McClellan. I appreciate that. Thank you, Senator.
    Senator Voinovich. You talked about the Advantage plans. 
Could you explain what those plans are. I assume it is 
something like an HMO where somebody would sign up and that HMO 
would be given X number of dollars and they would provide 
services, ordinary Medicare services, and now they would have 
an additional drug benefit. How would that work? And would they 
help the individual that was in that Advantage plan to make the 
right decision in terms of the drugs that they should be--the 
plan that they should go into or will they have a plan of their 
own? How does that work?
    Dr. McClellan. That is right. In general, Senator, the 
Medicare Advantage plans have their own drug benefit as part of 
the plan, and that is part of the advantage of coordinated 
care. We are expecting a lot of the Medicare Advantage plans to 
offer more generous drug benefits beyond just the basic 
Medicare statutory requirement. The reason for that is that 
through care coordination they can keep their overall costs 
down and provide more benefits to seniors. That already happens 
now. Many Medicare Advantage plans--most of them--are providing 
some limited drug coverage, and now with the new drug subsidy 
in 2006, they will be providing much more.
    They found that providing effective drug coverage and 
giving people affordable access to medicines helps them keep 
costs down in other areas. It helps them keep their patients 
with heart failure out of the emergency room. It helps them 
keep their patients with diabetes from experiencing 
complications that lead to surgery and circulatory problems and 
the like.
    We are also reinforcing this aspect of care coordination by 
increasingly targeting the money that goes to Medicare 
Advantage plans to the plans that are taking care of 
beneficiaries with chronic illnesses. We are doing this through 
risk adjustment. We are going to 100-percent risk adjust our 
payments to the plans. That means that if you are a coordinated 
care plan, you have to attract chronically ill beneficiaries 
and serve them well in order to make any----
    Senator Voinovich. How many Medicare-eligible people in 
this country are in Advantage plans, what percentage?
    Dr. McClellan. We are over 5 million enrollees now, and 
this has been increasing by 50,000-plus a month in recent 
months. So that is about 14 percent, and it is growing 
substantially because these plans are offering better benefits 
and lower costs and they are more widely available in Medicare 
than ever before. And this is not just HMOs. That is 
historically the main kind of coordinated care plan in----
    Senator Voinovich. In other words, if I am an individual 
out there and I am on Medicare and I do fee-for-service, I go 
to see a doctor and I have something wrong with me and they get 
reimbursed for it, under ordinary circumstances what I would do 
is I would sign up for Part D separately from that.
    Dr. McClellan. Separately from that.
    Senator Voinovich. So then I would have my A, B, and D.
    Dr. McClellan. That is right.
    Senator Voinovich. Right, or I would have the alternative 
to check around in my community to find out if there is an 
Advantage plan where I could enter into that plan, they would 
get the money from CMS, and they would then take care of 
looking after me in terms of my health care and my prescription 
drug needs.
    Dr. McClellan. That is right, and they would have a 
comprehensive set of benefits, and they increasingly cover 
services beyond the minimum that Medicare offers. So, for 
example, AltCare is a good example of a coordinated care plan 
in Ohio that is run by doctors and that focuses on taking this 
holistic approach to keeping a patient healthy. They do not 
think about doctor visits separately from drugs, or separately 
from hospitalizations. They think about the patient. How do you 
help a patient with heart failure, diabetes, or asthma, or 
another chronic disease stay well and get the most out of their 
health care? By combining this new drug coverage with the other 
coordinated services they provide, including wellness services, 
or visiting patients in the home when they need help in 
managing their medications, they can take a lot of steps to 
keep overall costs down and, most importantly, to keep patients 
with chronic illnesses healthy.
    Senator Voinovich. Thank you. Senator Akaka.
    Senator Akaka. Thank you, Mr. Chairman.
    Dr. McClellan, I understand that soon seniors will be asked 
to select a drug plan. CMS will be responsible for counseling 
and outreach for seniors and vulnerable populations, such as 
individuals suffering from mental illness.
    As you know, the MMA required GAO to examine the accuracy 
and consistency of answers provided through the Medicare toll-
free help line that is supposed to provide answers to questions 
about program eligibility, enrollment, and benefits. 
Unfortunately, GAO's findings were not encouraging. Accurate 
answers were provided only 61 percent of the time, inaccurate 
answers were provided 29 percent of the time, and no answer was 
provided for the remaining 10 percent.
    Given these results, what assurances can you provide this 
Subcommittee that CMS outreach efforts on implementation of the 
regulations will be more effective?
    Dr. McClellan. Well, let me answer that in two parts. 
First, we want to make sure that accurate information is 
available through our 1-800-MEDICARE number.
    Second, 1-800-MEDICARE is only one of a number of sources 
that are going to be available for seniors starting now and 
throughout the year to help them learn about and get the most 
help from the drug benefit.
    On 1-800-MEDICARE, that GAO survey asked a set of 
hypothetical questions that are not necessarily what our 
customer service representatives actually are faced with when 
beneficiaries call in every day. We have an ongoing independent 
review process that checks how accurate the information 
actually provided by our customer service reps are on the calls 
that come in.
    We have been monitoring that very closely, on an ongoing 
basis. We review a sample of all of the calls in every single 
month, not just a one-time asking of hypothetical questions. 
And I am very pleased that we are maintaining accuracy rates--
meaning the beneficiary was satisfied with the answer, the 
answer was independently reviewed and found to be accurate--
well over 90 percent of the time. We have a quality control 
process built in for when the answers are not complete and are 
not accurate and are not given in a timely fashion to make sure 
that is the case.
    There are several other reasons for the GAO's findings that 
we pointed out in our response, when you actually interpret it 
properly, and get the numbers up and in line with what we are 
seeing in these ongoing independent evaluations of 1-800-
MEDICARE. This is very important to get right.
    Third, as you mentioned, we need to make sure that we are 
doing actual outreach at the grass-roots level to a lot of 
beneficiaries who may not be able to call in or may not be able 
to use a computer. I was at an event in Philadelphia at a 
senior center recently where they are organizing grass-roots 
outreach teams that are using the Internet but in support of 
beneficiaries--they are not counting on the beneficiaries to 
use them directly--to get them informed and then signed up for 
benefits this year, and I had not one, not two, but three 
translators at that event. They are focusing specifically on 
their beneficiary populations that do have language barriers or 
do have cognitive impairments, just as they provide assistance 
now with helping those beneficiaries get access to the coverage 
they are eligible for in Medicaid and helping them manage their 
health costs.
    So those grass-roots efforts are very important in addition 
to making sure we have effective 1-800-MEDICARE answers.
    Senator Akaka. Thank you for that response, Dr. McClellan.
    In recent testimony before the Senate Committee on Finance, 
the HHS Inspector General nominee, Daniel Levinson, testified 
that prescription drugs are especially vulnerable to fraud, 
waste, and abuse. And he said, ``It is therefore essential that 
the CMS build a sound infrastructure for program implementation 
with strong internal controls, adequate data collection to 
enable proper oversight, and sound financial management 
systems.''
    How has CMS addressed these concerns?
    Dr. McClellan. Well, I agree completely with Mr. Levinson's 
statement. He is a man of great integrity who is watching 
closely what we are doing in this area and has had great advice 
for us. I hope he gets confirmed by the Senate soon.
    Here is another case where we have learned a lesson from 
the drug card. With the drug card, early on we contracted with 
a program integrity organization that has helped us with 
monitoring the financial transactions with the drug card, with 
making sure there was not any bait-and-switch, and keeping a 
close eye out for exactly the kinds of things that you are 
worried about. We made that announcement, instituted it in 
April, 2 months before the drug card started, and we have been 
monitoring the drug card very closely. We have seen no 
systematic evidence of any fraud or abuse or even misleading 
statements by cards, and we have been right on top of any minor 
violations to get them corrected and to help the program keep 
working smoothly.
    We are going to do the same thing with the drug benefit. We 
will have program integrity oversight in place, we have special 
contractors that are making sure that the money is used 
appropriately, and that the subsidies are spent on their 
intended purposes of helping seniors get access to affordable 
medicines. We will be watching that very closely with a lot of 
help and a lot of tight oversight from the Office of the 
Inspector General.
    This is a very important area for making sure that we 
continue to have a high level of program integrity. We have 
also requested additional funds in our fiscal year 2006 budget 
to help us meet these new responsibilities, which we take very 
seriously.
    Senator Akaka. Thank you. Thank you, Mr. Chairman.
    Senator Voinovich. Senator Levin.
    Senator Levin. Thank you, Mr. Chairman.
    The Act that we are talking about contained tax subsidies 
to encourage employers who keep their retirees covered with 
prescription drug coverage. The threshold which was used by the 
bill is called ``credible prescription drug coverage,'' so that 
if a company maintains that credible prescription drug coverage 
they will then get a tax subsidy for doing so.
    Has the criteria for what is credible been set forth 
already in the regulations?
    Dr. McClellan. Yes, sir, it has.
    Senator Levin. OK. And who makes the decision as to whether 
a particular company meets that criteria? Will that be a 
Medicare decision, an IRS decision, or a combination?
    Dr. McClellan. It will be a Medicare decision done by our 
independent actuaries. It is an actuarial test that the 
coverage is of high quality and that the money we are providing 
in the subsidy is going to the beneficiaries to support their 
coverage.
    Senator Levin. Now, when we were debating the bill, the 
Budget Office estimated that once it was fully implemented by 
CMS that as many as 25 percent of retirees with existing 
prescription drug coverage would still lose the coverage 
despite those subsidies. According to one estimate, that would 
be about 2.5 million retirees who now have good coverage from 
their former employer who would lose that coverage or have it 
significantly reduced.
    Do you agree with that estimate, first of all?
    Dr. McClellan. No, and this is a good example of why the 
interaction in our process of developing the regulations and 
issuing guidances is so important. We have developed a number 
of steps that employers can take to continue and enhance their 
drug coverage, and there are lots of ways to do it. The bottom 
line is that we want to make sure beneficiaries are better off. 
From what we are seeing in recent surveys, about 90 percent 
plus of employers are planning to continue their coverage in 
one way or another, and continue their support for 
beneficiaries. There are a lot of ways they can do it, not just 
with this employer subsidy. And I can talk about that if you 
are interested.
    Senator Levin. This is for retirees, we are talking about.
    Dr. McClellan. This is for retirees that we are talking 
about, and then there are some retirees who are just in access-
only plans. It is not like the Big Three automakers. This is 
where the retirees are paying for all their coverage on their 
own. Those retirees may well be substantially better off in the 
new highly subsidized Medicare drug coverage. So we are not 
expecting that kind of drop rate at all.
    Senator Levin. What is the drop rate you are predicting?
    Dr. McClellan. Well, in our final regulation we talked 
about approximately 90 percent of beneficiaries having coverage 
either through continuing the current coverage with the retiree 
subsidy or through the employer doing what is called a wrap-
around. They get the basic Part D benefit, and then they fill 
in gaps, just like many employers do with retirement benefits. 
We pointed out that, right now, this other small group of 
beneficiaries is not getting help from their employer. So they 
are going to be better off, and they are going to get lot 
bigger subsidies in Part D, which is subsidized coverage, than 
they would from any unsubsidized employer coverage. But we are 
expecting, from what we are hearing and what all the surveys of 
businesses are showing, that the vast majority of employers are 
going to take advantage of the new help from Medicare to 
continue or to improve their coverage.
    Senator Levin. So is your prediction that 90 percent of 
employers essentially will maintain their coverage or better 
for their current retiree----
    Dr. McClellan. Or they will--through one mechanism or 
another. They can either use the retiree subsidy or they can 
wrap around the basic benefit. In working with States like 
Michigan, they may be better off financially doing a wrap-
around. But the point is to continue and improve coverage for 
retirees.
    Senator Levin. That leaves somewhere around 10 percent who 
will be worse off?
    Dr. McClellan. I do not think they will be worse off.
    Senator Levin. Will there be anybody worse off?
    Dr. McClellan. Well, we are obviously trying to minimize 
that number.
    Senator Levin. I know what your goal is. Are you projecting 
that there will be any retirees who will lose their coverage 
that they now have?
    Dr. McClellan. We have not been able to do specific 
projections at the level of each and every beneficiaries.
    Senator Levin. Just a gross number?
    Dr. McClellan. What our actuaries projected was that there 
was going to be a substantial increase in the total support for 
retiree coverage. Now, we have the government working with 
employers to support the coverage, not just the government 
alone--not just employers alone.
    Senator Levin. So your actuaries are not projecting that 
any retirees are going to be worse off.
    Dr. McClellan. They have not done detailed specific 
estimates at the level of each and every firm. I can tell you 
that we are working with small employers, large employers, 
States, all of them, to help make sure they take advantage of 
the new subsidies to get that----
    Senator Levin. I understand that. You have said that here. 
But that means the glass may be 90 percent full. I am just 
trying to figure out how empty it is.
    Dr. McClellan. Well, the glass is----
    Senator Levin. It is OK because I am running out of time 
and you are trying to make sure there are none. But you are not 
willing to tell us that there is a projection as to how many 
will be worse off.
    Dr. McClellan. Our projection is that the glass is going to 
get a lot fuller.
    Senator Levin. A lot fuller, but you are not willing to 
tell us how much fuller.
    Dr. McClellan. I cannot give you an exact number for each 
and every----
    Senator Levin. Or an approximate number.
    Dr. McClellan. I think it is around 90 percent, and the 
rest, they are probably better off.
    Senator Levin. You are not going to give us an approximate 
number. That is OK. I just want to ask my last question. I give 
up trying to get the answer to that one.
    When the GAO finds, as it has, that the CMS violated the 
Anti-Deficiency Act by spending appropriated taxpayer dollars 
on the unallowable activity--we are talking here about those 
commercials--CMS is required by law to file a report relative 
to that finding of that violation to the President, Congress, 
and the GAO, even if it disagrees with the GAO's determination. 
And I don't doubt that you disagree with the GAO determination. 
At least I would not be surprised to hear that you do not agree 
with it.
    First, are you going to follow it, even though the Justice 
Department says you do not have to? And, second, are you going 
to submit that report, which has to be required, even if you 
may not agree with the finding of the GAO? This is the area 
that Senator Lautenberg has been so creative and so determined 
to explore, not just with CMS but with a number of other 
agencies which have engaged in the same activity. So that is my 
specific question. It has to do with that report. First, are 
you going to file the report required by law? Second, are you 
going to follow the GAO's recommendation even though the 
Justice Department says you do not need to?
    Dr. McClellan. Well, Senator, I am going to make sure we 
fully comply with the law and that we are transparent with 
Congress and everyone else in all of these sensitive issues. 
Now, I am a doctor and not a lawyer, and our main focus is on 
getting accurate information out to beneficiaries. But we 
absolutely want to make sure that we do that in full compliance 
with the law.
    As you know, the Department of Justice sets the rules for 
the Executive Branch for interpreting the law, and they do have 
a disagreement with the GAO on this particular issue. The 
Department of Justice's Office of Legal Counsel, which has the 
binding legal authority for the Executive Branch, says that our 
interpretation of the law in this case was appropriate. But, 
more importantly, I will make sure that we comply with the law 
in providing any information you want. I think the main goal 
here, which is to get accurate information to beneficiaries, is 
our foremost goal this year as we try to inform beneficiaries 
about the facts of the drug benefit. There are a lot of 
beneficiaries out there who do not have the facts, who do not 
think this benefit applies to them, who do not realize that it 
can help them save half or more of their drug costs. There are 
also low-income beneficiaries who do not realize that there is 
extra help and a comprehensive benefit for them.
    So I want to make sure we are absolutely complying with the 
law and rely on the experts to make sure we do that, at the 
same time we really are focusing on getting accurate 
information out to beneficiaries.
    Senator Levin. For a non-lawyer, you have been very deft.
    Senator Voinovich. Senator Lautenberg.
    Senator Lautenberg. Thanks, Mr. Chairman. Just a few brief 
things on the news reports.
    Dr. McClellan, I heard what you said very clearly, and I 
just want to confirm it because I thought your statement was 
very positive in terms of response to what the law requires. I 
just want to draw this out so that everybody is clear on this.
    We have a statement from the Government Accountability 
Office. They say that it is a violation of law. The 
Administration says they do not care.
    Now, you are in charge here. Will you try to eliminate the 
distributing of these fake news reports? There is a responsible 
agency of government that says they are fake. So now the ball 
is in your hands. Has CMS stopped producing these video 
releases?
    Dr. McClellan. I think you are referring to this video news 
release from a year ago. There has not been another one since 
then. But in terms of the legal authority here, as you know, in 
the Executive Branch I am bound by the legal interpretations of 
the Department of Justice, and the Department of Justice and 
their Office of Legal Counsel sees this issue a little bit 
differently than the Government Accountability Office.
    Regardless of the technical aspects of the legal 
disagreements here, I want to make sure we get accurate 
information out about the drug benefit. We have not had any 
video news release since the one that you are mentioning from 
over a year ago.
    Senator Lautenberg. But the declaration of war is already 
laid down there. The Administration is saying they do not care. 
I am not sure that those were the precise words, but that was 
the precise meaning. Are you prepared here and now to say that 
you will not permit anything in your Department to be prepared 
that goes out that imitates, that portrays a news release when, 
in fact, it is not?
    Dr. McClellan. There has been a lot of attention around 
this issue over the past year. There have been no new video 
news releases issued since the one you are talking about from 
over a year ago, at a time when we have been doing an 
unprecedented amount of outreach and providing information to 
beneficiaries and working with other groups that do that. I am 
going to keep following effective approaches and I am going to 
make sure that we stay within the law in doing it. But the main 
goal is to make sure that beneficiaries get accurate 
information.
    Senator Lautenberg So you are willing to step up and say 
that your Department, CMS, will absolutely be unwilling to have 
anything produced with your--that you have knowledge about that 
isn't factual as we would expect it to be in terms of not using 
actors, actresses, not using any means of seduction, either 
compensation or otherwise, to news broadcasters to color the 
issues?
    Dr. McClellan. We absolutely want to follow the law, and 
these details happened before I got to the agency a year ago. 
From what I understand, though, the GAO wasn't issuing a 
finding relating to the accuracy of the information. They just 
said that they wanted a clearer identification that this was a 
produced news release, something that was not attributable to 
the Federal Government. And in two out of the three segments of 
that release, it was attributed to the Federal Government. They 
wanted it in that third segment. And, yes we will make sure we 
follow the law on----
    Senator Lautenberg. There is a judgment about the accuracy 
of these things. I correct you here. There is a judgment about 
the accuracy. If the process is bad, does that suggest it is 
bad because those who are producing it want to tell the truth? 
Or is it bad because people are being given false information?
    Dr. McClellan. Well, I want to make sure we are getting 
accurate information to beneficiaries. Over the past year, 
Medicare has developed a lot of materials in close consultation 
with outside groups, including many groups that did not support 
the Medicare law. These materials communicate accurately the 
basic facts about this being a drug benefit available for 
everyone, that it can provide help for everybody with Medicare 
regardless of how they get it, what their drug costs, and that 
the benefit provides extra help to low-income seniors. That is 
our main goal, and I want to be absolutely in compliance with 
the law.
    Senator Lautenberg. So you are willing to say that your 
agency will not produce or pay for any releases that are 
sponsored by the government other than just the facts and not 
used for any coloration of the facts?
    Dr. McClellan. Well, Senator, we are producing an 
unprecedented amount of information support, working with lots 
of outside organizations to get beneficiaries informed about 
the drug benefit accurately. And I absolutely want to make sure 
that the information is not misleading, and obviously we are 
going to fully follow the law in doing this very important 
outreach and education effort.
    Senator Lautenberg. Following the law as defined by 
government accountability?
    Dr. McClellan. Again, the authority on what the law means 
for the Executive Branch is the Department of Justice. The 
authority for the Legislative Branch is the Government 
Accountability Office. They do differ sometimes in their 
interpretation of specific provisions of the law. In terms of 
our overall goal, though, of making sure beneficiaries have 
exact information, 99 percent of the time they agree, and that 
is what we are following in our implementation of this law 
right now. This outreach effort----
    Senator Lautenberg. OK. So what do you do with the 5 
percent that they do not agree on?
    Dr. McClellan. We are bound under the Constitution to 
follow the Executive Branch legal authorities, and if there are 
further issues here, I am sure they can get sorted out.
    Senator Lautenberg. If you were running a company, Dr. 
McClellan--and you are a very clever fellow, and I always enjoy 
seeing you----
    Dr. McClellan. Thank you, sir.
    Senator Lautenberg [continuing]. And talking to you. If you 
were running a company and the auditor said, look, this 
accounting statement is 95 percent right, and you say, OK, I am 
going to listen to the auditors. Now, if you know it is wrong, 
you are going to have to say it is wrong and that you will not 
permit it.
    Is the $35 monthly premium the correct figure, or is just 
an estimate?
    Dr. McClellan. It is an approximate estimate. Some may be 
lower, some may be higher. If beneficiaries get access to extra 
coverage because that is what they want, they may pay a little 
bit more for it. But that is the best estimate of the range of 
premiums. Some beneficiaries are going to pay less. That is the 
advantage of having choices that let beneficiaries get the care 
the beneficiaries need.
    Senator Lautenberg. The regs are out. Don't they say $37?
    Dr. McClellan. It is right around $35 to $37. Again, some 
plans are going to offer lower-cost coverage; some I expect are 
going to offer supplemental benefits at a higher cost, and 
seniors will be able to choose the coverage that is best for 
them.
    Senator Lautenberg. Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Lautenberg. Senator 
Pryor.

               OPENING STATEMENT OF SENATOR PRYOR

    Senator Pryor. Thank you, Mr. Chairman. Dr. McClellan, I 
appreciate your time and your patience with our questions.
    The first question I have relates to the Medicare 
Modernization Act, and specifically, I know that several CMS 
employees have extensive knowledge of pharmaceutical issues 
given their experience in working with the Medicaid program. To 
what extent have those people been able to apply their Medicaid 
expertise implementing what is going on with the MMA?
    Dr. McClellan. Extensive application, Senator. Just to give 
you an example, Gail Arden, who has been working on Medicaid 
issues for a long time in our Center for Medicaid and State 
Operations, is one of the key coordinators of our outreach and 
transition issues with the State for dual-eligible 
beneficiaries and also for the State pharmaceutical assistance 
programs.
    You are absolutely right that we have a lot of expertise in 
the agency on Medicaid issues, and this is an agency-wide 
effort to implement the Medicare drug law effectively. That is 
the best way to make sure that States save money as intended, 
the best way to make sure that we get a smooth transition. So 
we are absolutely relying on their expertise.
    Senator Pryor. Let me stay with the MMA, if I can. This 
Subcommittee has jurisdiction over, ``the management, 
efficiency, effectiveness, and economy of all departments, 
agencies, and programs of the Federal Government, including 
overlap and duplication of Federal programs.'' Chairman 
Voinovich has really been a bulldog on trying to keep the 
agencies accountable and trying to make sure that Congress 
exercises its oversight, which we should. One thing I noticed 
with the Medicare Modernization Act is that the MMA mandates 
that Medicare Advantage local programs receive an average of 
107 to 109 percent of traditional Medicare payment levels, 
correct? Do you follow me so far?
    Dr. McClellan. I think you are talking about the GAO 
estimate there.
    Senator Pryor. Right.
    Dr. McClellan. Yes, I think the estimate is 107 percent.
    Senator Pryor. Right. However, experts believe that private 
plans will actually receive about 116 percent of the cost of 
the same patients in traditional Medicare because the plans 
serve healthier than average enrollees. Do you have any 
comments on that?
    Dr. McClellan. The trend is getting our payments focused on 
the beneficiaries that have chronic illnesses and have higher 
costs. I was talking earlier about how we are moving towards 
more risk adjustment of our payments to private plans. They are 
at 50 percent this year; they are going to 75 percent next year 
and 100 percent in 2007. So we are truly accelerating the focus 
of targeting the payments in Medicare Advantage on the patients 
who have the most to gain from coordinated care, and that is 
people with chronic illnesses. They can use drugs in 
conjunction with the care they get from their doctors, stay out 
of the hospital to avoid complications, and keep their overall 
costs down. That is why the Medicare Advantage plans are so 
important. They are saving beneficiaries now about $100 a 
month--$100 a month compared to fee-for-service Medicare, and 
that savings means lower overall health care costs but, most 
importantly, it means lower health care costs for our 
beneficiaries who really need help right now and need to be 
able to take advantage, if they want to, of what care 
coordination has to offer.
    Senator Pryor. Well, let's talk about our beneficiaries 
here for just a moment, because I cannot speak for Ohio or 
other States, but I know in Arkansas our Medicaid program 
currently provides coverage for prescription drugs. I assume 
most states do, but probably not all required it. We do and 
starting on January 1, Medicaid will not cover any drug covered 
by Medicare Part D, and the beneficiary must rely on the 
Federal program exclusively. Many of these beneficiaries, as 
you can imagine, as you mentioned a moment ago, have multiple 
and many times chronic conditions.
    I am just concerned that there is going to be difficulty in 
switching to a new formulary overnight. I am concerned there is 
going to be some needed transition--I hate to use the word 
``casualties,'' but there are going to be some folks that miss 
and fall in the gaps because the formularies are not set up the 
right way. And, I guess I am just concerned that you all are 
trying to provide some guidance on this, but I am not sure that 
we are going to make sure that we get the transition needed, 
that I think we, in Congress, would like to see. Would you like 
to comment on that?
    Dr. McClellan. Yes, we would be delighted to work with you 
and your staff to make sure that you are aware of all the steps 
that we are taking to make that transition work smoothly, and 
that means extending it from just December 31 to January 1, 
early notification of not just the fact that it is coming but 
which plans people would be going into, transition requirements 
on the prescription drug plans for handling Medicaid 
transitions effectively, as well as many other safeguards built 
into our oversight of the program. We are building electronic 
data systems that make it possible for someone who just walks 
into a pharmacy to tell the pharmacist their name, their date 
of birth, and they will--even if they did not pay any attention 
to this transition, they will be able to let them know which 
plan they are in and how they can continue to get the drugs 
that they need.
    This is a very important issue. It requires a lot of 
ongoing close work with each and every State, including 
Arkansas, to make sure that people get the full advantage of 
this comprehensive benefit.
    Medicaid drug coverage, Senator, is an optional benefit. 
Many States have limited their Medicaid coverage to keep costs 
down. The Medicare drug coverage is going to be comprehensive. 
It is going to cost Medicaid beneficiaries at most a few 
dollars a month, and we intend to implement it to get State 
savings so they can provide even more help for their low-income 
citizens at the same time. This is very important in Arkansas. 
You have a lot of low-income beneficiaries, many of whom do not 
even qualify for Medicaid now, and are getting no help beyond 
the drug card in the transitional system with their drug costs. 
And so we would very much like to work closely with you to make 
sure we get all of those people or as many as possible into 
effective coverage, and that includes a smooth transition.
    Senator Pryor. Thank you, Mr. Chairman.
    Senator Voinovich. Doctor, you have done a wonderful job 
today.
    Dr. McClellan. Thank you.
    Senator Voinovich. You have been on the grill here for 
quite some time, but you have really gone into a lot of areas 
where I am sure that Members of the Subcommittee wanted 
information, and I am sure that anyone that is having an 
opportunity to watch us on C-SPAN will be much better informed 
about this wonderful program.
    I just want you to know that as Chairman of this 
Subcommittee, if there is anything that we can do to be of help 
to you, if there is flexibility that you have discovered that 
you need or anything else, money, whatever, I want you to pick 
up the phone and call us, and we will do everything we can to 
help you. You have got a very formidable task ahead of you, but 
I am encouraged by what I have heard here this morning.
    Thank you very much.
    Dr. McClellan. Senator, thank you very much. We truly 
appreciate your support, and we are looking forward to 
continuing to work with you to get this help to seniors. Thank 
you.
    Senator Voinovich. Thank you.
    We will now call on our next two witnesses: Marcia Marsh 
and Ann Womer Benjamin. I apologize to our two witnesses. I 
hope that you have learned as much this morning as I have.
    Ms. Marsh, thank you for being here today, and we look 
forward to your testimony.

    TESTIMONY OF MARCIA MARSH,\1\ VICE PRESIDENT FOR AGENCY 
          PARTNERSHIPS, PARTNERSHIP FOR PUBLIC SERVICE

    Ms. Marsh. Thank you. Senator Voinovich and Senator Pryor, 
I appreciate the opportunity to speak to you today about our 
partnership with CMS on our Extreme Hiring Makeover. That 
project was modeled after the popular television series that I 
am sure the two of you probably do not get to take advantage of 
watching in the evenings. But it brings together the experts 
from the private sector in recruiting and assessment with three 
Federal agencies. And when we first announced this program, the 
HHS Director called us that afternoon and said, ``You really 
need to meet with the leadership team at CMS.'' And I stepped 
up to the plate to take that public challenge right off the 
bat.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Marsh with attachments appears in 
the Appendix on page 64.
---------------------------------------------------------------------------
    So where are they? Our heavy lifting in the last several 
months has focused on two key areas. The first is in mapping 
their hiring process, what they are doing, and the second part 
is in doing a demonstration project that will show how they 
might want to model it going forward. And I know when I mention 
process mapping, your eyes probably glaze over. That is not 
exactly a sexy topic. But it is the way in which we can really 
get to the information that will demonstrate how long things 
are taking, why we cannot have qualified candidates on 
certificates, and how we can fix the process.
    So we worked with the CMS hiring managers, their HR 
expertise, and with their new hires to really map that process. 
And when we completed it, we rolled out the map across a 
conference table like this, and it included 64 steps. And the 
reaction of the HR managers and the managers has been fairly 
similar: What can we do to streamline that?
    So in the next 2 weeks we will be meeting with the CMS 
redesign team to work on how we remodel that process, and we 
are looking for one that has a goal of efficiency and only 
value-added steps.
    Now, the most exciting thing that we have done is in the 
demonstration project, and here is where I think CMS is really 
stepping out as a great model for government. We have an 
illustration up here for you of one of those early efforts.
    We worked with some volunteers from the Centers for 
Medicaid and State Operations around the position of a health 
insurance specialist, a GS-13, and we picked that one because 
it is fairly common to CMS and cuts across the entire 
organization. They are going to have multiple openings in the 
course of the next several months. And what we did with that 
job was to first start to redefine a new look. And we worked 
with our partners at Monster Government Solutions in trying to 
put out a new vacancy announcement, and I know, Senator, you 
have been very keen on what is happening in recrafting the 
image of government.
    And here is an example of the old vacancy announcement 
appears on your left, and you will see it is very text heavy, a 
lot of Federal jargon, and when you read down into it, you have 
a lot of the ``shall not's'' and the ``no's.''
    The new vacancy announcement, which appears in the new 
USAJobs format, appeals to a candidate right off the bat about 
the mission of CMS and your ability to impact the Nation's 
health care. We have had a real uptick in response on that 
basis.
    So I know in our detailed testimony we outline for you all 
the steps that CMS took in this demonstration process. So I 
would like to use this exhibit to just take you through that 
fairly quickly.
    What we wanted to do because we had multiple openings was 
to attract as many candidates as possible for this particular 
announcement. Previously, the same announcement within HHS 
attracted about an average of 53 applicants. And what we did 
was to post it on USAJobs and Monster, but we did not want to 
settle for that. It drove a lot of eyes there. We really wanted 
to dig deeper into some of those people that sit out in the 
private sector companies and at the States, with apologies to 
my colleague over here, who are those sorts of experts and see 
if they wouldn't want to take a look at that job announcement.
    So one of our partners in this process, a company called 
AIRS, did an Internet targeting campaign for us when in the 
last few days of this position they went out, they searched 
candidate resumes from across the country in all sorts of job 
databases, and sent them all E-mail messages saying, ``Wouldn't 
you like to apply for the CMSO position? You look like you are 
very qualified.''
    On that basis, when we concluded that operation, we had 227 
applicants for this particular position, and 33 of those came 
from our target pool. So we proved the fact that with the 
better advertising and the targeting we can bring a lot of 
people in the door.
    So how do we select from those candidates to pick the very 
best? And the first thing that a candidate has to do when they 
apply is to answer some basic questions that are prescreening 
questions, and they are in the automated tool that CMS uses 
called Quick Hire.
    What we did there was to just ratchet up that performance a 
little. Previously, that screen would eliminate about 6 percent 
of the candidates as not minimally qualified. But with sharper 
questions based on the competencies that the CMSO managers 
outlined, we were able to take that up to a 15-percent screen. 
And then for all the people that successfully came to the other 
side of that, we sent them an E-mail asking them to take a 45-
minute skills assessment test. It tested their knowledge of 
Medicare, Medicaid, managed care, writing skills, and a variety 
of other things. We were pleased that of about the 200 
applicants that successfully managed the screen, 169 invested 
the time to take that particular test.
    On that basis then, we used category ranking, and 24 
candidates floated to the top. Of those 24 candidates, many 
were invited in for interviews and an additional behavioral 
interview assessment. And as you see on the results here, we 
had six candidates who were hired very quickly. I would like to 
let you know that the top candidate based on just abilities was 
a disabled veteran who was interviewed, first interview, first 
job offer, and he reported for duty yesterday with five new 
colleagues. Two of those came from our targeting campaign.
    We are excited about folding this into our new process 
redesign. We think that CMS would be a model not only for HHS 
but for the rest of government. And given the fact that every 
Federal hire is important and really represents a multimillion-
dollar investment, if you look at the personnel costs for a 
single person over the course of their career, we think that 
managing this kind of process in this kind of time will result 
in a great benefit not only for CMS but for the rest of 
government.
    I look forward to answering any questions that you have 
about the project.
    Senator Voinovich. Thank you very much. I am sure that Dr. 
McClellan was very appreciative of your being involved. He has 
to hire 500 people more, or something like that? That is quite 
a task.
    We are so happy that you are here today, Ann, and, again, I 
apologize that you had to sit around for so long. But you have 
done an outstanding job in the State of Ohio in terms of being 
the Director of our Insurance Department, and I cannot thank 
you enough for the wonderful help that you have given us during 
this last year or so in trying to sign up as many people in 
Ohio to take advantage of this new drug benefit. We are anxious 
to hear your testimony today.

 TESTIMONY OF ANN WOMER BENJAMIN,\1\ DIRECTOR, OHIO DEPARTMENT 
                          OF INSURANCE

    Ms. Benjamin. Thank you very much, Chairman Voinovich. I 
appreciate being here. I am Ann Womer Benjamin, the Director of 
the Ohio Department of Insurance, and I want to thank you, Mr. 
Chairman and Senator Pryor, for the opportunity to provide this 
testimony today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Benjamin appears in the Appendix 
on page 85.
---------------------------------------------------------------------------
    CMS has indeed been a reliable and supportive partner 
working with the Ohio Department of Insurance and our Ohio 
Senior Health Insurance Information Program, or OSHIIP, to 
educate and enroll Ohio seniors and Medicare beneficiaries in 
the prescription drug program.
    The Ohio Department of Insurance regulates and licenses 
approximately 1,740 insurance companies, 180,000 agents, and 
more than 13,000 insurance agencies, and monitors the financial 
solvency of the insurance industry in Ohio.
    Another very important facet of our consumer protection 
mission and of particular relevance today is the Ohio 
Department of Insurance's OSHIIP Division. OSHIIP was 
established in 1991 by then-Governor Voinovich and plays an 
essential role in educating Ohio seniors and others who qualify 
for Medicare. Through its toll-free help line, 950 volunteers, 
objective and understandable literature, and speakers' bureau, 
OSHIIP provides valuable information to Ohio's 1.8 million 
Medicare beneficiaries.
    I would like to take a brief moment to publicly thank 
Senator Voinovich for his leadership and support of senior and 
Medicare initiatives, including OSHIIP. Further, I would like 
to thank Dr. McClellan for his strong commitment to providing 
the needed resources and information to educate Ohio's Medicare 
population.
    Since the passage of the Medicare Modernization Act of 
2003, CMS has been instrumental in helping OSHIIP with 
information and resources to prepare and respond to the many 
changes that are coming to Medicare. These efforts could not 
have been more apparent than last April, when Senator Voinovich 
and Dr. McClellan joined Governor Taft and me at an OSHIIP 
volunteer training session to kick off Ohio's introduction of 
the Medicare prescription drug card program. More than 100 
community volunteers participated in the training designed by 
CMS.
    CMS has continued to provide OSHIIP and Ohio consumers with 
invaluable assistance, including many workshops, publications, 
and toolkits to update OSHIIP training teams on the many facets 
of the Medicare program. CMS also seeks the input of all State 
SHIP programs to ensure that the material is meeting the needs 
of the consumer and regularly distributes E-mails on critical 
issues and common problems facing the States.
    Outreach and educational efforts have also increased at the 
State and local levels with the support and coordination of CMS 
through biweekly and monthly conference calls to keep lines of 
communications open, allowing OSHIIP to have the most current 
and pertinent information available. CMS also spearheaded Ohio 
Medicare Partners to help answer a wide range of health- and 
health insurance-related questions here in Ohio.
    In mid-February of this year, CMS introduced its ``2005 
REACH National Medicare & You Training Program'' focusing on 
the new prescription drug coverage training module. CMS also 
facilitated working sessions for each State's Medicare Partners 
so that coordinated outreach plans could be jointly developed 
to maximize population penetration and group efficiency.
    Later this year, the Ohio Department of Insurance and 
OSHIIP will be hosting local Medicare prescription drug 
coverage enrollment and outreach events in each of Ohio's 29 
most rural counties. CMS has committed to mailing invitations 
to these events to the low-income residents of these counties.
    The department and OSHIIP have been very pleased with our 
collaboration with CMS, but there is always room for 
improvement. We have experienced some delay in getting training 
materials needed to conduct our volunteer training sessions. We 
also have experienced delays regarding technical and 
statistical inquiries we make to CMS. While our impression is 
that CMS is trying to ensure that the proper individuals 
respond and provide the most accurate information in a timely 
fashion, CMS delays sometimes result in gaps in accurate 
information being available.
    This year we have received a substantial increase in our 
annual Federal grant to help administer OSHIIP, and Ohio and I 
thank you. We will utilize some of those funds to hire another 
employee to assist in what we predict will be a dramatic 
increase in calls. With the expected increase in our workload, 
the ever-increasing 65-plus population, and the many options 
consumers face, our challenge will be to continue excellent 
consumer service to those Ohioans struggling to make informed 
decisions.
    Dr. McClellan has been a real champion of seniors, and his 
leadership of CMS has reflected this commitment. He and CMS 
have worked hard to take Medicare benefits and options to 
seniors and ways to make their choices easier to understand and 
evaluate. I would like to thank Chairman Voinovich again for 
the opportunity to share the many positive and exciting things 
we are doing for seniors in Ohio. From our perspective, we feel 
the collaboration with CMS has been very beneficial, and we 
only hope it continues to grow. Thank you.
    Senator Voinovich. Thank you very much.
    Ms. Benjamin, you have worked pretty closely, as you have 
mentioned in your testimony, with CMS and just mentioned that 
they have made more money available. Do you feel that the 
additional money made available to the State of Ohio is 
adequate to give you the resources you need to be effective in 
helping them get the job done?
    Ms. Benjamin. Chairman Voinovich, certainly resources are 
always an issue, particularly in a program such as this that 
continues to grow and expand and the beneficiaries continue to 
expand. With your encouragement and support last year, we had 
the foresight to continue to develop our volunteer pool, which 
we have done. Last year, we had about 800 volunteers statewide. 
Now we have 950, and that number continues to grow. That 
certainly helps where we have resource shortages because, as I 
said, we have volunteers who provide information after they are 
trained freely.
    In addition, we are continuing more and more to use the 
area agencies on aging, senior centers, and other such centers 
and activities that deal with seniors on a daily basis so that 
people involved in those programs will also, without direct 
charge to our OSHIIP program, be able to provide not only 
contact information but also valuable enrollment information to 
the seniors they encounter.
    Senator Voinovich. I know that some of the municipal 
offices on aging have been participating. I am very familiar 
with what is happening in Cleveland. Do they get any resources, 
additional resources, to do the job that they have been asked 
to do?
    Ms. Benjamin. Chairman Voinovich, honestly, they don't from 
us. I don't know if they do from other sources, but they don't 
come from OSHIIP. The only money that we distribute out from 
OSHIIP is part of our Federal grant goes to the Ohio Department 
of Aging, likewise for outreach programs that are complementary 
to OSHIIP's.
    Senator Voinovich. Has CMS or have you looked out across 
the State to look at the various levels of groups that are 
providing information to see how it is all coordinated and 
whether there are any holes in the information system?
    Ms. Benjamin. That is a continuing challenge, and we have 
realized, for instance, over the last year that rural counties 
are a particular outreach challenge. And one of the things that 
we have done over the past year is reach out in particular to 
rural counties to develop our volunteer pool as well as to 
develop our contacts where we perhaps did not have them or did 
not have as many with local senior agencies and centers so that 
we would make sure that we reach those seniors in the more 
outlying areas.
    Generally the more urban areas have better outreach systems 
and information systems in place for seniors.
    Senator Voinovich. Dr. McClellan talked about the Advantage 
plans, and it looks like there is a growing number of people 
taking advantage of them. As part of your responsibilities and 
information distribution, are you making information available 
about those Advantage plans also?
    Ms. Benjamin. Yes. That information is in very 
comprehensive brochures that the OSHIIP program distributes. In 
addition, we have been coordinating our brochures and 
information with the Department of Aging to make sure that we 
cover all bases, so to speak.
    Senator Voinovich. One of the things that I am concerned 
about is that the whole Medicare delivery system to a degree is 
expensive and in so many instances really does not respond to 
the needs of our senior citizens; that is, they come in when 
they are really sick, and too often they do not have a regular 
physician they go and see and have someone looking after them. 
And it seems to me that if someone is encouraged to get into 
one of these Advantage plans, that is a whole lot better way of 
their getting the kind of medical services that they need, 
including prescription drug benefits. And I think anything that 
CMS can do, and you can do, to at least make that information 
available to people would be very helpful to them. As you 
remember, my motto when I was governor was ``Working harder and 
smarter, and doing more with less.'' And the fact is that I 
think that we would spend less money and we would have better 
service to our Medicare-eligible individuals.
    Ms. Benjamin. Chairman Voinovich, if I could expand on what 
you just said, we do at the department, and in OSHIIP in 
particular, have trained personnel available to answer the 
telephone during business hours during the week to respond to 
seniors' questions as to which plan or plans or drug cards 
would be most appropriate for them. In fact, we also can run 
the PDAP right there while the senior is on the telephone and 
provide a detailed report to that senior within 24 to 48 hours 
as to what drug card or cards would be more appropriate for 
that senior's situation.
    We have trained personnel who help senior consumers 
evaluate all their options, and I think that just further adds 
to the ability of these seniors to make informed decisions and 
to know what all their options are.
    Senator Voinovich. Thank you.
    Ms. Marsh, during the course of the Extreme Makeover 
project, the Partnership for Public Service learned much about 
the inner workings of CMS, and I would like to say publicly 
that we really are grateful for the Partnership for Public 
Service. Many people are not aware that it did not exist 
several years ago, and that a man named Sam Heyman from New 
York, who was concerned about the fact that not enough people 
were going to government service, created this new partnership, 
and you have been very helpful in encouraging people, 
particularly on college campuses, to take advantage of the 
opportunities to come to work for the Federal Government.
    How familiar was the Partnership with the department before 
you began this project? And how did you get into it?
    Ms. Marsh. How familiar were we with the department or vice 
versa?
    Senator Voinovich. How familiar were you--well, I am 
interested in how you got together.
    Ms. Marsh. We have a monthly meeting with all the HR 
directors in the major departments in the offices to talk about 
issues that are key to them. And we made comment about this 
Extreme Makeover project, and as I mentioned, that very 
afternoon----
    Senator Voinovich. In other words, what you are telling me 
is that the CHICOs--you get together with them once a month, 
with the partner----
    Ms. Marsh. Their operating HR directors typically in some 
of the CHICOs come and have a conversation about their issues, 
what they would like to see, and we mentioned the Extreme 
Makeover project, and that afternoon the HHS HR Director called 
back and said, ``I want you to get on the phone right now with 
the leadership team at CMS.'' So we had an initial 
conversation, and then met virtually everyone in the 
organization and their senior leadership team, focusing on 
their key hiring issues and talked about what we are trying to 
do.
    Among the things that we required of an organization was 
senior leadership commitment and an organization that was in 
pain. We did not want to have to educate people in this 
project. And CMS was in pain with the big ramp-up they had, but 
also their senior leader said this is really important, we will 
sign on, and they have been at the table with us throughout 
this process.
    Senator Voinovich. So, in other words, they found out about 
you through the meetings that you had once a month.
    Ms. Marsh. That is right.
    Senator Voinovich. And wasn't it the Partnership for Public 
Service that also brought, was it, Monster to the Department of 
Personnel?
    Ms. Marsh. Well, actually, Monster had responded to the RFP 
that the OPM had put out to modify USAJobs, and they have been 
one of our partners in this endeavor and, in fact, had 
introduced us to many of the other individuals and firms that 
came together as part of this hiring effort. And I should point 
out that all the efforts that we have had from all of these 
firms have been pro bono. So they have dedicated hundreds and 
hundreds of hours to the effort among three agencies to try and 
really create a successful model within the Federal Government.
    Senator Voinovich. It is interesting because when we got 
started with this human capital challenge that we had to create 
a situation where we would be able to attract the best and 
brightest to the government, we had an executive session that 
was sponsored by Harvard University, and the folks from Monster 
were at the table with us. We tried to get the best and 
brightest people in the country together to talk about how does 
the Federal Government attract the best people and at the same 
time have an environment where you keep the best people working 
for you. And so this has just moved along, hasn't it?
    Ms. Marsh. It has, and I think, Senator, it was at one of 
your hearings where Jeff Taylor, who is the CEO of Monster, 
rolled out a 47-page job announcement--I think that might have 
been one of yours--just to say, ``How does a candidate plow 
their way through 47 pages and who is intrepid enough to want 
to do that?''
    Senator Voinovich. Well, I have heard complaints for a long 
time about the fact that they make it difficult for us to go to 
work for the Federal Government.
    Ms. Marsh. And I think in showing the new and improved 
advertisement--and much credit given to OPM. They have this new 
five-template format that starts with ``What is your mission? 
What are you really looking for? Let's sell the benefits.'' 
There has been a lot of momentum in the last couple of years.
    Senator Voinovich. Great. And are there any impediments 
that you have noticed over there that we might try to knock 
down?
    Ms. Marsh. At this point, we do not have any. We are still 
trying to consider--we are still trying to go through all of 
the findings. We are completing our 2(b) process. What we are 
trying to do is to look and see if agencies could make 
improvements with the existing flexibilities that have been 
given out in the last couple of years. So we certainly see that 
we are able to do a lot. That example that I gave you was not a 
direct hire authority example. It was with the existing 
flexibilities.
    There may well be.
    Senator Voinovich. Now, they came to--we changed the law to 
give direct hiring, but they had to come to the Office of 
Personnel Management to get permission to do the direct hires.
    Ms. Marsh. They did, and they have been very successful 
with those. And part of our endeavor is to look at their 
ordinary hiring and the non-direct hires to make sure that we 
can backfill some of those positions that will be subject to 
the retirements that you mentioned earlier on.
    When we finish this project across all three agencies, we 
are really looking at investments in the HR function. As you 
well know, that strength has been depleted over the course of 
the last couple of decades with retirement and downsizing. So 
one of the things we may want to come back to the Subcommittee 
with is some observations about some special investments in the 
HR function across government, sort of Clinger-Cohen-type 
endeavor for the very important HR assets.
    Senator Voinovich. Thank you. Do either one of you have 
anything else, any comments? You have heard the lengthy 
testimony and the questions to Dr. McClellan. Any comments that 
you would like to make in conclusion?
    Ms. Marsh. The only thing I would say, they have a massive 
challenge. Having come from a private sector benefits 
consulting organization, I understand what it is like to roll 
out on a private sector company a major endeavor like this. And 
this is a scale that just boggles the human imagination, what 
you all have to do collectively over the course of the next 
couple of years. So it is really a privilege to try and assist 
that particular organization doing something that is as 
important.
    Senator Voinovich. Well, I want to thank you and the 
Partnership for Public Service for stepping forward and helping 
us out, and I look forward to your recommendations on how we 
can help other agencies get the job done. And, Ann, thank you 
very much for all the good work that you do in Ohio. I think 
that the partnership that we had between CMS and the Department 
of Aging and the Department of Insurance is probably one of the 
best in the country, and I think that had it not been in 
existence, we wouldn't have had the number of people sign up 
for the discount drug card. I think there is a tendency out 
there to kind of feel it is all in the hands of the Federal 
Government, but I learned when I was governor that when new 
programs come out, people usually do not call the Federal 
Government, they call State Government. And I knew that it was 
coming, and our folks just did a great job, and I am so 
grateful to you.
    Ms. Benjamin. Well, I really appreciate that, and I thank 
you for your help and encouragement along the way, you who are 
so familiar with the OSHIIP program from its very beginning, 
and I have to say it indeed has been a challenge and will 
continue to be a challenge as the program changes to get the 
information out to the people who need it. But we are doing 
everything we can at OSHIIP to get that information out, and 
CMS has truly been a very helpful partner and continues to be 
so. If we have problems, we call the regional people and they 
respond generally very quickly.
    Senator Voinovich. Well, if they don't, you call me.
    Ms. Marsh. I will. Thank you. I will take that. [Laughter.]
    Senator Voinovich. Thank you very much. The hearing is 
adjourned.
    [Whereupon, at 12:13 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              

                  PREPARED STATEMENT OF SENATOR COBURN

    On Tuesday, March 23, the Medicare and Social Security Trustees 
released their annual report on the financial status of the Social 
Security and Medicare trust funds.
    I'd like to just take a minute to go over some of the findings of 
the Medicare trustees report and the drug benefit.
    The Medicare report shows the Hospital Insurance Trust Fund in a 
deficit state by 2010 (just four years away) and in bankruptcy in 2018. 
The report also shows a significant unfunded liability for the Medicare 
program.
    From what I understand from reading the report and the laws and 
regulations, the cost containment provision would be triggered next 
year. The way I understand the provisions, there is a ``cap'' on the 
general revenue amount that can be spent on the total Medicare 
program--this cap is 45 percent. It is estimated that 45 percent of 
total Medicare spending will be funded by general revenues within the 
next 7 years, if this is the case then the cap would have been reached 
and this would initiate a trigger that would result in either cutting 
the program benefits or increasing dedicated program revenues either 
through premium increases or dedicated payroll taxes. If this is the 
case, then it is my understanding that in next year's report the 
trustees believe they will issue the warning that the cap will be 
reached within 7 years and the cost containment process will be 
activated to implement ``corrective action.'' I find the instability of 
this system disturbing. I look forward to hearing the testimony of our 
distinguished witnesses.

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