[Senate Hearing 109-389]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-389

     MEETING THE CHALLENGES OF MEDICARE DRUG BENEFIT IMPLEMENTATION

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

                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                            FEBRUARY 2, 2006

                               __________

                           Serial No. 109-17

         Printed for the use of the Special Committee on Aging




                     U.S. GOVERNMENT PRINTING OFFICE
                             WASHINGTON: 2006        
27-432 PDF

For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001





                       SPECIAL COMMITTEE ON AGING

                     GORDON SMITH, Oregon, Chairman
RICHARD SHELBY, Alabama              HERB KOHL, Wisconsin
SUSAN COLLINS, Maine                 JAMES M. JEFFORDS, Vermont
JAMES M. TALENT, Missouri            RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina       BLANCHE L. LINCOLN, Arkansas
MEL MARTINEZ, Florida                EVAN BAYH, Indiana
LARRY E. CRAIG, Idaho                THOMAS R. CARPER, Delaware
RICK SANTORUM, Pennsylvania          BILL NELSON, Florida
CONRAD BURNS, Montana                HILLARY RODHAM CLINTON, New York
LAMAR ALEXANDER, Tennessee           KEN SALAZAR, Colorado
JIM DEMINT, South Carolina
                    Catherine Finley, Staff Director
               Julie Cohen, Ranking Member Staff Director

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator Gordon Smith........................     1
Opening Statement of Senator Herb Kohl...........................     3
Opening Statement of Senator Elizabeth Dole......................     4
Opening Statement of Senator Thomas Carper.......................     6
Opening Statement of Senator Bill Nelson.........................     7
Opening Statement of Senator Hillary Clinton.....................     8
Opening Statement of Senator James Talent........................    10
Opening Statement of Senator Ken Salazar.........................    11
Prepared Statement of Senator Conrad Burns.......................    12
Opening Statement of Senator Conrad Burns........................    13
Opening Statement of Senator Rick Santorum.......................    13
Prepared Statement of Senator Blanche Lincoln....................    87

                                Panel I

Mark B. McClellan, M.D., administrator, Centers for Medicare and 
  Medicaid Services, Department of Health and Human Services, 
  Washington, DC.................................................    15
Linda McMahon, Operations, Social Security Administration, 
  Washington, DC.................................................    51

                                Panel II

Robert J. Kenny, Medicare Part D beneficiary, Tillamook, OR......    89
Michael Donato, Medicare Part D beneficiary, Mansfield, OH.......    95
Sharon Farr, Center for Individual and Family Services, 
  Mansfield, OH..................................................    99

                               Panel III

Timothy R. Murphy, secretary, Executive Office of Health and 
  Human Services, Massachusetts Department of Public Health, 
  Boston, MA.....................................................   107
Susan Sutter, president-elect, Pharmacy Society of Wisconsin, 
  Horicon, WI;...................................................   119
Mark B. Ganz, president and chief executive officer, Regence 
  Group, Portland, OR; on behalf of the National Blue Cross and 
  Blue Shield Association........................................   129

                                APPENDIX

Prepared Statement of Senator Larry Craig........................   139
Prepared Statement of Senator Susan Collins......................   139
Prepared Statement of Senator Russell Feingold...................   140
Prepared Statement of Senator Rick Santorum......................   141
Article submitted by Senator Santorum............................   143
Prepared Statement of Senator Mel Martinez.......................   144
Questions from Senator Santorum for Robert Kenny.................   144
Questions from Senator Santorum for Susan Sutter.................   144
Testimony submitted by Long-Term Care Pharmacy Allicance.........   146
Statement submitted by National Association of Chain Drug Stores.   150
Statement submitted by American Society of Health System 
  Pharmacists....................................................   158
Statement of the American Psychaitric Association................   165
Statement submitted by AARP......................................   169
Statement submitted by the American Pharmacists Association......   177
Testimony of Jack Vogelsong, Commonwealth of Pennsylvania, 
  Department of Aging............................................   185
Testimony of Kenneth Goodman, chief operating officer, Forest 
  Laboratories...................................................   194

                                 (iii)



 
     MEETING THE CHALLENGES OF MEDICARE DRUG BENEFIT IMPLEMENTATION

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



                       THURSDAY, FEBRUARY 2, 2006

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The committee convened, pursuant to notice, at 10:03 a.m., 
in room 216, Hart Senate Office Building, Hon. Gordon H. Smith 
(chairman of the committee) presiding.
    Present: Senators Smith, Talent, Dole, Martinez, Santorum, 
Burns, Kohl, Wyden, Lincoln, Carper, Nelson, Clinton, and 
Salazar.

      OPENING STATEMENT OF SENATOR GORDON SMITH, CHAIRMAN

    The Chairman. Ladies and gentlemen, if everyone would take 
their seats, we welcome you all here. We thank you for coming. 
This is our first hearing in the Aging Committee of the year 
2006 and there is hardly a topic we could address that is more 
timely and more important to the lives of our seniors than the 
new prescription drug benefit. Obviously, it has gotten a lot 
of people's attention as it has been implemented. It has not 
been problem-free, but this is not a hearing just to pile on. 
It is a hearing to look for solutions, so we appreciate very 
much our witnesses who have taken the trouble to be here and we 
want you to feel at home here. I understand some are feeling 
quite nervous about this. But this is a great national effort 
to fill a part of the Medicare promise that should have been 
done long ago.
    But again, our goal today is to evaluate CMS's ability to 
address current problems in a timely manner and to anticipate 
future problems before they occur. Only when this happens can 
we regain and earn the confidence that beneficiaries want to 
have in this valuable program.
    It is most unfortunate that many of the problems have 
involved what are known as dual-eligibles, which are people who 
are on Medicaid, which is a State responsibility, and now have 
been shifted to Medicare, which is a Federal responsibility. 
These are often the poorest and most vulnerable Americans who 
rely on medications to manage their chronic physical and mental 
illnesses. We knew there would be challenges associated with 
their transition from Medicaid into the new Medicare drug 
benefit, but it seems that perhaps not enough was done to 
ensure a seamless transition.
    Last March, this committee held a hearing where experts 
offered solutions to the very problems the program has 
experienced. I felt their recommendations had merit, strongly 
enough so that Senator Kohl and I sent a follow-up letter to 
CMS. While I applaud CMS's efforts to address the current 
situations and problems that have arisen, I have to question 
whether any of this would have developed if the recommendations 
we made had been adopted.
    However, again, let us look forward. I hope to have answers 
to a number of key questions. First, is the accurate enrollment 
information about dual-eligibles available to plans and 
pharmacists to ensure beneficiaries can receive their 
medications at correct prices? Second, have the call center 
hold times improved so that beneficiaries and pharmacists can 
get access to accurate information in a timely manner and 
resolve problems? Third and finally, are low-income 
beneficiaries still being denied drugs or charged inappropriate 
deductibles and copayments?
    I know that progress is being made to improve communication 
between all parties, but I am hearing reports that not all 
plans and pharmacies are aware of the options to address 
problems. This is certainly the case with what is called the 
first fill policy, which requires plans to cover the cost of a 
30-day emergency supply of medication when a beneficiary needs 
a drug that is not covered by his or her formulary. While all 
plans reportedly had first fill policies in place on January 1, 
many pharmacists and plan representatives were not aware of 
them, and even if they were, they couldn't get the 
authorization necessary to dispense the drug.
    I want to note and commend my own State that took action 
and created stop-gap programs to pay the cost of emergency 
medications. I am committed to ensuring that States are 
reimbursed for their expenses. Again, Medicare is a Federal, 
not a State, program.
    While the focus of this hearing is on the immediate 
challenges associated with the implementation of the Medicare 
drug benefit, there are some programmatic changes that are 
needed. One such change is the extension of the institutional 
copayment exemption to dual-eligible beneficiaries who are 
receiving care in homes and community-based centers. Under 
current law, dual-eligibles who reside in nursing homes are not 
required to pay copayments for generic or brand name drugs. 
However, those living in assisted living facilities or who 
receive services through adult day care programs or other types 
of community-based services are required to pay these costs.
    Considering that dual-eligible beneficiaries in both 
nursing home and community-based care settings generally have 
the same amount of resources available to them. This is simply 
not right. It put dual-eligibles in States like Oregon, which 
provide most of their long-term care services in a community 
setting at a disadvantage and may even create a disincentive 
for individuals to choose community-based care options in the 
future. By the way, some of those options are less expensive 
than nursing homes, but my point is simply that the seniors 
should have the choice of where they receive their care.
    Yesterday, I introduced a bill along with Senator Bingaman 
that would extend the copayment exemption to dual-eligibles 
receiving their care in home or community-based settings. I 
believe this small change to the Medicare drug program will 
have an enormous impact to ensuring that low-income 
beneficiaries have continued access to their drugs while 
protecting their right to receive care in the setting of their 
choice. I hope my colleagues will consider this bill. I think 
it is an improvement.
    I look forward to today's discussion and I hope we have a 
thoughtful and productive dialog. I am proud of the Aging 
Committee. We are the first to take up this issue and I know it 
is of real timely urgency for seniors. We have excellent 
witnesses, including two beneficiaries who will discuss the 
success and challenges associated with the program's 
implementation.
    With that, I will turn to my colleague, Senator Kohl, for 
his opening remarks.

             OPENING STATEMENT OF SENATOR HERB KOHL

    Senator Kohl. I thank you, Mr. Chairman, and I also welcome 
our witnesses who will be here today.
    Dr. McClellan, I am glad to see you back again to discuss 
Medicare Part B implementation. As I am sure you know, we have 
some serious problems on our hands, and as I am sure we would 
agree, we need to put aside any partisan thoughts to work 
together to get this program running so that seniors are better 
off than they were before we passed the drug benefit. I do not 
believe we are there at this time.
    Every day, we hear stories from seniors and individuals 
with disabilities. Some find themselves switched from Medicaid 
into a Medicare drug plan that does not cover the drugs that 
they need. In other States, hundreds of dollars of incorrectly 
charged copays. Still others wrestle with the choice between 
the dizzying number of drug plans, all covering different drugs 
and different costs, and few that Medicare can explain in any 
detail.
    A good number of these problems, I think you would agree, 
come from a flaw in the original plan, the primary reason that 
I and others voted against it in 2003. Medicare Part D is not 
what many seniors thought they were promised, a simple drug 
benefit delivered through the reliable, popular Medicare 
program. Instead, private insurers distribute the drug benefit, 
and I believe it is set up as much for their profit and 
convenience as it is for that of our seniors.
    Nowhere is that more obvious to me than in the provisions 
of the drug benefit law that prohibits, as you know, the 
Federal Government from negotiating with drug companies for 
lower drug prices. Forty-one million Medicare beneficiaries 
demanding fair prices, I believe could have backed the drug 
companies down, but the law will not let them even try.
    Striking that provision, and I am a cosponsor of 
legislation to do that, I believe might be the single most 
powerful action we can take to increase the popularity and the 
benefit of Medicare Part D among seniors. I would hope that the 
administration would endorse fixing that provision. I believe 
it would not only be good policy, but a strong signal that 
seniors are, indeed, our primary concern.
    I would bet that, Dr. McClellan, you are as disappointed as 
anyone at the troubled roll-out of Medicare Part D. Seniors 
don't have enough information, as you know, to choose a drug 
plan and they get inaccurate or inconsistent advice when they 
call Medicare. Senator Nelson has introduced a bill that would 
extend the enrollment deadline from May 15 and give every 
beneficiary a chance to change their plan at least once at any 
point in 2006, and that seems to me something that we could and 
should do.
    We also have to take immediate action to help those hit 
hardest so far, the so-called dual-eligibles, the very poorest 
and sickest seniors and disabled individuals who were switched 
to the Medicare drug benefit on January 1. We hear stories of 
patients denied medicines because their paperwork is delayed or 
their new plan does not cover what they need. We know the 
Administration must be as concerned as we are with that result 
and we look forward to talking about what we can do to turn it 
around.
    But it is not only seniors who are overwhelmed. Pharmacies, 
as you know, are struggling to navigate the new system. Today, 
we will hear from Sue Sutter, a pharmacist from Dodge County, 
WI, about the extreme steps they have taken to make sure that 
no patient is turned away. Even in the face of being unable to 
verify payment, many pharmacists have still dispensed 
medications to their clients and some pharmacies have been 
forced to the extreme of taking out lines of credit to cover 
their costs. Many States, including Wisconsin, have had to step 
in to cover drugs, as you know, to avert a public health 
emergency.
    I believe we can act now to fix these problems. Dual-
eligibles must have guaranteed access to the drugs they need 
and some real help to get into the proper drug plan. The 
Federal Government must reimburse seniors, pharmacies, and 
States who have stepped in to fill the holes. We should extend 
the enrollment deadline for seniors to sign up for the benefit 
so that they would have enough time to pick the drug plan that 
best suits their needs, and we should also let seniors change 
their drug plans this year if the one they choose changes mid-
year and no longer provides coverage for their drug. We should 
also allow, as I said, Medicare to negotiate directly with drug 
companies for lower prices for seniors and taxpayers if we 
cannot explain why they should be disallowed from doing that.
    Earlier this week, I met with seniors, individuals with 
disabilities, pharmacists, and advocates in Milwaukee who have 
been working around the clock to help people get the drugs they 
need. The administration needs to show that same commitment and 
must look at what can be done to rectify the problems that 
exist with Medicare Part D.
    Again, I thank you all and I certainly thank our Chairman 
for holding this important hearing.
    The Chairman. Thank you, Senator Kohl.
    As is our tradition, we will go on those who arrived first, 
so it is Senator Dole, Senator Carper, Senator Nelson, Senator 
Clinton, and Senator Talent.

          OPENING STATEMENT OF SENATOR ELIZABETH DOLE

    Senator Dole. Thank you very much. Thank you, Chairman 
Smith, for holding this hearing to examine and address the 
challenges in implementing the new Medicare prescription drug 
program.
    Twenty-four million Americans, including more than 778,000 
North Carolinians, are enrolled in Medicare Part D, and today, 
these folks are receiving more affordable access to life-saving 
medication. For a majority of these individuals, the program is 
working properly and they are receiving their prescriptions at 
a much lower cost than before. In fact, pharmacies across the 
Nation are filling one million prescriptions a day to Medicare 
Part D enrollees.
    However, there are some beneficiaries, in many cases the 
neediest among us, who are having considerable trouble 
transitioning into the new program. This is simply unacceptable 
and clearly not what was intended. It is critical that we 
identify these problems and work together to ensure that this 
new program serves each and every beneficiary successfully.
    I have heard from a number of pharmacists, providers, and 
beneficiaries in my home State of North Carolina about both the 
successes and challenges they have encountered in the first 
month of the new Medicare drug program. While I am delighted to 
hear that so many Americans who did not have prescription drug 
coverage before are now benefiting from this program, I am also 
very concerned about those who are encountering obstacles as 
they try to fill their prescriptions.
    I have heard reports, as I am sure we all have, about 
beneficiaries who are being charged the wrong copayment, 
pharmacists and beneficiaries who are not able to get in touch 
with the plans, and computer systems that are working 
inadequately. What is worse is that in many cases, it is the 
dual-eligible individuals, those who qualify for both Medicare 
and Medicaid benefits, and the low-income subsidy populations, 
that are having the most trouble.
    Because these beneficiaries often have more serious health 
concerns and depend on their prescription drugs the most, it is 
even more important that these problems be addressed quickly.
    The new Medicare prescription drug plan is the largest 
change to Medicare since the program's creation 40 years ago, 
and with any change that scale, that magnitude, it is nearly 
impossible to avoid startup challenges. But now we have got to 
identify those individuals who are vulnerable and make certain 
their needs are met. We have got to make certain that the new 
drug program is working for all beneficiaries, pharmacists, and 
providers alike.
    We have already seen tremendous progress in solving some of 
the initial difficulties. Data submissions have been 
streamlined. Customer services have been enhanced. Pharmacy 
support has been expanded. I thank Dr. McClellan and CMS for 
taking steps to quickly improve the systems that were faltering 
and to assist those experiencing problems. I also thank the 
many pharmacists, providers, case workers, State and Federal 
officials, friends and family members who are working together 
to assist beneficiaries in their community.
    I am disappointed by the unconstructive rhetoric and blame 
game that some are resorting to. We must work together, not 
point fingers, to solve these problems.
    In conclusion, let me just say that in the coming days and 
weeks, it is vital that all parties involved continue to make a 
concerted effort to strengthen the new Medicare drug program. 
Congress must ensure that diligent work is being done to meet 
the needs of every beneficiary. Millions of Americans are 
better off, thanks to the benefits provided by this landmark 
program, and there is no reason why every enrollee should not 
share the same experience.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Dole.
    Senator Carper.

           OPENING STATEMENT OF SENATOR THOMAS CARPER

    Senator Carper. Thank you. I want to welcome our witnesses 
today. Thank you very much for joining us. It is good to see 
both of you and I express my thanks to you, Mr. Chairman, and 
to our colleague, Senator Kohl, for pulling us together so that 
we can begin to exercise our responsibility and our oversight 
responsibility as this new benefit is implemented.
    We all know, it has already been said, the implementation 
process has been bumpy, rocky. Maybe it was difficult given the 
magnitude of the kind of program that we are introducing here. 
I voted for this benefit in the expectation that we would make 
improvements and as a first step toward ensuring that all 
seniors and disabled persons have access to prescription drug 
coverage under Medicare. However, this is only going to work if 
we continue to improve the program's implementation almost on a 
daily basis, and I know that is what you are trying to do and 
that is what we are trying to do in my State of Delaware.
    I just say to my colleagues, I think maybe it is going a 
little bit easier in Delaware. We had our tough moments and 
still have them, but we have an extraordinary cooperation 
between State and local folks, working with CMS, working with 
Social Security, working with folks in the private sector to 
try to smooth it out as best we can.
    I know we have all heard how confusing this program is and 
about the transition problems that are associated with the new 
benefit. Some beneficiaries have gone, as we know, without 
needed medications. Pharmacists have dispensed medications they 
have not been paid for. Medicare and health plan phone lines 
have been overwhelmed, such that resolution of these problems 
are even harder to come by.
    In my State of Delaware, we have done, as I said, I think a 
pretty good job of trying to implement the process and a lot of 
people have worked very hard to make that possible. I think we 
have been able to avoid the worst, but for a lot of people, 
there has been a lot of heartache, as you know. Now we have got 
to sort through the problems that we see and we have to fix 
them.
    I am going to suggest several steps. The first one would be 
that the Centers for Medicare and Medicaid services must 
address as quickly as possible all the many problems that you 
have heard about and that we have heard about in this past 
month or so. This includes that States, that pharmacists and 
beneficiaries are appropriately compensated for costs that they 
have incurred as a result of transition problems, and CMS 
should provide Congress with regular updates on the progress of 
resolving these issues, and this is an opportunity to provide 
one update in person. We hope that others would follow.
    Second, I believe we will need to streamline and simplify 
the benefit. As it stands now, CMS, I believe, approved too 
many plans, each one with different rules, different standards 
for pharmacists, different standards for appeal. Put quite 
simply, the program as implemented today is just too confusing. 
I will remember for a long time a conversation I had with 
Senator John Breaux and former Secretary Tommy Thompson a year 
or two before the adoption of the program and talking to them 
about my mother, about their mothers and how difficult this 
stuff is going to be for them to understand on a very good day. 
What we have done is we have put in place a program that is, 
for a lot of our senior citizens, almost incomprehensible.
    Third point, we need to ensure that CMS has the proper 
structures in place to oversee participating health plans. CMS 
must ensure the plans are doing what they are supposed to be 
doing and that any lack of compliance is immediately identified 
and corrected.
    Finally, we need to ensure that the Social Security 
Administration continues to conduct outreach to low-income 
populations. Today, I think only about a million people have 
been found eligible for the subsidy out of an estimated, I 
think, eight million people who are believed to be eligible 
beneficiaries.
    I just say in conclusion, we can do better with this drug 
benefit and I hope that today's hearing is a real good step 
toward fixing some of the problems that we have all experienced 
and worked to correct.
    Thanks, Mr. Chairman.
    The Chairman. Thanks, Senator Carper.
    Senator Nelson, how are we doing in Florida?

            OPENING STATEMENT OF SENATOR BILL NELSON

    Senator Nelson. Well, you can imagine with the significant 
senior citizen population we have in our State, and Mr. 
Chairman, I will be very brief and just summarize because you 
all have a tough job and you need to know what we are hearing 
and it has been said here.
    We are going to have an opportunity to vote on this today, 
on one of the things that has already been mentioned here. The 
Chairman has mentioned it. I have filed an amendment on the tax 
reconciliation bill that will delay for 6 months the deadline 
of signing up that will help a lot of the folks that I have 
been talking to who are quite confused with over 43 plans to 
choose from. They are not only confused, they are frightened 
because of that deadline coming and if they make a mistake. So 
that is a part of the amendment, as well, that they would have 
the opportunity to change that without having to wait a year.
    Now, you have also heard the commentary here about the 
dual-eligibles. I will tell you, your attention is riveted in a 
town hall meeting when senior citizens are sitting or standing 
in front of you and literally tears are coming down their face 
because they had their prescriptions under Medicaid and now the 
pharmacist is refusing to give it to them as they have been 
transferred under Medicare.
    Then the third thing that I would just quickly mention is 
that Senator Clinton and I filed a bill last week, and I just 
heard you say, Mr. Chairman, that you filed one, as well, and 
this is prescription drug copayments in those that are in 
assisted living facilities. Now, if you are low-income nursing 
home, you don't have to pay the copayments. But if you are low-
income and you happen to be in assisted living facilities, and 
it may be that you are there because you have got a mental 
problem and the medications are absolutely essential, you see 
the problem. They are not getting their medication. Senator 
Clinton and I have filed a bill that would cancel those 
copayments for low-income individuals.
    Good luck as you are implementing this with everything that 
we are seeing come up to the top.
    The Chairman. Maybe we should combine your bill with the 
bill Senator Bingaman and I introduced. Senator Clinton.
    Senator Nelson. The more the merrier.

          OPENING STATEMENT OF SENATOR HILLARY CLINTON

    Senator Clinton. Mr. Chairman, we would certainly welcome 
that and we will work together, because that is one issue that 
must be fixed immediately. I have been in pharmacies from 
Buffalo to Rochester to Syracuse to New York City. I have been 
to hospitals. I have spoken with many pharmacists, doctors, 
nurses, seniors, people with disabilities, their family 
members, their advocates. Because I worried that the bill 
itself was fatally flawed in its design, I voted against it, 
but once it passed, I certainly determined that I would try to 
do everything I could to make sure that New Yorkers understood 
it, could access it, and make the best of it.
    To that end, I issued in our State a brochure that my 
excellent staff put together. We have sent out tens of 
thousands of these in English and Spanish. But as the date 
approached for the January 1 implementation, I became even more 
concerned and introduced legislation to try to fix some of 
these problems that I was convinced were going to happen.
    The GAO came out with a report that highlighted and really 
set off the alarms about a number of these problems, and yet 
despite the concerns of many about what was going to happen, we 
were unsuccessful in either slowing down the process or making 
it work better and the results are the ones that I have seen 
firsthand over the last several weeks in my State, and I have 
to identify completely with what both Senator Kohl and Senator 
Nelson have said. I mean, it is an absolute embarrassment, 
outrage, deep heartbreaking disappointment to be in the 
presence of people who are so distraught, confused, upset and 
feeling abandoned.
    I know any program is difficult, but I would remind us we 
implemented the entire Medicare program in 11 months back in 
1965, and we didn't have computers. We had a simple program 
people could understand and an effective effort to make sure it 
came into being as smoothly as possible.
    Now, the first thing, Mr. Chairman, I would suggest is that 
we get some agreement on the facts here, because we cannot 
possibly deal with what we as elected representatives are 
coping with, which is an overwhelming outpouring of constituent 
requests, unless we know the facts. I think it is important to 
start with the fact that the administration continues to claim 
that we have 24 or 25 million beneficiaries. Let us look at 
those figures.
    First, the 6.2 million dual-eligibles already had 
prescription drug coverage. They were covered by Medicaid. They 
got their drugs. Most of them got it for free. It was seamless. 
Their doctors understood how to access it for them. Four-point-
five million Medicare Advantage enrollees had Medicare managed 
care plans that offered prescription drug coverage. They 
already were covered. Seven-point-four million retirees already 
had coverage from their previous employers for their drug 
needs. Federal retirees, veterans and their families, 3.1 
million, already had existing drug coverage. So we have about 
3.5 million new enrollees in our country who signed up for the 
new benefit.
    In New York, we only have 110,000 new beneficiaries, and 
who can blame them? People are taking a wait-and-see attitude. 
They don't want to be signed up with some plan that may not 
even have their drug on the formulary. Their doctors are 
telling them, wait. Don't rush into this, because I don't want 
to have to be rediagnosing you. You have been fine on the drugs 
that I have given you for a decade. I don't want to have to 
write notes and ask for permission to give you the drug that I 
think you should have. So people are taking a wait-and-see 
attitude, except for the dual-eligibles, who were automatically 
enrolled, who had no choice over what the plan they were going 
into said or what kind of copayments they would be required to 
make.
    So I think that we need to have, as the first order of 
business, an agreement that we are going to talk about facts, 
not spin, not rhetoric, not propaganda. We are going to talk 
about facts because people's lives are at stake, and I take 
this very seriously.
    There are a number of fixes that we have been putting 
together on both sides of the aisle. One, you heard about. The 
Chairman, Senator Nelson, and I, we would like to make sure 
that the dual-eligibles living in group homes, in assisted 
living facilities, like a young man that I met recently outside 
of Albany had a bill for the first time ever that he was 
supposed to pay to get the drugs he needed will not have to 
face that.
    Second, I would like to see the pharmacists in this country 
reimbursed. They have been on the front lines. They have been 
the ones who have had to tell customers, ``I am sorry, this 
isn't covered,'' or, ``Mrs. Jones, I know you used to get your 
drugs for free, but now you are going to have to pay me $42. 
Oh, you can't pay? Well, I am going to give it to you anyway 
and we will try to get this worked out.'' They are the ones who 
have been on hold to the Medicare hotline or to the plan's 
hotline, trying to get answers for their customers about what 
they were entitled to and how much it was going to cost them. 
So I certainly hope we will reimburse the pharmacists.
    With respect to the recent announcement about reimbursing 
the States, let us make sure that that is not cutoff at 
February 15 because I don't think a lot of these problems are 
going to be fixed by February 15, and I don't think any State 
that has stepped up to the plate, as so many of ours have, 
should be penalized because the Federal Government designed a 
fatally flawed plan and is implementing it in a manner less 
than acceptable.
    Now, I also am deeply concerned about the large numbers of 
beneficiaries with mental illnesses who have had trouble 
getting their medications. Now, as beneficiaries finish their 
one-time transition supplies of medications not covered on drug 
plan formularies, they will have to switch medications or file 
for an exception to the plan's formulary policies, and I 
predict this will be the next big challenge, Dr. McClellan, 
that will be faced by the Part D program, as millions of 
beneficiaries try to take advantage of the exceptions and the 
appeals process, and I hope you have plans in place, and I 
would request that your agency provide this committee with data 
on the numbers of beneficiaries who file appeals to plans, the 
number of successful appeals, and rejections by plans, and 
information on the timeliness with which plans handle appeals.
    Finally, there continue to be widespread reports of drug 
plans requiring prior authorization for beneficiaries to 
receive needed medications. Now, some reports have plans 
requiring forms for each drug, while others are requiring 
doctors to fill out forms as long as 14 pages for drugs that a 
beneficiary has been taking for years. Now, your agency's 
request that plans discontinue this practice does not seem to 
be working based on the information we have, and I hope that 
you will require, not request, require that the plans cease 
this practice and enforce that requirement.
    Mr. Chairman, we have legislation with a comprehensive fix 
that I hope we can get bipartisan support on. I, for one, 
believe we should scrap this and start over. We are spending 
hundreds of billions of dollars on an inefficient delivery of a 
plan that could be done in a much more cost-effective way. We 
have taken taxpayer dollars by the billions and transferred it 
to the pharmaceutical companies and the insurance companies as 
a way to entice, even bribe, them to provide drug coverage to 
the poorest of the poor and the sickest of the sick. That is 
not in keeping with either our values or, frankly, what should 
be expected of high-performance government.
    I look forward to getting responses, but I hope that we 
will start with an agreement that no spin, no rhetoric, let us 
talk facts and let us get facts before this committee so that 
we can discharge our responsibilities to the people who are 
dependent on us.
    The Chairman. Thank you, Senator Clinton.
    We will now hear from Senator Talent, Senator Salazar, 
Senator Burns, and Senator Santorum, and if you could keep them 
abbreviated, we would appreciate it. Our witnesses, three 
panels of them, are waiting. Senator Talent.

           OPENING STATEMENT OF SENATOR JAMES TALENT

    Senator Talent. I will be brief, Mr. Chairman. I have had a 
number of town hall meetings around Missouri talking about this 
new coverage and listening to seniors. It is the third round of 
town hall meetings I had on prescription drug coverage. I have 
encountered in my time in public life many, many senior 
citizens who were in a position where they were choosing 
between the necessities of life and prescription drugs because 
they had no coverage because Medicare did not have prescription 
drug coverage as a base, and that is not the case now. There 
are thousands of people in the State of Missouri who were 
paying thousands of dollars out of pocket a few months ago who 
are not paying that anymore and that is a huge plus for the 
program.
    But we have a lot of issues that we have to deal with, 
also, and many Senators have mentioned that. I am looking 
forward to having the chance to ask you about that.
    I am concerned--it is funny, because as I was thinking 
about this and where we were going to have difficulties, I 
thought the auto-enrollment process would probably go pretty 
well because we already had those people on the computers and I 
thought we would just be able to shift them over. We have had 
14,000 Missourians for whom the auto-enrollment process failed. 
I appreciate your assurances that the State is going to get 
reimbursed. I want to make certain that that happens.
    I also have concerns from a pharmacist's point of view 
about how this is working out. I have heard from a lot of 
pharmacists in that respect, and also issues in getting 
information from the plans as people try and make choices about 
what plan that they are going to pick.
    I appreciate the fact that you are here today and I am 
going to desist from any further statement and just ask that my 
opening statement be put in the record.
    The Chairman. Without objection.
    Senator Salazar.

            OPENING STATEMENT OF SENATOR KEN SALAZAR

    Senator Salazar. Mr. Chairman and Ranking Member Kohl, I 
very much appreciate the work you do on this committee and I 
very much look forward to working with you, since this is my 
first meeting before this committee.
    On the subject that we are dealing with here today, I know 
the horror stories that we have heard all around the country. 
They are no different at all in my State than some of the 
stories that have been talked about here this morning already. 
In Colorado, we have 17 companies that are providing 42 plans 
to Medicare beneficiaries. The implementation of the program 
has caused numerous people in my State to come to me and to my 
other colleagues and to tell us about the concerns that they 
have with the implementation of the program.
    In the first few days of the program, many of the 
pharmacies did not have the correct information, and I saw and 
heard from people who were trying to scrounge together money 
from friends and relatives to try to pay for prescriptions. 
Some of them were able to do it. Some of them, frankly, had to 
go without.
    I don't want to go over all the concerns that have already 
been talked about by my colleagues, but there is one particular 
concern that I do have that I want to reemphasize and that is 
the payments with respect to pharmacies that have been 
providing prescription drugs on a promise that they are going 
to get reimbursed by the government. In my native San Luis 
Valley, there are perhaps one or two pharmacists in each of the 
six counties of my valley. These pharmacists are often the 
center of health care for the community and especially for the 
elderly. When they see the elderly hurt, the pharmacists 
themselves hurt. I have heard from these pharmacists who are 
paying the up-front costs of the CMS requirement that 
pharmacists must provide a 30-day supply of drugs to dual-
eligible beneficiaries and then to be paid back by the plan the 
beneficiary is enrolled in. Placing the burden on these 
pharmacies risks the livelihood of these small businesses. I 
urge CMS to ensure that each of these pharmacists is paid 
quickly and accurately.
    Finally, I look forward to working on a bipartisan basis 
with the members of this committee and the other members of the 
Senate and Congress to try to make sure that we can take care 
of the humongous problems that have been illustrated with 
respect to the implementation of this program.
    The Chairman. Thank you.
    Senator Burns
    Senator Burns. I would ask that my full statement be put in 
the record.
    The Chairman. Without objection.
    [The prepared statement of Senator Burns follows:]

                  Prepared Statement of Senator Burns

    Today, as we discuss the implementation of the new Medicare 
drug benefit, I think it is important to remember that this is 
an entirely new program--barely a month old. Before it, drug 
coverage in the Medicare program was very limited. Seniors 
whose employers did not provide drug coverage could get it only 
through what was then known as Medicare+Choice, through Medigap 
policies, or worse, would have to go without coverage at all.
    With that in mind, I voted for the new benefit. As of mid-
January, over 24 million seniors have been enrolled--53,000 in 
Montana, with thousands more enrolling every day. Millions of 
these Americans did not previously have any coverage, and now 
they do. Of those who have enrolled, the vast majority are 
finding that the new benefit covers the drugs they need and 
will save them money.
    However, as we are all aware, the implementation has not 
gone smoothly in all cases. I'm sure that what I am hearing 
from my constituents in Montana is no different from what my 
colleagues on this committee are hearing.
    I think that every state has had difficulties encountered 
by low-income dual eligibles. A number of states, as well as a 
number of pharmacies have stepped in to cover the costs of 
providing these beneficiaries with needed medications.
    Seniors are finding that the program is extremely 
confusing.
    Some calls from pharmacies and seniors are put on hold for 
hours. Often this long wait results in merely being given the 
opportunity to leave a message that is often not returned.
    Pharmacies, particularly small ones in rural parts of 
Montana, are extremely concerned that reimbursement is too low. 
We cannot afford to have these small pharmacies close in states 
like mine where beneficiaries often must travel great distances 
to get their drugs.
    Finally, I am personally concerned about the limited 
efforts CMS is making to reach out to rural and remote areas, 
most specifically on our Indian Reservations.
    While many Native Americans were automatically enrolled at 
the beginning of the year, many were not.
    To date, I have heard of no efforts to reach out to Native 
Americans to explain to them the importance of enrolling and 
assisting them with this process. In a state the size of 
Montana, outreach to these remote areas is critical, and I am 
concerned that CMS doesn't fully understand how much territory 
we have to cover out there.
    We have not had as much success as I would like to see in 
getting eligible tribal members signed up for Medicare in 
general, and I worry that the problem is worse on the Part D 
program.
    The result, I fear, is that many on the reservations will 
miss the deadline.
    I am very concerned about all of these problems, and my 
office has been helping hundreds of Montanans get the help they 
need from CMS to get enrolled.
    However, these problems do not mean that this is a bad 
program or that Congress must initiate wholesale legislative 
changes. I am concerned that some have seized upon these 
difficulties in a cynical attempt to score political points. We 
must not do this! Those that have already labeled the program a 
failure are only discouraging seniors, who many need the help, 
from enrolling or even investigating their options. Far too 
much is at stake--people's lives are at stake--and I am 
unwilling to play politics with the lives and health of our 
seniors.
    To begin making drastic changes now risks exacerbating 
problems that can and currently are being fixed by CMS. Our 
focus now should be ensuring that all seniors who want to be 
enrolled get enrolled by May 15th.

           OPENING STATEMENT OF SENATOR CONRAD BURNS

    Senator Burns. This doesn't surprise me. This program is a 
month old and we Americans are in this business that everything 
has to be instant--tea, coffee, everything that we do--and we 
are supposed to just go out there and have a new program, put 
it in place, and all at once, it is perfect.
    I would ask my colleagues that just throwing out a bunch of 
stuff and try and help and get the program in place serves our 
purpose and then we know what to fix. Right now, we don't know 
what to fix, but I would tell CMS this. Your first manual that 
went out on this was a bureaucrat's dream, but it was a 
nightmare to seniors. You had to have a lawyer and an 
accountant there with you to work your way through it. About a 
third of ours are signed up and we have got until May 15, and I 
think we should dedicate ourselves, both as elected 
representatives, to help put this program in place because we 
have people now getting drugs that couldn't get them before.
    Yes, there is a lot of confusion out there because 
sometimes some folks live on confusion. I would just ask, let 
us all get together and make it work and then we know what to 
fix. When we are as old as 11 months it took to put Medicare in 
place, we might see some holes and we might find that this 
program might be a pretty good program, that it might be 
working. But like Americans, we want everything instantly. We 
want it to just pop up and do this when you have got a lot of 
folks out there that are dual-eligibles. There has already been 
a commitment made to the pharmacists that they be reimbursed on 
the dual-eligibles and what they have been holding in limbo. 
That commitment has already been made, I think, and I think we 
should bring that to light here.
    We continue to get a lot of calls. We continue to work with 
our resource centers and our offices to answer as many 
questions as we possibly can. But just to come out here and 
throw up your hands and say it is not going to do it, that we 
are going to start changing it now, is not the correct approach 
to this. We may find that everything falls into place.
    I voted for it and I know it is going to be costly, but I 
will tell you, I have got people in Montana--we have just come 
back from the National Prayer Breakfast and there Bono came up 
with a great statement, and it applies to me in Montana in the 
same. Where we live should not determine whether we live. So we 
have some special needs in rural areas.
    I would certainly advise everybody, let us make it work. 
Let us find where the holes are. Then let us fix them, or let 
us make them work on the ground. Thank you very much.
    The Chairman. Thank you.
    Senator Santorum.

           OPENING STATEMENT OF SENATOR RICK SANTORUM

    Senator Santorum. Thank you, Mr. Chairman, and I, too, 
appreciate your willingness to hold this hearing and to get to 
the bottom of some of the problems and concerns. I think we 
need to take a step back and say that it is a good thing that 
we are here.
    For almost two decades, we have been trying to get a 
prescription drug program passed through numerous 
administrations, through numerous Congresses, and we were not 
able to do it. We were not able to find compromise, and with 
compromise comes a meshing of a whole bunch of different ideas 
of how to do things best and often you don't get the optimal 
solution. I think no one who voted on the prescription drug 
bill that passed a couple of years ago would have said that 
that was their optimal plan or this was designed perfectly, 
from the Congress, I might add, but it was the best we could 
accomplish given a very divided atmosphere here in Washington, 
DC.
    So it is somewhat remarkable to expect that something that 
is the product of deep division, lots of haggling, lots of 
changes that occurred throughout the legislative process, is 
going to result in a perfect system that would be implemented 
without error. Those who stand here and suggest that somehow or 
another that the whole thing should be thrown out may have 
forgotten that it took us 20 years to get the whole thing 
passed in the first place and that just throwing it out would 
doom seniors, 24 million of whom are signed up today and 
receiving benefits, to a situation where they would be getting 
less care than they are today. So we should not be so flippant 
in casting out babies with bathwaters when it comes to a 
program that was hard fought to get accomplished in the first 
place.
    So while I commend the Chairman and suggest that there is 
much to be done in improving this situation, the idea that we 
are going to play, once again, politics with prescription drugs 
instead of trying to get down to the hard work of trying to fix 
this system and its implementation, I think is below the 
dignity of this committee.
    I am happy that Dr. McClellan is here. As he knows, we have 
had many conversations in the last few weeks about the 
situation in Pennsylvania. I have spoken to Secretary Leavitt 
on more than one occasion and have encouraged him and am still 
working with him to have him come up to Pennsylvania.
    But that does not mean that we need to start all over or 
throw this program out. We need to continue to look at it, see 
if we can implement it correctly, solve the problems that 
exist, make changes if some are necessary here in the Congress 
that in all likelihood we created in the design of the program, 
and then go about the process of making sure that seniors get 
the kind of care that we have told them that we are delivering 
to them.
    I can tell you that in Pennsylvania--I have just gotten 
numbers from the problems that exist in my State--for excessive 
cost-sharing claims, we have about 250 people a day that have 
made claims to the State to help on that regard and the State 
has paid out about $100,000. For emergency supply claims, there 
is about 175 to 200 people per day that have cost the State so 
far about $55,000. For super priority prior authorizations for 
dual-eligibles, we have had 180 claims that have cost the 
Commonwealth $15,000.
    Now, each one of these is a problem, but I would not 
suggest that these numbers suggest that we should throw the 
program out and start all over again when you are talking about 
tens of thousands, if not hundreds of thousands, of people 
being served in the Commonwealth.
    So I would just suggest, Mr. Chairman, that we get down to 
business in figuring out what the problems are, how we can fix 
them, how we can improve them, and what Congress' role in 
creating the problems and what our role should be in trying to 
fix them.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Santorum.
    We have on our first panel two witnesses. We are grateful, 
Dr. McClellan and Ms. Linda McMahon, for your presence here. 
Dr. McClellan is the administrator for CMS and Linda McMahon is 
deputy commissioner of Operations at the Social Security 
Administration.
    To my colleagues, we will have 5-minute rounds of questions 
afterwards, so Mark, take it away.

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

    Dr. McClellan. Thank you, Mr. Chairman, Senator Kohl, all 
of the members here who care so passionately about this 
program. I appreciate the opportunity to give you a status 
report on the new prescription drug coverage.
    Currently, more than 24 million Americans are receiving 
help through this program. This includes millions who 
previously had no coverage, millions who now have better 
coverage than their Medicare Advantage plans, more complete, 
more comprehensive, and millions now getting real help keeping 
their retiree coverage in place, coverage that has been going 
away over the past 20 years. Drug plans are now filling 
millions of prescriptions each day. Every day, tens of 
thousands of new beneficiaries are using their new drug 
coverage to save money, to get peace of mind, and to stay 
healthy, and because of competition, because of choice, this 
coverage is costing much less than people expected, with 
premiums one-third lower for beneficiaries than had been 
predicted as recently as last summer.
    A change this big in this short a period of time is bound 
to have some problems and I am very concerned about anyone who 
has experienced problems in getting their medicines at the 
pharmacy counter the first time they tried to use their 
coverage. In particular, some problems with data translation 
between Medicare and the drug plans and States may potentially 
have affected--potentially--a few hundred thousand of the six 
million people with Medicare and Medicaid, particularly those 
who switched plans late in December. At the same time, some 
pharmacies have had difficulty in using the support systems 
intended for those beneficiaries.
    We make no excuses for these problems. They are important, 
they are ours to solve, and we are finding and fixing them.
    We have outlined some urgent actions that we are taking in 
a 1-month report that was just released by the Department of 
Health and Human Services. This includes actions with our 
information systems, the health plans, pharmacists, and States, 
all to help all of our beneficiaries use their coverage 
smoothly.
    On our systems, we built and tested each component and we 
are working with the health plans and the States to continue 
improving them. Prior to January 1, to insure that all duals 
that we knew about were appropriately covered, we exchanged 
data files with the States to compare our respective lists. The 
data matched at a rate of more than 99 percent according to an 
outside review. To verify that our enrollment information 
matched plan information, we transmitted, again, files with 
dual-eligible and low-income subsidy individuals to the plans 
on January 13, 18, and again on January 30. We are working to 
provide significantly faster responses to information submitted 
by plans on their new enrollees and the drug plans are working 
with us to submit data in ways that can be processed 
successfully and quickly.
    With the plans, we have set up specific checks to ensure 
that they provide adequate formulary coverage of all needed 
medicines, particularly those for specific disease populations, 
such as HIV-AIDS and mental illness that have been a particular 
concern to this committee. We developed specific procedures for 
timely exceptions and appeals. In using this procedures, a 
Medicare beneficiary can get coverage for a drug not on a 
plan's established formulary.
    In addition, we required plans to have a transition policy 
for dual-eligible individuals, as you all noted, to get a one-
time supply of their current medications while they determine 
whether a less expensive, very similar medicine will work for 
them or if they need to continue their current drugs. I have 
made it clear to the drug plans that these transition policies 
must be followed and we will take further enforcement actions, 
if necessary.
    Many plans have extended their transition policy for the 
large number of beneficiaries who started their coverage in 
January. To help ensure a smooth transition for these 
beneficiaries, Medicare is notifying plans that the 
transitional coverage period in effect now will continue for 60 
more days.
    To help pharmacists identify what plan a beneficiary is in 
when a beneficiary shows up without a card or other billing 
information, we collaborated with pharmacists starting in 2004 
to create an electronic eligibility and enrollment checking 
system that operates as part of the existing pharmacy computer 
systems. Response times since January 2 have been less than 1 
second and the number of queries is decreasing steadily, 
because that means more individuals have their cards or their 
billing information when they go to the pharmacy.
    I and my staff have visited pharmacies. We have seen 
firsthand what they have done to help make sure even those 
beneficiaries who have difficulty are getting the medicines 
they need, and we have been very impressed with the tremendous 
work of the nation's pharmacists and we are listening to their 
ideas for improving the program. That is one reason we just 
announced some new steps, like supporting efforts by plan and 
pharmacy groups to implement consistent and clear messaging 
systems in pharmacy billing, and that is why we are paying 
close attention to customer service and pharmacy service.
    I am pleased that over the last few weeks, many plans have 
made great strides in implementing effective pharmacy service 
lines, and to ensure that they all do so, we are increasing our 
monitoring and reporting on plan help lines as a basis for 
further enforcement actions, if necessary.
    We have also worked closely with the States, beginning in 
2004, on automatic enrollment and on the low-income subsidy 
eligibility application, the calculation of the State phase-
down or claw-back contributions, on training to assist 
beneficiaries, and on exchanging information between Medicare 
and Medicaid. When pharmacies were having difficulty filling 
prescriptions for certain dual-eligible beneficiaries, as you 
all have noted, a number of States turned their Medicaid 
systems back on to assist those individuals, and we appreciate 
the help that States have provided to support pharmacists 
serving these beneficiaries. We have put in place a payment 
program to reimburse States for the direct and administrative 
costs that they incurred.
    We are seeing that States that work closely with us, like 
the State of Pennsylvania, on supporting pharmacists and using 
the new Medicare systems and connecting people to their 
Medicare coverage have been able to limit billing to the State 
systems to relatively small amounts, often just a very small 
fraction of dually eligible individuals, as they connect those 
people with their coverage. We intend to work closely with all 
States to use these approaches to complete the transition to 
Medicare coverage for the remaining dually eligible 
beneficiaries.
    I want to talk for a minute about the millions of 
beneficiaries who are choosing to enroll in Medicare coverage 
and get new savings and protection available right now. It 
takes a little time to process people through the eligibility 
and enrollment systems. After you enroll, you will generally 
get an acknowledgement letter in a week or so and then your 
drug plan I.D. card in 3 to 5 weeks. That acknowledgement 
letter and the card contain important information that makes it 
easier for the pharmacist to help you use your coverage the 
first time. So we are encouraging people who enroll or change a 
plan to do so in enough time to get that information into the 
system.
    If you enroll before the 15th of the month, you should have 
the information you need by the beginning of the next month 
when your coverage starts. In those cases, we have seen over 90 
percent of individuals use their coverage for the first time 
without difficulty. People who sign up later will still get 
their medicines, but they are more likely to spend extra time 
working through some details. As we continue to find and fix 
problems, we are seeing fewer of these cases.
    We are going to continue working around the clock to help 
every Medicare beneficiary who enrolls to use their new 
coverage and we are seeing that using the coverage means real 
savings. Now, for the first time, we have independent budget 
estimates of the costs of the drug coverage that are based on 
the actual experience with the strong competition to provide 
coverage. Medicare's drug benefit will have significantly lower 
premiums and lower costs to Federal taxpayers and States as a 
result of stronger than expected competition with lower drug 
costs. Beneficiary premiums are now expected to average $25 a 
month, down from the $37 projected in last July's budget 
estimates. Taxpayers will also save. State contributions for a 
portion of the Medicare drug costs for beneficiaries who are in 
both Medicare and Medicaid will be 25 percent lower over the 
next decade. All of these savings result from lower expected 
costs per beneficiary.
    I want to thank you for the opportunity to discuss this 
first important month of the Medicare prescription drug 
benefit. While we are pleased that millions of Medicare 
prescriptions are being filled every day, we are going to 
continue working around the clock all over the country with all 
our partners to ensure every person with Medicare can use their 
coverage smoothly, and I am happy to answer any questions you 
all may have.
    The Chairman. Thank you very much, Doctor.
    [The prepared statement of Dr. McClellan follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    The Chairman. Linda McMahon.

    STATEMENT OF LINDA S. McMAHON, DEPUTY COMMISSIONER FOR 
   OPERATIONS, SOCIAL SECURITY ADMINISTRATION, WASHINGTON, DC

    Ms. McMahon. Thank you, Mr. Chairman, Members of the 
Committee. On behalf of Commissioner Barnhart, I want to thank 
you for inviting me to discuss Social Security's efforts to 
implement the new Medicare Part D Low-Income Subsidy Program.
    As you know, I am Linda McMahon, deputy commissioner for 
Operations at the Social Security Administration, and I have 
been with the agency for 15 years. As you know, SSA was given 
the responsibility by Congress to take extra help applications 
and to make eligibility determinations for individuals who were 
not automatically eligible for the subsidy. We are also 
responsible for deducting Part D premiums from Social Security 
benefits when Medicare beneficiaries tell the Prescription Drug 
Program (PDP) provider that they want that payment option.
    SSA was given these Medicare Modernization Act (MMA) 
responsibilities because of our network of nearly 1,300 offices 
and 35,000 field employees across the country and because of 
our prior role in administering some parts of the Medicare 
program. Upon passage of MMA, we immediately recognized that 
development of a simplified application for the extra help was 
essential for successful implementation of that part of the 
program. Working with CMS, we conducted extensive testing of 
the extra help application form. In fact, the paper application 
changed significantly over time and went through many drafts 
before it was finalized.
    Our Office of Systems staff also contributed to the design 
of the application to make sure that the information on the 
form could be electronically scanned into our computers. That 
made it easier for applicants and people who assist them to 
apply and it minimized the number of employees that we need to 
process those forms.
    Then we worked to develop alternatives to the traditional 
paper-based application, and in July of last year, we unveiled 
the Internet version of the application. That allows people to 
apply online for help with costs associated with the Medicare 
prescription drug plan. The online application has been a 
tremendous success and more than 2,000 Internet applications 
are being filed daily.
    Telephone inquiries were also part of our efforts to make 
the extra help application process as simple as possible. We 
provided extensive training to our teleservice representatives 
so that they could answer subsidy-related questions. We 
developed an automated application-taking system, allowing the 
teleservice representatives to refer callers directly to 
specialized claims taking employees who could then take the 
applications by phone.
    Finally, we developed a computer matching process with the 
Internal Revenue Service to validate certain income information 
provided by applicants. Using this computer match allowed SSA 
to build a process that would not require applicants to submit 
proof of resources and income as long as their statements on 
the application were in substantial agreement with the computer 
records.
    Now, to ensure that this simplified process that I have 
just described was put to use, we have worked hard to inform 
Medicare beneficiaries about the extra help available for 
prescription drugs. For example, during the past year, Social 
Security has held more than 66,000 Medicare outreach events 
throughout the country, and we have hosted a number of 
application-taking sessions in Social Security offices. We 
continue to work with States and other organizations to 
identify people with limited income and resources who may be 
eligible for the extra help.
    Although the new prescription drug plan did not begin until 
January 2006, SSA began mailing subsidy applications to 
potentially eligible individuals in May 2005, and this initial 
effort allowed us to begin making eligibility determinations 
for extra help as early as July 2005.
    Now, as has been pointed out, as important as the initial 
mailing of the applications was, follow-up contacts with those 
individuals who did not return the application has been and 
continues to be just as important to us. As an example of our 
ongoing efforts to help enroll as many eligible individuals as 
possible, we are contacting Medicare beneficiaries who have 
requested Part D withholding from Social Security benefits and 
who were mailed a subsidy application but didn't return it. We 
will be contacting them by phone or by mail and we want to see 
if we can assist them in applying for the extra help. We will 
also continue to use our routine agency mailings, such as COLA 
notices, to inform the public about the subsidy.
    So, what has resulted from all this effort? Well, as of 
January 27, almost 4.4 million people have applied for the 
extra help. We processed almost 4.1 million, or 93 percent of 
those cases. Almost 700,000 cases did not require a decision by 
SSA because the person was already deemed eligible or they had 
filed a duplicate application. But of the 3.7 million 
applicants who do require a decision, we have now made 
determinations for over 3.4 million of them and found nearly 
1.4 million of those individuals eligible. That is a 40 percent 
eligibility rate.
    In conclusion, I want to express Commissioner Barnhart's 
appreciation and my personal thanks to Congress for providing 
SSA with the resources that we needed to begin this challenging 
process. Your assistance in fiscal years 2004 and 2005 made it 
possible for us to hire more than 2,500 employees to work on 
implementation of MMA provisions. It also allowed extensive 
training for thousands of on-duty employees and made possible 
the design of critical new computer systems. Your support has 
truly been crucial.
    We look forward to working with the Committee as we 
progress with implementation of the extra help program, and we 
appreciate this opportunity to tell our story and will be happy 
to answer questions.
    The Chairman. Thank you very much, both of you, for, again, 
your presence here and your testimony.
    [The prepared statement of Ms. McMahon follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    The Chairman. Mark, I think, obviously, the question in all 
of our minds is, while many of the problems we are raising 
today are problems we foresaw last March when we had a hearing 
here, but clearly the transition didn't go as smoothly as we 
would've liked. I mean, why, with all that advance notice, has 
there been such a difficult transition?
    Dr. McClellan. We did have a lot of discussions about the 
transition issues for the new Part D benefit and I really 
commend the committee on a bipartisan basis for paying close 
attention and having many constructive ideas about how we could 
make the transition go smoothly. You will recall when we talked 
last spring, we raised a lot of issues around long-term care 
pharmacies, about making sure that plans would comply with the 
necessary support that those pharmacies needed for their 
nursing home beneficiaries. We talked about coverage of needed 
drugs for people with mental illnesses and other conditions 
where the specific drug really mattered.
    In many of these areas, we were able to make further 
enhancements in the program to address concerns, about 
everything from packaging issues in nursing homes, to new kinds 
of support to help nursing homes identify the plans their 
beneficiaries are in and bill them properly, to expanding and 
being clear about the broad formulary coverage requirements for 
people with mental illness, HIV-AIDS, and other serious 
conditions.
    We also talked about the transition issues for people who 
were dual-eligibles around January first and steps that we 
could put in place to make sure they got their medications at 
the pharmacy and we took those suggestions, like getting in 
place this automatic information system that many pharmacists 
have been able to use to avoid the phone calls that they 
routinely have to face when people start a new program.
    The Chairman. Isn't it true you have also extended the 
enrollment deadline from 30 days to 90?
    Dr. McClellan. The transition coverage has been extended to 
90 days.
    The Chairman. Ninety days.
    Dr. McClellan. We talked last spring about the importance 
of transitional coverage and we are watching that very closely, 
as are the plans, to make sure we have got that in place for a 
long enough period for people to smoothly decide whether or not 
the drugs they are on now could be switched with alternatives. 
But again, we have got broad formulary requirements in place 
now for the drugs for conditions like mental illnesses and 
cancer and AIDS where it really matters.
    So that dialog with you all has been extremely helpful and 
we are going to continue taking every step we can to make this 
transition go smoothly. It was a big change on January 1 with 
the entire dual-eligible population moving over, as required 
under the statute, and suggestions, the input that you all had 
in this process has been very helpful for limiting the number 
of cases where people have had significant difficulties and we 
will keep working very closely with you to address the cases 
that we are seeing, to find the problems and fix them.
    The Chairman. I am also mindful that Secretary Leavitt 
announced or assured the States that their costs in this 
transition would be reimbursed.
    Dr. McClellan. We did. We had an announcement about that 
last week. We have been working closely with the States on the 
best mechanism for providing this reimbursement and many of the 
State Medicaid directors, other State officials that I talk 
with frequently have had some very constructive ideas on how to 
do it. We have seen many States working closely with us, just 
like Senator Santorum mentioned, Pennsylvania's close work with 
our regional office. The same thing is happening in Oregon, 
Delaware, and many other States to limit the number of cases 
where there are difficulties and to get people connected with 
their coverage quickly.
    So we have put forth a reimbursement program based on a 
demonstration, a model waiver. We have the details of that 
program coming out right away, basically just a checklist that 
States can go through for following these best practices to get 
people connected with their coverage and we will handle the 
reimbursement. The State submits the claims to us. We work on 
reconciling--we do the work for reconciling them with the plan 
payments, and for any difference in higher Medicaid payments 
than what these competitive plans are paying, we will make up 
that difference, too, and we will also pay for any reasonable 
administrative costs in the process.
    The Chairman. I have heard horror stories, Mark, about 
long, long call waits for people trying to get information. 
Have you beefed up the call center?
    Dr. McClellan. We have, and I know we have been working 
very closely with your staff on monitoring how the call 
center's work is going. In the very early days of the program, 
we had relatively long waits on our line at 1-800-MEDICARE. I 
am proud to say that we have kept those average wait times, 
even during the first week in January when we had the largest 
number of these complaints and transition questions. We had the 
wait times under 5 minutes. We have been monitoring it closely 
since then. It is under a minute for the most recent days and 
definitely no more than a few minutes at any time during this 
month.
    We are also very pleased at how many of the prescription 
drug plans have responded. Many of these plans quickly, after 
the first week or two, staffed up their own help lines for 
customers, for pharmacists, and others. We have been monitoring 
those wait times and we have seen them come down substantially 
to acceptable levels of just a few minutes for many of the 
plans and we want to make sure all the plans get there, and 
that is why we announced yesterday that we are going to be 
taking some further steps to monitor and even publish the 
performance measures for these plans.
    The Chairman. Senator Kohl.
    Senator Kohl. Thank you, Mr. Chairman.
    Dr. McClellan, why not allow Medicare to negotiate maximum 
discount from the pharmaceutical companies? These are actual 
tax dollars we are talking about, and if the program meets 
anywhere near its expected projected costs over 10 years, $750 
billion--who knows what it will cost--a 20 percent discount is 
$150 billion. Wouldn't you expect taxpayers to expect the 
government to get these prescription drugs at the minimum price 
necessary?
    Dr. McClellan. I expect our program to get the best 
possible cost for implementing this program. That is why we are 
very pleased with the results that we are seeing so far based 
on the actual costs of the program that is coming in, where the 
drug plans are competing and getting the costs of coverage down 
way below what had been projected. We are seeing cost 
projections now, these numbers that we released today, showing 
costs that in 2006 are going to be 20 percent lower for the 
Federal Government than had been forecast. As our actuaries and 
other independent experts had said at the time, they do not 
believe that with the steps that we have in place to encourage 
strong competition, to encourage price negotiation to get lower 
prices to beneficiaries, that any additional government price 
negotiation would save more money.
    Our concern about more government negotiation is, as you 
know, the way the government can get lower prices, the same 
thing that many of the plans have done but we regulate very 
carefully, they do it by narrowing the formularies. This is how 
the VA plan, which has a considerably narrower formulary than 
we have required the Medicare plans to have, means that many 
people would not be able to continue taking the drugs that they 
are on right now, the ones that their doctors have prescribed 
and that they have decided, or they may want to decide they 
want to continue, even if they are not on a formulary.
    So we are very concerned about making sure that our 
formularies are broad enough and that the plans negotiate and 
get the lowest possible costs of coverage, and that is exactly 
what is happening. That is why the costs of this drug benefit 
for each person covered is coming in so much lower than people 
had expected, and that means savings for beneficiaries in the 
lower premiums, savings for the Federal Government, and savings 
for States, that 25 percent lower claw-back payment that I 
mentioned earlier.
    Senator Kohl. Well, that is well and good and I am sure 
that argument in your mind is a very strong one, but when you 
have a single buyer, in this case Medicare, negotiating for a 
huge discount based on the size of their purchase, all the 
evidence is that you get a much bigger discount than if you 
have, like 46 different plans negotiating their own much 
smaller discount based on their purchases. All the indications 
are that the bigger your buy, the bigger your discount, and 
apparently you are saying that that law of business is not 
true.
    Dr. McClellan. Well, these drug plans include--many of 
these plans are large health care organizations that already 
cover millions of Americans under 65, millions of Federal 
workers and retirees, and so have very large population bases, 
so they can drive those stronger discounts. Again, that is what 
we are seeing. If you include not just the low prices--there 
have been some studies that have come out recently that kind of 
tilt the scale by counting Medicaid rebates in the Medicaid 
price side but don't count the rebates that the private plans 
are also getting and that they are required to incorporate in 
the payments they get from us and the bids that they put in. 
When you do that, you see low costs.
    That is why we are hearing from many States that in their 
Medicaid plans, where the State does the negotiation, their 
costs are expected to be higher than under the drug plans. That 
is why we are having to supplement what we are paying some of 
the States in this repayment program beyond what the drug plans 
would pay for the same drugs.
    Senator Kohl. I appreciate that. I would just end the 
subject in terms of my inquiry this morning by saying that 
after 1 month, to make a projection is almost ludicrous, and to 
expect us to sit here and say, well, that is the deal, 1 month 
in, that is the deal, you know--you know that you should not 
make that with any certainty. It is just a number you are 
throwing out. It is no different than so many of the 
projections that come out from this administration about the 
costs of the deficit, the costs of this, the costs of that, and 
it turns out to be wildly inaccurate. So we take what you say 
this morning as being sincere, but as certainly not the last 
word.
    Dr. McClellan. I agree with that. We should keep watching 
very closely on this and every other aspect of the program. 
This is the first time, though, that our independent actuaries 
have been able to incorporate actual data from the cost of this 
benefit as it is actually being delivered in doing their 
estimates.
    Senator Kohl. On another subject, the pharmacies that have 
been filling prescriptions and not getting paid, Senator Burns 
said a minute ago that they are going to get reimbursed, but as 
you know, nothing has been determined with certainty with 
respect to that. As you also know, many of them are paying out 
money from their pocket, money they don't have, and they need 
to be reimbursed immediately and they deserve to be reimbursed 
as soon as they present the evidence. How we are going to get 
that thing done?
    Dr. McClellan. Well, as I have talked to pharmacists and 
pharmacy leaders around the country, which we do on an almost 
daily basis--which I do on an almost daily basis and our staff 
all over the country is doing regularly, as well, this is now 
getting to be one of the top levels of concern, and one of the 
reasons is that we have had a change in the way the pharmacy 
contracts work. Up until now, for many of the people who are 
covered by the drug benefit, they were previously covered in 
Medicaid, which had one payment schedule, typically paying once 
a week, or people who were paying cash, and those are people 
who would pay right at the time, often very high rates, but 
right at the time, right at the pharmacy counter.
    Under the contracts that the pharmacies have with the drug 
plans, they get paid several times a month based on claims 
submitted, and so we have had a period over the last couple of 
weeks where the claims have started going in but the checks 
haven't started coming out. Now, we are watching very closely 
to make sure that the drug plans pay according to the 
contractual payment schedules that they have set up. Those 
payments have started to come out recently. Some plans pay 
every 10 days. They have already sent out millions of dollars 
in payments. Others pay every 15.
    Those checks are going out starting right now, and we want 
pharmacists to know that if they are having problems getting 
the contractual terms met, that is one of the areas where CMS 
monitors complaints and we will help enforce those contracts. 
But there are a lot more things that we can do to help 
pharmacists that I am sure are going to come up later in this 
hearing and I want to talk about those, too.
    Senator Kohl. Thank you, Mr. Chairman.
    The Chairman. Senator Carper.
    Senator Carper. Thanks. Thank you for your testimony. I 
thought it was helpful. I want to ask for a clarification, if I 
can, from Ms. McMahon. I said in my opening statement that I 
think that there are about eight million eligible 
beneficiaries, low-income beneficiaries for this program, and I 
said, to date, only about 1.1 million people had been found 
eligible. That was through December 31. I think I heard you say 
that----
    Ms. McMahon. As of January 27, that number is 1.4 million 
that we have determined eligible.
    Senator Carper. Here is my question. Does that mean that 
there are roughly another just under seven million eligible 
low-income beneficiaries that we still have to potentially be 
signed up for this benefit?
    Ms. McMahon. Well, I would have to put the answer to that 
this way. We sent out almost 19 million notices to people to 
say, ``you are potentially eligible''. We knew that not all of 
them would be eligible, but we wanted to cast the widest net we 
possibly could to make sure that anybody that had any hope of 
being eligible, we would contact, and we are trying to follow 
up with those folks.
    What is the actual right number of people? One of the 
things we are finding out is that there are more people who 
have higher resources than we expected, which in a way 
shouldn't be a surprise because a large part of the population 
are people who went through the depression and World War II. 
They saved money. Maybe they don't spend like my generation 
does. So they have higher resources than we expected. In fact, 
even with $10,000 and $20,000 resource limits, they have maybe 
$17,000 more over that. So we don't know exactly how many 
people are eligible.
    Senator Carper. We know it is more than 1.4 million.
    Ms. McMahon. Yes, we do.
    Senator Carper. I would just urge you to increase your 
efforts, continue your efforts to help us find them, help them 
sign up, OK?
    Ms. McMahon. We are going to do that, and in fact, we are 
hoping that we can get ideas----
    Senator Carper. That is all I want to say. That is all I 
want to say because I have got a lot of questions here I want 
to get into----
    Ms. McMahon. All right.
    Senator Carper [continuing]. But thank you. Dr. McClellan, 
this is a question that could be for either of you. Just help 
me on this. If a person signs up, picks one of these plans, in 
my State we have got a whole lot of plans, I think a whole lot 
more than I expected, and I think it is part of the confusion 
for pharmacists and for seniors, as well. But if somebody signs 
up, as I understand it, in a particular plan, they think it is 
best given the medicines they take, do I understand that the 
plan itself can change and maybe, say, drop out coverage, 
decrease coverage for some of the medicines, and we will say 
that happens in April, then do I understand that the 
beneficiary, the senior citizen, has to wait until the end of 
this calendar year in order to be able to change plans and pick 
out a plan that better suits their needs?
    Dr. McClellan. Well, first of all, as you know, Senator, 
the drug plans all have to meet our broad formulary 
requirements. These are broader than the requirements in many 
Medicaid prescription drug programs, broader than the VA 
formulary requirements. Eighty of the top 100 drugs are 
typically covered by plans, so that the plans are having broad 
formularies to start with to make sure all medically necessary 
drugs are available.
    Plans can change their formularies, and I want to talk 
about two different kinds of cases. One is when something new 
happens in medical knowledge or medical treatment availability, 
so there is new information suggesting that a drug shouldn't be 
used in certain circumstances or a new generic version of a 
medicine becomes available. Those are things that the plans 
should incorporate in their formularies to help make sure 
people get the right treatments for their conditions at the 
lowest cost.
    Plans have an ability to change formularies otherwise, but 
only if they replace one drug with another drug that is in the 
same category, works in the same way, and offers as good of 
benefits to the patient. But in order to do that, several 
things have to happen first. First, they have to submit this 
information to us to have a CMS approval for making any such 
formulary change. Second, they have to give advance notice to 
their beneficiaries so that there is plenty of time for the 
beneficiary to determine whether they should stay on the drug 
they are on now or whether going to this other less expensive 
alternative is better for them.
    So far, we have seen no cases of that occurring. We also 
had some experience with this with the drug card that was in 
place for a couple of years and that millions of people use to 
lower their prices. There were also concerns that this would 
happen then. We monitored. Again, we saw essentially no cases 
of such formulary shifting. We are going to watch very closely 
to make sure the plans continue to provide the level of 
coverage that they have promised from the beginning. I think 
they have generally every intention of doing that, but we are 
going to verify that that happens.
    Senator Carper. Be vigilant. Be vigilant.
    Dr. McClellan. Yes.
    Senator Carper. We have established in Delaware a Delaware 
Prescription Assistance Drug Program when I was privileged to 
be Governor of our State. A lot of States have them, as you 
know.
    Dr. McClellan. Yes.
    Senator Carper. CMS recently announced the waiver process 
would allow States to be reimbursed for costs that they incur 
in paying for drugs for dual-eligible beneficiaries. However, a 
number of States like my State, and I think like probably half 
of the States that are here represented on this committee, 
States where we are incurring costs for other low-income 
beneficiaries, like those in our own State Prescription 
Assistance Program, I am told that--I met with our Secretary of 
Health and Social Services recently and I learned from him that 
our State's Prescription Assistance Program has over, I guess, 
over 10,000 enrollees now, which is a lot for a tiny State and 
has really stepped up to the plate to help enrollees navigate 
the new benefit and we are trying to blend the two together so 
that we really dramatically increase coverage and use the 
strength of both programs.
    In some cases in Delaware, we are incurring costs for the 
Delaware Prescription Assistance Program enrollees who have 
enrolled or tried to enroll in a Part D plan but have not yet 
been recognized by the plan as enrolled. Here is my question. 
Will CMS open the waiver process to States like my own and like 
others who have established their own Prescription Assistance 
Programs and who have incurred unnecessary costs in other State 
programs? I would ask that if you can get into that now, fine, 
but if now, I just really would ask that you and your folks 
address it.
    Dr. McClellan. The reimbursement plan that we have 
discussed does apply to State assistance programs for other 
low-income individuals, other partial dual individuals who were 
enrolled in the Medicare program and either they or their--
because of issues with the pharmacy, they didn't get the 
coverage they should have received. So that is part of our 
program.
    I want to say, as well, that the program in Delaware, like 
in many other States, is terrific. It is going to get a lot of 
help from the new Medicare coverage because you now only have 
to wrap around the basic Medicare benefit, and Senator, I would 
like to make sure we follow up specifically with you to resolve 
these issues in Delaware. We have had a very close working 
relationship with you and the State and I want to make sure 
that continues as we work through these transition issues.
    Senator Carper. My time has expired. I would just add, if I 
could, one last sentence, Mr. Chairman. The folks that are in 
our Delaware Prescription Assistance Program are not dual-
eligibles. They are not dual-eligibles. They are low-income.
    Dr. McClellan. Let me follow up with you. If they are not 
dual-eligible or low-income, we will work directly with you and 
the State on addressing this.
    Senator Carper. Thank you so much.
    The Chairman. Thank you.
    Senator Clinton.
    Senator Clinton. Thank you, Mr. Chairman. I want to start 
by trying to get some clarification. Senator Burns said that 
CMS is committed to reimburse pharmacies. My understanding 
based on what Secretary Leavitt told the Finance Committee is 
that he did not want to make such a commitment at this time to 
reimburse pharmacies and that, in fact, the pharmacies will 
need to seek reimbursement through private drug plans. Is that 
correct?
    Dr. McClellan. Well, pharmacists that have done a terrific 
job in stepping up with the implementation of this program need 
to be paid for the drugs that they provided and we are going to 
make sure that the contracts with the drug plans are enforced, 
and if there are any difficulties in making those payments, we 
will help ensure the payments do take place.
    Senator Clinton. Well, that is an important commitment. I 
would just suggest, though, that given all the confusion, 
oftentimes pharmacists don't even know which plan a beneficiary 
is enrolled in. They are going to have to go back and get that 
information. These contractual obligations may be difficult for 
them to enforce. I think many of us expect that these 
pharmacies will get reimbursed one way or another and we will 
look to CMS to ensure that that does happen.
    I have a series of questions, Dr. McClellan, and I would 
appreciate brief answers because I know we all have a lot of 
information we are trying to get out.
    Will you support our legislation to waive fees and 
copayments for dual-eligibles in assisted living facilities?
    Dr. McClellan. We are strong supporters of getting people 
into assisted living. We need to hear more about how this 
legislation would work. We are already working with a number of 
States that are picking up those copayments and combining it 
with some of the home and community-based waiver services, some 
of the other programs that already exist to help people in 
assisted living.
    So we would like to hear more about the legislation, and in 
the meantime, we are going to do what we can under current law 
to help States fill in those copays, and many States are 
already either doing that or considering doing that. As you 
said, they are limited copays from the overall budget 
standpoint of a State. They are very important for those 
particular individuals and we want to do all we can to help 
people get out of institutions. It is a strong commitment of 
this Administration and we will work with the States and 
definitely want to talk with you further about your 
legislation.
    Senator Clinton. Well, we will move quickly on that because 
right now, there is a tremendous burden being imposed. So as 
quick as you can get some assessment as to the best way to do 
that, we need to hear it because we can't let this just linger 
on, so I appreciate your willingness to work with us.
    I am also concerned about the additional problems that we 
are encountering with respect to mental illness. Will you 
provide us with data on the numbers of beneficiaries that file 
appeals to plans, the number of successful appeals and 
rejections by plans, and information on the timeliness with 
which plans handle appeals?
    Dr. McClellan. We definitely want to work with the 
committee on that. I think that is an important part of the 
oversight and our continuing interaction on making sure that 
implementation goes as smoothly as possible. I would point out 
that with our extension of the transition period for another 60 
days, people who are on medications now are going to continue 
them. I also point out that we have very broad formulary 
requirements, essentially all drugs for mental illnesses, 
especially for people who are already stabilized on those 
drugs. So I wouldn't expect to see a lot of information on 
appeals from this particular area for a while because of these 
other steps that we have taken. But we definitely want to keep 
a close eye on that with you.
    Senator Clinton. Now, your announcement that you will 
reimburse States requires that States cease using State 
reimbursement systems and return to the Medicare prescription 
drug system by February 15. In light of the problems we have 
seen, would you reconsider continuing to assist States that may 
have to step in and pick up costs for their citizens who are 
not getting their benefits?
    Dr. McClellan. Senator, the payment program does include an 
opportunity to extend its period beyond February 15. What we 
expect, based on what we are seeing from many States already, 
is that there are specific steps that States can take to 
minimize billing into the State systems. Those kinds of steps, 
we expect States should be able to put in place by the middle 
of February if not sooner, and that is going to drive down the 
use of State reimbursement in the cases where States haven't 
done that yet.
    Senator Clinton. But in the case of the exceptions----
    Dr. McClellan. But if there are still exceptions needed, if 
there is still additional limited help needed beyond that, that 
definitely is part of the waiver process, as well, and we would 
discuss that with the particular State. The goal here that we 
have is the same as the States have, is to get these 
beneficiaries, all of these beneficiaries, transitioned to 
their Medicare coverage as quickly as possible.
    Senator Clinton. Dr. McClellan, with respect to the plans 
requiring forms, some as long as 14 pages, for doctors to fill 
out, you have requested that the plans discontinue this 
practice, but at least according to our information, it does 
not yet seem to have taken hold. Will you require the plans to 
end this practice?
    Dr. McClellan. We have been watching this very closely, 
too. I am pleased that many of the plans have taken steps or 
already have in place steps to have a smooth and 
straightforward exceptions and appeals process. We have also 
worked very closely with pharmacy groups, medical groups, and 
others to develop a model form that is very straightforward, 
exactly as you are discussing.
    I think we have talked about how some of the benefits of 
competition here, getting to lower costs, but obviously what 
many beneficiaries want right now is more simplicity and I 
think you are going to start seeing the market respond and the 
plans respond to that. That is what people want, is a 
straightforward way as possible to use these benefits. We are 
going to help push that along by working with the plans and 
pharmacy groups on things like a standard exceptions and 
appeals form. So I think you will be hearing more about that in 
the days ahead. Remember, we have got 60 more days with the 
extension of our transition coverage period to help make sure 
these processes work as smoothly as possible.
    Senator Clinton. I highly commend the idea of a single 
form. It has been my experience that insurance companies thrive 
on complexity and confusion in the health care arena, so the 
more it can be simplified, I think the more money we will save, 
the quicker we will get the services out to the people who need 
them, and the burden will be removed from doctors who shouldn't 
be spending their time filling out forms to make a case for a 
drug that they have prescribed for years for their patient.
    Mr. Chairman, I really thank you for having this hearing. I 
hope we have a continuation of these hearings. I share my good 
friend Senator Kohl's skepticism about costs. I, a long, long 
time ago, took a course in consumer law and the concept of 
bait-and-switch has stayed with me ever since, so this has to 
be watched extremely closely if it is going to have the 
benefits that we want it to have for people. Thank you.
    The Chairman. Thank you.
    Senator Talent.
    Senator Talent. Thank you, Mr. Chairman.
    Director McClellan, on page two of your statement, you have 
a graph which I have been trying to understand. In the 
statement introducing it, you say that there were 15 million 
people with drug coverage on December 21 and 24 million on 
January 14. Would you explain that a little bit?
    Dr. McClellan. The increase in enrollment related to more 
people signing up on their own, more retirees registering for 
coverage to get support for their retiree coverage, as well, 
and that is what has gotten to the number that now exceeds----
    Senator Talent. So those retirees had the coverage, but 
what they now have is a subsidy in addition to it?
    Dr. McClellan. They didn't have a subsidy, and what they 
didn't have was much security in keeping that coverage in 
place. As you know, in Missouri, a lot of retiree plans have 
been dropped or cut back. The plans now have new support from 
us to keep them in place and to keep high-quality benefits 
there, and there are hundreds of firms and thousands of 
beneficiaries in Missouri who are taking advantage of this new 
help.
    Senator Talent. So what you are saying is that there are 
nine million additional people who are receiving some benefit 
because of the new program.
    Dr. McClellan. I would say it is even more than that. It is 
true that many of the people who are in the Medicare Advantage 
health plans--those are the HMOs and the PPO plans in Medicare 
that existed before, in many cases, before 2006, those plans 
did have some drug coverage in many cases. They all offer extra 
benefits and lower cost for the people who enroll in them. That 
is why many seniors, and more and more seniors are signing up 
for those plans.
    What the drug benefit allowed them to do was enhance that 
coverage. So instead of having $250 worth of help for a quarter 
that just ran out, people now have a relatively comprehensive 
drug benefit and it costs less and it offers more coverage, 
less of a doughnut hole, no deductible, things like that, that 
are not available in the basic Medicare benefit. So people in 
Medicare Advantage----
    Senator Talent. Superior to what they had under the HMOs?
    Dr. McClellan. Exactly. Similarly, the retiree coverage 
trends over the last years have been steadily downward. We have 
seen that halt with the result of the new subsidy being 
implemented. Then there are millions more people, including 
many, many in Missouri, who are getting new drug coverage who 
didn't have it before and saving a lot of money.
    Senator Talent. So the nine million figure is people who 
didn't have any drug coverage before who now have it, plus 
people who were on HMOs who are now on Medicare Advantage and 
getting improved coverage.
    Dr. McClellan. I think the figure is even larger than that. 
I think that is--what you are looking at is a change in 
enrollment between the last part of December and early January. 
Going into the last part of December, there were already many 
people who had enrolled either through a Medicare Advantage 
plan or a retiree plan or something like that.
    Senator Talent. Well, since we may evidently have a debate 
on whether to scrap the whole thing, it might be a good idea 
for us to get down exactly the benefits people are getting, and 
my sense of it is that there are millions of people around the 
country----
    Dr. McClellan. Oh, yes.
    Senator Talent [continuing]. Who are getting a substantial 
additional benefit, either coverage that they did not have or 
better coverage or stabilization of the private retiree 
coverage that they had.
    Dr. McClellan. That is right, and they are----
    Senator Talent. I am certainly running into a lot of people 
in Missouri who are saying, ``Boy, I was paying out of pocket 
before and I am not now,'' so maybe we ought to really get a 
total of the number of people in the country who would lose 
benefits if we went back to square one.
    Dr. McClellan. That is many millions of people who would 
lose benefits----
    Senator Talent. Because that is the balance on the other 
hand. I mean, it is good to have a hearing on the problems, and 
I have been living with that because I have been out, as you 
know----
    Dr. McClellan. I know you have.
    Senator Talent [continuing]. Because I have called you from 
the road on some occasions where I had cell phone coverage, and 
I have been living with some of those issues, also. But we have 
to have the balance and realize why we did all this and what is 
going to happen if we go back to square one with it.
    Let me ask you a couple of questions. I am going to submit 
more for the record. One, and I have taken some real-life 
questions from people who have had issues. This one lady is 
trying to find out whether a particularly rather exotic and 
necessary drug that she has been taking since July of last year 
is covered under the plan that she was auto-enrolled in and she 
is having trouble getting a response from CMS. We hear about 
this. I mean, I hear some people say, ``I called, I got 
through, no problem.'' Then I have other people who say, ``We 
are getting a run-around.''
    How big is the problem, in your judgment, for people who 
are calling CMS and what is the difficulty? Is it that during 
peak hours everybody is calling and not enough on off-hours or 
whatever?
    The second point that was raised with me, I thought was a 
very good one, and maybe we need to do this rather than you, 
but the Agencies on Aging have done heroic work on this, the 
senior centers----
    Dr. McClellan. Yes, absolutely.
    Senator Talent. I mean, I don't know how they rolled out 
Medicare originally without these, but they have just been 
tremendous----
    Dr. McClellan. Absolutely.
    Senator Talent [continuing]. Just great about it and so 
constructive, and they have had to put a lot of time and effort 
into it. I wonder, do you have any plans, or do we need to do 
this legislatively, to maybe help compensate them because they 
really put an enormous amount of effort. They didn't do it to 
get money from the government. They did it to help the seniors. 
But it would be good to compensate these because they have 
spent a lot of time and effort on it, and that was raised with 
me.
    Do you want to comment on those two, and then I will submit 
the other questions?
    Dr. McClellan. Absolutely, Senator, and thank you for all 
your effort. I appreciate the phone conversations and keeping 
in close touch about how things are working on the ground in 
Missouri.
    Senator Talent. That is very polite of you, because I have 
called up to complain on occasions----
    Dr. McClellan. That is no problem. It is part of the job. 
The Area Agencies on Aging, senior centers, other local 
partners, we have tens of thousands of them around the country, 
are doing a huge amount of work to help people find out about 
the new benefits and take advantage of it and they really are a 
tremendous resource. They are helping people get through. They 
hear a lot of things. My gosh, there are a lot of plans. What 
does this mean for me? They turn it into, practically, you 
know, here is the plan that is relevant for you. Here is how 
you can sign up and save money in just a matter of minutes. 
They are helping around the country millions of seniors do 
that.
    We have doubled our budget for supporting the State Health 
Insurance Assistance Programs. We have enhanced our 
collaborations with the Administration on Aging, which provides 
funding and enhanced funding for many of these groups. We are 
also adding to this effort with a grassroots network around the 
country. There are many faith-based organizations, many 
advocacy organizations, many seniors organizations that don't 
get government funding but now are working more closely 
together with these federally and State and locally sponsored 
groups than ever before. In States where this has happened most 
successfully, it has really taken a lot of the load off these 
Area Agencies on Aging to enhance and extend their resources 
substantially, so we truly value their support and we are going 
to continue this higher level of funding.
    Senator Talent. It has really validated the Older Americans 
Act structure, Mr. Chairman----
    Dr. McClellan. Oh, absolutely.
    Senator Talent [continuing]. Because they have just been 
absolutely essential. I am sorry, 30 seconds. I know others 
have the same issue. My pharmacists are less concerned about 
what they do with transition issues. Obviously, they are 
concerned because people need to get the pharmaceuticals they 
need to get reimbursed, but the way the system is set up, 
independent pharmacies in smaller towns are going to be at a 
structural disadvantage in terms of reimbursement. You and I 
have talked about this. Tell me what your thinking is on it now 
and maybe what we can do to help them that will not undermine 
the basic structure of law, and then I am done. Thank you.
    Dr. McClellan. The community pharmacists are doing terrific 
work, especially in rural communities. From hearing from them, 
there are several things that we know that we can do to help 
that I think they would find useful. One of them is making sure 
that the contracts that the plans have with the pharmacies are 
enforced, and that includes also other requirements like 
network requirements. In many of these rural communities, as 
some of you have mentioned, there is just one pharmacy there. 
Maybe Senator Salazar mentioned it. They are the main focus of 
support in the community. Well, those pharmacies need to be 
part of the network in order for the plans to meet our access 
requirements under the drug benefit. So we will make sure that 
the plans meet the access requirements and that means that they 
are going to have to pay the pharmacies enough for them to meet 
their costs and participate in the program.
    Also, many of the community pharmacies have faced added 
burdens because of differences in the messages that they are 
getting from the different plans because they may not have been 
able to use all the support tools that we have set up and we 
intend to be available for every pharmacy right off the bat. We 
have taken some new steps to work with the software vendors and 
the other organizations that support these community 
pharmacists, as well, so that we can help make sure they are 
able to continue to provide a high level of service.
    This is going to be an ongoing concern for us. This is a 
big change in the way pharmacies bill, especially many 
community pharmacies, a big change in the way their work 
process goes and their business process goes. So I think the 
best thing for us to do is to keep in close touch about these 
issues and make sure that we are continuing to respond to the 
ideas that we hear out in the field about making the benefit 
work as smoothly as possible.
    The Chairman. With the indulgence of my colleagues, the 
order is next Senator Burns and Senator Martinez. Senator 
Nelson has one burning question and needs to be across town in 
a minute. Do you mind if he asks that first?
    Senator Burns. Let him burn the barn down.
    The Chairman. All right. Senator Nelson?
    Senator Nelson. Thank you to my colleagues. This is just a 
follow-up to the earlier conversation. Dr. McClellan, could you 
tell us for the record CMS's, your shop's, position with regard 
to extending the Medicare deadline for 2006 and also whether 
CMS supports allowing seniors to change plans once during 2006 
if they make a mistake?
    Dr. McClellan. Senator, we are not supporting that 
legislation at this time. What we are focused on right now are 
the main topics that have already come up at this hearing, 
which is to make sure that everyone is able to take advantage 
of the new coverage, and we have seen a lot of progress on that 
because we have identified the problems, have been taking steps 
to fix them, and we are seeing millions of prescriptions 
getting filled. We are seeing tens of thousands of people 
signing up every day. That is still the No. 1 topic on calls to 
1-800-MEDICARE. We are helping people find out about what the 
coverage means for them and sign up in a matter of minutes. So 
anybody who has questions calls at 1-800-MEDICARE and go to the 
many events going on around the State of Florida right now to 
find out about the coverage.
    So that is where we are focused right now. I am sure we are 
going to have a lot more discussions about this in the days and 
weeks ahead, though.
    Senator Nelson. Thank you, Mr. Chairman. We are going to 
take this issue up later today in the amendments to the tax 
reconciliation bill, and thank you to my colleagues for your 
kind opportunity for me to ask the question.
    The Chairman. Thank you, Senator Nelson.
    Senator Burns.
    Senator Burns. Thank you, Mr. Chairman.
    I asked the question a while ago as far as what actions we 
take as Congressional offices and our attitude toward the 
program and why it is so important. I go back to the days when 
they issued the card, you know, the drug card. The rhetoric was 
so negative that a lot of people did not even attempt to go 
sign up for their discount card and therefore went and paid a 
lot of money out of their pockets when they could have been 
saving about $600 a year----
    Dr. McClellan. Or more.
    Senator Burns [continuing]. Or more, because they were 
afraid of it. So I think the way we approach this will not only 
decide the fate of the program, but it will also provide 
seniors with some confidence that this is designed for them, 
and as we see glitches along the line, we will fix those. That 
is a point of legitimate debate here as a policymaker goes. So 
that is why I said that a while ago just absolutely throwing it 
out and saying, well, it is a bad program and then scare them 
further does not accomplish a great deal if this is for the 
benefit of them, and that is the reason I asked for that. I 
still say that--and we have got to have some way as 
Congressional, but I will say that the resource centers, senior 
citizen centers in Montana have been marvelous and that works.
    Now, we have a little different circumstance in Montana. 
How about my reservations? When we say rural areas, Dr. 
McClellan, as you know, in Montana, we have got a lot of dirt 
between light bulbs out there and these smaller rural 
pharmacies have a hard time making a go of it in our smaller 
farm communities and now they are asked to do some things that 
sometimes puts a real financial burden on them. It was my 
understanding that that commitment had been made, and I think 
it has been, but we have got to make sure of that.
    Have we made any kind of an effort by your office for an 
outreach to my reservations, because as you know, we are 
dealing in a different kind of a circumstance there than we 
are, say, with the average Montanan?
    Dr. McClellan. Absolutely. I have participated in a number 
meetings with tribal leaders from around the country, including 
representatives from some of the tribes in Montana. The drug 
benefit is for people who are Native Americans, who are Alaska 
Natives, just as much as for any other beneficiary in the 
program. The drug plans have to offer contracts to the 
pharmacies on the tribal lands. Many of the plans are now 
serving people in Indian country and I am going to continue 
monitoring that very closely to make sure that we work out--
there are some special issues in how, for example, Indian 
Health Service Funds interact with the drug benefit. But people 
who are living in tribal lands definitely should pay attention 
to this program. It can be real help for them, just as much as 
any other American, in lowering their drug costs.
    Senator Burns. We are going to start a program of outreach 
to those reservations and I would ask if you can have some 
resources, maybe some people or something that we could--and if 
you have done some real background work on it, that is most 
helpful.
    Dr. McClellan. We can.
    Senator Burns. That outreach, I think, is really needed. I 
was talking to the Chairman of all the reservations that I have 
in Montana the other day and that seemed to be a topic of 
discussion. Of course, sometimes, you know, their people, they 
have a communications problem, too. We all have communications 
problems. So that outreach is very, very important. So we will 
be in touch with you and I thank you for your testimony here 
today. You have clarified a lot of stuff as far as I am 
concerned.
    But how can we benefit you? What role do you see we should 
play in carrying that message and to make this work? We want to 
make it work to the maximum if we possibly can.
    Dr. McClellan. I think your continued close work with us on 
identifying problems and letting us know about it. One of the 
things I have been most impressed with is the way that district 
staffs, the local staffs of your offices, have worked closely 
with our regional offices around the country when you identify 
someone who has a problem to get them into our casework system 
and get that problem fixed, and also to enable us to solve any 
systematic problems.
    You know, we talked a little bit earlier about this very 
big concern I have about a particular group of people who are 
dually eligible, who have Medicare and Medicaid and were 
previously getting their drug coverage from Medicaid, who we 
are working right now to make sure they can all take advantage 
of the coverage effectively. That has been our biggest concern.
    For the vast majority of seniors who sign up for this 
coverage, I think the main thing for them to know is if you 
give it a little bit of lead time, things will work very 
smoothly. So for a typical senior signing up, they can save 
half on their drug costs or more. There are lots of places they 
can go in Montana and every place else for help. About a week 
after they enroll, they will get a letter in the mail from 
their drug plan. Keep that until you get your drug plan I.D. 
card, which will come in a few weeks. If you allow that couple 
of weeks or so between when you sign up for the coverage and 
when you start to use it, you are likely to have a very good, 
smooth experience the first time you use your coverage and you 
are going to start saving on your medicines and have that peace 
of mind from drug coverage, which is a new thing in Medicare.
    Senator Burns. The only thing I am trying to do is cut down 
on the number of phone lines I am going to have to have to make 
it work. But we want to work with you and we want to work with 
the seniors because I don't want them left behind. I don't want 
anybody left out of this program that can take advantage of 
this program because it is designed for them----
    Dr. McClellan. That is right.
    Senator Burns. To get it in place. Then if we have got some 
problems later on, then let us tackle those problems.
    Thank you, Mr. Chairman, very much.
    The Chairman. Thanks, Senator Burns.
    Senator Martinez.
    Senator Martinez. Thank you, Mr. Chairman.
    Dr. McClellan, we appreciate your being here today----
    Dr. McClellan. Thank you, Senator.
    Senator Martinez. All the work that you are doing to make 
this program be a success, which I know it will be in time. It 
is already a success, but even a better success in time.
    In my State of Florida, we have many nursing home residents 
and a number of them, quite a number of them, in fact, are part 
of the dual-eligible population and were auto-enrolled in Part 
D programs. However, many of the programs they were enrolled in 
do not cover the drugs that they need. Under the Federal and 
State regulations, nursing homes are responsible for providing 
prescription drugs to their residents, but they are prohibited 
by Part D marketing guidelines from helping dual-eligibles 
choose a plan that meets their needs.
    So will CMS consider revising its regulations to allow 
nursing home professionals or pharmacists to assist residents 
in selecting Part D plans designed to meet their needs?
    Dr. McClellan. Thank you very much, Senator, for asking 
that question. The nursing home administrators and staff, the 
long-term care pharmacy staff in the nursing homes are a great 
resource for information about the new drug coverage and they 
are working very hard with us to help all nursing home 
beneficiaries take advantage of it. This is a big help for many 
people in nursing homes and many States. The Medicaid payment 
rates have not been good and many of the other nursing home 
residents are spending thousands of dollars of their own money 
on prescriptions, so this is a very important benefit for them 
and we want it to work.
    Our guidelines, and just to clarify this, do allow nursing 
home administrators and pharmacists to provide objective 
information about the drug plans. We try to draw the line with 
steering. So there may be a particular plan that--a drug the 
pharmacist may like that is OK from the pharmacist's 
standpoint, but when you are advising a beneficiary, it is 
important to use objective information, like what the 
beneficiary's costs are going to be, whether their current 
drugs are all on the formulary. Things like that are absolutely 
fine for the nursing home administrators, other nursing home 
staff to talk to their beneficiaries about.
    If we need to clarify this further with some of the nursing 
homes in the State, I would be delighted to work with you on 
doing so. We have worked very closely with many of the nursing 
home associations, ACA, ASA, the Alliance, and others to make 
sure people in the nursing homes know what they are allowed to 
do, and they are allowed to provide objective information to 
help people choose a plan. They just can't steer based on 
financial, you know, direct financial incentives or something 
like that. But we want to make this work for everyone in the 
nursing homes.
    Senator Martinez. As we run into problems on that, we may 
get with you about seeing how we can break through, but----
    Dr. McClellan. We would be delighted to do that. We have an 
ongoing outreach effort with the nursing home associations and 
through our regional offices with the State and local 
associations, weekly phone calls, things like that that we can 
use to help get any needed clarifications out.
    Senator Martinez. Let me say, I want to say a good word for 
your regional offices.
    Dr. McClellan. Oh, they have been terrific.
    Senator Martinez. We have worked very closely with them. 
They have done a terrific job and have really been of 
assistance to our folks as they have tried to help people with 
the program. We had a series of meetings, as many others have 
done, to try to help folks to get enrolled and so forth and 
they have been a real great resource and we appreciate it.
    Dr. McClellan. I will take that back to them. Thank you, 
Senator.
    Senator Martinez. With the implementation of the Part D 
program, Medicaid coverage of prescription drugs for dual-
eligible population was transferred to the Medicare 
prescription drug program. Do you see any possibility of 
transferring those beneficiaries exclusively to Medicare so 
that all of their care would be under one roof eventually?
    Dr. McClellan. Well, it is a very--the advantages of 
coordinated care for dual-eligibles are obvious. They have some 
of the highest costs in our health care system and have some of 
the highest rates of complications from medication 
interactions, from preventable complications like bedsores and 
other problems that lead to hospital admission, worse outcomes, 
and higher cost.
    There are a number of plans in Medicare now called special 
needs plans that provide a broader range of services, 
including, in many cases, coordination with the long-term care 
services in State Medicaid programs. We are looking at ways 
that we can support Medicaid and Medicare work more closely 
together to provide this kind of coordinated care, and as you 
know, the State of Florida is working with us on a new waiver 
program in Medicaid that would give people with a disability 
and their caregivers more control over how they can actually 
get these kinds of integrated services so it is a lot easier to 
put some of the Medicaid traditional long-term care support 
services together with coordinated care for medical benefits 
and drug benefits with a reform program like Florida is working 
on right now.
    I don't know that there is going to be major legislation on 
this right away, but I think under our demonstration 
authorities in Medicare, with the new plans in Medicare and 
with steps like the State of Florida is taking, there are some 
real opportunities to provide much better coordinated care with 
fewer complications and lower costs to dual-eligibles. So we 
will pursue that with you, as well.
    Senator Martinez. Sounds good. One last issue is the 
pharmacists and the State of Florida getting paid if plans take 
too long in doing so, so we would be interested in seeing how 
you will monitor this once a reimbursement system is 
established to make sure that timely payment is made to those 
that are due.
    Dr. McClellan. We will be monitoring that closely. We have 
had this time lag now as people switch from one payment system 
to another that hopefully we are going to be getting past with 
the checks really starting to go out last week, this week, and 
so forth, but we will be monitoring that closely.
    Senator Martinez. Thank you. Thank you, Dr. McClellan.
    The Chairman. Senator Wyden.
    Senator Wyden. Thank you very much, Mr. Chairman, and thank 
you for all your leadership and Senator Kohl's, and also a 
bouquet to my colleague from Arkansas who is letting me go 
ahead of her because we have got the intelligence stuff.
    Senator Lincoln. Oh, we love bouquets.
    Senator Wyden. You are gracious, as always.
    Dr. McClellan, when I came to the Congress after being 
director of the Gray Panthers for 7 years, I saw that a lot of 
senior citizens would have a shoebox full of private health 
insurance policies. They would have 10, 15, sometimes 20 
policies. I wrote a law that drained that swamp so that now 
there are essentially ten policies in the private sector where 
people can actually compare the coverages one to another and 
actually use the market to make choices for them.
    I don't understand why CMS won't do that for this 
prescription drug program. I refer you to the testimony of an 
Oregonian that Senator Smith invited, Mr. Kenny, who advocates 
that. Let me tell you what I think has been the consequence of 
your not using the kind of approach I am talking about, that is 
senior friendly so that older people can compare the choices. I 
think you have done great damage during this roll-out to the 
cause of private sector choice in American health care.
    I voted for this program. I want to make it work. What has 
happened is instead of using an example like we had with these 
private policies sold to supplement Medicare, we now have in 
the State of Oregon more than 70 choices, more than 70 choices. 
So older people say they can't compare. They can't look and 
say, well, maybe this one rather than that one.
    So I think you ought to be moving in a hurry to make this 
more user friendly, more understandable, and there is a model 
out there right in front of you that you can use, the Medigap 
model for the policies older people bought to supplement their 
Medicare. It is at the last page of Mr. Kenny's testimony where 
he specifically says something like that would be helpful. Can 
we start on that right away, trying to make sure that we do 
have innovation in the private sector. We are all for that. But 
making these choices more understandable and specifically will 
you support looking at this Medigap kind of model?
    Dr. McClellan. Well, Senator, I know how much you have 
worked to make competition succeed for seniors and for other 
Americans and I do want to keep working closely with you on 
improving how this program is working, as well. What we have 
seen so far is more of a response from the private sector than 
many people, I think you and I included, expected there was 
going to be in this program when the law was passed. That is 
why the law didn't include, or may be one reason why the law 
didn't include these specific kinds of standards for types of 
plans.
    The advantage of that is that we are seeing the costs come 
in much lower and benefits come in better than expected. People 
can now get drug coverage through Medicare that is better than 
the standard Medigap policy drug coverage for about a tenth of 
the cost of that Medigap drug coverage. So there are some real 
advantages to the competition and choice that we have seen so 
far.
    But I absolutely agree with you. I talk to a lot of these 
seniors around the country, as well, that when they first 
approach this program and they haven't had a chance to talk to 
a counselor or talk to somebody at 1-800-MEDICARE about which 
choices are relevant for them and how they can find out how to 
take advantage of the program, that can be a real challenge for 
them and we are trying to break through that now. I do think, 
also, that now that we have seen competition work to bring down 
costs and improve choices, we are going to see competitive give 
seniors the next thing they want, which is more simplicity and 
more understanding of how these choices actually work, and we 
will be pushing that process along. I want to keep talking with 
you about the best way to do that.
    Senator Wyden. I am still unclear why you think it doesn't 
make sense for government to try to structure these choices for 
older people so that instead of 70 policies--I am not wedded to 
a specific number--we have whatever the number is so that 
people can actually sit at their kitchen table and compare 
them, because I don't think that the private sector in and of 
itself is going to produce more simple, more understandable 
policies. It didn't happen with Medigap. It didn't happen. It 
happened because people like former Senator Dole and the late 
Senator Heinz worked with me, and we said that government and 
the private sector are going to structure the choices. So I 
will ask you once again, are you saying you won't look at that?
    Dr. McClellan. I am saying that we do want to look at ways 
to make it easier for people to make--even easier for people to 
make choices among plans.
    Senator Wyden. Even easier? It is bedlam out there. When 
you use the word ``even easier,'' talk to Mr. Kenny who is 78 
years old about what his friends say.
    Dr. McClellan. And I----
    Senator Wyden. Older people are saying, you can't even sort 
this out with an advanced degree. They don't say that with 
Medigap, with their private policies to supplement Medicare----
    Dr. McClellan. I think looking toward simplification is 
absolutely the next step in this process, now that we have got 
the benefit in place. If we had tried to put in a standardized 
benefit back when the law was passed, we would have ended up 
with a deductible with a doughnut hole with things that people 
clearly don't want and they are not choosing now. We are seeing 
people choose plans that have the kind of coverage they want 
and now we need to--I agree. We need to help them get to more 
simplicity. But I think the drug plans are competing to do 
that, too, and that is what we want to help along.
    Senator Wyden. I didn't propose a Medigap-type amendment to 
this legislation for a reason, because I wanted the private 
sector to have the first crack at it. But I didn't conceive 
that the roll-out in the last few months would be bungled this 
way. I don't think it had to be this way. I think you could 
have worked with the private sector without a law on a 
voluntary basis and persuaded them, look, let us come up with 
some uniformity in the terms and make it possible for people to 
compare the choices. It could have been done voluntarily. It 
wasn't done voluntarily.
    Now we have got a mess on our hands and I hope that you 
will work with myself and others because I think it didn't have 
to be this way. There is a model that could be an alternative. 
Read Mr. Kenny's statement. He calls for that in his testimony.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Wyden.
    Senator Lincoln.
    Senator Lincoln. Thank you, Mr. Chairman, and thanks for 
holding such an important hearing today. Many of us have been 
swamped by calls in our offices by our seniors and disabled 
across the State who are truly frustrated about the, as you 
say, the choices, which we do want choices, but certainly their 
ability to access the technical assistance they need to 
understand those choices, so we appreciate your patience. I do, 
certainly. I am at the end of the totem pole here.
    Dr. McClellan. I appreciate all your----
    Senator Lincoln. I voted for adding this prescription drug 
benefit to Medicare and I want it to work and I think I have 
demonstrated that. I have met with more than--over 3,000 
seniors across our State. We held meetings which your district 
division offices out of Dallas were very gracious in helping us 
with, trying to make sure that we could be prepared and that 
people would have the knowledge and information they needed to 
make wise choices.
    We could quickly see that it was difficult. In time, I came 
back to Washington and joined my colleagues, concerned about 
the short 6-week transition period for particularly our dual-
eligible beneficiaries. I had hoped that we could work with you 
to make that transition period longer. It is hard to believe 
that while everyone else on Medicare was given 6 months to make 
that transition, this group of individuals, which often can be 
considered some of the most at risk, perhaps, were given only 6 
weeks. So I hope that as we move forward and we look for ways 
to improve on this legislation, as we did with the extension of 
that transition period, that as opposed to fighting, our deep 
desire is that you will work with us to look at the ways we can 
correct.
    If there is anything that we did in moving into this 
proposal, and I think many of us that have supported it and 
want to continue to support the effort, is that we don't look 
at it as a work of art but a work in progress and that we can 
recognize the things that we can do better and that you will 
work with us in Congress to change those in a way that will 
make a difference.
    As I said, these are beneficiaries that are, in many 
instances, our most vulnerable, and in Arkansas, it is a 
disproportionate share, a greater share of our seniors that 
fall into that category, and, as is the Arkansas way, our 
pharmacists, our medical providers have been working diligently 
to make sure that these individuals who are their neighbors and 
their friends in the community are going to get what they need.
    I guess what we want to know from you is how we can, and 
you particularly at CMS, can continue to make these 
individuals, particularly our pharmacists, whole.
    My office has received a tremendous number of calls from 
pharmacists who are concerned about the timing of their 
reimbursement----
    Dr. McClellan. Right.
    Senator Lincoln [continuing]. From these prescription drug 
plans. The plans have in their contracts that they will be 
reimbursed every 2 weeks, and yet when the pharmacists finally 
make contact with the plans, one, they are not able to 
negotiate anything with them, and they are told that they won't 
get their payments in 2 weeks. It is crazy. I mean, I know that 
some of the larger pharmacy groups out there have got the 
technology and the capability to overcome that. They also have 
the resources to be able to make it through that period of 
time, but a lot--as Senator Burns mentioned, in rural America, 
your local pharmacists don't have that.
    I have had at least three of my pharmacists call and say 
they have had to take out a loan from the bank in order to make 
it through and pay their suppliers and that is just 
inexcusable. I mean, these are people who are dedicated to 
their constituency and their customers and their community, and 
to take out a $500,000 loan just to make it through the month 
is something that, in my opinion, is not only unintended in 
this legislation, but it is unacceptable. So I hope that as we 
have led seniors to the doorstep of this opportunity of a new 
prescription drug component that we will not leave them or the 
people that serve them at that doorstep.
    I guess my question to you is, what are you going to do in 
terms of the timing of this? Arkansas to date has spent about 
$3.8 million now, almost $4 million. You say you want to make 
it all whole, and I want to believe you on that, but I also 
think that the timing on this is incredibly important. I mean, 
are you going to guarantee us in 30 days that these people are 
going to be paid? Are you going to go back to these plans and 
be an advocate on their behalf?
    Dr. McClellan. First of all, Senator, I would like to thank 
you for all your close work with us on the implementation of 
the benefit. As you mentioned, your office is working closely 
with our regional office, answering people's questions, helping 
any individuals who are having difficulty, and helping more 
people enroll. I think that is why Arkansas has one of the 
highest rates in the Nation of enrolling in this program----
    Senator Lincoln. We want it to work.
    Dr. McClellan [continuing]. The program is having a big 
impact for people in the State who have been struggling with 
their drug costs. The State is going to be reimbursed. We have 
been in very frequent contact with Governor Huckabee, who has 
been a real leader on this issue and helping pharmacists, that 
we are having difficulty at the beginning and in working with 
us on getting an effective reimbursement plan in place. So the 
State is going to be reimbursed for those costs. But I want----
    Senator Lincoln. Do we know the timing on that?
    Dr. McClellan. Well, the model--we are releasing a specific 
template, just a checklist. That is all the State has to fill 
out in order to get into this reimbursement program. That will 
be available as soon as today. We hope that the States like 
Arkansas will be able to quickly complete this agreement with 
us and then the reimbursement process will actually involve the 
State sending us the claims that they have that they haven't 
been able--where the pharmacist couldn't bill the Medicare plan 
properly and we will do the reconciliation with the drug plans 
and we will also pay for any additional costs to the extent 
that any competitive drug plans come in at a lower cost than 
Medicaid. We will make that up, as well.
    But I want to talk about the pharmacists specifically----
    Senator Lincoln. Good.
    Dr. McClellan [continuing]. Because they do have a timing 
issue, and I have heard that from talking to many of these 
independent pharmacies around the country and their 
associations. They went from being paid by Medicaid, often on a 
weekly basis, to these contracts that you mentioned which often 
have 15-day payment cycles. Some of them are less. Some of them 
are less. Some of them are 10 days. Some of them are a little 
bit longer. Those checks are just now starting to come in. In 
the meantime, it has been a real stretch for many of the 
community pharmacies to meet their short-term expenses and to 
pay the distributors and others.
    We have been in contact with basically everyone involved in 
the whole pharmacy drug distribution chain, the wholesalers and 
others. Many of them have relaxed the terms for payments during 
this transitional period to help pharmacists through that 
process, and now, now that those contract terms are coming due, 
we are watching very closely to make sure that the plans do pay 
on schedule so that they can get those costs covered and get 
through this transitional period.
    Senator Lincoln. Do you feel like you have the sufficient 
authority to regulate the plans?
    Dr. McClellan. The plans have contracts with the pharmacies 
and----
    Senator Lincoln. But they won't negotiate with them. They 
won't talk to them.
    Dr. McClellan. Well, our regulatory authority goes to 
making sure that plans meet our standards for having access to 
pharmacies. So if a pharmacy, especially in a rural area, it is 
the only pharmacy around, isn't getting a rate that they think 
is acceptable and permits them to serve Medicare beneficiaries, 
if they don't participate, the plan won't meet our standards 
for having----
    Senator Lincoln. So do they go through an appeals process? 
I mean, is that what you have in place?
    Dr. McClellan. Well, the plan wouldn't even get approved if 
it doesn't meet our pharmacy access standards.
    Senator Lincoln. But the point is if they are not meeting 
that and they are still the plan that exists for that 
individual, that constituent, what is the pharmacist--what do 
they have? What power do they have? Do they have an appeals 
process? Do they come to you and say, this plan is not adhering 
to the contract?
    Dr. McClellan. If it is not adhering to the----
    Senator Lincoln. Are you going to fight that contract for 
them?
    Dr. McClellan. If it is not adhering to the contract, we 
want to hear about any complaints about failure to adhere to 
contracts and----
    Senator Lincoln. That is what they have been doing, is 
calling you about the timeliness.
    Dr. McClellan. Well, we will take action, and we have heard 
about a few of these already. Some of the ones that we have 
seen so far were cases where the plan submitted, the pharmacy 
submitted its claims for services delivered, say, in the first 
couple weeks of January. Then the plan has 15 days to pay and 
those checks are starting to go out now. We have this 
transitional issue. So we are watching very closely to make 
sure that happens the way it is supposed to happen, and if we 
see any systematic pattern of complaints about plans not 
following their pharmacy contract, we absolutely are going to 
follow up on that with the plans. We have specific compliance--
--
    Senator Lincoln. So you feel you have enough authority----
    Dr. McClellan. We have specific compliance staff and 
compliance officers and specific contacts on compliance issues 
with the plans to make sure they are adhering to the contract 
terms.
    Senator Lincoln. You feel comfortable that you have enough 
authority and enough individuals on point to do that?
    Dr. McClellan. At this point, we do. We are watching 
complaints that come in and making sure that contracts are 
being adhered to, and if we--we will let you know if there end 
up being bigger problems----
    Senator Lincoln. Where could I or a pharmacist get more 
information about these contracts?
    Dr. McClellan. The contracts between the plans and the 
pharmacies are filed. Plans have to make available a contract 
for any pharmacy that potentially wants to do business with 
them. There is an ``any willing pharmacy provision,'' and in 
order to meet our pharmacy access standards, the plans must 
have pharmacies available and convenient access for all of 
their beneficiaries. The plans have filed information with us 
showing that they have got a standard contract----
    Senator Lincoln. So the pharmacists call CMS to get that 
contract?
    Dr. McClellan. Well, the pharmacists will have that 
contract directly because they have entered into the contract 
with the plan. So they have got their contract information 
directly and what we want to know about is, is a plan failing 
to adhere to the terms of their contract----
    Senator Lincoln. OK, and so----
    Dr. McClellan [continuing]. That is something that the 
pharmacist is----
    Senator Lincoln [continuing]. Hopefully, you are the one 
that will help them as an advocate if there is a problem.
    Dr. McClellan. Yes, as well as the pharmacy associations 
often help with these contractual issues with plans and we do 
want to provide some assistance, as well.
    Senator Lincoln. We also have a State law----
    Dr. McClellan. If I could just add one more issue on this 
topic, early on, especially, the pharmacists were having real 
trouble sorting out billing issues because they couldn't get 
through to plans or couldn't get through to us.
    Senator Lincoln. Yes.
    Dr. McClellan. As I said already in this hearing, we have 
taken some major steps to make sure any pharmacist can contact 
Medicare virtually immediately, with no waiting, on our toll-
free pharmacist help line. That is working very smoothly now in 
terms of quick access for pharmacists with questions or 
complaints. Pharmacies also should expect a high level of 
performance from the drug plans. Many of the drug plans have 
taken some great steps over the last several weeks to improve 
pharmacy access to them so they can resolve any of these 
contract or payment issues, and we expect all the plans to do 
that----
    Senator Lincoln. There was definitely a big problem in 
contacting----
    Dr. McClellan [continuing]. That kind of smooth and direct 
contact with the plans can also go a long way to helping with 
these issues and that is why we are going to increase our 
monitoring of plan performance on their pharmacy lines. Again, 
we have seen lots of plans make big improvements. They are 
doing very well on quick access----
    Senator Lincoln. Their Washington offices probably called 
in, because I found when I couldn't get hold of you or to 
somebody in CMS that could answer my question, I called their 
government relations office here in Washington and started 
sending my constituents to them because the questions there 
just simply were inexcusable in terms of being required to pay 
deductibles and copays and other things that were clearly out 
of sync with what we had produced in the legislation.
    Dr. McClellan. I am glad we are seeing progress there, but 
we are going to obviously keep watching this very closely until 
all these problems are fixed.
    Senator Lincoln. We have sent you a letter. Arkansas has a 
State law that allows patients to choose their own pharmacy. In 
long-term care settings, we are one of the few States which has 
historically interpreted the rule to allow each individual to 
decide which pharmacy they want to use. We sent you a letter on 
the ninth of January hoping that you could promptly clarify the 
intent of the patient's rights to choose a pharmacy as it 
exists under State laws. Can you give me an indication when I 
might get some guidance issued from you?
    Dr. McClellan. I can. In fact, we have been working 
directly with community pharmacists on this. We have had an 
exchange of letters with the National Community Pharmacy 
Association to make clear a couple of things. One, we do expect 
some standards for long-term care pharmacies and plans that are 
contracting with them to meet. Basically, a plan must support 
the required level of services for a long-term care pharmacy 
and it must provide access to needed long-term care pharmacy 
services for every beneficiary in the plan, whichever long-term 
care pharmacy they happen to be using.
    We have also made clear in this exchange of letters that 
the plans--that there is no restriction in our policy on which 
pharmacies a nursing home can contract with to provide 
services. In fact, in a number of States, we are seeing more 
competition where community pharmacies are taking advantage of 
the fact that we are trying to set up a level playing field 
here to supply access to services and pharmacies.
    So there is nothing in our rules that prohibits 
beneficiaries from getting the long-term care pharmacy choice 
that they need. It is really more of an issue directly for the 
nursing home and we want the nursing homes to know that if they 
want or if their beneficiaries want to contact with or get 
their services from different long-term care pharmacies, that 
is absolutely permitted under the Medicare rules.
    Senator Lincoln. Or local?
    Dr. McClellan. That is right.
    Senator Lincoln. Not just long-term, but local pharmacies, 
too.
    Dr. McClellan. Local pharmacies. Obviously, local 
pharmacies, too.
    Senator Lincoln. Just last, in the nursing home situation 
we have in Arkansas, they say their pharmacies are still 
experiencing a rejection rate of 25 percent. Twenty-five 
percent of the time, they are getting rejected, and the plans 
are still charging copays to the nursing home patients, which 
are actually prohibited, I think, under the law.
    Dr. McClellan. That is right, and this is an example----
    Senator Lincoln. Can you tell me how you are addressing 
that?
    Dr. McClellan [continuing]. I talked at the outset about 
this being one of the biggest problems that we are working on 
right now and that we are taking steps to fix. It has several 
sources. One is making sure that the plans all have complete 
and accurate data on the nursing home status of their 
beneficiaries and that they are using it. To help make sure 
that happens, we have sent out the complete lists of all the 
dual-eligible and low-income beneficiaries in a plan to those 
plans. We most recently sent another list of this information 
out on January 30. We also are handling casework and complaint 
issues. So if we see a pattern of a specific plan not having 
the right copayment information in, we can go work directly 
with that plan to try to get it addressed.
    We still need to make more progress on this, but it is 
absolutely one of our top priorities to make sure everyone has 
the correct copayment information, including the zero copay 
information in the nursing homes----
    Senator Lincoln. Well, I would just say that in enforcing 
these plans and the policies, many of the pharmacists are 
reporting that when they call the plans, the staff that are 
answering the queries from the plan don't know about the 
policies.
    Dr. McClellan. One of the technical issues that we have 
been dealing with with certain plans over the last few weeks is 
that there is a--I don't want to get too technical here, but 
there is a specific piece of information that we send out in 
the files that have information on beneficiaries in the plans 
on the nursing home status of a beneficiary and we do want to 
make sure that all the plans are using that. Most of them are 
using it just fine now, and we have, again, double-checked to 
make sure they have got the right information in place. So I 
think you should expect to see continued progress on this, but 
you should keep letting us know if you are seeing particular 
cases----
    Senator Lincoln. Don't worry.
    Dr. McClellan [continuing]. I know you will, but that is 
why this is one of our very top issues for long-term care 
pharmacies right now.
    Senator Lincoln. I just hope and pray that you won't be 
afraid to make changes that need to be made in order to make 
this a success. There is clearly from so many of us, we realize 
that a prescription drug component of Medicare is essential, 
but I don't think anybody has all the right answers and I hope 
that as we work through this, we are willing to make the 
changes that need to be made to make this a success. No pride 
of authorship or no, you know, I don't know, possession, of 
possessiveness in terms of what we have done here, but if we 
get it fixed and we can get it fixed in a way that will sustain 
it as a program and not, again, lose the confidence of the 
seniors out there, whether they are the dual-eligibles and the 
most vulnerable or whether they are those that are healthy and 
yet going to be looking to Medicare in the future, to engage in 
what we need to have them engage in, because participation is 
going to be critical in the long-term success of this.
    So thank you for your help and I appreciate it. I know, Mr. 
Chairman, if I may ask unanimous consent to include my 
statement in the record, I apologize for running late. But I do 
appreciate working with you, and again, I hope you all keep 
answering your phone lines because we are going to keep 
calling.
    Dr. McClellan. We absolutely will, Senator.
    Senator Lincoln. OK, thanks.
    Dr. McClellan. Thank you for your leadership and your 
passion. We have taken some new steps that we just announced 
yesterday on exactly these issues and we will keep making 
changes to fix these problems.
    Senator Lincoln. I would say that you would get a 
resounding applause here if you gave a greater emphasis on 
timing, because that is what is killing people out there in the 
hinterlands.
    Dr. McClellan. For the pharmacies, I know.
    Senator Lincoln. For the pharmacies, particularly, but the 
States, as well, I mean, to have a better idea of when those 
resources are coming and when they can expect. If it is just 
setting a deadline for yourself or for us, in a way, that we 
are going to make sure that that happens within a certain 
period of time, it gives them a great reassurance, not to 
mention the financial institutions that are backing them, so 
thank you.
    The Chairman. Thank you very much.
    [The prepared statement of Senator Lincoln follows:]

             Prepared Statement of Senator Blanche Lincoln

    Mr. Chairman, thank you for holding this important hearing 
today on the problems our constituents are having with the new 
Medicare prescription drug benefit, or Part D.
    I voted for adding this prescription drug benefit to 
Medicare, and I want it to work. I know it's not a perfect law, 
and I have voted several times in the last two years to improve 
it. Last year, I and many of my colleagues grew concerned about 
the short, six-week transition period for ``dual eligible 
beneficiaries,'' those 6.4 million Medicare beneficiaries who 
also qualify for Medicaid because they are low-income.
    These beneficiaries are among the most vulnerable of 
America's citizens. They are disproportionately women and 
minorities and live alone or in nursing homes. Nearly three 
quarters of them have an annual income of $10,000 or less. 
Thirty eight percent of them have a cognitive or mental 
impairment. Over a third of them are disabled. Less then half 
have graduated from high school. And, they use at least 10 more 
prescription drugs on average than non-dual eligible 
beneficiaries. They are more likely to have chronic conditions 
like heart disease, pulmonary disease, or Alzheimer's Disease.
    While everyone else in Medicare was given six months to 
enroll in a prescription drug plan, these dual eligible 
beneficiaries were given only six weeks. Moving 6.4 million 
seniors and individuals with disabilities to an entirely new 
system is a major undertaking. Even MedPAC, an independent 
advisory committee, had warned that even large, private 
employers need at least six months to transition their 
employees' drug coverage from one pharmacy benefit management 
company to another.
    It is obvious that the dual eligible beneficiaries have 
experienced the most problems since January 1st, and I believe 
the problems they have had were entirely predictable. I voted 
to add six months to the transition period for this vulnerable 
population, but officials from the Centers for Medicare and 
Medicaid Services said that our amendment was unnecessary. They 
said that they were ready.
    Since January 1st, my office has been swamped with calls 
from upset seniors and pharmacists. Dual eligible seniors 
weren't in the computer system, the phone lines at the plans 
and at CMS were jammed, and pharmacists were uniformed of the 
various processes they needed to use. Seniors were placed in 
plans that did not cover their specific medications and were 
told to pay high deductibles and co-pays that they weren't 
allowed to be charged under the Medicare law. Pharmacists are 
not getting paid on time and have to take out loans to pay 
their bills and keep their doors open. Half the states, 
including Arkansas, have had to step in and fill in the blanks 
where CMS's transition plan has failed.
    These problems could have been avoided. I feel that the 
administration failed to fully prepare for the implementation 
of this new program even after repeated warnings from me and 
other members of Congress. But, now that we are in this 
situation, we must fix it. The government must not leave our 
most vulnerable seniors at the doorstep to fend for themselves. 
I want to work with CMS to fix these problems and avoid them in 
the future. This hearing and other hearings are a necessary 
part of that process. Thank you, Mr. Chairman.

    The Chairman. Dr. McClellan and Linda McMahon, as you can 
see, notwithstanding all that is going on in this world, this 
is what is going on in our communities.
    Senator Lincoln. That is right.
    The Chairman. You have been on the hot seat and we thank 
you for your candor and your participation here, and with that, 
we will call up the next panel.
    Many of my colleagues have been pulled in different 
directions, but we do want to hear from all of you who are on 
these panels because what you have to say is important to the 
Senate record. This is being broadcast by C-SPAN and there are 
undoubtedly many seniors who are anxious to hear what is being 
said this morning and your testimony, as well.
    Bob Kenny is the first witness of the second panel. He is a 
Medicare beneficiary who hails from my home State of Oregon. He 
is from Tillamook. No doubt many viewers have been eating 
cheese from that area. He used the Internet to enroll in the 
prescription drug plan, and as a volunteer with the State 
Senior Health Insurance Benefits Assistance Program helped many 
other seniors enroll, as well. He will share his experience and 
offer his insight on how the drug benefit program has been 
working so far.
    He will be followed by Mr. Mike Donato, who is a dual-
eligible beneficiary from Mansfield, OH. Mr. Donato previously 
received his prescription drug coverage through Medicaid. He 
will share with us his experience with the new Medicare drug 
benefit thus far.
    Then we will hear from Sharon Farr, who is Mr. Donato's 
counselor, and she will be discussing her role at the Center 
for Individual and Family Services.
    Bob, welcome. Thank you for being here.

  STATEMENT OF ROBERT J. KENNY, MEDICARE PART D. BENEFICIARY, 
                         TILLAMOOK, OR

    Mr. Kenny. Good morning, Mr. Chairman, Senator Kohl. I am 
delighted to be here today to give the message that there 
really are successful sign-ups for Medicare D. I work with 
Medicare D both on a personal basis and as a volunteer for the 
Senior Health Insurance Benefits Assistance program, SHIBA.
    At 78 years of age, I have recently undergone a triple 
bypass operation and have mild emphysema. My drug cost would be 
about $300 a month without Medicare D. With my Medicare D 
prescription plan, my total cost, including premium, will be 
cut to $141 a month, a savings of 53 percent, or a total of 
$1,908 a year. In addition, I just recently changed to a 
preferred drug from a non-preferred and will save an additional 
$30 a month that way, and I plan to save more money by going 
into mail order.
    How did I go about signing up? Because of my SHIBA 
training, I knew the shortest route would be to use the 
government website Medicare.gov. I went to that site armed with 
my list of six prescription drugs and my Medicare card. The 
site was new to me, so I did site exploring and then started in 
earnest. I told the site that I wanted to compare plans, filled 
in the personal information and after that my drug usage. It 
was time consuming, about three-quarters of an hour. The 
comparison showed the plans from the least to the most 
expensive with the yearly cost for each. I checked pharmacies 
to make sure mine was included and identified the parent 
company of the plan as a stable firm. In addition, I went over 
the math to verify the yearly cost figure. Having decided that 
the lowest-cost plan was acceptable, I enrolled.
    My membership card arrived in a little over 2 weeks. 
Shortly after January 1, I registered my plan with my pharmacy 
and ordered medication. The medication was quickly approved and 
provided at the proper discounted price. Since that time, I 
have filled more prescriptions with the same results.
    I am sure that my good results in some measure reflected my 
half-day Medicare D training and my computer savvy.
    My work as a SHIBA volunteer began in 1993. According to 
the last census, my county of Tillamook in Oregon has a 
population with 19.8 percent seniors as compared to 12.4 
percent for the U.S. as a whole. I have counseled about 30 
Medicare D patients since mid-November. The seniors that come 
to me for Medicare D are often very confused by the publicity 
that tells them they should be confused, or they have been 
talking to a plan salesman, or they have been looking into 
plans and are really confused.
    In most cases, this confusion was either eliminated or 
considerably reduced by going through the steps required by 
Medicare.gov. Few of my clients know how to use a computer, and 
those that do may not have Internet access. At the end of the 
appointment, however, almost all were thrilled by the amount 
that they would save in drug costs. There has been only one 
client of mine who found there would be no reduction in her 
costs. She was a lady in extremely good health who did not 
spend enough to cover the $250 deductible. Even this lady 
decided to enroll anyway in order to avoid the 1 percent per 
month penalty which would be added to her premium if she did 
not enroll before May 15.
    Lest I paint too pretty a picture, I know there are real 
problems in some areas. I work with the general population of 
seniors and that has yielded good results. At the same time, I 
have heard from those who work with dual-eligibles, those with 
Medicare and Medicaid, that they have seen serious difficulties 
in everything from getting clients into the right plan to 
straightening out computer records so medications could be 
dispensed.
    In spite of all the real problems you are hearing about, 
Medicare D is a good thing for an overwhelming proportion of 
those eligible. In our county, there is even a plan available 
which will produce savings with drug costs of as little as $35 
a month. Not many seniors have drug costs that low.
    The Medicare.gov website is, in my opinion, now doing a 
good job leading people through the process. When the sign-up 
period started in November, it was often not available due to 
excess traffic, had errors in plan information, and was much 
harder to use. Since then, the information has been corrected, 
major improvements have been made, and the site is both faster 
and easier to use.
    In spite of my satisfaction with the results and a real 
conviction that Medicare D is good for the elderly, it is 
obvious that improvements can be made. I would recommend to the 
committee the following changes be considered.
    Provide a paper application for those that do not have 
computer access, and by that I mean a paper application to 
apply for the comparison. The actual enrollment is already 
available either by phone or by paper application.
    On the Medicare.gov website at present, medications and 
their dosages must be entered one at a time in order to allow 
the program to make the notation. This results in a processing 
wait each time a single drug or change in dosage is entered. It 
would be much more efficient if all drugs and their dosages 
could be entered at the same time, resulting in a single but 
longer wait.
    Stop the auto-enrollment to reduce confusion and save 
manpower.
    Standardize the formulary for all plans to provide improved 
comparability.
    As with supplemental plans A through J, reduce the number 
of prescription plans, not vendors, to a manageable number 
which can be compared one to the other. If you think about it, 
that is already almost in existence. It simply has not been 
categorized. If you look at the plans, they already either do 
or do not cover the $250. They either do or do not cover the 
doughnut hole. They either do or do not have mailhouse 
pharmacies. They either pay nothing for generics or a small 
charge. The small charges are very close together. For non-
generic drugs, they either pay 25 percent or they have a fixed 
amount. Where it is a fixed amount, they are very close 
together. So there would be very little change and very little 
restriction of competition to standardize the plans.
    There are more than 4,800 seniors in Tillamook County. Only 
about 500 of these have been helped, mostly because most of 
them do not know where to go for help. My schedule is now 
running empty. We could nationally provide local TV and radio 
announcements giving the telephone number of the closest SHIBA 
office or its equivalent which can be called to get real help 
one-on-one in a timely manner.
    Thank you.
    The Chairman. Thank you very much, Bob. That is a terrific 
real world experience and some suggestions that we will 
certainly take to heart. We have a hearing in the Finance 
Committee next week on this same topic and I am going to grab 
your testimony and push your ideas. It is very good of you to 
come this long way to participate in this important discussion.
    Mr. Kenny. Thank you for having me.
    [The prepared statement of Mr. Kenny follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    The Chairman. Mr. Donato.

   STATEMENT OF MICHAEL DONATO, MEDICARE PART D BENEFICIARY, 
                         MANSFIELD, OH

    Mr. Donato. Hi, Senator Smith. My name is Mike Donato. I 
live with my mom, Daisy, in Mansfield, OH. I was diagnosed with 
schizophrenia and bipolar disorder in 1995. I have been on the 
Social Security Disability program since then.
    Senator, I take medications for many health problems, 
everything from asthma to high blood pressure. I particularly 
depend on mental health drugs to live in the community with my 
friends and family. When I am not on medications, I tend to get 
sick and end up in the emergency room or the hospital. This is 
my first time in Washington, DC and I don't want to offend 
anybody, but it is fair to say I don't like hospitals. Nice 
people, but the food is pretty bad.
    I would say that things got off to a pretty rocky start 
with this new Medicare drug program. For example, I am in an 
AARP plan, but I never got a letter from them. Sharon Farr from 
the Center for Individual and Family Services, had to find my 
enrollment online. In fact, she has been helping me a lot these 
past few weeks. You will hear from her in a moment.
    When I went to Walgreen's in early January to get my 
prescriptions filled, they said I owed them a total of $700. I 
was afraid and, honestly, pretty panicked, Senator Smith. Where 
I come from, that is a great deal of money. Most of all, 
though, I was worried about my mom. Daisy was very nervous 
about what would happen to me if I couldn't get my medications. 
Lord knows she doesn't have the money to buy all my drugs I 
need to live.
    Today, I sit here feeling pretty lucky. Now that Sharon has 
got me enrolled in this new Part D program and we have ironed 
out all the problems, I can take all nine of my medications I 
need for the very first time. I was never able to do that under 
Medicaid. I also know for a fact that I couldn't have handled 
all this without Sharon's help.
    But what about the seniors? What happens to people who 
don't have the help I had? I hope you will give them the 
assistance they need. I think Daisy feels the same way.
    Thanks for having me here. I will answer your questions the 
best I can.
    The Chairman. Thank you, Michael. I don't have a question. 
I just--you are a living example that this is a program that is 
working for you. For all the problems you have heard spoken of 
this morning, it is obviously worth the effort and the struggle 
to keep getting this program implemented and get it right.
    Mr. Donato. I agree.
    The Chairman. Thank you.
    [The prepared statement of Mr. Donato follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    The Chairman. Sharon Farr.

   STATEMENT OF SHARON FARR, ACCOUNTS RECEIVABLE SUPERVISOR, 
    CENTER FOR INDIVIDUAL AND FAMILY SERVICES, MANSFIELD, OH

    Ms. Farr. Good afternoon, Chairman Smith and members of the 
committee. My name is Sharon Farr. I am an accounts receivable 
supervisor at the Center for Individual and Family Services in 
Mansfield, OH. I supervise a staff of five case managers 
working with 140 persons with serious mental illnesses eligible 
for both Medicare and Medicaid who qualify for the new Part D 
prescription drug benefit. Today, I will briefly outline some 
significant challenges that one of my clients, Mike Donato, and 
many other dual-eligibles with mental disorders, are 
experiencing with the new Medicare prescription drug benefit.
    Let us focus on Mike's case for just a moment. As you just 
heard, he takes medication for nine health conditions, 
including schizophrenia, bipolar disorder, diabetes, asthma, 
and high blood pressure. In late 2005, Mike was auto-enrolled 
into AARP prescription drug plan. When he attempted to get his 
prescriptions filled in early January, Mike did not appear in 
the Walgreen's computer system as dual-eligible. The pharmacy 
charged him a $250 deductible plus the copayment for all the 
medication Mike takes, about $700 in all. It is very important 
to note that his Social Security Disability check amounts to 
$694 per month for all his living expenses. Mike's mother 
stepped into the situation at that point and gave him $67 so he 
could at least purchase his mental health medication.
    When I contacted AARP, I was told to wait 48 hours and a 
computer glitch would be corrected, but nothing happened after 
2 days. I then began calling the Center for Medicare and 
Medicaid services, AARP, and Walgreen's, all with the objective 
of enrolling Mike as a dual-eligible so we could qualify for 
subsidies due him. I was calling these organizations three 
times a day for a solid week. At one point, I was on the phone 
for 3\1/2\ hours and endured multiple phone cutoffs. Meanwhile, 
the AARP website had no mechanism of identifying dual-eligibles 
upon enrollment.
    By the way, Community Mental Health Centers across the 
country are reporting very similar experiences, particularly 
with respect to PDP prior authorization processes. Many 
consumers who, for example, are stabilized on anti-psychotic 
medications now find that the same drug is subject to PDP fail-
first policies, requiring case managers to navigate often 
confusing new systems.
    Finally, 3 weeks after his Part D odyssey began, Mike 
showed up in the Walgreen's computer system as dual-eligible. 
Mr. Chairman, I don't mind telling you that we had a little 
celebration. Mike can now afford all nine drugs in his 
medication regimen, which is something he could not do under 
the Medicaid program. Walgreen's was very accommodating through 
the process and even refunded Mike's mother her $67.
    Throughout this process, I have been working with both the 
National Alliance on Mental Illness and the National Council on 
Community Behavioral Health Care, who have provided invaluable 
assistance.
    Both NAMI and the National Council hope that CMS will 
successfully resolve the information technology problems that 
have plagued Part D to date. In addition, our colleagues in the 
mental health field, and including the American Psychiatric 
Association the National Mental Health Association, insist that 
PDPs provide a 30-day emergency supply of medications as 
required by the current CMS transition policy. It is also 
essential that CMS renew the all or substantially all formulary 
guidance requiring broad coverage of anti-psychotic, anti-
depressant, and anti-convulsants for 2007 contract year and 
beyond. This is critically important to making the drug benefit 
effective for people with severe mental illnesses. In addition, 
as front-line safety net providers, we need a workable and 
transparent exception process to ensure that dual-eligibles are 
able to quickly access medications that are subject to prior 
authorization and step therapy.
    In closing, there are some immediate issues that need the 
attention of Congress. For instance, CMHCs have found that 
copayment structures for dual-eligibles is unwieldy and 
confusing. This requirement has generated thousands of 
additional visits to CMHCs across the nation, and the 
tremendous staff time amounts to an unfunded mandate on safety 
net community mental health providers. In fact, I estimate that 
my five case managers have spent 200 to 300 hours attempting to 
enroll dual-eligibles in the new benefit. Moreover, people with 
Alzheimer's disease, mental retardation, and mental illness 
eligible for Part D need additional help, specifically one-on-
one pharmaceutical benefits counseling. The House and Senate 
Appropriations Committee required CMS to provide additional 
assistance through the $150 million MMA education and outreach 
program, but it has not been materialized to date.
    Thank you for listening. I look forward to answering any 
questions you may have.
    The Chairman. Sharon, thank you very much for focusing on 
the mental health component or category in all of this. It is 
very important to me that this not take a back seat to other 
prescription drugs. I also thank you for serving and helping 
Michael.
    [The prepared statement of Ms. Farr follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    The Chairman. Senator Kohl.
    Senator Kohl. Thank you. Just a brief comment. I would 
first like to thank both of our Medicare beneficiaries for 
traveling so far to be here with us today and to make your 
comments. Mr. Kenny, I am pleased that your experience in 
enrolling in the Medicare drug benefit was a good one and that 
you have been able to counsel others that don't have access to 
the resources that you do.
    Mr. Donato, the Medicare drug benefits certainly should not 
be an obstacle to proper health care, but as you have 
demonstrated, that is exactly what it has been for too many 
Medicare beneficiaries. Of course, you are very fortunate to 
have a strong advocate working on your behalf.
    However, with all due respect, Chairman Smith, the stories 
we have heard today are far different from what I have been 
hearing in my State of Wisconsin. Just this past Monday in 
Milwaukee, Amy McHutchin, who is from the Wisconsin Coalition 
for Advocacy, painted a far different picture and I want to 
quote something she said to me.
    She said, ``In just under a month, I have worked with 
numerous Medicare beneficiaries with severe mental illness, 
recent organ transplants, diabetes, and other life or death 
illnesses that have had trouble accessing their medications. 
Many were turned away from pharmacies empty-handed or left the 
pharmacies having spent their month's grocery or rent money for 
their medications. The calls also seem to be much more urgent 
in nature as we near the end of the month, where beneficiaries 
have no longer been able to secure a temporary supply of 
medications from their pharmacy and have been without their 
medications for several days.'' This is an expert in Wisconsin 
who made that quote to me.
    I share this with the committee because I want to be clear 
today. For far too many people, this drug benefit has not 
worked properly and we clearly have a responsibility to 
acknowledge them and to focus and refocus our efforts on making 
sure the many challenges people have been facing are adequately 
addressed and not in any way papered over.
    Mr. Chairman, I thank you.
    The Chairman. Thank you. I am grateful to our second panel 
and we will now call up our third.
    The third panel will consist of Mr. Timothy Murphy of the 
Commonwealth of Massachusetts, Secretary of Health and Human 
Services. His state was one of the first to implement a stop-
gap program to pay the costs of emergency supplies of 
medications for beneficiaries. He will discuss the state's role 
in the Medicare drug benefit as well as its efforts to receive 
reimbursement from CMS and drug plans for costs associated with 
its stop-gap program.
    He will be followed by Ms. Sue Sutter. She is here 
representing the Pharmacy Society of Wisconsin. Senator Kohl 
will introduce her.
    Then Mark Ganz, who is my friend and fellow Oregonian. He 
is the CEO of the Regence Group and is representing the 
National Blue Cross and Blue Shield Association. He will 
discuss his company's approach to implementation of the drug 
benefit, including its work with pharmacies and other 
interested parties to resolve problems encountered by 
beneficiaries.
    We thank all three of you for being here. Tim, take it 
away.

STATEMENT OF TIMOTHY R. MURPHY, SECRETARY, EXECUTIVE OFFICE OF 
 HEALTH AND HUMAN SERVICES, MASSACHUSETTS DEPARTMENT OF PUBLIC 
                       HEALTH, BOSTON, MA

    Mr. Murphy. Thank you, Chairman Smith and Senator Kohl, for 
this opportunity to speak on this important issue. I also just 
wanted to introduce to the committee Beth Waldman, who is the 
Medicaid director for Massachusetts, who is joining me today, 
also with Paul Jeffrey, who runs our pharmacy services, so if 
any questions that we can answer for the committee.
    I would also request, Mr. Chairman, that I just have my 
written testimony put into the record.
    The Chairman. We will include it.
    Mr. Murphy. What I have done for the committee is also 
prepared a presentation, which I believe you have, just to walk 
through the Massachusetts experience.
    Just by way of background, what you should know about 
Massachusetts is that we have two programs. One is obviously 
for the Medicaid or the dual-eligibles, and then we also have a 
State Pharmacy Assistance Program called Prescription 
Advantage, which is a very successful program. We serve in 
Massachusetts on our Medicaid program about a million people. 
It is about 17 percent of our population. Our dual-eligibles 
are about 190,000 individuals. Just to give some percentages on 
that, it is about 51 percent elderly and 49 percent are 
disabled. Our Prescription Advantage, or our SPAP, is 72,000 
individuals, and that is for lower and moderate-income seniors 
that have received services from the Commonwealth to help with 
prescription benefits.
    In addition, I would also say, and I think this is 
important to note, that there is about 700,000 elders in 
Massachusetts that will now benefit by having prescription Part 
D available to them.
    In anticipation of Part D, we anticipated certain 
transitional issues that would occur with the program, and 
prior to January 1, the legislature passed and the Governor 
signed a bill that accomplished a couple of things. One was for 
a formulary assistance, and while we recognize that the Federal 
requirement did have a 30-day transition, we wanted to backstop 
that and make sure that that would be available, so the State 
agreed that that would pick up if someone went and changed to a 
new insurance product and a particular drug was not included, 
that the pharmacist could fill that prescription for 30 days 
and that the Commonwealth would pick up that cost. In addition 
to that, we also did a cost sharing assistance and such that we 
took down the copays on Part D to what they had been 
historically under the Medicaid program in Massachusetts. So we 
had done that in advance just to make sure that as we were 
moving to a new system, which we were very excited about, that 
we would not have issues with a number of our participants.
    I would note on page four that we did, unfortunately, 
experience more transitional issues than we had anticipated. 
Our Office of Medicaid in 2002 established a Pharmacy Advisory 
Council. We work very closely with a lot of the major 
pharmacies within the Commonwealth to ensure that when we are 
delivering services through the Medicaid program, that it is 
done in the most efficacious way possible. We have had 
historically challenges with that, and I think through the work 
of Director Waldman and Paul Jeffrey that we have come a long 
way in Massachusetts.
    So we were watching very closely as soon as the Medicaid 
Part D launch date of January 1 hit to have a good 
understanding of what was going on within our community, and 
what we did find was that a number of dual-eligibles were 
experiencing great difficulty being able to fill prescriptions, 
specifically, and you have heard this all today so I don't want 
to spend too much time on it, but there were issues about 
overcharging of copayments, extensive system glitches.
    I think that this is one thing that CMS has been working 
hard on to fix, but data matches and the hand-offs between 
States to the Federal Government to the various plans, 
obviously, a number of complications. So people weren't seen 
within the systems when they were going into the pharmacies. 
Particularly, you had situations where individuals were signing 
up for the benefits or being auto-enrolled in the last week of 
December and then showing up the first day of January looking 
for a service and that was very difficult for individuals.
    In addition to that, numerous phone calls from consumers, 
their families, from pharmacists, from doctors spending a great 
deal of time on the phone trying to talk to plans, you know, 30 
minutes, 60 minutes, and obviously in the early weeks that was 
very challenging. So we did have situations where people were 
leaving pharmacies without drugs.
    On page five of the presentation, Governor Romney, after 
kind of surveying what had occurred during the first week in 
January, directed myself and the Office of Medicaid to put in 
place a system such that people would make sure that there was 
a seamless transition to Medicare Part D, and primarily what we 
did, both for the dual-eligibles and for people who were on the 
SPAPs, was that we would step in as a primary payor. If you 
will, we lifted the edits in our system such that pharmacists 
could then go and bill our Medicaid program. Those emergency 
measures went into place on January 7 for the Medicaid program, 
on January 11 for our SPAP program, and then we were 
encouraging the pharmacists and working with our council for 
them to bill Part D and also to use the Wellpoint system. But 
we did allow them to use the Mass Health, our Medicaid program, 
as a primary payor.
    I am pleased to report, however, that conditions are 
improving since we instituted these emergency measures. Through 
the countless hours of work of our program with consumers, with 
pharmacists in particular, we have been able to make dramatic 
improvements in such that what we have been able to do on 
January 26 is we have changed what the emergency measures that 
we are taking. So we are no longer allowing Medicaid to be, if 
you will, the first payer. We are making sure that the 
pharmacists are required to use the Wellpoint system or to bill 
the Medicare Part D plans, and they have to do that first 
before they are able to come to us on our program as a payor.
    On page seven, I think that there is some interesting data 
that I would like to share with you that demonstrates the 
effectiveness of what we have seen. What we did is we took 
snapshots of January 9, January 23, and January 31 to see where 
we were, and we looked at claims submitted to the Part D 
program, how many claims we paid, and then what was our average 
cost of a claim.
    So as an example, on January 9, we had 43,400 claims 
submitted to our plan. By the time January 31 rolled around, 
after we had, if you will, lessened the emergency measures by 
putting some edits back into our system, only 18,200.
    In addition to that, our claims paid declined from 35,000 
on January 9 to 5,000 claims on January 31, and our average 
cost per claim went from $45 on January 9 all the way down to 
$12 on January 31. So I think what we are seeing is that there 
are clearly systems issues that have occurred. CMS has been 
working very closely with us at the regional level in Boston 
and at the national level, our team at Medicaid has been 
working very closely with them to identify specific issues for 
individuals, systems issues for our total program, and they 
have been responsive.
    I would note that on January 25, Secretary Leavitt flew up 
to Boston, sat down with Governor Romney and myself to explain 
where he saw where the problems were, to talk about the 
demonstration project they were going to put forth as fixes for 
the Medicaid Part D roll-out. It is refreshing in that both 
Secretary Leavitt and the folks at CMS are stepping right into 
this, understand what the issues are, trying to work with the 
States. We obviously want to have a constructive engagement 
with them. We obviously would like to be reimbursed for the 
costs that we have incurred, and so we are hopeful, of course, 
that that will happen.
    Just some more facts just to give you a sense of what we 
have experienced in Massachusetts. Since we put emergency 
measures in place for the dual-eligibles, we have paid over 
400,000 claims that would have been under the Medicare Part D. 
The total value of those claims, $16 million, and we have 
serviced 100,000 unique members of our 190,000 individuals on 
the Medicaid program.
    Smaller information, or smaller numbers, I should say, for 
our SPAP but also equally as important to convey to this 
committee.
    I would say in closing, Mr. Chairman, that we recognize 
that there have been significant issues that have occurred as 
part of this transition. We knew that some of those would 
happen. This is a massive system changeover, and for those of 
us who do this for a living in terms of dealing with large 
health care programs, when you are changing over IT systems and 
starting huge new programs, you always go through this. We also 
recognize that at the individual level, these are very 
stressful circumstances when you are looking to get 
prescription drugs and you go in and you are not found within a 
system. People have an expectation when something worked on 
December 31, why doesn't it work on January 1? We need to pay 
attention to that and make the right type of steps to remedy 
those situations.
    Again, I think HHS and CMS have worked very closely with 
us. I know that they take this serious. We are looking forward 
to having a good dialog with them, and I would just suggest in 
closing that we want to make sure that the timeline and the 
process for reimbursement is easy for the States. We believe 
that we are being helpful in this transition and we need to 
have that recognized. We want to make sure that in the 
demonstration project that it is well defined as to what the 
administrative costs are to be reimbursed. Make that very clear 
for us so that we can get timely reimbursement back from the 
Federal Government.
    We would propose that the February 15 date be a date to aim 
for, but one that people need to take into consideration to see 
where we are at that particular time and that the SPAPs also do 
get reimbursed.
    I thank you for your time.
    The Chairman. That is excellent testimony. I hope that, 
based on what you have heard at this hearing today and your 
experience in Massachusetts, you are optimistic. That is my 
sense.
    Mr. Murphy. Yes, I am.
    The Chairman. You wouldn't scrap the program?
    Mr. Murphy. No. I mean, I would just state that we 
obviously have a number of folks on Medicaid, 190,000, who are 
receiving this benefit. But I think sometimes lost in the 
conversation are the 700,000 other seniors and disabled within 
Massachusetts that this is a new benefit and it will take some 
time for those people to recognize that through more education, 
but I know that Governor Romney and I find that to be 
particularly exciting.
    [The prepared statement of Mr. Murphy follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    The Chairman. Senator Kohl, do you want to introduce Ms. 
Sutter?
    Senator Kohl. Yes. We are very pleased to have Sue Sutter 
from Horicon, WI, with us today. She and her husband own two 
rural community pharmacies and Sue is the President-Elect of 
the Wisconsin Pharmacy Society, so we are delighted to have you 
and are excited to hear your testimony.

STATEMENT OF SUSAN SUTTER, PRESIDENT-ELECT, PHARMACY SOCIETY OF 
                     WISCONSIN, HORICON, WI

    Ms. Sutter. Thank you, Senator Kohl. Good afternoon, 
Chairman Smith, Senator Kohl. Thank you for conducting this 
hearing and for providing me the opportunity to address you.
    Yes, I am Susan Sutter and I am very proud to be a 
pharmacist and proud to be from Wisconsin. My husband and I 
have both been practicing pharmacists and own these two 
pharmacies in Horicon and Mayville, which are approximately an 
hour from Madison and Milwaukee, for over 25 years, and I am 
the president-elect of the Pharmacy Society of Wisconsin, which 
is the State's professional society of pharmacists.
    When it comes to Medicare Part D, I have been asked, which 
side am I on? It is critical for your consideration of my 
comments today to understand that my husband and I, as well as 
our pharmacist colleagues, are on the side of our patients. 
Pharmacists and seniors have been frustrated together with the 
rocky start of this new program.
    It is important to emphasize that the provision of a 
pharmacy benefit for Medicare recipients is a valuable addition 
to the health care of everyone enrolled in the program, 
especially those without prior prescription drug insurance. 
However, implementation and use of the Part D benefit has been 
an enormous challenge for everyone involved. Calling these 
challenges merely glitches diminishes what tens of thousands of 
pharmacists and pharmacy technicians have had to do in our 
attempt to provide medications to our patients when the system 
has not worked the way it is supposed to work.
    CMS has worked diligently to address many of the Part D 
problems and some have lessened, but significant problems 
remain and millions of seniors are yet to enroll in the 
program.
    I won't waste your time today pointing fingers. Rather, my 
appeal to you is to acknowledge that the problems exist and for 
you to demand that they be corrected immediately.
    I will begin with the complexity of the program. It must be 
made easier to understand, easier to enroll, and easier to use. 
I recognize that can't happen overnight, but steps to simplify 
and standardize the Part D program can and should begin in 
earnest.
    As part of my written testimony, I have provided for your 
consideration a list of 15 specific problems and 15 
corresponding recommendations for resolving those problems. 
Time does not permit me to review this list, but please 
consider it a pragmatic tool for making Part D work. Some of 
the solutions I have outlined must be implemented by the 
prescription drug plans, some may require changes at CMS, and 
others may require Congress to act, but each deserves serious 
consideration.
    The health care needs of Medicare patients are as diverse 
as their last names. Because PDPs have built their programs on 
norms, many of those diverse needs are not being met. For 
example, discharges of some hospitalized patients are being 
delayed because their at-home medications can't be authorized. 
Thousands of seniors at home in assisted living facilities, 
mental health clinics, have lost the special packaging of 
medications they relied upon to take their medications safely 
and correctly because a PDP won't authorize these packaging. 
These examples are prevalent and they have significant cost and 
quality of care consequences.
    I have been surprised to see that CMS makes requests, not 
mandates, to the PDPs to get the program right. I think that is 
unacceptable and perhaps so does CMS. It appears that CMS does 
not have sufficient authority to regulate PDP policies and 
activities. They should be given that authority and they should 
use it, and there should be significant financial penalties 
assessed to the PDPs when they fail to perform.
    To illustrate this point, after learning of coverage 
problems in the first week of January, CMS asked for a second 
time that all PDPs remove prior authorization requirements and 
allow a 1-month transitional supply of each medication for 
every Part D enrollee. Some plans have complied with this 
request, but many have left various hoops and hurdles in place 
to make it overly difficult to provide essential medication 
therapies. Insurance plan rules have overruled patient needs 
and it should be the other way around. This burdensome process 
must change.
    Medicare Part D was created so that recipients would be 
properly treated. In closing, I must emphasize that the 
nation's pharmacy providers must also be fairly treated. It 
hasn't happened and it won't unless Congress steps in. We 
pharmacists simply want to care for our patients and be paid 
for the services we provide. Rather than recognizing the 
valiant effort and sustained contribution of the nation's 
pharmacists over the past week, the Part D benefit is 
undercutting the financial viability of the very pharmacy 
infrastructure that it depends on.
    I look forward to your questions and I ask for your 
leadership and resolve in ensuring fair treatment both for 
recipients and the providers of the Part D benefit. Thank you.
    Senator Kohl. Thank you for your testimony.
    [The prepared statement of Ms. Sutter follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Senator Kohl. I have just one question I would like to ask 
you. I am sure you have experienced, as other small and medium-
sized pharmacies in Wisconsin and across our country have, 
going to the length of having at times to take out lines of 
credit or to extend credit for which they don't have the 
resources and shouldn't be doing it, but to see to it that 
their patients are served. What has been your experience and 
what do you suggest we do to remedy this situation as quickly 
as possible?
    Ms. Sutter. Certainly. There are a number of financial 
things on different levels. First of all, the amount of time, 
uncompensated time, the work that we are doing administratively 
within these pharmacies because of what was not set up properly 
and proper training at the PDPs, we have hundreds of hours 
across these pharmacies and across the country. In addition to 
that, pharmacists like ourselves have given free drugs, 
medications, to our patients with the hope and understanding 
that we will get some type of reimbursement. Certainly other 
pharmacies, and I have heard it a great deal in the last week, 
have gone to the point of needing line of credit because most 
of our wholesaler bills are now due.
    That is only the first line of the financial issues. 
Senator Lincoln earlier commented about the issues with the 
contracts with the PDPs. It is take it or leave it. Yes, there 
are rural pharmacies that can use the access requirement to 
possibly get negotiations with these PDPs, but we still have 
two. One of our pharmacies meet that access requirement. We 
have two that have not negotiated in good faith to contract 
with us.
    But I also want to state, there are pharmacies in the urban 
area where the density requirements or the access requirements, 
you are still asking patients to change pharmacies. One of the 
things that I hope that everyone understands, having gone 
through what they have gone through in this first month, is 
that many, many, many of these patients have patient-pharmacist 
relationships and you are taking away their choice of staying 
with the pharmacist that they trust. These contracting problems 
that we are having, they may have a certain set of pharmacies 
in an urban area, but they have to leave the clinic pharmacy 
that they have a relationship or a specialized pharmacy through 
a health system that they have been using.
    So as we address those issues, I want you to understand 
that the contracting, the overall contracting issue is going to 
be an ongoing financial issue for us.
    Senator Kohl. Thank you. Your testimony, your experience, 
the kind of perspective you bring to this issue is really 
important to this committee and I appreciate very much your 
coming here today.
    Ms. Sutter. Thank you, Senator.
    The Chairman. Tim, you just heard Sue's testimony. Is that 
familiar to you in Massachusetts?
    Mr. Murphy. Yes. It was interesting, because when other 
folks were talking about that today, I turned to Paul and 
asked, what have we heard in Massachusetts, and it is a little 
different in that it is clear that a number of pharmacists have 
given free drugs to folks to kind of, if you will, tide them 
over while they were trying to find and identify them within 
the system. I think in Massachusetts, because we acted so 
early, though, in terms of, if you will, turning the edits off 
of our Medicaid system to allow people to bill, that we were 
able to address this problem such that our pharmacists aren't 
in the same situation that you are hearing from other parts of 
the country today, and so we haven't heard situations of people 
taking lines of credit or things like that, and I would turn to 
Paul just to make sure I am not overstating that case. It is 
consistent.
    The Chairman. Sue, you had many good ideas there and we 
will continue to push them. Thank you.
    Ms. Sutter. Thank you.
    The Chairman. Mark Ganz, Regence Group, Oregon. Welcome.

   STATEMENT OF MARK B. GANZ, PRESIDENT AND CHIEF EXECUTIVE 
OFFICER, REGENCE GROUP, PORTLAND, OR; ON BEHALF OF THE NATIONAL 
             BLUE CROSS AND BLUE SHIELD ASSOCIATION

    Mr. Ganz. Thank you, Chairman Smith, Senator Kohl, for the 
opportunity to testify about an issue that touches so many. My 
name is Mark Ganz. I am president and chief executive officer 
of Regence Blue Cross Blue Shield, a taxable not-for-profit 
health insurer. We are one of the oldest plans in the country 
and the largest in our region, serving over three million 
people in Washington, Idaho, Utah, and Oregon.
    Regence has been serving Medicare beneficiaries since the 
program began in 1965, so we know a lot about their needs and 
their expectations. To make Part D a success, we knew it would 
take one-on-one, face-to-face engagement, a huge investment of 
people and resources for our company. So it was only after 
careful deliberation that we decided to take on this challenge.
    A key reason that we got involved with Part D was that we 
knew we could save seniors money on their medications. Regence 
operates one of the few in-house not-for-profit pharmacy 
benefit programs in the country. Our nationally recognized 
program has saved our members more than $370 million in drug 
costs over the past 5 years. We were, quite frankly, very 
excited about the opportunity to expand these savings to 
Medicare beneficiaries.
    Also, I had personally experienced the plight of 
beneficiaries who existed without drug coverage. My mother has 
been spending more than $8,000 a year on drugs, paying full 
price at the pharmacy. She called me for help on Part D and we 
spent a few hours going over her drug list and different plans 
to see which might work best for her over the Thanksgiving 
holiday. As a son, it was a humbling reminder that this person 
who once took care of me now needed me to help take care of 
her. Thanks to the Part D program, she will save at least 
$4,000 a year. That is a big deal for her as she approaches 80 
and beyond. For me, that is what this program is about.
    We all share a commitment to Americans who need Part D and 
need our help to make it work for them. This commitment is what 
has guided our service to seniors for more than 40 years and is 
precisely how we approached our implementation of Part D, one 
person at a time.
    So what did we do to gear up for Part D? First, we prepared 
ourselves, our partners, including all of the pharmacists, and 
our members for what was coming. We reached out to them early 
and often.
    Second, we did our best to anticipate the inevitable 
problems and glitches. We developed ``what if'' scenarios so we 
could identify risks and develop solutions ahead of time.
    My written testimony outlines the proactive steps we took 
beginning last summer. Let me simply say that it was a massive 
mobilization effort that required an all hands on deck attitude 
at our company, and our planning has largely paid off.
    Even so, when October 15 arrived, we were immediately 
swamped. The response to this program was far beyond anything 
we had anticipated. Here are just a few examples.
    In 1 month, we have enrolled 63,000 people, more than three 
times the total we enrolled in that market segment the prior 2 
years combined.
    Call volume to our government program line has more than 
tripled, from 12,000 to over 40,000 per month. Many seniors 
have called us ten, even 20 times for advice.
    At the nearly 300 seminars and outreach sessions that we 
did, we engaged more than 17,000 people personally who wanted 
to get advice and answered questions, and I personally was 
engaged in some of those outreach sessions.
    So how are we doing today? Overall feedback has been 
positive from our State governments, from pharmacies, and from 
our members. I don't want to mislead you. We have not been 
perfect. We have had our share of problems--fortunately, not 
with my mom, yet, although I am sure I will hear from her if we 
do.
    But our primary objective has remained intact. We give 
seniors the benefit of the doubt if any question arises and we 
tell the pharmacies, fill the prescription. We will pay you. We 
are taking the financial liability, and if we end up 
overpaying, we do not intend to go and seek the reimbursement. 
We are just paying it now. We will sort out the discrepancies 
later. As a result, Regence members are getting their 
medications and they are calling to say, thanks for being on 
their side.
    Here are a few more numbers. As of January 23, we have 
filled 120,000 prescription drug claims. As of January 20, we 
had paid out to pharmacies $7.5 million in medication claims.
    While we are proud of our success, we are not sure that 
that performance is all that unusual. We believe that the 
health care industry has been working hard to help people 
through this major transition. During the moments of 
frustration, it might be tempting, even satisfying, to focus on 
the flaws and point the finger. But for those of us on the 
front lines, it is more important right now to persevere, work 
with our partners to solve problems, and keep a laser focus on 
the people we are here to serve.
    Any human endeavor, especially one that involves 43 million 
Americans, will have challenges and have human errors. At 
Regence, our goal has been to minimize problems and maximize 
access and personal engagement, one beneficiary at a time. We 
think it is working and the effort is worth it for our members.
    So on behalf of the 5,500 Regence employees that I am here 
representing, I am honored to share our story with you. Thank 
you for inviting me and I am happy to answer any questions.
    [The prepared statement of Mr. Ganz follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    [GRAPHIC] [TIFF OMITTED] 
    
    The Chairman. Mark, your very insightful and helpful 
testimony is particularly memorable regarding your mom. Do you 
at Regence find that you are able to work with the seniors to 
get through the frustration and get them enrolled? Do they 
appreciate the amount of savings that are there for them? I 
mean, your mom, I am sure, is aware that there are $4,000 
annual savings available to her.
    Mr. Ganz. Right. I think it is early on, so I think that 
the appreciation will increase as people see the actual savings 
and can compare it to the full price they have been paying in 
the past, because they are not only going to get coverage, but 
they are also getting the benefit of a greater focus on 
generics and other things that will actually help lower their 
costs. So I think that that will increase over the year. I 
mean, we are very early on in this program.
    But yes, I think the main thing we have heard from seniors 
is they have appreciated the personal outreach. That is how 
they like to process. That is how they learn. They are not 
going to learn it from just getting a brochure in the mail. 
They need to really go through it.
    The Chairman. Our thanks to all three of you and our other 
two panels. You have added measurably to our Senate record and 
we clearly understand from you that it is not perfect, but it 
can get a lot better if we keep working on it. So thank you and 
thank you, Senator Kohl. I think this has been a very 
informative hearing for all members.
    We are adjourned.
    [Whereupon, at 1:09 p.m., the committee was adjourned.]


                            A P P E N D I X

                              ----------                              


               Prepared Statement of Senator Larry Craig

    Thank you, Mr. Chairman, for convening this important 
hearing to assess the implementation of the new Medicare Part D 
prescription drug program. I think one month into the roll-out 
of the program is an opportune time to reflect on the progress 
we have made, the short-comings we have already identified and 
to discuss possible solutions to some of the problems we face.
    I do not want to suggest that all of the news surrounding 
this program is unfavorable. In fact, just the opposite is 
true. I think the American public has a lot to be proud of when 
we look back on our first month. CMS is reporting that over 1 
million prescriptions per day are being filled for our nation's 
most vulnerable citizens. In addition--contrary to many 
predictions at the time of enactment--dozens upon dozens of 
companies are participating in a market-based system to provide 
medications to tens of millions of citizens. In my own State of 
Idaho alone, there are 19 different companies offering over 40 
plans from which beneficiaries can receive prescription 
medications at significant discounts. One of those providers, 
The Regence Group, is here today to testify about their 
experience in implementing this important new program. I want 
to thank them for their willingness to come and offer their 
perspective and advice.
    Of course, not all of the news is good either. As I 
mentioned at the outset of my statement, a few serious short-
comings have been identified in the implementation of this 
program, particularly in the transition of our Medicaid 
patients from state coverage to Medicare coverage. This 
complicated transitional period has been weighed down by a lack 
of understanding at the retail pharmacy and consumer level as 
well as a lack of timely and helpful service at the industry 
and governmental levels. Pamphlets and mass mailings are 
important. But, I think most of you would agree there is no 
substitute for one-on-one human interaction where questions can 
be posed and answered correctly. I know CMS and industry have 
been training call center employees for months and recently 
have even increased their call center efforts. That is a 
welcome and important step. Now, it is time to pass on the best 
available, most accurate information to our beneficiaries, 
pharmacists, and providers.
    Mr. Chairman, just three years ago, Congress and the 
President set out on a bipartisan mission to provide affordable 
prescription medications to America's seniors and Medicaid-
eligible citizens. Together, we put our best efforts forward, 
forged many compromises, and to a large degree have 
accomplished what we set out to achieve. Is our program 
perfect? No. But, I believe that constructive reviews, such as 
this hearing, coupled with the best intentions of the American 
people will ultimately perfect this program for the betterment 
of all of our deserving seniors and citizens in need.
    Thank you again, Mr. Chairman.
                                ------                                


              Prepared Statement of Senator Susan Collins

    Mr. Chairman, thank you for holding this hearing to discuss 
critically important issues related to the implementation of 
the Medicare Part D drug benefit.
    The addition of a prescription drug benefit represents the 
broadest expansion of Medicare since the program's inception in 
1965. This important new program has the potential to provide 
prescription drug coverage--for the first time--to more than 11 
million Medicare beneficiaries who previously had to pay for 
their prescriptions out of their own pockets. Moreover, the 
program has the potential to improve coverage for millions more 
who had coverage that was less generous than the new Part D 
benefit.
    Unfortunately, however, the implementation of this new 
benefit has been fraught with serious problems and missteps. 
Given the magnitude of the new program, I think that everyone 
anticipated some start-up difficulties. But it is now evident 
that the Centers for Medicare and Medicaid Services has made 
some major errors and miscalculations. Of particular concern is 
the fact that some of our poorest and sickest seniors are the 
ones who have had the most trouble with the new benefit. We 
must therefore make every effort to identify and rectify these 
problems as quickly as possible.
    I understand that CMS has taken some steps to address a few 
of the problems that have been identified. For example, they 
have dramatically increased the staff at the call center for 
pharmacists, and they have also improved the speed and accuracy 
of the ``E-1'' computer system that can be used to check a 
beneficiary's enrollment. The Committee will be hearing later 
from a pharmacy representative who I hope will tell us whether 
these changes have made their jobs any easier.
    Maine was the first state to step in and say that, if a 
pharmacist is unable to confirm that a Medicare beneficiary is 
enrolled in a Part D plan because of a computer glitches or 
another problem--the state will cover the costs of the drugs. 
Governor Baldacci is to be commended for stepping in to provide 
this safety net, and I am committed to making sure that my 
State is not saddled with millions of dollars in costs due to 
the federal government's problems in implementing the new 
benefit.
    Secretary Leavitt has given me personal assurances that 
Maine will be reimbursed for the money it is spending to 
prevent any disruption of benefits for our seniors. I have also 
joined a bipartisan group of my colleagues in introducing 
legislation that would require the Department of Health and 
Human Services to do so.
    As problematic as the start-up has been, this new Medicare 
benefit has the potential to provide much-needed relief from 
high prescription drug costs, particularly for those seniors 
and disabled individuals who previously had no coverage at all. 
It is therefore imperative that we work together to identify 
problems quickly and make the changes necessary to make the 
program work.
    Again, I want to thank the Chairman for calling this 
hearing.
                                ------                                


             Prepared Statement of Senator Russell Feingold

    I thank the Chairman for holding this hearing today. The 
implementation of the Medicare Prescription Drug Benefit has 
been of great concern to me as well as my constituents in 
Wisconsin, and I am pleased that the Committee on Aging is 
examining some of the serious problems that have occurred since 
January 1st of this year. I am also pleased that Senator Kohl 
has invited Sue Sutter, a community pharmacist from Wisconsin, 
to come and testify before the committee today. Sue and her 
husband, John, own two pharmacies in Wisconsin, and I know that 
she will provide a much-needed perspective on the effects of 
this program on independent pharmacies in rural communities.
    Supporters of the Medicare Prescription Drug Benefit have 
touted it as the vehicle that would supply affordable, easily 
accessible prescription drugs for seniors. The program has so 
far fallen far short of that goal. The outcry that I have heard 
from pharmacists, beneficiaries, and health care providers over 
the past few weeks makes clear that the implementation of the 
program has been a disaster. This program has not provided 
either affordable or easily accessed drugs to many Medicare 
beneficiaries. Instead it has presented providers and 
beneficiaries with frustration, confusion, expensive 
medications, and sometimes no medications at all. It is 
unacceptable for individuals to go without life-saving 
medications, yet this is what has been happening in Wisconsin 
and across the country since this program commenced.
    Since the beginning of January, I have received panicked 
phone calls from people in my state saying that they were 
unable to receive drugs that they had been routinely getting at 
their pharmacy every other month. Many calls were from people 
who could not receive essential drugs such as insulin, anti-
psychotics, or immunosuppressants for transplant patients. At 
the same time as I was hearing from people suffering from pain 
because they did not receive their pain medications, I received 
press releases from the Centers for Medicare and Medicaid that 
expressed satisfaction with the launch of the program, and 
boasted on the millions of participants in the program. There 
may be millions participating in the program, but too many of 
them cannot receive their drugs and too many pharmacists are 
unable to comply with the complicated regulations in the 
program. CMS should be focusing its efforts on addressing this 
emergency rather than disseminating public relations messages.
    I hope that this hearing will provide a forum in which 
important questions will be answered, and that solutions will 
be found to the multi-faceted troubles that have occurred as a 
result of this program. I have written Secretary Leavitt and 
Dr. McClellan repeatedly to voice my concern about Medicare 
Part D, but I have not yet received a single response.
    Some of the problems that I hope are addressed by the 
administration today include the supposed contingency plans for 
implementation that have failed. The transitional plans offered 
by the private drugs plans have often been inadequate. While a 
30-day supply of drugs has been encouraged by CMS, it has not 
been required. I think it is time that CMS remember who this 
plan is supposed to serve: the people, not the drug and 
insurance companies.
    I also hope that the many problems regarding dual eligibles 
are addressed in this hearing. I was disheartened to learn that 
some beneficiaries had to pay for their drugs on their credit 
cards, their only other option being to go without their 
medications. Those with little income will be paying for these 
drugs for months, with interest, and this is a sad burden for 
the federal government to place on the neediest in society. 
Other dual eligibles are entirely without drugs or have had 
gaps in their treatment. This is unacceptable, and I hope this 
is addressed today.
    Additionally, I hope that CMS will properly address the 
issue of reimbursement for the state governments. Many states, 
including Wisconsin, came to the aid of the public when the 
federal government would not by enacting emergency provisions. 
Now, these states are depending on the federal government to 
act responsibly and reimburse them for funds that were spent 
out of tight state budgets. To date, the administration has put 
in place a complicated system that forces states to bill 
various private drug plans. This is an undue burden for states 
short on cash and personnel, and I hope that CMS will provide 
an adequate alternative.
    We cannot sustain a great nation if we do not care for our 
elderly, sick, disabled, and home-bound. These are the people 
this drug plan is supposed to be serving, and I fear that they 
have been dismally let down the past month. Let us not wait any 
longer. There is an opportunity at this hearing to find 
solutions, and I hope that this opportunity will be seized by 
my colleagues and the administration.
                                ------                                


              Prepared Statement of Senator Rick Santorum

    Good morning, I would like to thank the Chairman for 
holding today's hearing and providing an opportunity to discuss 
a very important topic--the implementation of Medicare Part D. 
I would also like to thank today's panelists for taking the 
time to share their own experiences with the implementation of 
this important benefit and their suggestions for how it can be 
improved. As a member who represents a state with one of our 
nation's largest senior populations, ensuring that my 
constituents have access to medically necessary prescription 
drugs is one of my highest priorities.
    Since Medicare Part D implementation began, all of us have 
heard the anecdotal reports of confusion and frustration that 
have stemmed from the inherent challenges of implementing the 
most comprehensive improvement to the Medicare program since 
its inception over forty years ago. As I have personally 
communicated to Secretary Leavitt and Dr. McClellan, it is 
unacceptable if even one of our most vulnerable citizens has 
encountered any difficulty in obtaining medically necessary 
drugs. Any problems that have been identified since the 
Medicare drug coverage began must be addressed immediately. I 
look forward to accompanying Secretary Leavitt to Pennsylvania 
later this month so that he can see first hand what my 
constituents are experiencing.
    The Aging Committee is taking an important first step in 
delving into issues related to Medicare Part D implementation, 
and next week's Senate Finance Committee hearing will build 
upon today's discussion. Many of the questions and concerns we 
are hearing about Medicare Part D implementation mirror those 
from the early days of implementing the original Medicare 
program in 1966--problems which have long since been resolved. 
Over the past forty years, Congress has strengthened and 
improved Medicare to ensure that program has kept pace with 
improvements in health care. I would caution my colleagues that 
hastily drafted legislative ``fixes'' to improve this nascent 
program would be premature as the program is only in its second 
month, and each day we are hearing positive reports of 
continuing improvements. Just as Congress has acted to 
strengthen and improve Medicare over the past forty years, I am 
confident that Congress will continue to work with CMS to act 
as necessary to strengthen and improve Medicare Part D. Honest 
discussions such as today's are an essential step in ensuring 
that such improvements are the result of a policy driven 
process.
    Last week I received a letter from a senior in Doylestown, 
Pennsylvania. She wrote, ``Senator Santorum, thank you for 
supporting the Medicare prescription plan. Today I paid $9.60 
for a 90 day supply of my hypertension medication which in 2005 
cost me $45.'' Thanks to Medicare Part D, this Pennsylvania is 
not only saving on her drug costs, but she has the peace of 
mind of knowing that her financial health is protected against 
catastrophic drug costs. We cannot lose sight of the enormous 
potential of this benefit to improve the health of millions of 
Americans; yet, this potential cannot be fulfilled unless the 
problems the program is experiencing today are successfully 
resolved.
[GRAPHIC] [TIFF OMITTED] 

               Prepared Statement of Senator Mel Martinez

    First, I would like to thank the Chairman and the Ranking 
member for holding this critical hearing.
    Clearly, the implementation of Medicare Part D has been a 
massive undertaking. And, with most undertakings of this 
proportion, problems can and have arisen.
    But we must not lose sight that the kinks in the system are 
being addressed and their impact minimized more each day as the 
process continues to move forward.
    A project of this magnitude is going to have rough spots as 
it starts. The goal must be to improve and so so in a timely 
manner.
    However, I have been greatly concerned about the impact on 
some of Florida's most vulnerable population the roughly 400,00 
dual eligibles that reside in the state.
    It has been reported that a portion of these low income 
individuals are experiencing great difficulty in gaining access 
to much needed medications.
    To stave off a crisis situation, I am very pleased that the 
Centers for Medicare and Medicaid Services (CMS) announced a 
state reimbursement plan for costs associated with the 
successful transition of dual eligible Medicare beneficiaries 
into their new Medicare coverage.
    Governor Bush, after consultation with Florida House and 
Senate leadership, also signed an Executive Order providing 
authorization for Florida's Agency for Health Care 
Administration (AHCA) to apply for this waiver.
    Florida's temporary waiver will provide one more tool for 
AHCA to handle cases-particularly those in the low-income 
subsidy category-to transition successfully to Medicare without 
the burden of unwarranted deductibles, co-insurance or 
excessive co-payments.
    This waiver will allow the state to focus its efforts on 
those who are still confronting problems and to resolve those 
issues as quickly as possible.
    With that said, I look forward to hearing from Dr. Mark 
McClellan for an update on the situation and the views of the 
other panelists we have here today. Thank you.
                                ------                                


            Questions from Senator Santorum for Robert Kenny

    Question. What advice would you offer to a Medicare 
beneficiary who may be reluctant to find out about or enroll in 
Medicare drug coverage?
    Answer. The new Medicare Part D Prescription Drug Coverage 
bill seems to be either liked or disked. I will not attempt to 
settle that argument here.
    The real question needs to be, ``Now that it is here, 
should I join or not?'' The answer is, ``Yes, join.''
    Yes, join even if you do not like the law, the people who 
wrote it are anything else about it. Join even if you think it 
is big, dumb and overly complicated.
    Yes, join if you spend as little as $35 a month for 
prescription drugs. There is a plan that will save you money. 
Yes, join even if you do not spend $250 to use the deductible. 
Most of us use more drugs as we age and even if you are not 
spending it now, there is an excellent chance you will spend 
much more than that in the future. Joining now may seem like a 
waste of money but there is a 1% a month additional charge if 
you wait to join until after May 15, 2006. Plans are available, 
in our area, for as little as $6.93 a month, so it does not 
cost much to avoid the stiff penalty.

            Questions from Senator Santorum for Susan Sutter

    Question. You criticized the prescription drug plans' 
efforts to provide support to pharmacists-can you speak to how 
effective education efforts have been on the part of CMS and 
prescription drug plans since January 1st? How do you believe 
these efforts could be approved?
    Answer. Quite frankly, pharmacists have gone from a severe 
lack of information from the plans prior to January 1st to 
``information overload'' from both CMS and the plans as the 
challenges and problems of implementation have been identified. 
Pharmacists are now faced with tons of documents from the plans 
which can only be implemented if the pharmacist continues to 
shift their professional time to these administration issues 
instead of serving their patients and their needs. The problem 
with the volume and variety of information we are now receiving 
confirms what I stated in my testimony--the Medicare Part D 
benefit needs to be simplified and standardized.
    Until the larger issue of standardizing the plan can be 
addressed, CMS should be directed to clearly delineate what 
information CMS will provide and that which should come from 
the plans. For example, CMS could define what areas of 
information all plans must have policies on and direct the 
plans to provide that information in a concise common format 
for easy review for the pharmacist.
    All of this written information does not help patients 
receive their medications if the individuals on the plan's 
``help'' desk are not adequately trained or educated to 
implement the plan's policy correctly. After two months, some 
plans still have pharmacists working through a maze of phone 
numbers or individuals to get a problem resolved.
    Finally, let me share a personal example of obtaining 
information, but finding it difficult to use the information to 
actually serve the patient. A patient (not a dual-eligible) 
came in my pharmacy yesterday to have his medication refilled 
and presented his Part D card that he had finally received. I 
asked when his benefit was effective and he stated January 1st. 
I offered to send his January claims to his plan and refund any 
difference. I made the offer because I had read that CMS 
requested that the plans open their claims processing 
``windows'' (which often are only open for 30 days or less) to 
accommodate this type of situation. I received the message 
``claim too old'' and confirmed through the PBM's help desk 
that the patient would have to file paper claims to be 
reimbursed. I contacted the plan's Director of Pharmacy to 
confirm that the plan had decided to ignore CMS's request. He 
stated that the plan wants the claims to be accepted but that 
the PBM is saying no to the plan and it remains a point of 
``discussion'' between the plan and the PBM. In summary, it 
only confuses the situation to communicate directives from CMS 
if the plans, or in this case, the plan's PBM, can ignore the 
request. Again, CMS needs the authority to mandate, not simply 
request, such directives to the plans.
    Question. Have recent efforts on the part of CMS, such as 
pharmacy call-in sessions, been helpful in clarifying 
confusion?
    Answer. Pharmacists appreciate CMS's outreach efforts but 
not all pharmacists are able to participate in the call-in 
sessions. In addition, the session conducted on Part B versus 
Part D drug coverage was very useful. However the most common 
problem for pharmacists is that the Part D plans themselves are 
not clear on the issue. CMS must follow through and audit the 
Part D plans' proper coverage of these drugs.
    The most effective method CMS has used is communicating 
through the pharmacy professional associations. As a member of 
several of these associations, I appreciate the outreach to 
them.
    Going forward, CMS should identify one method of 
communication--one spot on the CMS website or one e-mail 
listserv--to communicate with pharmacists. If such an effort 
was made, pharmacists would know there was a simple, quick way 
to find information on Part D and look for updates.
    Thank you for your interest in the challenges pharmacists 
are facing with the implementation of Medicare Part D.

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

[GRAPHIC] [TIFF OMITTED] 

                                 
