Medicare: CMS's Beneficiary Education and Outreach Efforts for	 
the Medicare Prescription Drug Discount Card and Transitional	 
Assistance Program (18-NOV-05, GAO-06-139R).			 
                                                                 
The Medicare Prescription Drug, Improvement, and Modernization	 
Act of 2003 required the Centers for Medicare & Medicaid Services
(CMS) in the Department of Health and Human Services (HHS) to	 
broadly disseminate information on the program to the millions of
Medicare beneficiaries--seniors and people under age 65 with	 
permanent disabilities--who are eligible for a drug discount	 
card. In response, CMS began education and outreach efforts	 
designed to publicize the availability and features of the drug  
discount cards, provide information to facilitate beneficiary	 
choice, and assist beneficiaries with the enrollment process.	 
Congress asked us to provide information on CMS's efforts because
the agency's experience in supporting the drug card program may  
yield important insights relevant to implementing the new	 
prescription drug benefit that becomes effective in 2006. In this
report, we (1) describe CMS's education and outreach efforts in  
support of the drug card program and review assessments of these 
efforts by public and private health care research organizations 
and (2) provide data on enrollment in the drug card program and  
identify factors that may have limited this enrollment. 	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-139R					        
    ACCNO:   A41857						        
  TITLE:     Medicare: CMS's Beneficiary Education and Outreach       
Efforts for the Medicare Prescription Drug Discount Card and	 
Transitional Assistance Program 				 
     DATE:   11/18/2005 
  SUBJECT:   Customer service					 
	     Drugs						 
	     Government information dissemination		 
	     Health care cost control				 
	     Health care programs				 
	     Medicare						 
	     Public assistance programs 			 
	     Prescription drugs 				 
	     Medicare Prescription Drug Discount Card		 
	     and Transitional Assistance Program		 
                                                                 

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GAO-06-139R

     

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November 18, 2005

The Honorable Henry A. Waxman

Ranking Minority Member

Committee on Government Reform

House of Representatives

Subject: Medicare: CMS's Beneficiary Education and Outreach Efforts for
the Medicare Prescription Drug Discount Card and Transitional Assistance
Program

Dear Mr. Waxman:

Established by the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), the Medicare Prescription Drug Discount
Card and Transitional Assistance Program1 is designed to help participants
obtain prescription drugs at reduced prices.2 All Medicare beneficiaries,
except those with drug coverage through Medicaid, are eligible to enroll
in the program to obtain drug discount cards, which are offered through
private sector sponsors. In addition, enrollees in the program with low
incomes who lack other drug coverage are also eligible for up to $600 each
year in transitional assistance to help pay for their prescriptions. The
drug card program, which began enrolling beneficiaries in May 2004, serves
as an interim measure until January 1, 2006, when, in accordance with MMA,
a prescription drug benefit becomes available to the nearly 42 million
people enrolled in Medicare.

MMA required the Centers for Medicare & Medicaid Services (CMS) in the
Department of Health and Human Services (HHS) to broadly disseminate
information on the program to the millions of Medicare
beneficiaries-seniors and people under age 65 with permanent
disabilities-who are eligible for a drug discount card. In response, CMS
began education and outreach efforts designed to publicize the
availability and features of the drug discount cards, provide information
to facilitate beneficiary choice, and assist beneficiaries with the
enrollment process. You asked us to provide information on CMS's efforts
because the agency's experience in supporting the drug card program may
yield important insights relevant to implementing the new prescription
drug benefit that becomes effective in 2006. In this report, we (1)
describe CMS's education and outreach efforts in support of the drug card
program and review assessments of these efforts by public and private
health care research organizations and (2) provide data on enrollment in
the drug card program and identify factors that may have limited this
enrollment.3

1Throughout this report we refer to the Medicare Prescription Drug
Discount Card and Transitional Assistance program as the drug card
program.

2Pub. L. No. 108-173, sec. 101(a), S: 1860D-31, 117 Stat. 2066, 2131--48
(to be codified as 42 U.S.C. S: 1395w-141).

To do our work, we focused on several key education and outreach efforts
that CMS used to provide Medicare beneficiaries with information on the
drug card program. We interviewed CMS officials involved in planning and
implementing the program's education and outreach efforts and reviewed
relevant agency documents. We also reviewed various assessments of CMS's
drug card campaign as well as relevant studies of some of CMS's
traditional means of disseminating information about Medicare.
Specifically, we reviewed assessments by various research organizations,
other government entities, and beneficiary advocacy groups as well as our
own previous reports. These included assessments conducted by AARP, Abt
Associates, the American Enterprise Institute (AEI), the Congressional
Research Service (CRS), the Kaiser Family Foundation (KFF), the Medicare
Payment Advisory Commission (MedPAC) and the Medicare Rights Center. We
provided information on CMS's expenditures on specific efforts in the drug
card campaign to the extent such information was available.

We obtained program enrollment data from CMS. To initiate a beneficiary's
enrollment for the drug discount card and for transitional assistance, CMS
determines the applicant's eligibility using Medicare and Medicaid
enrollment data and federal sources of income data. Although we did not
independently verify the accuracy of CMS's program enrollment data, we
believe they are sufficiently reliable for the purposes of this report.
Our work was performed from May 2005 through November 2005 in accordance
with generally accepted government auditing standards.

Results in Brief

CMS implemented a variety of education and outreach efforts that included
the use of mass media and individualized counseling to inform
beneficiaries about the drug card program and to assist in enrollment.
Assessments we reviewed showed that CMS was effective in raising awareness
of the drug card program, but was less effective in its efforts to inform
and assist beneficiaries. In general, studies found that CMS's efforts did
not consistently provide information that was clear, accurate, and
accessible, and they collectively fell short of conveying program
features. At the same time, these assessments acknowledge the actions
taken by CMS to address some of these problems. Studies we examined
indicated that disseminating information via mass media and direct mail
may not have been effective in reaching beneficiaries, particularly those
with low incomes. Studies also found that CMS's telephone help line and
Web site did not always provide the information beneficiaries needed to
choose a card that was best for them. Assessments also showed that
CMS-funded State Health Insurance Assistance Programs offering one-on-one
counseling provided valuable assistance to beneficiaries but were limited
in the number of people they could serve. An analysis of CMS partnerships
with community-based organizations showed that these organizations could
have been utilized more effectively in promoting the drug card program.

3Other GAO products related to this topic include Medicare: CMS's
Implementation and Oversight of the Medicare Prescription Drug Discount
Card and Transitional Assistance Program, GAO-06-78R (Washington, D.C.:
Oct. 28, 2005), and a review of sponsors' processes related to the drug
card program (forthcoming).

As of September 1, 2005, about 6.4 million Medicare beneficiaries were
enrolled in the drug card program, including 1.9 million who received
transitional assistance. Many more beneficiaries were automatically
enrolled than enrolled on their own. A variety of factors may have limited
enrollment in the program. CMS attributed the extent of enrollment to
confusion and misperceptions about the drug cards among Medicare
beneficiaries. In addition, other assessments noted that the drug card
program's unfamiliar design, abundance of choices, and uncertain value may
have discouraged some beneficiaries from enrolling.

Background

The drug card program is operated through private drug card sponsors,
approved by CMS, and provides discounts off the retail price of
prescription drugs.4 On average, beneficiaries have a choice of 37 general
drug discount cards-including both national (nationwide) and regional
(state specific) cards-and pay an annual enrollment fee of $19.5 To
enroll, beneficiaries may submit standardized information to a drug card
sponsor by mail, telephone, or via the Internet. An open enrollment period
was established at the end of 2004 for beneficiaries who wished to change
their card selection.

Transitional assistance is available for Medicare beneficiaries who are at
or below 135 percent of the federal poverty level and not enrolled in any
public or private insurance plans that provide drug coverage.6
Beneficiaries who qualify do not have to pay an enrollment fee, pay 10
percent or less of each prescription's retail price, and receive a $600
annual credit toward their drug purchases.7 Beneficiaries apply for
transitional assistance through card sponsors. CMS then verifies the
beneficiary's income and drug coverage status, determines eligibility, and
notifies the drug card sponsor, which informs the beneficiary of the
decision.8 Low-income beneficiaries currently enrolled in pharmaceutical
manufacturers' card programs-arrangements that offer discounts on
particular manufacturers' drugs-may also enroll in a discount card program
to take advantage of the $600 transitional assistance.

4Drug card sponsors are required to offer a discount for at least one drug
in each of the 209 therapeutic categories identified by CMS on a list of
frequently used medications, and are precluded from offering discounts for
nine classes of drugs. 42 C.F.R. S: 403.806(d)(2) (2004). The formularies,
or sets of preferred drugs, that are covered by the discounts, may not
include all of a beneficiary's drugs. Beneficiaries who use drugs not
included in the formulary will not be able to obtain discounts for those
drugs. However, if a beneficiary is approved for transitional assistance,
payment may be made for a drug, even if it is not on the formulary.

5Among the qualifications to offer drug cards, sponsors-pharmacy benefit
managers, heath insurers, and others-had to secure a large network of
retail pharmacies. CMS established separate access requirements for urban,
suburban, and rural areas. For example, in urban areas, at least 90
percent of a card's enrollees must live within 2 miles of a network
pharmacy.

6To qualify for transitional assistance, a beneficiary must (1) have an
income at or below $12,569 per year for an individual, or $16,862 for a
couple in 2004 and (2) not have other prescription drug coverage through
Medicaid, employer-sponsored group health insurance programs, an
individual health insurance policy, TRICARE (health care program for
active duty and retired uniformed services members and their families), or
the Federal Employee's Health Benefits Program. MMA 117 Stat. 2133.

For various groups of beneficiaries, enrollment in the Medicare drug card
program may be made automatically-with an option for the individual to
decline-by virtue of beneficiaries' participation in other Medicare or
state programs. Beneficiaries in managed care plans-Medicare Advantage-may
be group enrolled in exclusive drug cards sponsored by their health
plans.9 In some states, state pharmacy assistance programs, which provide
prescription drugs at low or no cost to needy Medicare beneficiaries and
others who do not qualify for Medicaid, may automatically enroll
beneficiaries in a drug card program and choose to pay the enrollment fee
and coinsurance.10 In addition, CMS decided to facilitate enrollment in
the discount card program for certain low-income beneficiaries.

CMS estimated that beneficiaries enrolling in drug card programs would
experience significant savings on their prescription drugs. The discounts
would vary depending on the drug card selected, the drugs purchased, and
the pharmacy used. According to an October 2004 CMS study, prices for
commonly used brand-name drugs under the discount card program ranged from
12 to 21 percent below national average retail pharmacy prices. It stated
that savings for generic drugs were larger, with prices ranging from 28 to
75 percent lower than the typical price paid nationally.

7MMA 117 Stat. 2140-42. Qualified individuals were entitled to receive the
full $600 credit amount in 2004 regardless of when they enrolled. If they
enrolled in 2005, the credit was prorated based on the quarter in which
they enrolled. Any 2004 credit balance was rolled over into 2005; and any
2005 credit balance will be rolled over into 2006 until the individual
enrolls in a Medicare prescription drug plan or the initial part D
enrollment period closes on May 15, 2006, whichever comes first.

8Once an applicant is determined eligible to receive transitional
assistance, CMS transfers funds from the Medicare part B Trust Fund
directly to the approved discount card sponsor with which the eligible
beneficiary has enrolled. The discount card sponsor is responsible for
applying each eligible enrollee's $600 subsidy to the beneficiary's cost
of prescription drugs covered under the program.

9Although many Medicare managed care plans already offer drug coverage,
not all do so and most offer limited coverage. The discount card would be
used in situations of no coverage or limited coverage under the plans. If
the Medicare managed care plan offers a drug card, its members may only
get that drug card. If a Medicare managed care plan does not offer a drug
card, its members may sign up for any card available in their area.

10Because people enrolled in state pharmacy assistance programs receive
comprehensive help with their drug expenditures, their coverage may not
change under a drug card program. However, with such enrollment, federal
dollars substitute for state dollars, thus reducing the cost of those
state pharmacy assistance programs.

In implementing its education and outreach efforts, CMS focused on
enrolling those beneficiaries most likely to benefit from the drug
discount card and transitional assistance program. Not all beneficiaries
eligible to enroll in the drug card program were expected to do so because
many have coverage through other sources. CMS assumed that those who could
benefit from the card and subsidy were low-income beneficiaries eligible
for transitional assistance and beneficiaries who were not low income but
either had no or limited drug coverage.11 Therefore, in developing and
disseminating messages and materials promoting the drug card program, the
agency placed special emphasis on low-income beneficiaries.

CMS had a limited amount of time to plan and launch the drug card program.
Although agency officials started planning for the discount card shortly
before enactment of MMA, they did not begin developing a strategy for
communicating with beneficiaries until regulations detailing the
requirements of the new program were issued on December 15, 2003. MMA
required that the Medicare discount card program begin operating within 6
months of enactment. The education campaign began in January 2004;
enrollment for the drug card began May 3, 2004; and the card was effective
June 1, 2004.

To evaluate its 2004 education and outreach efforts, CMS initiated a
lessons learned process whereby information was collected from various
entities involved in the drug card program. They included CMS central
office staff, regional office staff, and contractors hired to provide
marketing reviews and CMS customer service. In total, 212 individuals
participated in discussions to obtain information on the effectiveness of
various elements of the agency's communications strategy and how best to
implement Medicare's prescription drug benefit program. The results of
this process were reported in February 2005.12

CMS Used Multiple Education and

Outreach Efforts; Assessments of

These Efforts Identified Weaknesses

CMS relied on multiple education and outreach efforts-some that used mass
communication and others that provided individualized attention-to support
the drug card program. Specifically, these efforts included media
advertising, direct mail, Medicare's Web site and toll-free help line,
one-on-one counseling, and partnerships with community organizations.
Assessments we reviewed showed that CMS was effective in raising awareness
of the drug card program, but its efforts were limited in their ability to
inform and assist beneficiaries. Studies indicated that CMS's

11In 2002, 18 percent of noninstitutionalized Medicare beneficiaries
lacked drug coverage for the full year. Others obtained drug coverage from
a variety of sources, including employer-sponsored plans (34 percent),
Medicaid (14 percent), Medicare managed care plans (12 percent), Medigap
policies (12 percent), and other public programs (10 percent).

12Centers for Medicare & Medicaid Services, Medicare-Approved Drug
Discount Card and $600 Credit Program: CMS and Drug Card Sponsor Lessons
Learned, Final Results and Analysis (Baltimore, Md.: February 2005).

education and outreach activities did not consistently provide information
that was clear, accurate, and accessible. Reports also indicated that, in
some cases, CMS made improvements when problems were identified.

Media Advertising and Direct Mail

As part of its education and outreach efforts, CMS initiated a multimedia
advertising campaign-the National Publicity Campaign-in 2004 to  generate
awareness about changes to the Medicare program, including the 2006
prescription drug benefit and the interim drug card program, as well as
sources of additional information. By February 2004, CMS began using
television and print media to introduce beneficiaries to the changes in
Medicare established by MMA. In spring 2004, CMS launched another series
of advertisements specifically to educate Medicare beneficiaries on the
availability of drug discount cards and their key features. A third set of
advertisements in late summer and early fall 2004 sought to encourage
enrollment by highlighting the savings offered through the drug discount
cards. According to CMS, in fiscal year 2004, funding for the National
Publicity Campaign was approximately $65 million.

Another component of the National Publicity Campaign relied on several
direct mailings to promote the drug card program. According to CMS
officials, the agency's discount card materials were consumer-tested to
ensure they were understandable by various population groups, including
beneficiaries with low literacy, poor English proficiency, or low income.
In its first mailing, in February 2004, CMS sent a letter and a flyer to
all Medicare beneficiaries alerting them to the drug discount cards as
well as to the upcoming 2006 prescription drug benefit. In April 2004, CMS
issued a second direct mailing, this time a three-page description of the
drug card program. Another more targeted letter was sent that month to
persons with Social Security payments below the income eligibility
threshold established to qualify for transitional assistance. This
communication focused on the benefits available to low-income persons and
the process for obtaining a card and applying for the $600 credit.
According to CMS officials, the agency spent at least $18 million of its
publicity campaign funds on these mailings.

Assessments of the National Publicity Campaign found that the impact of
the campaign was mixed. On the one hand, it helped generate awareness that
the drug card program existed. In a June/July 2004 survey developed by KFF
and the Harvard School of Public Health, fewer than one-third of
respondents 65 years of age or older said they were aware of the drug card
program.13 A November/December 2004 follow-up survey showed that 86
percent of respondents over the age of 65 were aware of the discount card
program, and 67 percent said they were aware of the $600 subsidy.14

13Kaiser Family Foundation/Harvard School of Public Health, Views of the
New Medicare Drug Law: A Survey of People on Medicare, publication no.
7144 (Washington D.C.: August 2004).

14Kaiser Family Foundation, November/December 2004 Health Poll Report
Survey, publication no.7247 (Washington, D.C.: January 2005).

On the other hand, CMS was less successful in conveying essential features
about the discount cards. Based on focus groups conducted in fall 2004 and
winter 2005, Abt Associates reported that one-quarter to one-half of
beneficiaries were unaware that there was more than one drug card to
choose from.15 In addition, in its February 2005 self-evaluation, CMS
reported that the campaign was not effective in educating beneficiaries on
the details and complexities of the program, especially on how to obtain
transitional assistance. The agency noted that weaknesses in the
communications strategy it developed prior to the launch of the drug card
program may have led to these shortcomings. It cited, for example, the
volume and content of CMS and drug card sponsor outreach material as
contributing factors. In a legal analysis issued in March 2004, we found
that CMS's initial print advertisements contained a number of significant
omissions. For example, while all of the materials we reviewed mentioned
the new drug discount cards, none indicated that the cards may not be free
and that savings may vary among drugs.16

The assessments we reviewed also found limitations in the use of direct
mail to help increase enrollment in health care initiatives. In
particular, studies have shown that direct mailings may not be an
effective outreach tool for Medicare beneficiaries with low incomes. In
its report, MedPAC found that low literacy rates, poor English
proficiency, and unfamiliarity with health care programs limit low-income
beneficiaries' ability to comprehend and act on direct mail
instructions.17 Similarly, in 2004 we reported that a 2002 direct mailing
to low-income Medicare beneficiaries by the Social Security Administration
(SSA) had a low response rate. SSA conducted a direct mailing campaign to
encourage low-income beneficiaries to enroll in a program that provided
assistance with premiums and other out-of-pocket costs associated with
Medicare. Of the 16.4 million low-income beneficiaries that SSA targeted
with the mailing, we found that 74,000 additional eligible
beneficiaries-about 0.5 percent of all letter recipients-enrolled in
Medicare savings programs than would have likely enrolled without the
letter.18

Among low-income elderly, a lack of knowledge regarding the drug discount
card and transitional assistance persisted into the summer. In a June/July
2004 survey, KFF and Harvard School of Public Health found that 70 percent
of beneficiaries with incomes below $15,000 did not know enough to say if
the drug discount cards were part of the new Medicare drug law, and only
13 percent of those surveyed were aware that low-income beneficiaries can
receive a $600 credit.19

15Abt Associates, Evaluation of the Medicare-Approved Prescription Drug
Discount Card and Transitional Assistance Program: Interim Evaluation
Report, Final Report (Cambridge, Mass.: October 11, 2005).

16GAO, Medicare Prescription Drug, Improvement, and Modernization Act of
2003--Use of Appropriated Funds for Flyer and Print and Television
Advertisements, B-302504 (Washington, D.C.: March 10, 2004).

17Medicare Payment Advisory Commission, Report to the Congress: Issues in
a Modernized Medicare Program (Washington, D.C.: June 2005).

18GAO, Medicare Savings Programs: Results of Social Security
Administration's 2002 Outreach to Low-Income Beneficiaries, GAO-04-363
(Washington, D.C.: March 26, 2004).

Medicare Web Site

In addition to the National Publicity Campaign, CMS used its Medicare Web
site-www.medicare.gov-to educate beneficiaries about the drug card program
and the choices they have when selecting a card. In particular, users of
the Web site could access a tool called the Prescription Drug  Assistance
Program (PDAP), which was developed to help beneficiaries determine
whether they were eligible to enroll in the drug card program, decide
whether to enroll, and select the discount card that best suited their
needs. Launched in April 2004, PDAP allowed users to compare drug cards by
displaying information on the pharmacies that accept each card, the drugs
each sponsor covers in its formulary, and the prices beneficiaries should
expect to pay for these drugs.20 CMS also included a price comparison
feature on PDAP so that users could compare drug prices offered through
the various discount cards based on dosage and quantity.

To use PDAP, beneficiaries entered their zip codes and responded to a
series of questions that were used to determine eligibility for the drug
card program. Next, beneficiaries selected the drugs they use regularly
along with dosage and monthly quantity. PDAP then generated a list of
available drug card sponsors and the prices available through their cards.
Because a beneficiary may prefer a specific pharmacy, PDAP could search
for a list of drug cards that a particular pharmacy accepts.

Several assessments that reported on PDAP found that the Web-based tool
was an important resource for Medicare beneficiaries and those who assist
them in selecting drug discount cards. In general, these assessments
indicated that PDAP could perform the complex calculations required to
determine the comparative value of numerous discount cards available to
eligible beneficiaries. For example, both CRS and MedPAC observed that the
comparative information provided by PDAP was valuable for family members
and others who help beneficiaries select a drug card.21

Although PDAP was viewed as an important resource, several studies found
that when the tool was first introduced, it did not always provide
accurate information. Assessments indicated that the Web-based tool listed
inaccurate drug prices and pharmacies that were not participating in the
drug card program. According to CRS, because CMS posted the maximum price
cited by drug card sponsors, some prices displayed on PDAP were too high.
In addition, we found that some pharmacies reported being incorrectly
listed as participating in the program, but most of the inaccurate
listings were attributed to pharmacies being unaware that they had
contracted to participate in a card sponsor's network, according to CMS.22
In response to these problems, CMS officials told us that they updated and
verified drug pricing and corrected the pharmacy participation
information.

19Kaiser Family Foundation/Harvard School of Public Health, Views of the
New Medicare Drug Law: A Survey of People on Medicare, Additional Findings
by Income Group, publication no. 7169 (Washington, D.C.: September 2004).

20According to the CMS Administrator, PDAP includes information on
approximately 60,000 drug products and 75,000 pharmacies. The component of
the Web site with information about drug prices was deactivated on
September 30, 2005.

21For example, see Congressional Research Services, Beneficiary
Information and Decision Supports for the Medicare-Endorsed Prescription
Drug Discount Card, RL32828 (Washington, D.C.: Mar. 24, 2005).

Another issue reported by CRS was that some users may have had difficulty
navigating the Web site, and MedPAC reported that beneficiaries were
overwhelmed by the number of drug cards from which they could choose.23
According to KFF, most beneficiaries do not use the Internet, and even
those who assist them often found the Web-based information more
perplexing than helpful. An April 2004 KFF survey showed that use of the
Internet by seniors is growing but overall remains low, with about 70
percent of those age 65 or over reporting that they never use the
Internet. Of those who do go online, 2 percent reported having visited
Medicare's Web site. Furthermore, according to KFF, the use of the
Internet among beneficiaries also varied significantly by income. For
those with incomes below $20,000-nearly two-thirds of seniors in 2002-only
15 percent have ever used the Internet. For beneficiaries with incomes
above $50,000-about 1 in 12 seniors in 2002-65 percent reported having
ever used the Internet.24

By July 2004, CMS officials took steps to make PDAP more user friendly.
For example, CMS created an option to sort and view the top five drug
cards with the lowest cost for the beneficiary and provided information on
the annual savings offered by various drug cards. While CMS addressed
certain problems associated with PDAP, these changes did not eliminate the
challenge for CMS in using the Internet as an information resource for
Medicare beneficiaries.25

Medicare Telephone Help Line

One of the goals of the National Publicity Campaign was to make the public
aware of CMS's telephone help line-1-800-MEDICARE-as a primary source of
information on the Medicare program, including information on the drug
card program. The toll-free telephone help line is a vehicle for Medicare
beneficiaries, their families, and other members of the public to obtain
answers to their questions about the drug card program features and
enrollment. During the 6 months following the enactment of MMA, the help
line handled over 9 million calls-many of which involved questions about
prescription drug coverage-more than triple the number handled in the
previous 6 months.

22GAO-06-78R.

23Medicare Payment Advisory Commission, Public Meeting: State Lessons on
the Drug Card (Washington, D.C.: Sept. 10, 2004).

24Kaiser Family Foundation, E--Health and the Elderly: How Seniors Use the
Internet for Health Information (January 2005).

25According to MedPAC, beneficiaries who are computer literate and have
Internet connections in their homes are unlikely to have the high-speed
connections necessary to use PDAP.

As the volume of calls directed to the help line about the drug card
program increased, there were concerns about the accuracy and completeness
of the information provided by the help line's customer service
representatives (CSR). In December 2004, we reported that CSRs had
substantial inaccuracy rates when answering questions about the drug
discount card and transitional assistance.26 For example, one question we
posed to CSRs about income eligibility for the $600 credit was answered
inaccurately in 55 out of 70 calls, generally because the CSRs did not
seek the needed information on the sources of beneficiaries' incomes to
correctly answer the question. On another question, CSRs responded with
inaccurate answers in 10 out of 70 calls when asked to identify the lowest
cost card available at a particular pharmacy, given an individual's
specific pharmaceutical needs.

Other research organizations have also raised concerns about how
information on the drug card program is communicated via 1-800-MEDICARE.
MedPAC reported that CSRs provided too much information, rather than
helping beneficiaries narrow their options, and that operators conveyed
inaccurate information. In addition, KFF and CRS have commented on the
long wait times associated with the help line,27 and the Medicare Rights
Center reported frequent disconnections following the influx of calls due
to the National Publicity Campaign.28 In response to the increased call
volume, CMS had added over 800 CSRs by October 2004, more than doubling
the number of staff previously available.

One-on-one Counseling

For Medicare beneficiaries and their families seeking individual
assistance with the drug card program, CMS supports one-on-one counseling
through State Health Insurance Assistance Programs (SHIP). Operated by
states and funded through CMS

grants, SHIPs use over 12,000 trained counselors-mostly volunteers-to
provide information and assistance on a wide range of Medicare and
Medicaid issues. In 2003, CMS reported that SHIP programs nationwide
served over 2 million Medicare beneficiaries, with about 1.2 million of
those receiving assistance through one-on-one counseling sessions-in
person and over the telephone-and approximately 800,000 receiving
assistance through presentations and public education outreach. For the
drug card program, these counselors helped beneficiaries and their
families make selection decisions using PDAP and assist those applying for
transitional assistance. In 2004, SHIPs resources-$21 million-were
primarily devoted to informing

26GAO, Medicare: Accuracy of Responses from the 1-800-MEDICARE Help Line
Should Be Improved, GAO-05-130 (Washington, D.C.: Dec. 8, 2004).

27See, for example, Kaiser Family Foundation, Medicare Drug Discount
Cards: A Work in Progress, prepared by Health Policy Alternatives, Inc.
(Washington, D.C.: July 2004).

28Medicare Rights Center, Medicare-Approved Drug Discount Cards: A
Prescription for Improvement (New York, N.Y.: May 2004).

beneficiaries and their families about the drug card program. In fiscal
year 2005, CMS increased funding for SHIPs by about 50 percent, to roughly
$31 million, to expand these efforts.

CRS has noted that one-on-one counseling and assistance to beneficiaries
provided by SHIPs have been essential complements to the information
disseminated more generally through CMS's other education efforts, such as
1-800-MEDICARE and the Medicare Web site. For its June 2005 report, MedPAC
examined the challenges that state officials and beneficiary advocates
face in educating beneficiaries about the discount card program. MedPAC
suggested that CMS adequately fund SHIP outreach activities and direct
beneficiaries to SHIPs for personalized assistance with the program. At
the same time, MedPAC acknowledged that SHIPs alone are not able to
counsel all Medicare beneficiaries who may need one-on-one counseling.

Partnerships with Local Organizations

As the SHIPs demonstrate, CMS relies on local outreach to help disseminate
information and assist beneficiaries. Consistent with this strategy, the
agency has developed an outreach effort known as the Regional Education
About Choices in Health (REACH) program to increase awareness about
changes in Medicare for beneficiaries not generally reached by national
efforts due to barriers of language, literacy, location, income, or
culture. REACH relies on local community-based organizations to use
established networks for distributing health care information to serve
beneficiaries in familiar, community settings. In 2004, CMS sponsored
training sessions and distributed targeted materials to REACH partners to
help them inform beneficiaries and facilitate enrollment for the drug card
program and transitional assistance.

In addition, CMS has partnered with the Access to Benefits Coalition
(ABC), a group of national nonprofit organizations-including AARP, the
Salvation Army, and the American Hospital Association-and 56 local
coalitions that help low-income Medicare beneficiaries use private and
public resources to save money on prescription drugs. To complement CMS's
efforts, ABC awarded $2 million to its network of grassroots groups to
educate and enroll lower income beneficiaries in the drug card program. It
set a short-term goal to ensure that at least 5.5 million low-income
beneficiaries would receive the $600 annual transitional assistance credit
by the end of 2005. ABC also developed a Web-based tool for counselors and
others to use to determine the individualized combination of programs-the
drug card program, state pharmacy assistance programs, manufacturer's
discount card programs, and drug company patient assistance programs-that
maximize beneficiary savings.

Similarly, in 2004, CMS, in cooperation with HHS's Administration on
Aging, contracted with Ogilvy Public Relations Worldwide and spent $6.1
million to select, support, and evaluate community-based organizations to
provide outreach related to the drug card. More than 100 organizations,
including area agencies on aging, social service providers, health care
agencies, and faith-based organizations,  were selected to target
low-income, hard-to-reach beneficiaries, including those in medically
underserved communities. Most were funded to complete their work from
September 2004 through February 2005. Under the terms of their
subcontracts with Ogilvy, the community-based organizations agreed to meet
measurable performance standards regarding the specific number of
beneficiaries they educated, assisted, and enrolled. Local organizations
that fell short of achieving their agreed-upon performance standard for
the number of beneficiaries whom they assisted with enrollment faced a
reduction in their final payment.

Assessments of CMS's efforts to support the drug card program through
partnerships with local organizations are limited. We identified an
evaluation by Ogilvy that was submitted to CMS in May 2005. That report
stated that community-based organizations funded by the partnership
assisted nearly 900,000 beneficiaries in the enrollment process, but
raised questions about whether these organizations were adequately
prepared for the task.29 Among the shortcomings cited by community-based
groups, as reported in the Ogilvy report, were (1) organization leaders
received training and orientation, but the training provided to staff and
volunteers was insufficient to prepare them to answer the often
complicated questions from beneficiaries; (2) the organizations
experienced initial frustration and difficulties accessing and using CMS
materials, including the Medicare Web site; and (3) outreach to nonelderly
disabled beneficiaries was limited, largely because many community-based
organizations did not feel qualified or equipped to serve this specific
population.

About 6 Million Beneficiaries Obtained

a Drug Discount Card; Several Factors

May Have Limited Enrollment

Approximately 6 million beneficiaries are enrolled in the drug card
program and nearly one-third of these participants received transitional
assistance with their drug card. Many more beneficiaries were
automatically enrolled than enrolled on their own. The number of
beneficiaries in this latter group fell below an enrollment projection set
by CMS but exceeded one set by the Congressional Budget Office (CBO). A
variety of factors-beneficiary confusion as well as features in the
program's design-may have limited enrollment in the drug card program.

Of the 6 Million Enrollees, Nearly Two-Thirds Were Automatically Enrolled

As of September 1, 2005, approximately 6.4 million Medicare beneficiaries
had obtained discount cards through the drug card program. This number
included 4.5 million beneficiaries who had obtained only the discount
cards and another 1.9 million who obtained both discount cards and
transitional assistance. Roughly two-thirds of participants enrolled early
in the program-May through July 2004. (See fig. 1.) To enhance enrollment,
CMS randomly assigned drug cards to beneficiaries in Medicare Saving
Programs (MSP), which cover various Medicare-related out-of-pocket costs
for certain low-income beneficiaries.30 Drug card sponsors mailed drug
cards to about 1.1 million of the beneficiaries in MSPs in October 2004
and to about 120,000 of these beneficiaries in February 2005.31
Approximately 12 percent of those who received these cards from the agency
applied for and obtained transitional assistance.

29Ogilvy Public Relations, Development of Community-Based Coalitions to
Support Drug Card Awareness, Final report on CMS Contract Number
500-01-0003, Task Order 0011 (May 31, 2005).

Figure 1: Enrollment in the Drug Card Program May 2004 through August 2005

Note: In May 2004, the first month of the program, 66,910 beneficiaries
enrolled in a drug discount card and received transitional assistance.
Data are as of the last Thursday or Friday of the month.

CMS data also demonstrated that slightly more than a third of the Medicare
beneficiaries who enrolled in the drug card program did so on their own.
As shown in table 1, of the 6.4 million total discount card program
participants, we estimate that 2.3 million enrolled on their own
initiative, and 4.1 million were automatically enrolled by virtue of their
participation in other Medicare or state assistance programs.

30There are four MSPs, each with differing income eligibility requirements
and levels of benefits-the Qualified Medicare Beneficiary, Specified
Low-Income Medicare Beneficiary, Qualifying Individual, and Qualified
Disabled and Working Individual programs. To enroll, eligible
beneficiaries must have incomes and assets within the specific program's
federal ceilings and enroll through their state Medicaid program.

31Some of the original 1.1 million MSP beneficiaries that CMS autoenrolled
in a general card in fall 2004 subsequently enrolled in a different drug
discount card, canceled their assigned card, or died. As of September 1,
2005, this MSP group had declined to about 874,000 enrollees.

Table 1: Estimated Autoenrollment and Self-Enrollment in the Drug Discount
Card and Transitional Assistance Program, September 2005

                                                 Discount card with           
                                   Discount card       transitional 
                                            only         assistance Total
Autoenrolled                        3,221,147            833,075 4,054,222 
o  Beneficiaries in Medicare                                               
Advantage a                         2,370,463            245,850 2,616,313
o  Beneficiaries in Medicare                                               
Savings Program b                     850,684            144,225   994,909
o  Beneficiaries in state                                                  
pharmacy assistance programs c              0            443,000   443,000
Self-enrolled                       1,274,725          1,065,292 2,340,017 
Total                               4,495,872          1,898,367 6,394,239 

Source: GAO analysis of CMS data.

Note: Enrollments effective as of September 1, 2005.

aMedicare Advantage refers to Medicare's managed care plan options.

bMedicare Savings Programs assist low income beneficiaries by paying for
some or all Medicare premiums and deductibles.

cState Pharmacy Assistance Programs provide low income and other
beneficiaries with financial assistance for prescription drugs.

Despite efforts to facilitate enrollment, the number of beneficiaries who
obtained discount cards with transitional assistance-1.9 million-fell
significantly below CMS's projection. CMS anticipated that its drug card
program, in general, would have the highest participation rate among those
beneficiaries who would also qualify for transitional assistance.
Specifically, the agency estimated that 4.7 million of the beneficiaries
eligible for transitional assistance in 2004 would enroll in the drug card
program and receive transitional assistance.32 CMS based this estimate on
a variety of factors, including enrollment rates in similar programs and
the nature and duration of the drug card program. In contrast, the 1.9
million beneficiaries who obtained discount cards with transitional
assistance exceeded a CBO estimate. In a July 2004 paper, CBO estimated
that about 20 percent of those eligible for transitional assistance, or 1
million beneficiaries, would enroll in the drug card program and receive
the $600 credit. CBO estimated that relatively few beneficiaries would
participate in the interim program because of the program's relatively
short duration before the 2006 prescription drug benefit takes effect and
the perception that the interim program is of limited value.33

32CMS, Medicare Program: Medicare Prescription Drug Discount Card; Interim
Rule and Notice, 42 C.F.R. Parts 403 and 408, Federal Register/Vol. 68,
No. 240/Monday, December 15, 2003.

33Congressional Budget Office, A Detailed Description of CBO's Cost
Estimate for the Medicare Prescription Drug Benefit (Washington D.C.: July
2004).

Beneficiary Confusion and Program Design

Issues May Have Limited Enrollment

Assessments indicate that the level of enrollment in the drug card
program-especially among those receiving transitional assistance-may be
explained by a variety of factors. In particular, studies we reviewed
found that beneficiary confusion about the drug card program as well as
weaknesses in the program's design may have deterred some beneficiaries
from enrolling.

Beneficiary Confusion

One factor that may have limited enrollment is some beneficiaries' reduced
ability to access information and make effective choices about different
health care options. The Medicare population has significant
vulnerabilities in terms of health and cognitive status: 71 percent of
beneficiaries have two or more chronic conditions, 29 percent are in fair
or poor health, and 23 percent have cognitive impairments.34 Efforts to
inform beneficiaries are particularly challenging with older members of
minority, low-income, limited English-speaking, and other underserved
populations. Research has shown that beneficiaries lack a basic
understanding of the Medicare program, and even those who know the
fundamentals have significant information gaps.

In the case of the drug card program, CMS has acknowledged that confusion
or misperceptions about the drug cards among Medicare beneficiaries may
have affected enrollment. In its February 2005 self-assessment, CMS found
that despite the agency's education and outreach efforts, beneficiaries
confused the drug card with the 2006 prescription drug benefit, and some
beneficiaries did not enroll because they were under the impression that
Medicare would be sending them a card. Furthermore, the concept of a
private drug card sponsor was difficult for many beneficiaries to
understand. In addition, CMS found that some beneficiaries may not have
enrolled because they believed they were ineligible for the discount
cards. Specifically, many beneficiaries incorrectly thought that the drug
card was only for low-income people, and those who likely qualified for
the $600 in transitional assistance did not believe they qualified for it,
even after having the income criteria explained to them. CMS also asserted
that there was a misconception that acceptance of the $600 transitional
assistance would negatively impact a beneficiary's eligibility for other
assistance programs, such as housing and food stamps.

Design Features

Several features of the drug card program's design may also have limited
enrollment. First, because it was designed as a voluntary opt-in program
for most eligible beneficiaries, it represents a significant change in
individual responsibility. KFF noted that requiring an active decision and
effort may seem unfamiliar to, or be difficult for, some beneficiaries.
Unlike more customary expansions in coverage under fee-for-service
Medicare-where a new benefit is automatically available to
beneficiaries-the drug card program asked beneficiaries to decide to
enroll; choose a card; submit enrollment information; and in some
instances, apply for transitional assistance. KFF also reported that some
Medicare beneficiaries lack familiarity with the concept of drug discount
cards and with the tools-for instance using Medicare's PDAP to compare
drug prices-that could be used to help make a decision to obtain a drug
card. Because of the increased individual responsibility, automatic
enrollment proved more effective than voluntary enrollment in increasing
participation in the program.

34Kaiser Family Foundation, Medicare at a Glance, publication no. 1066-08
(Washington, D.C.: April 2005).

Another factor in the program's design that may have limited enrollment
was the number of card options beneficiaries could consider in making
their choice. As noted by CRS, studies have shown that the responsibility
of choosing from a broad array of options can lead to inaction. In the
case of the drug card program, the availability of 37 cards, on average,
has made it difficult and time-consuming for beneficiaries to compare
their drug card options. KFF and MedPAC reports noted that the amount of
information on available cards and participating pharmacies, and the
complexity of drug pricing, may have been overwhelming for many
beneficiaries and others assisting them. CRS concluded that the large
number of cards from which to choose may have deterred beneficiaries from
choosing to enroll.

Finally, studies we reviewed suggested that enrollment in the program
depended, in part, on beneficiaries' assessment of the value of the drug
cards. The greater the perceived value of the discounts offered by the
card, the more likely beneficiaries were to make the effort to obtain a
card. However, MedPAC found that beneficiaries were uncertain about the
value of drug cards, or perceived that they offered relatively small
savings, and therefore saw no need to enroll in the program. AEI suggested
that since most Medicare beneficiaries already have some type of
prescription drug coverage, they may have assumed that a discount card
program would be of little value to them.35 Abt focus group participants
reported that they found other ways to reduce costs below what the cards
offer, such as getting free samples from their provider(s), using discount
cards from other groups, and getting drugs from Canada or Mexico. As noted
earlier, according to CBO, the temporary nature of the drug card
program-the program was designed to operate for no more than 18 months-may
have contributed to low participation.

Agency Comments

We provided a draft of this report for comment to the Administrator of
CMS, and we received written comments. (See enc.)

35Beneficiaries without drug coverage may have discount cards offered by
retailers or associations. For example, as reported by AEI, for a $20
annual enrollment fee, AARP's MembeRx Choice provides average discounts of
nearly 20 percent off retail prices. Beneficiaries in such programs may
have assumed that they do not need a Medicare-endorsed drug card because
they already have a private card under a similar corporate name. See:
American Enterprise Institute, Private Discounts, Public Subsidies: How
the Medicare Prescription Drug Discount Card Really Works (Washington,
D.C.: June 2004).

CMS commented that the draft report did not provide a complete account of
all its education and outreach activities in support of the drug card
program. However, we examined several key education and outreach efforts
that CMS used to provide Medicare beneficiaries with information on the
drug card program. We focused on these key efforts because they were
identified as elements in CMS's own communication plan for the drug card
program and were highlighted by CMS officials. Furthermore, these key
efforts accounted for a substantial portion of CMS's budget for
beneficiary education.

CMS provided examples of additional partnerships that we did not include
in our report. It highlighted grants to the Department of Agriculture,
Indian Health Service, Administration on Aging, and the National
Governors' Association. In our review of activities with partner
organizations, we focused on those entities that received substantial
resources-over $1 million-to provide education and assistance largely to
low income beneficiaries.

CMS commented that the draft report presents particularly negative
assessments of CMS's efforts, rather than the studies that CMS itself
conducted as part of its overall oversight activities. In our draft, we
did include discussions of several education and outreach efforts that
assessments found to be useful to beneficiaries. Specifically, we noted
studies that reported the price comparison information on the Medicare Web
site was an important resource for beneficiaries as well as for those who
assist them in selecting a drug card. We also reported that one-on-one
counseling provided by SHIPs was an essential complement to CMS's other
education efforts.

CMS expressed concern about a reference to our December 2004 report in
which we found that CSRs had substantial inaccuracy rates when answering
questions about the drug discount card and transitional assistance.
Specifically, we reported that CSRs inaccurately answered 55 of 70 calls
on eligibility for transitional assistance. While CMS questioned the
accuracy rate we reported at the time, we continue to believe that this
finding was correct, based on the income information we supplied to the
CSRs.

CMS commented that we omitted a factor that may have contributed to
limited enrollment in the drug card program. Specifically, CMS observed
that we did not mention that beneficiaries who take few or no prescription
drugs have limited incentive to enroll. However, we did not find this
factor identified in the assessments we reviewed. Furthermore, 2003 data
show that 89 percent of seniors report taking prescription drugs, and of
those nearly half report using 5 or more different drugs.36

CMS also provided clarifying information and technical comments, which we
incorporated as appropriate.

                                   - - - - -

36Health Affairs Web Exclusive, Prescription Drug Coverage and Seniors:
Findings From A 2003 National Survey (April 19, 2005).

As agreed with your office, we plan no further distribution of this report
until 30 days after its date. At that time, we will send copies of this
report to the Administrator of CMS, appropriate congressional committees,
and other interested parties. We will also make copies available to others
upon request. In addition, the report will be available at no charge on
the GAO Web site at http://www.gao.gov.

If you or your staff have any questions, please contact me at (312)
220-7600 or at [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Other contributors to this report include Rosamond Katz,
Assistant Director; Krister P. Friday; and Shirin Hormozi.

Sincerely yours,

Leslie G. Aronovitz

Director, Health Care

Enclosure

           Comments from the Centers for Medicare & Medicaid Services

(290459)

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