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Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

A S  

SSESSMENT OF  PONSORS
M U
ATERIALS  NDER THE 

T M -

EMPORARY  EDICARE
A D D
PPROVED  RUG  ISCOUNT 

C P
ARD  ROGRAM

Daniel R. Levinson

Inspector General 

October 2005

OEI-05-04-00190
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Office of Inspector General 
http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services (HHS) 
programs, as well as the health and welfare of beneficiaries served by those programs. This 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying out 
their respective responsibilities and are intended to provide independent assessments of HHS 
programs and operations in order to reduce waste, abuse, and mismanagement and to promote 
economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts management and program evaluations 
(called inspections) that focus on issues of concern to HHS, Congress, and the public.  The 
findings and recommendations contained in the inspections generate rapid, accurate, and up-to-
date information on the efficiency, vulnerability, and effectiveness of departmental programs.  
OEI also oversees State Medicaid Fraud Control Units which investigate and prosecute fraud 
and patient abuse in the Medicaid program. 
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of 
allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment 
by providers.  The investigative efforts of OI lead to criminal convictions, administrative 
sanctions, or civil monetary penalties.  
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, 
rendering advice and opinions on HHS programs and operations and providing all legal support 
in OIGs internal operations.  OCIG imposes program exclusions and civil monetary penalties 
on health care providers and litigates those actions within HHS.  OCIG also represents OIG in 
the global settlement of cases arising under the Civil False Claims Act, develops and monitors 
corporate integrity agreements, develops compliance program guidances, renders advisory 
opinions on OIG sanctions to the health care community, and issues fraud alerts and other 
industry guidance.  Report Template Version  = 09-08-04  
  S Y N O P S I S  

Part D of the Medicare Prescription Drug, Improvement, and 
Modernization Act (MMA) of 2003 added outpatient prescription drug 
benefits to the Medicare program beginning in 2006.  In the interim, the 
MMA also created the Medicare-Approved Drug Discount Card program 
(drug card program).  The Centers for Medicare & Medicaid Services 
(CMS) administers the drug card program through private companies 
(sponsors) it has approved to offer the drug cards.  CMS requires these 
sponsors to develop pre-enrollment packets, which must contain the 
information beneficiaries need to make informed choices.  Sponsors may 
use pre-enrollment packets in their active outreach and/or may develop 
advertising materials to attract beneficiaries to their cards. CMS 
reviews and approves sponsors materials. Although we assessed 
sponsors materials under the drug card program, this report is 
intended to provide information to assist CMS in preparing for the  
Part D drug benefit.   
There are three sections to this report.  First, we provide background 
information on the drug card program and the Part D drug benefit, as 
well as a brief description of our methodology.  Second, we provide the 
results of our assessment of sponsors materials under the drug card 
program:  the materials sponsors used in their outreach to potential 
enrollees, the compliance of selected sponsors materials with CMSs 
requirements, and beneficiary understanding of key aspects of the drug 
card program based on reading sponsors materials.  Finally, based on 
our assessment of the drug card program, we offer implications for CMS 
to consider for the new Part D drug benefit. In return, CMS provided 
extensive comments demonstrating how its ongoing and planned efforts 
related to the oversight of sponsors marketing materials for the drug 
benefit have incorporated our suggestions.  
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  T A B L E   O F   C O N T E N T S  

SYNOPSIS .......................................................  i

INTRODUCTION ................................................ 1 

DRUG CARD MATERIALS ..................................... 9 

Materials used in outreach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

  Complianceofmaterials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

Beneficiary understandingof materials. . . . . . . . . . . . . . . . . . . . .  20

IMPLICATIONS:  NEW DRUG BENEFIT .................... 25 

AGENCY COMMENTS ......................................... 29 

OFFICE OF IN SPECTOR GENERAL RESPONSE ........... 30

ENDNOTES ..................................................... 32 

APPENDIXES .................................................. 38 

A:	  DetailedMethodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  38

B:	  Noncompliance for All Requirements Assessed and

   Sourcesof Error  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41

C:	  Beneficiary Understanding. . . . . . . . . . . . . . . . . . . . . . . . . . . .  44

D:	  AgencyComments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47

ACKNOWLEDGMENTS ......................................... 55

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OBJECTIVE 
To assess drug card sponsors materials under the Medicare-Approved 
Drug Discount Card Program in an effort to assist CMS in preparing for 
the new Medicare drug benefit under Part D.  In particular, to assess 
whether sponsors materials promote informed choice for beneficiaries 
and to review CMS oversight of sponsors materials. 
BACKGROUND 
Medicare Coverage of Prescription Drugs 
In 2004, Medicare provided health insurance for approximately  
41.8 million Americans; this includes more than 35 million seniors and 
6.5 million nonelderly people with disabilities.1  Medicare Part B covers 
a limited range of drugs, primarily those administered in a physicians 
office.  In 2003, Medicare spent approximately $4 billion on prescription 
drugs covered under Part B.2 
The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA), Public Law 108-173, added an outpatient prescription 
drug benefits to Medicare under Part D.  Effective January 2006, all 
Medicare beneficiaries will be able to enroll in private plans, which will 
cover a percentage of their drug costs.  Assistance with premiums and 
cost sharing will also be provided to an estimated 11 million low-income 
beneficiaries.3  Estimates of the Part D drug benefit cost range from $47 
billion to $58.9 billion for FY 2006.4 
Medicare-Approved Drug Discount Card Program 
While the full Medicare prescription drug benefit will not be 
implemented until January 2006, the MMA also created the Medicare-
Approved Drug Discount Card program (drug card program) to provide 
immediate access to discounted prescription drugs.  All Medicare 
beneficiaries who are enrolled in Medicare Part A and/or Part B and do 
not have outpatient prescription drug coverage under Medicaid are 
eligible. Beneficiaries can enroll in the drug card program at any time 
from May 3, 2004, through December 31, 2005.  Discounts became 
available in June 2004 and end in January 2006 with the advent of the 
full prescription drug benefit.  The Centers for Medicare & Medicaid 
Services (CMS) reported in December 2004 that 5.8 million beneficiaries 
had enrolled in the drug card program.5 
In early 2004, CMS approved private companies (sponsors), including 
manufacturers, health insurance companies, drug store groups, and 
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managed care firms, to provide a total of 73 Medicare-approved drug 
discount cards. Sponsors offer 40 national drug cards and 33 regional 
drug cards.6  Throughout this report, we use the term drug card 
sponsor when referring to the entity contracted to offer an individual 
drug card. In some cases, one company actually has several contracts 
and offers multiple drug cards. 
Medicare beneficiaries are allowed to enroll in only one drug card per 
year. Once beneficiaries are enrolled, they are not allowed to switch to 
a different drug card until the next open enrollment period.7 
Beneficiaries are expected to consider several program features when 
deciding which drug card is best for them.  Discounts vary between 
cards and may vary within each card by drug, by pharmacy, and by 
geographic location; and the discounts may also change over time. Drug 
card sponsors can offer discounts on all drugs allowed by CMS or may 
cover only a select list of drugs, and the particular drugs covered by a 
card may vary throughout the life of the drug card program. Discounts 
are available only at network pharmacies that have agreed to accept the 
card. Network pharmacies also vary by drug card.  Drug card sponsors 
may charge an annual enrollment fee of up to $30 or may offer a card 
without an enrollment fee.8 
In addition to the discounts available through the drug cards, the 
Medicare-Approved Drug Discount Card program provides $600 in 
Transitional Assistance credit for beneficiaries with incomes at or below 
135 percent of the Federal poverty level and without other drug 
coverage.9  Eligible beneficiaries may use the annual $600 credit toward 
prescription drug purchases in both 2004 and 2005.  Medicare also will 
pay any drug card enrollment fees for these beneficiaries.  According to 
CMS, 1.5 million drug card enrollees had begun receiving the $600 
Transitional Assistance credit by December 2004.10 
Sponsors and CMS Must Promote Informed Choice 
The MMA directs CMS and sponsors to make certain information 
available to eligible beneficiaries for the purpose of promoting informed 
choice among drug cards.11  CMS has conducted an outreach and 
education campaign and offers beneficiaries several other informational 
resources.  CMS offers a toll-free hotline (1-800-MEDICARE) to help 
beneficiaries assess their eligibility, find out which drug cards are 
available in their area, and compare features of available drug cards 
including discounts on the drugs they take.  CMS also offers this 
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information on its Web site (www.medicare.gov), along with a price 
comparison feature. 
The MMA requires that each sponsor shall make available to discount 
card eligible individuals . . . information that the Secretary identifies as 
being necessary to promote informed choice among endorsed discount 
card programs . . .12  CMS has delineated this information in its 
Information and Outreach Materials Guidelines for sponsors materials.  
CMSs regulations incorporate these Information and Outreach 
Materials Guidelines by reference.13  Examples of required information 
include how to become enrolled in a drug card, eligibility qualifications 
for the $600 credit, toll-free telephone numbers, enrollment fees, types 
of contracted pharmacies, types of prescription drugs offered for a 
negotiated price, how enrollees can obtain more complete information 
regarding drugs discounted and the pharmacy network, and a notice 
that drugs and prices may change. Drug card sponsors materials must 
explain enrollment rules, some of which imply that multiple drug cards 
are available (for example, materials must state that enrollees cannot 
enroll in a new drug card until January 1, 2005).  However, materials 
are not required to explicitly state that beneficiaries have a choice of 
drug cards.14 
Sponsors Materials:  Pre-Enrollment Packets and Advertising Materials 
CMS classifies sponsors drug card materials as either explanatory 
materials or advertising materials.  
Pre-Enrollment Packets and Other Explanatory Materials. Explanatory 
materials include information required by CMS to inform beneficiaries 
about the program.  CMS requires sponsors to make explanatory 
materials available to beneficiaries upon request prior to enrollment 
(through pre-enrollment packets), at enrollment (e.g., notification of 
enrollment status), and after enrollment (e.g., member handbooks, 
membership cards).15 
Sponsors pre-enrollment packets must include information CMS has 
deemed necessary for promoting informed choice prior to enrolling in a 
sponsors drug card.  These packets contain a cover letter, a program 
description (called a Summary of Program Features), enrollment 
instructions, and enrollment forms.  According to CMS regulations, 
sponsors are required to provide pre-enrollment, explanatory 
information through the Internet and some other tangible medium 
(such as a mailing) to explain the sponsors drug card to eligible 
beneficiaries.16 
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Advertising Materials.  Advertising materials provide general information 
about a drug card and are intended to generate interest and encourage 
beneficiaries to get the additional information they need to enroll.  
Although advertisements are not necessarily intended to provide in-
depth information about sponsors drug cards, these materials may 
affect beneficiary choice by including some key information about 
program features.  Advertising materials are required to include certain 
disclaimers when topics such as discounts and enrollment fees arise. 
Advertising materials cannot include enrollment forms and are not 
meant to be used to enroll.  However, beneficiaries who see sponsors 
advertisements may enroll over the phone (through a sponsors call-in 
center) and may not have the benefit of reviewing a pre-enrollment 
packet prior to enrolling.   
CMS Oversight of Sponsors Materials 
The MMA requires the Secretary to provide appropriate oversight to 
ensure compliance of endorsed discount card programs and their 
sponsors with the requirements of this section.17  CMS uses several 
mechanisms to ensure that sponsors materials are in compliance. 
In January 2004, CMS issued specific requirements and guidance for 
sponsors explanatory and advertising materials in its Information and 
Outreach Materials Guidelines.  These requirements outline the key 
program information that materials must include, as well as specific 
disclaimers, specific terminology, and requirements for presenting 
information clearly such as font size specifications.  These guidelines 
were revised and updated in August 2004.  CMS has also provided 
sponsors with a list of suggested terminology and model materials for 
member handbooks, enrollment instructions, and enrollment forms that 
sponsors can choose to adopt.18 
To ensure that materials promote informed choice, drug card sponsors 
must obtain CMSs approval of all materials before distributing them to 
beneficiaries.19  CMS has hired a contractor (hereinafter referred to as 
CMSs contractor) to review and approve sponsors materials. Materials 
are reviewed within 30 days and approved, disapproved, or approved 
with stipulations.  In the last category, sponsors are expected to make 
small changes to their materials before distributing them and to submit 
a copy of the final material to CMSs contractor. CMSs contractor 
conducts a retrospective review of a portion of these materials to 
determine whether the stipulated changes are made.  Materials that 
follow CMS models receive a streamlined 10-day review. 
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Finally, CMS may opt to randomly retrieve and review sponsor 
materials from the marketplace to ensure that sponsors have not 
modified these materials without CMSs approval.   
Implications for the Full Medicare Prescription Drug Benefit Under Part D  
Our assessment of sponsors materials and CMS oversight under the 
drug card program has particular relevance for CMSs implementation 
of the Part D drug benefit.  While the drug card program will end with 
the start of the Part D drug benefit in 2006, prescription drug plan 
sponsors materials will play a similar role in informing beneficiaries 
choice under the Part D program.  Specifically, beneficiaries will rely on 
information from CMS and prescription drug plan sponsors when 
enrolling in the Part D program.  Prescription drug plan sponsors will 
be required to produce materials similar to those under the drug card 
program and submit their materials to a similar review process under 
Part D.  In some cases, drug card sponsors are likely to apply to become 
prescription drug plan sponsors.   
CMS and prescription drug plan sponsors outreach to beneficiaries 
needs to be sufficiently thorough and clear to allow beneficiaries to 
make an informed decision about enrollment.  Beneficiaries 
understanding of the Part D drug benefit will be even more crucial than 
their understanding of the drug card program because the choices about 
enrolling in the Part D drug benefit will be considerably more complex.  
For example, Part D benefits will vary with beneficiary drug 
expenditures and with beneficiary income.  Further, beneficiaries with 
private prescription drug coverage will need to compare that coverage to 
the prescription drug plans available under Part D to determine which 
program best meets their needs.  And, though Part D is voluntary, 
beneficiaries who delay enrollment will face financial consequences, 
including increased premiums. 
Concurrent OIG Inspections 
OIG has conducted two additional studies related to the drug card 
program.  One, Medicare-Approved Drug Discount Card:  Beneficiaries 
Awareness and Use of Information Resources (OEI-05-04-00200), 
assesses the extent of beneficiaries awareness and use of information 
resources to decide whether to enroll in the drug card program and 
navigate the enrollment process. The second study, Analysis of Drug 
Card Sponsors Drug Prices (OEI-05-05-00020), monitors the 
prescription drug prices posted by sponsors on the Medicare Web site 
and determines the extent to which sponsors are changing these prices. 
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METHODOLOGY 
This inspection focuses on sponsors materials that are likely to inform 
beneficiary decisions about enrolling in the drug card program:   
pre-enrollment packets and advertising materials.  To assess the extent 
to which sponsors materials promote informed choice, we reviewed a 
selection of materials and conducted interviews with sponsors that 
administer 62 drug cards.  Although there are 73 cards in the program, 
we excluded 11 drug cards from our study.  Some of these 11 drug cards 
were not available to beneficiaries at the time of our interviews or 
served only long-term care beneficiaries.  See Appendix A for additional 
information about our methodology. 
Assessing Whether Sponsors Materials Promote Informed Choice 
To assess the extent to which pre-enrollment packets and advertising 
materials promote informed choice, we assessed selected sponsors 
materials in two ways: we conducted a structured review of sponsors 
materials and conducted cognitive interviews with beneficiaries who 
read selected materials and answered questions based on their reading. 
Selected sponsors materials.  We selected 62 pre-enrollment packets and 
20 advertising materials for our review.  We selected 1 pre-enrollment 
packet for each of the 62 drug cards included in our study. Based on our 
interviews with sponsors, we determined that the 62 drug card sponsors 
used a total of 80 pre-enrollment packets.  We found that 45 sponsors 
use only 1 pre-enrollment packet.  For the 17 sponsors that use 2 or  
3 pre-enrollment packets, we selected the packet that sponsors 
indicated was used to target the most beneficiaries. 
For our review, we selected one tangible advertising material from each 
of 20 drug card sponsors that use tangible advertising materials.  
Tangible advertising materials include such things as direct mail, print 
ads, and flyers; they do not include radio or TV ads, posters, 
presentations, etc.  For sponsors that sent tangible advertising 
materials via direct mail, we selected the direct mail material that 
targeted the most beneficiaries.  Similarly, for sponsors that did not use 
direct mail to send advertising materials, we selected the tangible 
advertisement that targeted the most beneficiaries. 
Structured review of sponsors materials.  We conducted a structured review 
of selected sponsors materials to identify whether CMS-approved 
materials include required information. We discussed the 
noncompliance we found in our structured review with CMS and CMSs 
contractor. Our report includes the results of these discussions. 
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We selected 25 requirements applicable to pre-enrollment packets and 
7 requirements applicable to advertisements.20  Because some 
requirements are only applicable to certain drug cards or materials, 
between 20 and 24 requirements are applicable to each selected  
pre-enrollment packet and 2 to 7 requirements are applicable to each 
selected advertisement. All selected materials were approved between 
March and July 2004. Although CMS revised its requirements for 
sponsors materials in August 2004, we assessed materials compliance 
with requirements applicable at the time the material was approved.  
As a result, some portion of materials that met all the requirements we 
assessed may not meet all current CMS requirements.21  See Appendix 
B for a complete list of the requirements we selected for our review. 
Cognitive interviews with beneficiaries.  To assess whether sponsors 
materials are clear and understandable to Medicare beneficiaries, we 
interviewed 151 Medicare beneficiaries in 5 cities:  Chicago, IL, Tucson, 
AZ, Seattle, WA, Providence, RI, and Jackson, MS.  We selected these 
cities because they vary by population size and geographical region, 
because more than 10 percent of each citys population is over age 65, 
and because beneficiaries in these cities State Pharmacy Assistance 
Programs were not automatically enrolled in the drug card program.22 
We excluded cities that CMS visited to conduct similar beneficiary 
interviews to test Medicare outreach materials.  We conducted 
interviews at four or five community-based senior centers in each city. 
Prior to the interviews, we screened respondents to ensure that they 
were eligible for the drug card program and that they made their own 
health care decisions.  Further, we only included beneficiaries who 
reported that they were comfortable reading and discussing materials.  
Each respondent was assigned a short 5- to 15-minute reading selection 
consisting of either an advertising material or a selection from a   
pre-enrollment packet. Thirty-eight respondents read an advertisement 
and 113 respondents read a selection from a pre-enrollment packet.  
Respondents then answered questions about the drug card program 
based on the material.  Although we allowed respondents to take their 
time and refer back to materials throughout the interview, beneficiaries 
in a real-world setting may have assistance from others in 
understanding sponsors materials, which our respondents did not have 
during our interview.  Overall, individual interviews lasted 
approximately 20 to 30 minutes.  (As previously mentioned, OIG is 
assessing how beneficiaries made enrollment decisions in real-world 
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settings in our concurrent inspection on beneficiary use of information 
resources.) 
In cases in which multiple drug card sponsors used the same 
pre-enrollment packet or advertisement, we included only one copy of 
the material for beneficiary interviews.  Because several sponsors 
developed identical or template materials that were used for multiple 
drug cards, our original selection of 62 pre-enrollment packets and 
20 advertisements was reduced to 35 unique pre-enrollment packets 
and 12 unique advertisements as reviewed by beneficiaries.  Since each 
beneficiary read 1 material and there were 47 selected materials  
(35 unique pre-enrollment packets and 12 unique advertisements), each 
material was read by 3 or 4 beneficiaries, for a total of 151 interviews. 
Interviews With Sponsors 
We conducted structured telephone interviews with 33 sponsor 
companies that offer a total of 62 general drug cards.  We used these 
interviews to identify sponsors materials for our review and to 
determine how sponsors use pre-enrollment packets and advertising 
materials in their outreach to beneficiaries.  (As indicated previously, 
we use the term drug card sponsor when referring to the entity 
contracted to offer an individual drug card; thus, there are 62 drug card 
sponsors included in this study.  In some cases, one company actually 
has several contracts and offers multiple drug cards.  Because of this, 
we use the term sponsor companies when referring to the 33 parent 
companies that administer the 62 drug cards included in this study.)   
Limitations 
The data in this report are restricted to the 62 pre-enrollment packets 
and 20 advertisements we assessed and to the sponsors and 
beneficiaries we interviewed.  Although we do not project our results to 
all sponsors materials, our data represent the primary outreach 
materials used to target the largest number of beneficiaries for the vast 
majority of drug card sponsors.  
Standards 
This inspection was conducted in accordance with the Quality 
Standards for Inspections issued by the Presidents Council on 
Integrity and Efficiency. 
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  D R U G   C A R D   M A T E R I A L S  

As mentioned previously, CMS requires sponsors materials to provide 
information deemed necessary to promoting beneficiaries informed 
choice.  When considering the information needed to inform 
beneficiaries choice, it is helpful to use the following framework.  To 
make an informed decision about enrolling in the Medicare-Approved 
Drug Discount Card program (as opposed to other drug coverage 
options), beneficiaries need to understand: 
o 	 Whether the drug card program itself applies to them (their 
eligibility), and 
o 	 The benefits and limitations of the drug card program. 
To make an informed decision about enrolling in a particular drug card, 
beneficiaries need to understand:  
o 	 That there are multiple drug cards to choose from, and 
o 	 How drug cards can vary, so they can compare cards and decide 
which card is best for them.   
CMS requires that sponsors pre-enrollment packets include information 
relevant to this decision framework, including eligibility requirements; 
disclaimers on key aspects of program benefits; and information about 
features that vary among drug cards, such as enrollment fees, drug 
prices, and pharmacy networks. 
Our assessment of whether sponsors materials promote informed choice 
for beneficiaries follows in three parts.  First, to convey this required 
information, drug card sponsors distribute information to potential 
enrollees.  Thus we first assessed materials used in outreach, including 
which materials are used, how they are distributed, how many 
beneficiaries potentially received them, and barriers to distributing 
materials through outreach.  Second, sponsors materials must supply 
potential enrollees with required information. We assessed this by 
looking at compliance of materials.  Third, sponsors materials must be 
clear and understandable to potential enrollees who will use the 
information in making decisions about enrollment.  We addressed this 
topic by assessing whether beneficiaries understand key aspects of the 
drug card program, as it would apply to them, after reading sponsors 
materials. 
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Materials used in outreach  By the end of July 2004, 47 of the
62 drug card sponsors we 
interviewed had engaged in outreach to inform beneficiaries about their 
drug cards. These efforts were designed to reach out to beneficiaries 
rather than rely on them to seek out information on sponsors drug 
cards. The remaining drug card sponsors made information available to 
beneficiaries in more passive ways, such as through Web sites or call-in 
centers.  Of the 15 sponsors not conducting outreach activities at the 
time of our interviews, 9 indicated that they had plans to begin doing so 
by September 2004. 
Nearly all drug card sponsors that engaged in outreach distributed        
pre-enrollment packets to beneficiaries, rather than relying solely on 
promotional advertising 
Of the 47 drug card sponsors that conducted outreach, 46 used  
pre-enrollment packets in these efforts.  Pre-enrollment packets are 
required to contain information needed to promote beneficiaries ability 
to make informed decisions regarding enrolling in the program and 
selecting the appropriate drug card.  In addition to distributing  
pre-enrollment packets, many sponsors also engaged in advertising 
campaigns to encourage beneficiaries to inquire about their drug cards.  
Drug card sponsors most commonly distributed pre-enrollment packets 
through the mail, but many also provided them to beneficiaries in person 
The majority of drug card sponsors distributed pre-enrollment packets 
via traditional direct mail campaigns, as noted in Table 1 below.   
TABLE 1: Number of Drug Card Sponsors That Distributed Pre- Enrollment 
Packets to Beneficiaries, by Outreach Method 
Number of Drug Card Sponsors 
Sponsors Outreach Method  That Used Method to Distribute 
Pre-Enrollment Packets 
Direct Mail/E-mail  32 
In-Person Outreach to Beneficiaries  21 
Providing Written Material for Distribution  14 
Other  4 
Total (Unduplicated) Drug Card Sponsors That Used Pre-
46 
Enrollment Packets in at Least One Outreach Method 
Source:  Office of Inspector General analysis of drug card sponsor interviews, 2004. 
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Sponsors used direct mail to deliver their pre-enrollment packets to as 
few as 2,250 beneficiaries and as many as 4 million beneficiaries. The 
median number of beneficiaries targeted by a sponsors direct mail 
campaign was 270,000.23 
However, the pre-enrollment packet material alone may not be 
sufficient to explain the program or promote informed choice.  Some 
drug card sponsors noted the difficulty of explaining the program in a 
written format.  One sponsor noted that the complexity of the program 
was difficult to capture in a small brochure and necessitates face-to-
face contact where you can walk the beneficiary through the program. 
In fact, many drug card sponsors did engage in in-person outreach to 
market their drug cards.  Some drug card sponsors provided 
information to beneficiaries at town hall meetings and health fairs.  
Others made presentations about their drug cards at senior centers, 
pharmacies, and various other venues.  In these settings, drug card 
sponsors not only distributed pre-enrollment packets, but also provided 
in-person education about their cards and were available to answer 
beneficiaries questions and resolve confusion that may be hindering 
beneficiaries decisions about enrolling.  However, due to the time-
consuming and labor-intensive nature of this approach, fewer 
beneficiaries received their pre-enrollment packets in this manner than 
by mail. The number of beneficiaries at these events ranged from a few 
to 500, with a median of 33 beneficiaries.  The median number of events 
attended or held by a drug card sponsor was 15.   
Another method drug card sponsors employed was providing third-party 
entities with pre-enrollment packets to distribute to beneficiaries on 
behalf of the sponsor. Typically these third-party entities were 
participating pharmacies, but they also included physicians offices, 
senior centers, and several other health care and government entities. 
This approach allows beneficiaries to receive information and ask 
questions about the drug cards from a trusted health-care professional.  
It also has the potential to reach a broader array of beneficiaries than 
the face-to-face presentations.  The median number of beneficiaries 
targeted with this approach was 33,750. 
While beneficiaries are more likely to have confidence in information 
received from a trusted health care professional, there is the potential 
that some may enroll in the drug card offered by the trusted third-party 
and not receive the benefit of comparison shopping.  As one sponsor 
indicated, People are pretty tied to their pharmacist and will listen to 
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their advice.  Another sponsor indicated concern about the 
consequences of pharmacists promoting their card.  They asked, if a 
pharmacy was promoting one card, would the beneficiary get 
information from the pharmacist about what is the best card [for the 
beneficiary]? 
Finally, four drug card sponsors sought to educate people who would be 
in a position to educate beneficiaries.  This included conducting 
seminars with local businesses and sending pre-enrollment packets to 
church leaders and State staff. 
Thirty-five of the 47 drug card sponsors that conducted outreach used 
advertising materials 
Although most sponsors indicated that they relied on pre-enrollment 
packets as their main form of outreach, 35 of the 47 sponsors conducting 
outreach also used advertising materials.  In these cases, an 
advertisement may be the only outreach material seen by beneficiaries 
who use the advertisement to decide whether to contact the sponsor or 
CMS for more information. 
As with pre-enrollment packets, drug card sponsors reported that they 
primarily distributed advertising materials via direct mail campaigns.  
They also relied on mass media, primarily using print advertisements. 
Substantially fewer sponsors advertised on radio or television, despite 
the fact that these offer the potential to reach far broader audiences. 
Drug card sponsors also used other, less conventional means to 
advertise their drug cards.  Sixteen drug card sponsors distributed 
advertisements as part of their in-person outreach and 10 engaged third 
parties to display or distribute their advertisements. 
Sponsors cited a variety of obstacles to informing beneficiaries about their 
drug cards 
According to 29 of the 33 sponsor companies we interviewed, some CMS 
requirements or processes present barriers to outreach.  We did not 
independently validate sponsor companies concerns but offer their 
feedback as we received it, as it provides an important perspective on 
the topic of promoting informed choice.  Twenty-six of these sponsor 
companies indicated problems with the CMS Medicare Prescription 
Drug Discount Card and Transitional Assistance Program, Information 
& Outreach Materials Guidelines. Their primary frustration was that 
the guidelines were constantly changing, often leading to multiple 
iterations through the approval process.  Twenty-two of the 29 sponsor 
companies also felt that the process for reviewing and approving the 
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materials presented problems.  Twelve of these provided general 
comments about the process, describing it as cumbersome, tedious, 
and the most frustrating challenge. Twenty-one of the 22 sponsor 
companies provided specific issues of concern, including inconsistent 
review; length of the review process; unresponsiveness of CMSs 
contractor; and communication between CMS and its contractor, 
resulting in confusion and inconsistent decisionmaking.   
These issues have the potential to negatively affect the information that 
beneficiaries receive about the program.  Some impacts that sponsor 
companies mentioned included their ability to get information into the 
market in a timely way, their ability to alter their strategy in response 
to changes in the market, and their creativity in testing new ideas or 
options.  One sponsor company found the review process so slow that 
the sponsor was deterred from developing new materials.  Another 
refrained from correcting errors and improving a document because it 
didnt have time to wait on the review process. 
On the other hand, the concerns mentioned by sponsor companies may 
be related to the challenges of implementing a new program in a very 
short timeframe.  For example, as time went on, some sponsor 
companies saw improvements in the review process.  One summed up 
this view, stating, . . . the review/approval process was pretty rough at 
the beginning . . . it was a learning stage.  It has improved now.  In 
addition, 13 sponsor companies, at the time of our interviews, indicated 
that they had no problems with CMSs contractor or had positive 
comments about the process. 
Compliance of materials  CMS requires sponsors to include 
information necessary for 
promoting beneficiaries informed choice in their pre-enrollment 
packets. These requirements include information that beneficiaries can 
use to assess whether the program applies to them, whether the 
program will benefit them, and information for choosing among drug 
cards. 
Of the 62 pre-enrollment packets we reviewed, we found 39 that were 
missing some information required by CMS 
These 39 noncompliant pre-enrollment packets were used in sponsors 
outreach to target approximately 8.6 million beneficiaries, primarily 
through direct mail.  These 39 packets represent 20 unique   
pre-enrollment packets because some sponsor companies developed 
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identical or template pre-enrollment packets that were used by 
multiple drug cards.24 
Of the 39 noncompliant pre-enrollment packets, 32 did not meet 1 or 
2 requirements.  The remaining 7 did not meet 3 or more requirements; 
2 of these pre-enrollment packets did not meet 14 requirements.   
The seven most commonly missed requirements relate to eligibility, 
program disclaimers, choice of cards, and comparative drug card 
information 
Of the 25 requirements we assessed, 7 requirements were missed most 
often by pre-enrollment packets.  Each of these 7 requirements was 
missed by between 5 and 20 pre-enrollment packets.  All other 
requirements were missed by zero to two pre-enrollment packets.   See 
Appendix B for results for all requirements we assessed. 
The seven most commonly missed requirements relate to four 
categories:  eligibility, program disclaimers, required information 
indicating that beneficiaries have a choice of cards, and information 
needed to compare the prices/discounts offered by drug cards.  (See 
Table 2.) 
TABLE 2: Requirements Missed Most Often in Pre-Enrollment Packets 
Pre-Enrollment 
Key Program 
Requirements  Packets Not in 
Feature 
Compliance (of 62) 
Income definition for determining eligibility for 
Eligibility  7 
Transitional Assistance 
Program description disclaimer:  Not intended to 
18 
replace other drug benefits 
Program description disclaimer:  Not a Medicare 
17 
Program  benefit 
Disclaimers  Drug prices/discounts disclaimer:  Discounts subject 
17 
to change [over time] 
Pharmacy network disclaimer:  Beneficiaries must use 
9 
network pharmacies for discount and $600 credit 
Disclaimer: Beneficiaries may only be enrolled in one 
Choice of Cards  20 
card at a time 
Comparative 
How to find information on drug prices/discounts, 
Program  5 
including Medicare price compare Web site 
Information 
Total (Unduplicated) Pre-Enrollment Packets Not in Compliance With at 
39 
Least One of the Seven Requirements 
Source:  Office of Inspector General analysis of selected sponsor materials, 2004. 
Eligibility.  CMS requires that pre-enrollment packets include eligibility 
criteria that beneficiaries can use to determine whether they are eligible 
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for the drug card program and for the Transitional Assistance credit.  
We found that nearly all pre-enrollment packets included required 
eligibility criteria for both the drug card program and the credit.  For 
example, all but two pre-enrollment packets stated that beneficiaries 
may be eligible for the $600 Transitional Assistance credit if your 
income, plus your spouses income (if married) is no more than . . . 
Single: $12,569 or less, Married:  $16,862 or less.25 
However, we found that seven pre-enrollment packets did not include 
the following required definition of what counts as income: 
Income includes money that you receive through retirement 
benefits from Social Security, Railroad, the Federal or State 
governments, or other sources, and benefits you receive for a 
disability or as a Veteran, plus any other sources of the type 
that you would report for tax purposes.26 
CMS requires that sponsors enrollment instructions include a 
definition of income.  In some cases, CMS contractors reviewers may 
have assumed that these sponsors included enrollment instructions in 
their pre-enrollment packets.  However, four of the seven noncompliant 
pre-enrollment packets did not include a separate enrollment 
instructions document in their pre-enrollment packet.  
Program disclaimers.  We found four disclaimers that were frequently not 
included in pre-enrollment packets.  These include two disclaimers 
related to describing the program, one related to discounts, and one 
related to pharmacy networks.  These disclaimers provide important 
information about the limitations of the program which may help 
beneficiaries compare this program to other drug coverage options. 
The following two disclaimers relate to describing the program: 
o 	 [Program name] is not intended to replace prescription drug 
benefits obtained through participation in insurance plans 
including a Medicare Advantage plan, a Medigap policy, Medicaid, 
or an employer or retiree plan. 
o 	 [Program name] is a prescription drug discount card program that 
is approved by Medicare but it is not a Medicare benefit.27 
We found that 18 pre-enrollment packets were missing the first 
disclaimer, and all but 1 of these were also missing the second 
disclaimer. 
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The third frequently missed disclaimer is required for materials that 
include any discussion of discounts.  These materials must include a 
disclaimer that discounts can change (i.e., over time).  We found that  
17 pre-enrollment packets did not meet this requirement.  This 
noncompliance is explained by a miscommunication about CMS policy 
changes.  CMSs contractor interpreted a new discount disclaimer to 
supersede this original disclaimer, although this interpretation was not 
intended by CMS.28 
The fourth frequently missed disclaimer relates to descriptions of 
pharmacy networks.  CMS requires pre-enrollment packets to include 
the following disclaimer about pharmacy networks: 
Enrollees must use [Approved Card Program]s network 
pharmacies in [service area] to obtain the prescription 
discount we offer and to apply Transitional Assistance to 
the prices of your drug. A network pharmacy is a 
pharmacy where our discounted drugs can be purchased 
and Transitional Assistance can be used.29 
Although all but one pre-enrollment packet we reviewed indicated that 
enrollees must use network pharmacies, we found that nine pre-
enrollment packets did not include the full information required in the 
disclaimernamely, that network pharmacies are also places that 
Transitional Assistance can be used.  This noncompliance is also 
explained by a miscommunication of CMS policy changes. CMSs 
contractor interpreted a CMS policy clarification related to describing 
pharmacy networks to supersede this original disclaimer, although this 
interpretation was not intended by CMS.30 
Choice of cards.  The topic of choice of cards is slightly different from the 
other requirements we examined.  Although the MMA notes the 
importance of promoting beneficiaries informed choice, drug card 
sponsors materials are not required to explicitly state that beneficiaries 
have a choice of drug cards.  Despite this, we found 16 pre-enrollment 
packets that explicitly state that beneficiaries have a choice of cards.  
One pre-enrollment packet states, There is a lot to know before you 
choose a discount card program . . . .  We will help you find the program 
that is right for you.  Another pre-enrollment packet indicates, . . . you 
can choose any Medicare-approved discount card you want.  But you can 
choose only one. 
However, CMS does require that pre-enrollment packets include 
information that implicitly indicates that beneficiaries have a choice of 
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cards (for example, how to disenroll in one card and enroll in a new one). 
We assessed whether pre-enrollment packets included the required 
statement: you may be enrolled in only one Medicare-Approved [drug 
discount card] at one time.31  Twenty pre-enrollment packets did not 
include this statement. 
For 13 of these pre-enrollment packets, CMS contractors reviewers did 
not apply the correct review protocol to the material, which accounts for 
the noncompliance.  When submitting materials for review and 
approval, sponsors are not required to designate whether a material will 
be included in their pre-enrollment packet.  Pre-enrollment packets can 
contain a variety of different materials, such as a Summary of Program 
Features, enrollment instructions, and forms.  However, some sponsors 
included simple brochures in their pre-enrollment packets, as opposed 
to their Summary of Program Features.  Because of this, reviewers 
assumed that materials submitted as direct mail brochures were not 
pre-enrollment packet materials but advertisements.  Sponsors that 
included a brochure in their pre-enrollment packet in place of their 
standard explanatory materials may have been unclear on CMSs 
requirements, or may have intended to take advantage of the fact that 
CMS does not require them to report how they intend to use submitted 
materials. 
Comparative information. Nearly all pre-enrollment packets included 
required information about some comparative features, including 
annual enrollment fees, and a description of how to get more 
information about pharmacies in a drug cards network. In addition, all 
pre-enrollment packets included sponsor contact information, and most 
listed the CMS Web site.  (See Table 5 in Appendix B for more detail.)  
However, we found five pre-enrollment packets that did not meet the 
requirement to describe how to get more complete information about 
drug prices and/or discounts, including both visiting the Medicare price 
compare Web site and contacting the drug card sponsor.  Referring 
beneficiaries to Medicares Web site is especially relevant since 
beneficiaries can use the site to compare different drug cards prices on 
the specific drugs the beneficiary uses.  
Of the 20 advertising materials we reviewed, 15 were noncompliant with one 
or more of the requirements we assessed 
Of the 20 advertising materials we reviewed, 15 did not include 
information related to at least one of the 2 to 7 requirements we 
assessed. These 15 noncompliant advertisements were used to target 
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approximately 4.7 million beneficiaries through direct mail and an 
unknown number of beneficiaries through a print advertisement and a 
pharmacy flier.  These 15 materials represent 7 unique advertising 
materials, since 1 template postcard was used by 9 cards.  (See 
Appendix B for results for all requirements we assessed.)   
A communication error between CMS and its contractor accounts for all 
the noncompliance that we found.  All 15 advertisements were missing a 
description of how to get more complete information about discounts, 
including visiting the Medicare Web site and contacting the sponsor.  
Thirteen of these fifteen were also missing the disclaimer that discounts 
are subject to change.32  Similar to pre-enrollment packets, CMSs 
contractor considered both of these requirements for advertisements to 
be superseded by a new requirement.33 
CMS oversight processes did not prevent noncompliance found relatively 
early in the program 
CMS oversight processes, including Information and Outreach 
Materials Guidelines for sponsors materials, review and approval of 
materials, and CMS model documents, did not prevent the 
noncompliance we found.  CMS provided sponsors with some model 
documents, including a model cover letter for pre-enrollment packets, a 
model member handbook, and model enrollment instructions and forms.  
We found evidence that many drug card sponsors were interested in 
following model documents. Fifty-nine of 62 pre-enrollment packets 
followed at least some model language offered by the CMS model 
handbook, model enrollment instructions, or model cover letter. 
However, CMS staff did not develop a model Summary of Program 
Features.  CMS staff indicated that a model Summary of Program 
Features may have assisted sponsors in understanding the 
requirements for their pre-enrollment packets. 
All the materials we reviewed were approved by CMS relatively early in 
the program (between March and July 2004), which was a time 
characterized by very tight deadlines and by many changes and 
clarifications regarding requirements for sponsors materials.  These 
constraints increased the potential for communication problems both 
with sponsors and with CMSs contractor.   
We found three sources of error that explain all noncompliance found in 
39 pre-enrollment packets and 15 advertisements:  reviewer error, 
sponsor error, and miscommunication about policy changes. Each 
source of error is described below.  Many of the 39 noncompliant  
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pre-enrollment packets had more than one source of error, so the 
following description contains a duplicated count of pre-enrollment 
packets. (See the final table in Appendix B for an unduplicated 
accounting of sources of error.) 
Reviewer error.  Twenty of the thirty-nine noncompliant pre-enrollment 
packets were noncompliant due, at least in part, to reviewer error. 
Eleven of these cases relate to two template pre-enrollment packets. 
Some reviewer error may be attributable to challenges CMSs contractor 
faced in the early implementation of the program, including frequent 
changes to review policies, high volume of materials for review, and 
confusing communication from CMS. 
Sponsor error.  Eighteen of the thirty-nine noncompliant pre-enrollment 
packets were noncompliant, at least in part, due to sponsor error (such 
as using an advertising brochure in the pre-enrollment packet as 
opposed to standard explanatory materials, or failing to include 
enrollment instructions in their pre-enrollment packet).  Sponsors may 
have failed to include correct materials in their pre-enrollment packets 
due to unclear standards.  For instance, CMSs original Information and 
Outreach Materials Guidelines do not clearly explain that sponsors are 
responsible for including all required materials in any packet to be used 
directly for enrollment.  CMS had not used formal methods of 
communicating to sponsors (for example, a bulletin) to clarify    
pre-enrollment packet requirements.  Although CMS staff indicated 
that this issue might have been raised during weekly conference calls 
with sponsors, CMS did not record or distribute minutes for these calls.  
However, CMS has somewhat clarified this issue in its revised 
guidelines. 
We also found evidence that some sponsors did not follow CMS 
requirements prior to distributing materials.  For instance, some 
sponsors apparently changed materials after approval and did not notify 
CMS. In most cases, these changes were minor. In addition, we noted 
that some sponsors did not revise materials to address stipulations on 
approval. After reviewing a sample of 105 materials, CMSs contractor 
found that 61 materials failed to address stipulations. Finally, we found 
two instances in which it appears that sponsors used unapproved 
materials. CMS reserved the right to conduct a review of sponsors 
materials in the marketplace, but has not conducted this review.   
Miscommunication of policy changes.  Twenty-three of the thirty-nine 
noncompliant pre-enrollment packets and all 15 advertisements were 
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noncompliant due to miscommunication about policy changes. CMS and 
its contractor developed an issues matrix to communicate policy 
changes and to identify and resolve questions about interpreting 
requirements for sponsors materials. When CMS resolved a policy 
question, the matrix would be updated with the decision and decision 
date. Reviewers used the issues matrix along with a standard review 
protocol while reviewing sponsors materials. Although this system 
appeared to work effectively to address many policy questions, it 
apparently failed in relation to disclaimers for discounts and pharmacy 
networks, as previously discussed. In one case, CMS issued a policy 
clarification through a brief e-mail, which was outside CMSs typical 
communication structure. 
Beneficiary understanding of materials  Prior to enrolling in a drug
card, beneficiaries need to 
receive key information that is relevant to making an informed choice. 
In addition, this information must be understandable. Materials that 
include required information do not fully inform beneficiaries decisions 
unless they can grasp key concepts, including eligibility, benefits and 
limitations of the card, choice of cards, and comparative information to 
select the card that best meets their needs. We assessed beneficiary 
understanding of five key program features related to these decision 
elements: eligibility, program limitations related to drugs covered, 
limitations related to drug prices, choice of cards, and comparative 
enrollment fee information. 
Each of five key features was understood by between 54 to 74 percent of 
beneficiary respondents reading pre-enrollment packets; however, only 
21 percent understood all five 
We asked 113 beneficiaries to review selected pre-enrollment packets to 
assess whether they could understand five key program features. In 
doing so, we found that each individual feature was understood by a 
majority of respondents. In fact, all but three respondents understood 
at least one key program feature. Table 3 outlines these results. (In all 
cases, denominators vary depending on the number of respondents 
answering each question. See Appendix C for more detail.) 
Respondents misunderstood key program features that were 
particularly complex (such as eligibility), not explicitly stated (such as 
choice of cards), and discussed only briefly (such as limitations on drugs 
covered). Nearly 80 percent of beneficiaries we interviewed did not 
understand all key features of the program. 
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TABLE 3: Proportion of Respondents Who Understood Key Program Features 
Based on Reading Sponsors Pre-Enrollment Packets 
Transitional  Non-Transitional 
Proportion of 
Assistance- Assistance-
Key Program Feature  Respondents Who 
Eligible  Eligible 
Understood Key Feature 
Respondents  Respondents* 
Eligibility  58%  63%  55% 
Program Limitations:  Drugs 
59%  44%  64% 
Covered Can Change 
Program Limitations:  Drug 
74%  67%  78% 
Prices Can Change 
Choice of Cards  54%  45%  59% 
Comparative Information:  
58%  50%  62% 
Annual Enrollment Fee 
All Key Program Features  21%  22%  21% 
* This category includes 13 respondents whose eligibility for Transitional Assistance could not be determined. 
Source:  Office of Inspector General analysis of Medicare beneficiary interviews, 2004. 
A greater proportion of Transitional Assistance-eligible (TA-eligible) 
respondents understood eligibility than those not eligible for 
Transitional Assistance; however, this was not the case for other topics. 
Sixty-three percent of TA-eligible respondents understood eligibility, 
compared to 55 percent of non-TA-eligible respondents.  (See Appendix 
C for further results related to beneficiary understanding by eligibility 
status for Transitional Assistance.) 
Eligibility:  Fifty-eight percent of respondents correctly assessed their 
eligibility; most confusion concerned income requirements 
Based on the material reviewed, 58 percent of respondents were able to 
correctly determine their program eligibility.34  Some respondents 
correctly determined their eligibility despite indicating confusion about 
eligibility at some point in the interview.  Respondents had to take into 
consideration their Medicare status, income, and other prescription 
drug coverage to determine their eligibility for both the drug card 
program and the Transitional Assistance credit.35 
A greater proportion of respondents correctly assessed their eligibility 
for the Transitional Assistance credit than correctly assessed their 
eligibility for the drug card program.  Eighty-four percent of 
respondents correctly judged whether they were eligible for the 
Transitional Assistance credit.  Of these, the vast majority provided at 
least one correct reason for their eligibility (for example, low income, 
lack of other drug coverage).  However, only 66 percent of respondents 
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correctly judged that they were eligible for the drug card program.36 Of 
these, 15 respondents gave an incorrect reason for their eligibility.  
Respondents who did not understand their eligibility for the drug card 
program most frequently misunderstood the nature of the income 
requirement described in pre-enrollment packets.  Some respondents 
erroneously believed the drug card program to have income 
requirements.  In addition, many respondents did not understand that 
the drug card program and the Transitional Assistance credit were two 
separate programs with distinct eligibility requirements. For instance, 
some respondents characterized the material as describing a program 
solely for low-income individuals.  Eligibility for the Part D prescription 
drug benefit will be similarly complex, with low-income beneficiaries 
eligible for enhanced drug coverage. 
In addition to income, respondents expressing confusion about eligibility 
mentioned specific confusion about the role of existing prescription drug 
coverage and current prescription drug expenditures.  Twelve 
respondents indicated concern that existing drug coverage (other than 
Medicaid) disqualified them from the drug card program.  Existing 
prescription drug coverage does exclude beneficiaries from receiving 
Transitional Assistance but not from enrolling in the drug card 
program.  Nine respondents reported that the amount they spent on 
drugs either qualified them or made them ineligible for the drug card 
program.  However, prescription drug expenditures are not a factor in 
assessing eligibility for either the drug card program or the Transitional 
Assistance credit. 
Program limitations:  Between 59 and 74 percent of respondents understood 
key limitations of the drug card program    
More respondents understood that drug prices could change than that 
drugs covered could change.  Seventy-four percent of respondents 
understood that drug prices could change.  Most pre-enrollment packet 
selections read by respondents described discounts or drug prices, and 
many included a percent discount that beneficiaries could expect.  
However, only 59 percent of respondents understood that drugs covered 
could change, perhaps due to a lack of description of drugs covered in 
the pre-enrollment packet.  Aside from the disclaimer that drugs 
covered could change, pre-enrollment packet selections tended to 
mention the topic of drugs covered only briefly.  For example, the vast 
majority of selections read by respondents did not mention specific 
drugs covered by the drug card.   
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Choice of cards:  Fifty-four percent of respondents understood that they had 
a choice of Medicare-approved drug discount cards  
Overall, 54 percent of respondents interviewed correctly identified that 
more than one Medicare-approved drug discount card is available, based 
on the pre-enrollment packet they reviewed.37  Twenty-six percent of 
respondents incorrectly identified that the card described in the pre-
enrollment packet they read was the only one available, and 20 percent 
did not know if there were other available cards.  Although most 
selections read by beneficiaries implicitly indicated that beneficiaries 
have a choice of drug cards, CMS does not require sponsors to explicitly 
state that beneficiaries have a choice of drug cards.  Respondents 
reading pre-enrollment packets understood this topic least often out of 
all topics we assessed. 
Some beneficiaries indicated that they knew from sources other than 
the material they reviewed that several Medicare-approved drug 
discount cards were available.  Five of these respondents volunteered 
that, based on the selected material reviewed, they were led to believe 
there was only one available Medicare-approved drug discount card, but 
that they knew from outside sources that there were others.38 
Comparative information:  Fifty-eight percent of respondents correctly 
determined the annual enrollment fee of the drug card 
For the drug card offered by the pre-enrollment packet they reviewed, 
58 percent of respondents correctly assessed both the amount and the 
frequency of the enrollment fee, if applicable.39  For the amount of the 
enrollment fee alone, 73 percent of respondents reported a correct 
response, and 75 percent of respondents reported a correct response for 
the frequency of the enrollment fee alone. 
Respondents reading advertisements understood key program features less 
often than those reading pre-enrollment packets   
Overall, respondents reading advertisements answered questions 
correctly less often than respondents reading pre-enrollment packets.  
Twenty-seven percent answered the vast majority of test questions 
correctly, compared with nearly half of respondents who reviewed 
pre-enrollment packets.  In contrast, 57 percent of respondents reading 
advertisements answered half or fewer test questions correctly.  About  
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one-third of respondents who reviewed pre-enrollment packets 
answered half or fewer of their questions correctly.40  (See Table 4 
below.) 
TABLE 4: Proportion of Key Test Questions Answered Correctly 
Proportion of Test Questions  Respondents Reviewing  Respondents Reviewing 
Answered Correctly  Advertisements  Pre-Enrollment Packets 
50% or Less   57%  32% 
51%-79%   16%  22% 
80% or More   27%  46% 
Source:  Office of Inspector General analysis of Medicare beneficiary interviews, 2004. 
Similar to beneficiaries who read pre-enrollment packets, a greater 
proportion of respondents who read advertisements correctly assessed 
their eligibility for the Transitional Assistance credit than correctly 
assessed their eligibility for the drug card program. Of the 
14 respondents who were asked to judge their eligibility for the  
$600 Transitional Assistance credit, 11 both understood their eligibility 
and provided the correct reason for their eligibility.  Of the 20 
beneficiaries asked to judge their eligibility for the drug card program, 
11 understood that they were eligible, and 4 of these gave the correct 
criteria for their eligibility.    
Roughly half of respondents reading advertisements understood choice 
of cards and enrollment fee.  Sixteen of the 34 respondents asked were 
able to correctly identify that there is more than one Medicare-approved 
drug discount card available. Of the 14 respondents asked the amount 
of the enrollment fee, 8 correctly reported the amount of the fee and 
6 responded that they did not know the amount. 
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  I M P L I C A T I O N S :   N E W   D R U G   B E N E F I T

Under Medicares new Part D prescription drug benefit, beneficiaries 
will face choices very similar to those they have under the drug card 
program. They will need complete, accurate, and understandable 
information about the Part D drug benefit to assess whether the 
program is appropriate for them and, if so, which prescription drug plan 
best meets their needs.  For instance, beneficiaries will need to 
understand whether they are eligible for the basic Part D drug benefit 
or the subsidies available to low-income individuals.  They will need to 
understand the advantages and limitations of the drug benefit, as well 
as how to compare different plans available to them.  While similar, 
many of the choices facing beneficiaries will be more complex under the 
Part D drug benefit, and will have greater implications for beneficiaries 
who delay enrollment. 
CMS will play a lead role in providing quality beneficiary education 
while reaching the number of beneficiaries who need to be informed 
about the new drug benefit. To do this, CMS will need to first establish 
effective oversight systems.  Second, these oversight systems should 
ensure that prescription drug plan sponsors materials provide clear 
information about their plans.  Finally, CMS outreach to beneficiaries 
must provide key comparative information about prescription drug 
plans to ensure that all beneficiaries are aware of their options under 
the Part D drug benefit. 
In light of our review of drug card materials, and to promote informed 
choice for beneficiaries, we believe that CMS should consider the 
following as it implements oversight of prescription drug plan sponsors 
materials and develops outreach for the full prescription drug benefit 
under Part D.   
CMS Management and Communication Systems 
CMS should anticipate implementation challenges to ensure that its 
management and communication systems are consistent, clear, and 
formalized. 
Anticipate implementation challenges. As we found with the drug card 
program, CMS will likely run into challenges in the early months of 
implementing the new drug benefit.  CMS may find it must make 
unexpected clarifications to policies or processes and will face high 
volumes of materials for review as plan sponsors will be eager to begin 
marketing their programs.  CMS may want to anticipate these 
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implementation challenges by ensuring that there are enough staff and 
resources to review the high volume of materials likely to be submitted 
in the few months before prescription drug plan marketing begins. 
CMS will need to ensure that all reviewers are well trained on reviewer 
protocols and should consider pretesting review protocols and the 
review process. 
Establish consistent, clear communication.  CMS should ensure that it uses 
consistent and clear communication with prescription drug plan 
sponsors and with CMSs contractor.  Clear communication is especially 
important given the abbreviated timeframe CMS has to implement the 
full Part D drug benefit.  CMS should ensure that plan sponsors and 
reviewers receive the same information related to materials and should 
coordinate instructions to both the CMS contractor and CMS regional 
staff who will review materials for Medicare Advantage prescription 
drug plans. 
Formalize communication.  Further, CMS should formalize communication 
with prescription drug plan sponsors and reviewers when feasible.  
While frequent conference calls may be an efficient way to address 
questions and any unforeseen issues, policy changes, clarifications, and 
guidance discussed on these calls should be documented and distributed 
to plan sponsors and reviewers.  CMS may want to continue to use an 
issues matrix, such as the one used in the drug card program, to track 
clarifications and instructions to reviewers.   
CMS Oversight of Prescription Drug Plans Materials 
CMS oversight of prescription drug plan sponsors pre-enrollment 
packets and advertising materials should ensure that beneficiaries have 
all the information necessary to make informed decisions about 
participating in the Part D drug benefit.  CMS requirements and 
oversight mechanisms should aim to facilitate the development and 
distribution of informative pre-enrollment packets and responsible 
advertisements.  In particular, CMS should consider incorporating the 
following items in its oversight of plan sponsors materials: 
Require development of pre-enrollment materials that contain specified 
information needed prior to enrollment. CMS should consider requiring that 
prescription drug plan sponsors develop pre-enrollment packets (or their 
equivalent) for the Part D drug benefit.  Similar to the drug card 
program, CMS should specify the minimum information that these 
pre-enrollment materials should contain to ensure that beneficiaries can 
use them to make an informed decision about enrolling.   
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CMS may want to keep these requirements as concise as possible.  In 
our interviews, many drug card sponsors reported that pre-enrollment 
packet requirements and the review and approval process for their 
materials were burdensome.  Prescription drug plan sponsors may also 
find the review process burdensome, and thus may be unlikely to 
dedicate the time and resources needed to develop these explanatory 
materials unless required.   
Requirements that result in extensive pre-enrollment packets may 
discourage prescription drug plan sponsors from using them in their 
outreach, due to printing and distribution costs. 
Identify pre-enrollment packet materials.  If CMS decides to require 
pre-enrollment packets (or their equivalent), it will need to require 
prescription drug plan sponsors to identify materials they will include 
in their packets to facilitate correct review.  Further, CMS should 
clearly state that plan sponsors are responsible for including these 
materials when they distribute enrollment forms.  Prescription drug 
plan sponsors should have no confusion about the information 
beneficiaries should receive when preparing to enroll. 
Provide model materials.  To streamline requirements for and facilitate 
compliance of materials, CMS should consider developing model 
materials for prescription drug plan sponsors to use.  We found evidence 
that many drug card sponsors were interested in following model 
documents.  Because model materials are likely to be adopted by plan 
sponsors, CMS should consider pretesting its model materials by 
conducting focus groups or cognitive interviews with beneficiaries.   
Require choice of plans statement. To ensure that beneficiaries realize 
they have a choice when considering the Part D drug benefit, CMS could 
require that prescription drug plan sponsors materials clearly state 
this. Specifically, CMS could require that all materials, including 
advertisements, include a CMS-sponsored label clearly stating that 
beneficiaries have a choice of Medicare prescription drug plans, 
describing the main ways in which plans vary, encouraging 
beneficiaries to find the best plan to meet their needs, and providing 
Medicare contact information to compare plans. 
Spot check materials.  CMS should consider conducting spot checks of 
prescription drug plan sponsors materials in the marketplace to 
determine whether plans are using unapproved outreach materials.  If 
CMS finds that plan sponsors are using such materials, it should take 
enforcement measures to address noncompliant plan sponsors and 
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consider focusing more efforts on reviewing final submitted versions of 
materials that were approved with stipulations.  
CMS Outreach to Beneficiaries 
CMS should enhance its outreach efforts to ensure that beneficiaries 
have all information necessary to make informed decisions about 
participating in the Part D drug benefit.  Exposure to information about 
a particular prescription drug plan alone may not provide beneficiaries 
with a full understanding of the array of choices available.  This could 
result in beneficiaries signing up for the plan that was marketed to 
them rather than the plan that best suits their health care needs. For 
example, they may simply sign up for the plan that their pharmacist 
has endorsed. Thus, CMS outreach will be a critical component in 
promoting informed choice by providing comparative information on 
prescription drug plans.  CMS should consider the following steps in its 
efforts to inform beneficiaries about the Part D drug benefit, to ensure 
that beneficiaries can make an informed decision about their 
enrollment. 
Distribute regionally tailored letters at the beginning of the new drug benefit. 
To facilitate beneficiaries informed choice at the beginning of the Part 
D drug benefit, CMS could distribute to beneficiaries regionally tailored 
letters that include a list of all prescription drug plans available in their 
area. This letter could provide comparative information about these 
plans, such as premiums and basic plan benefits.  The letter could also 
inform beneficiaries about the benefits and limitations of the program 
and how to compare plans.  For instance, the letter could indicate that 
premiums vary, that plans formularies may vary, and that plans use 
different networks of pharmacies. 
Provide a short guide to choosing a prescription drug plan.  In addition, CMS 
could produce a short guide to choosing a prescription drug plan and 
could require it to be included with all pre-enrollment packets.  This 
guide could reduce the burden on plan sponsors for sharing specific 
information necessary to informing beneficiary choice.  Alternatively, 
CMS could require each pre-enrollment packet to include a section on 
information Medicare wants you to know.  CMS is a trusted source 
and could give plan sponsors materials added credibility, as well as 
point out the basic factors a beneficiary should consider when choosing 
a plan. 
Facilitate in-person education.  Finally, CMS should continue to focus 
efforts on in-person education and should consider facilitating and 
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promoting prescription drug plan sponsors efforts to inform 
beneficiaries in person about the Part D drug benefit. Explaining the 
new drug benefit in person provides the greatest opportunity to help 
individual beneficiaries understand whether the Part D benefit is right 
for them.  Some drug card sponsors found in-person outreach to be more 
effective than relying on written materials alone.  Further, only  
21 percent of beneficiary respondents were able to understand all key 
program features after reading sponsors pre-enrollment packets. 
In-person education allows beneficiaries to ask questions and resolve 
confusion that may be hindering their decision about enrolling.   
As part of CMSs education and outreach efforts, CMS should continue 
to emphasize local, in-person outreach.  CMS currently partners with a 
variety of community-based organizations to provide local outreach to 
beneficiary populations that are sometimes difficult to reach.  Congress 
has allotted funds for CMS to enhance its in-person education efforts for 
the Part D drug benefit (through the State Health Insurance Assistance 
Program).  In addition to these efforts, CMS should continue to promote 
its toll-free hotline through which CMS representatives can provide 
quality information and answer beneficiaries questions. 
In addition to its own efforts, CMS should consider how to promote 
prescription drug plan sponsors use of in-person outreach to 
beneficiaries, including providing a forum in which plan sponsors can 
interact with beneficiaries.  For instance, CMS could leverage its 
partnerships with community-based organizations, departmental 
grantees, and senior groups to provide such forums and invite 
prescription drug plan sponsors to provide in-person education to 
beneficiaries. CMS could also partner with State and local legislators to 
offer town hall-style meetings and invite regional plan sponsors to 
participate. 
AGENCY COMMENTS 
CMS stated that it views the drug card as an important opportunity for 
using lessons learned when implementing the new drug benefit and 
agreed with most of the implications for the drug benefit that we 
suggested.  In fact, CMS noted that ongoing communications with OIG 
throughout the course of this project have already allowed it to 
incorporate some of our suggestions in the development and 
implementation of the marketing rules, guidelines, and oversight for 
sponsors materials and outreach to beneficiaries.   
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CMS noted that it has had substantially more time to plan for the drug 
benefit, as compared to the drug card program, and thus has been able 
to address our suggestions to develop stronger management and 
communication systems, oversight of marketing materials, and outreach 
efforts. To ensure consistent, clear, and formalized communications, 
CMS indicated that it has set up multiple channels for communication 
with Part D sponsors and industry representatives.  These include 
weekly Part D user group calls, a searchable MMA Question & Answers 
database, and a PDP help line to provide drug benefit sponsors with 
answers to marketing questions. Finally, a marketing guideline 
training program has been established.   
CMS stated that it has worked with an outside marketing contractor 
and received extensive public comment to help it develop marketing 
guidelines, model materials, and a streamlined marketing review to 
ensure the appropriate oversight of sponsors materials.  Additionally, 
CMS stated that it has developed an oversight strategy to ensure that 
sponsors are complying with requirements for the content and 
distribution of makerting materials.  Some components of this strategy 
include focused audits, routine audits, a complaints tracking system, 
and spot checks on a wide range of marketing materials.  
CMS detailed a comprehensive outreach effort with national, regional, 
and community-based outreach efforts related to our suggestions. The 
agency described a targeted education effort that incorporates a 
national multimedia campaign, simple fact sheets, audience-specific 
outreach materials, direct mail, and community-based grassroots 
outreach with numerous partners. CMS also highlighted the 
personalized information available through the Drug Plan Compare 
Web tool and 1-800-MEDICARE, as well as the one-on-one personalized 
advice and counseling available from the State Health Insurance 
Assistance Programs.  The complete text of CMSs comments is included 
in Appendix D. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
OIG appreciates CMSs response to this report and the detailed 
descriptions of its ongoing and planned efforts regarding the oversight 
of sponsors marketing marterials for the new drug benefit.  These 
descriptions highlight substantial efforts by CMS toward ensuring the 
appropriate management, guidance, and oversight of sponsors 
marketing materials. 
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We are pleased that CMS found this information to be constructive and 
is taking actions consistent with our findings and all of our suggestions, 
with the exception of two.  While CMS is not requiring the use of 
specific pre-enrollment packets as we suggested, it is specifying   
pre-enrollment materials sponsors should use in the marketing 
guidelines. This guidance should help ensure that beneficaries receive 
the information they need prior to enrollment.  CMS also disagreed with 
our suggestion to include a statement informing beneficiaries that they 
have a choice of plans in sponsors marketing materials.  It indicated 
that this would not be consistent with industry standards, and that it is 
using other marketing techniques to inform beneficiaries of their 
choices.  Based on our interviews with beneficiaries, we found that they 
may not fully understand the range of choices that they have.  We 
encourage CMS to strongly emphasize this in its education and outreach 
campaigns. 
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  E N D N O T E S  

1	 Centers for Medicare & Medicaid Services, 2004 CMS Statistics, 
Table 1, October 2004. 
2	 Part B summary data, CMS National Claims History file, calendar 
year 2003. 
3	 Centers for Medicare & Medicaid Services, Medicare Fact Sheet:  
Final Rules Implementing the New Medicare Law:  A New 
Prescription Drug Benefit for All Medicare Beneficiaries, 
Improvements to Medicare Health Plans and Establishing Options for 
Retirees, p. 3, January 21, 2005. 
4	 Congressional Budget Office, Comparison of CBOs March 2005 
Medicare Prescription Drug Baseline and the CBO Estimate for the 
MMA, March 4, 2005; and Centers for Medicare & Medicaid Services, 
Releasing the HHS Proposed Budget for FY 2006, February 7, 2005. 
5	 Centers for Medicare & Medicaid Services, Fact Sheet:  Medicare 
Modernization Benefits in the First Year, December 8, 2004.   
6	 Centers for Medicare & Medicaid Services, Approved General Drug 
Cards. This list includes all approved general drug cards, including 
those with special endorsements such as long-term care pharmacies 
and U.S. Territories; May 17, 2004. 
7	 Exceptions are made for beneficiaries under certain circumstances, 
such as moving outside the area served by their current drug card. 
8	 These program limitations are described in the following documents: 
Medicare Prescription Drug, Improvement, and Modernization Act of 
2003, P.L. 108-173,  101, subpart 4, codified in  1860D-31(c)(1-2) and 
 1860D-31(d)(1-2) of the Social Security Act; and Centers for Medicare 
& Medicaid Services, Medicare Prescription Drug Discount Card and 
Transitional Assistance Program, Information & Outreach Materials 
Guidelines, pp. 51-62, revised August 2004.   
9	 Low-income beneficiaries who receive Medicaid, TRICARE (military 
health insurance), the Federal Employees Health Benefit Program, or 
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an employers health plan are not eligible to enroll in the Transitional 
Assistance program. 
10	 Centers for Medicare & Medicaid Services, Fact Sheet:  Medicare 
Modernization Benefits in the First Year, December 8, 2004. 
11	 Medicare Prescription Drug, Improvement, and Modernization Act of 
2003, P.L. 108-173,  101, subpart 4, codified in  1860D-31(d)(1) and  
 1860D-31(d)(2)(A) of the Social Security Act.  
12	 Medicare Prescription Drug, Improvement, and Modernization Act of 
2003, P.L. 108-173,  101, subpart 4, codified in  1860D-31 (d)(2)(A) of 
the Social Security Act. 
13	 42 CFR  403.806(g)(5)(i) requires sponsors to comply with the 
Information and Outreach Materials Guidelines published by CMS.  
CMS initially published the Medicare Prescription Drug Discount 
Card and Transitional Assistance Program, Information & Outreach 
Materials Guidelines on January 22, 2004, and revised these 
guidelines in August 2004.  Revised guidelines are available on the 
CMS Web site:  www.cms.hhs.gov/discountdrugs. 
14	 42 CFR  403.806(g)(1) and Centers for Medicare & Medicaid Services, 
Medicare Prescription Drug Discount Card and Transitional 
Assistance Program, Information & Outreach Materials Guidelines, 
pp. 24-25 and 39-51, January 22, 2004. 
15	 Centers for Medicare & Medicaid Services, Medicare Prescription 
Drug Discount Card and Transitional Assistance Program, 
Information & Outreach Materials Guidelines, pp. 24-30, January 22, 
2004. 
16	 Centers for Medicare & Medicaid Services, Medicare Prescription 
Drug Discount Card and Transitional Assistance Program, 
Information & Outreach Materials Guidelines, pp. 24-30, January 22, 
2004. Also, 42 CFR  403.806(g)(1). 
17	 Medicare Prescription Drug, Improvement, and Modernization Act of 
2003, P.L. 108-173,  101, subpart 4, codified in  1860D-31(i)(2) of the 
Social Security Act. 
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18	 Centers for Medicare & Medicaid Services, Medicare Prescription 
Drug Discount Card and Transitional Assistance Program, 
Information & Outreach Materials Guidelines, January 22, 2004, 
revised in August 2004.  Revised guidelines are available on the CMS 
Web site:  www.cms.hhs.gov/discountdrugs.  Also, Centers for 
Medicare & Medicaid Services, Drug Discount Card Preferred 
Terminology for Beneficiaries, February 13, 2004. 
19	 42 CFR  403.806(g)(5)(ii) and 68 FR 69869, December 15, 2003. 
20	 We excluded requirements related to other program features, such as 
grievance procedures, enrollment/disenrollment rules, and mail order 
pharmacies.   
21	 CMS updated its Medicare Prescription Drug Discount Card and 
Transitional Assistance Program, Information & Outreach Materials 
Guidelines in August 2004.  Although we assessed compliance with the 
original Information and Outreach Materials Guidelines, the 
requirements we assessed continue to be applicable to sponsors 
materials in the updated guidelines. 
22	 Some State Pharmacy Assistance Programs automatically enrolled 
their low-income members in an exclusive drug card.  These 
beneficiaries did not make a decision about enrolling in the program. 
23	 It is important to note that all estimates of the number of beneficiaries 
targeted by particular outreach methods are based only on the 
estimations of drug card sponsors willing and able to supply the 
information.  Therefore, these figures are only meant to provide a 
general sense of the potential of each outreach method and may not 
represent the actual number of beneficiaries who received information 
about the drug card program.    
24	 The 39 noncompliant pre-enrollment packets are accounted for by 
20 different pre-enrollment packets:  3 template pre-enrollment 
packets that cover a total of 22 drug cards and 17 pre-enrollment 
packets for individual cards.  Of the 23 pre-enrollment packets not 
found to be noncompliant, 19 were for individual cards and  
1 template pre-enrollment packet covered the remaining 4 drug 
cards. 
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25	 Centers for Medicare & Medicaid Services, Model Enrollment Form 
Instructions, March 9, 2004.  Income requirements are accurate for 
2004. 
26	 Centers for Medicare & Medicaid Services, Model Enrollment Form 
Instructions, March 9, 2004.   
27	 Centers for Medicare & Medicaid Services, Medicare Prescription 
Drug Discount Card and Transitional Assistance Program, 
Information & Outreach Materials Guidelines, p. 40, January 22, 
2004. 
28	 In March 2004, CMS added a requirement that when sponsors 
materials specify a percent discount, they must also include the 
disclaimer:  Discounts vary by drug.  Contact [drug card sponsor] to 
find out . . . the discounted price.  CMSs contractor interpreted this 
policy change to supersede all previous disclaimers for discounts, as 
opposed to adding this new disclaimer to the existing requirements. 
This miscommunication about policy changes seems to have occurred 
despite the formal structure CMS and its contractor had established to 
handle policy clarification issues. 
29	 Centers for Medicare & Medicaid Services, Medicare Prescription 
Drug Discount Card and Transitional Assistance Program, 
Information & Outreach Materials Guidelines, p. 43, January 22, 
2004. 
30	 In late April 2004, CMS attempted to clarify some of the requirements 
for sponsors pre-enrollment packets by listing the key information 
that must be included in a sponsors Summary of Program Features.  
In this listing, CMS indicated that Summaries of Program Features 
must describe types of pharmacies in a drug cards network  
(e.g., retail, mail order, etc.).  However, this listing omitted several 
required disclaimers, including the disclaimer about pharmacy 
networks.  CMSs contractor informed us that it interpreted this 
omission as superseding the original pharmacy network disclaimers. 
CMSs policy clarification occurred outside the formal structure 
established to communicate policy changes between CMS and its 
contractor. 
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31	 Centers for Medicare & Medicaid Services, Medicare Prescription 
Drug Discount Card and Transitional Assistance Program, 
Information & Outreach Materials Guidelines, p. 47, January 22, 
2004. 
32	 Fourteen of our twenty selected advertisements specified a percentage 
discount.  All 14 included the required disclaimer:  Discounts vary by 
drug. Contact [drug card sponsor] to find out . . . the discounted price.  
However, this disclaimer does not indicate that discounts are subject 
to change over time, nor that discounted prices may be found on CMSs 
Web site. 
33	 See endnote 28 above. 
34	 All 151 respondents interviewed were eligible for the drug card 
program, and 53 respondents were eligible for the $600 Transitional 
Assistance credit according to demographic information they provided.  
We found that 82 respondents were not eligible for Transitional 
Assistance and 16 respondents did not provide enough demographic 
information to determine their eligibility.  These 16 respondents are 
included (with the 82 respondents) in our analysis as not eligible for 
Transitional Assistance because the majority of Medicare beneficiaries 
are not eligible for Transitional Assistance.  Of the 113 respondents 
reading pre-enrollment packets, 37 were eligible for Transitional 
Assistance, 63 were not eligible, and 13 did not provide enough 
demographic information to determine their eligibility. 
35	 However, this does not account for the reason respondents gave for 
their eligibility.  In some cases, respondents correctly assessed their 
eligibility but gave an incorrect reason or indicated that they did not 
know why they were or were not eligible.   
36	 To be included in our interviews, respondents had to be eligible for the 
drug card program.  That is, respondents were Medicare beneficiaries 
without Medicaid prescription drug coverage. 
37	 Unlike our other key program topics, we did not remove this question 
from interviews if the material did not explicitly address choice of 
cards. This question was meant to assess the impression made on 
respondents by reading sponsors materials. 
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38	 These five responses were included in our analysis as answering 
based on the material, there is only one drug card available.  We 
excluded from our quantitative analysis any response clearly based on 
outside knowledge and not on the material.  In addition to the five 
responses above, seven beneficiaries indicated that they knew from 
outside knowledge that more than one drug card was available under 
the Medicare-approved drug discount card program.  Eight other 
beneficiaries responded that they knew from outside knowledge that 
more than one drug card was available; however, these respondents 
referenced other, non-Medicare-approved drug cards.  All 15 responses 
were removed from our quantitative analysis.      
39	 Fourteen interviews were about cards that had no enrollment fee.  
These respondents were not asked to identify the frequency of the fee. 
In addition, respondents were not asked to identify the frequency of 
the fee if they incorrectly reported that there was no enrollment fee, or 
reported that they did not know the amount of the fee based on 
reading the material.  
40	 Unlike pre-enrollment packets, advertising materials are not expected 
to provide in-depth information about the drug card program and thus 
are not required to include information about all key program 
features.  Because we only asked respondents about topics covered in 
the material they read, the number of beneficiaries responding to each 
question varied from 3 to 34.  We calculated the proportion of correct 
answers for each respondent by dividing the number of correct 
answers by the number of test questions included in the interview. 
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Detailed Methodology 
Scope 
This inspection focuses on sponsors materials that are likely to inform 
beneficiaries decisions about enrolling in the drug card program. Pre-
enrollment packets are required to include information CMS has 
designated as necessary to promote informed choice prior to enrollment. 
Advertising materials are intended to generate interest and encourage 
beneficiaries to obtain the additional information they need to enroll.   
We did not review enrollment forms or postenrollment materials 
because these do not affect informed choice.  Also, our review excludes 
any materials written in languages other than English as well as any 
materials specifically designed for persons with disabilities (such as 
materials in Braille). CMS guidelines encourage, but do not require, 
sponsors to develop these targeted materials. 
Materials from exclusive drug card sponsors were excluded from our 
review because these sponsors drug cards are offered exclusively to 
beneficiaries enrolled in the sponsors Medicare Advantage program. 
These beneficiaries choose only whether to enroll in the drug card 
offered by their Medicare Advantage program and do not have a choice 
among drug cards.   
Assessing Whether Sponsors Materials Promote Informed Choice   
To assess the extent to which sponsors materials promote informed 
choice, we reviewed a selection of materials and conducted interviews 
with sponsors that administer 62 drug cards. 
Selection of sponsors materials.  We selected 62 pre-enrollment packets 
and 20 advertising materials as they were approved by CMS for our 
review.  Because we obtained materials from CMS rather than directly 
from the sponsors, it is possible that the selected materials could be 
different from the ones sent to beneficiaries.  For example, it is possible 
that a sponsor could send to beneficiaries materials that have not been 
reviewed and approved by CMS, or that a sponsor could fail to submit 
revised material to CMS prior to sending it to beneficiaries. 
The 20 advertising materials included 14 direct-mail materials 
(postcards, letters, brochures), 1 print ad, and 5 other tangible 
advertisements (brochures, pharmacy fliers) distributed either in person 
or through a third party.  Although 28 drug card sponsors used some 
tangible advertising in their outreach, 6 used materials not approved by 
CMSs contractor.  Four of these were letters approved by CMS regional 
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A P P E N D I X ~ A  
offices to be sent to Medicare Advantage members; the other two should 
have been submitted for CMSs review but were not. Finally, in two 
cases we made a sampling error by selecting an alternate version of the 
sponsors pre-enrollment packet instead of an advertisement. 
Structured Review of Sponsors Materials.  We conducted a structured 
review of selected sponsors materials to identify whether approved 
materials include required information.  We also collected some 
descriptive information about each material.  Our review included 
requirements related to eight key program features:  program 
description, eligibility, choice of cards, discounts/drug prices, enrollment 
fee, pharmacy network, contact information, and enrollment 
instructions/forms. 
We discussed the noncompliance we found in our structured review with 
CMS and CMSs contractor.  At our request, CMSs contractor reviewed 
sponsor materials we found to be noncompliant.  For most of the 
noncompliance we found, CMSs contractor agreed that materials were 
noncompliant and provided an assessment of the source of error that led 
to noncompliance.  In a few cases, CMSs contractor indicated that our 
interpretation of certain CMS requirements did not match the protocol 
used in its approval process, and that some materials in question should 
be considered compliant.  We discussed these cases with CMS staff, who 
clarified these requirements.  As part of this discussion, CMS staff 
indicated that a miscommunication about policy changes between CMS 
and its contractor was a source of error.  Our report includes the results 
of these discussions. 
Cognitive Interviews With Beneficiaries.  We conducted interviews at a total 
of 24 community-based senior centers in five cities (we visited 4 senior 
centers in 1 city and 5 senior centers in each of the other cities).  Within 
each city we sought to maximize the number of centers located in low-
income areas to increase the number of Transitional Assistance-eligible 
respondents.  Respondents volunteered to be interviewed and were not 
compensated for their time. 
To allow beneficiaries to review pre-enrollment packets and answer 
questions in a relatively short interview, we found it was necessary to 
provide them with a selection from the pre-enrollment packet as 
opposed to a complete packet.  We used a standard protocol to prepare 
pre-enrollment packet selections.  Our selections included information 
relevant to the key program topics in the interview and excluded 
information not relevant to the interview or repetitive information.  In 
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cases in which key information was repeated in the pre-enrollment 
packet we included the more comprehensive section. Advertising 
materials were brief enough to be read in 5 to 15 minutes and were used 
in our cognitive interviews in their entirety. 
We excluded questions from each interview when the selected material 
did not contain answers to those questions. In addition, all interview 
questions were phrased to elicit responses based on the material. We 
attempted to ascertain if a respondents response was based on the 
selected material or on outside information. If it was clear that the 
respondent was answering a question based on knowledge other than 
from reading the material, we excluded that response from our analysis 
of that question. 
Key Demographic Information on Our Beneficiary Respondents 
Overall, 53 of the 135 respondents who provided information on income, 
marital status, and other prescription drug coverage were eligible for 
the $600 Transitional Assistance credit. The 2004 income limit for 
Transitional Assistance is $12,570 for single individuals and $16,862 for 
married beneficiaries. Medicare beneficiaries who also have Medicaid, 
TRICARE for Life, Federal Employees Health Benefit Program, or other 
employer-sponsored coverage are not eligible for Transitional 
Assistance. We found that 82 respondents were not eligible for 
Transitional Assistance and 16 respondents did not provide enough 
demographic information to determine their eligibility. These 
16 respondents are included (with the 82 respondents) in our analysis 
as not eligible for Transitional Assistance because most Medicare 
beneficiaries are not eligible for Transitional Assistance. 
Following are demographics for the beneficiaries we interviewed: 
o 	 74 percent were single and 76 percent were female. 
o 	 71 percent were Caucasian, 21 percent were African American, 
2 percent were Hispanic, 1 percent were Asian, and 5 percent 
were other races. 
o 	 79 percent of our respondents were 65 to 84 years old, 14 percent 
were 85 and over, and 7 percent were under 65. 
o 	 70 percent had less than a college degree (5 percent had some 
grammar school, 14 percent had some high school, 27 percent 
were high school graduates, and 24 percent had some college), 
15 percent were college graduates, and 15 percent had attended 
graduate school. 
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Noncompliance for All Requirements Assessed and Sources of Error  
TABLE 5: Requirements Assessed for Pre-Enrollment Packets and Noncompliance Found 
Pre-Enrollment 
Key Program  Packets Not in 
Feature  RequirementsPre-Enrollment Packets Must Include the Following Information:*  Compliance (of 62) 
Annual income limits for both single and married beneficiaries  2 
Eligibility for  Beneficiary cannot have other prescription drug coverage  2 
Transitional 
Definition of income: Income includes money that you receive through retirement 
Assistance 
benefits from Social Security, Railroad, the Federal or State governments, or other 
7 
sources, and benefits you receive for a disability or as a Veteran, plus any other 
sources of the type that you would report for tax purposes. 
Who is eligible for drug card program  0 
Must be a Medicare beneficiary to be eligible for drug card program  0 
Eligibility for the 
Must not be receiving drug benefits through Medicaid to be eligible for drug card 
Drug Card Program  2 
program 
[Approved Card Sponsor Name] is available to all Medicare beneficiaries in [service 
area] except for those who have prescription drug coverage under their State's  2 
Medicaid. 
Program description material (could be Summary of Program Features, Member 
0 
Handbook, or other type) 
Enrollment instructions  2 
Pre-Enrollment 
Information 
Enrollment form for the drug card program  1 
Enrollment form for Transitional Assistance  1 
Benefits of the  IF AN ENROLLMENT FEE IS CHARGED:  Must indicate that Medicare will pay the fee 
0 
Program  if a beneficiary is eligible for Transitional Assistance 
[Program name] is not intended to replace prescription drug benefits obtained through 
participation in insurance plans including a Medicare Advantage plan, a Medigap policy,  18 
Medicaid, or an employer or retiree plan. 
[Program name] is a prescription drug discount card program that is approved by 
17 
Medicare but it is not a Medicare benefit. 
WHEN PRE-ENROLLMENT PACKET DISCUSSES DISCOUNTS: Discounts and/or 
17 
drug prices are subject to change [over time] 
Requirement that enrollees must use network pharmacies  1 
Program Disclaimers 
Enrollees must use [Approved Card Program]s network pharmacies in [service area] 
to obtain the prescription discount we offer and to apply Transitional Assistance to the 
9 
prices of your drug.  A network pharmacy is a pharmacy where our discounted drugs 
can be purchased and Transitional Assistance can be used. 
IF AN ENROLLMENT FEE IS CHARGED:  Must mention that an enrollment fee is 
2 
charged 
WHEN PRE-ENROLLMENT PACKET INDICATES THAT NO ENROLLMENT FEE IS 
1 
CHARGED:  Must indicate that there is a cost for drugs 
* Drug card sponsors are allowed to paraphrase information in quotes. 

Source:  Office of Inspector General analysis of selected sponsor materials, 2004.

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TABLE 5 (cont.):  Requirements Assessed for Pre-Enrollment Packets and Noncompliance Found 
Pre-Enrollment 
Packets Not in 
Key Program  Compliance 
Feature  RequirementsPre-Enrollment Packets Must Include the Following Information:*  (of 62) 
You may be enrolled in only one [Medicare-Approved Rx Discount Approved Card 
Choice of Cards  Program] at one time OR Medicare beneficiaries may be enrolled in only one [Approved  20 
Card Program] at a time. 
IF AN ENROLLMENT FEE IS CHARGED:  Must include the (correct) amount  1 
WHEN PRE-ENROLLMENT PACKET DISCUSSES DISCOUNTS:  How to get more 
complete information about drug prices and/or discounts including both visiting Medicare  5 
Comparative  Price Compare Web site and contacting sponsor 
Information About 
Drug card sponsor toll-free number  0 
Drug Card 
Medicare toll-free number  0 
Medicare Web site  2 
Total (Unduplicated) Pre-Enrollment Packets Not in Compliance With at Least One of the 25 Requirements  39 
* Drug card sponsors are allowed to paraphrase information in quotes. 

Source:  Office of Inspector General analysis of selected sponsor materials, 2004.

TABLE 6: Requirements Assessed for Advertising Materials and Noncompliance Found 
Key  Advertisements 
Program  Not in Compliance 
Feature  RequirementsAdvertisements Must Include the Following Information:*  (of 20) 
WHEN AD INDICATES THAT NO ENROLLMENT FEE IS CHARGED:  Must indicate that 
0
there is a cost for drugs 
WHEN AD DISCUSSES DISCOUNTS:  Must indicate that discounts and/or drug prices are 
Program  13
subject to change [over time]
Disclaimers 
WHEN AD SPECIFIES A PERCENT DISCOUNT:  Must state that Discounts vary by drug.  
Contact [Program Name] to find out [if your prescription drug is covered and] the discounted  0 
price. 
WHEN AD INCLUDES ENROLLMENT INFORMATION:  Must include You may be enrolled 
Choice of 
in only one [Medicare-Approved Rx Discount Approved Card Program] at one time OR   0
Cards 
Medicare beneficiaries may be enrolled in only one [Approved Card Program] at a time. 
WHEN AD INDICATES THAT AN ENROLLMENT FEE IS CHARGED:  Must include the 
0
(correct) amount 
Comparative 
WHEN AD DISCUSSES DISCOUNTS: Must describe how to get more complete 
Information 
information about drug prices and/or discounts including both visiting Medicare price  15
About Drug 
compare Web site and contacting sponsor 
Card 
Drug card sponsor toll-free number  0 
Total (Unduplicated) Advertisements Not in Compliance With at Least One of the Seven Requirements  15 
* Drug card sponsors are allowed to paraphrase information in quotes. 

Source:  Office of Inspector General analysis of selected sponsor materials, 2004.

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TABLE 7: Sources of Noncompliance for Sponsors Pre-Enrollment 
Packets and Advertising Materials 
Pre-Enrollment Packets  Ads With Any 
Source(s) of Error 
With Any Noncompliance  Noncompliance 
Reviewer Error Only  13  0 
Sponsor Error Only  3  0 
Miscommunication of Policy Changes 
3  15 
Only 
Reviewer and Sponsor Error  0  0 
Reviewer Error and Policy 
5  0 
Miscommunication 
Sponsor Error and Policy 
13  0 
Miscommunication 
All Types of Error:  Reviewer Error, 
Sponsor Error, and Policy  2  0 
Miscommunication 
Total With Any Noncompliance  39  15 
Source:  Office of Inspector General analysis of CMS verification of selected sponsor materials noncompliance, 2004. 
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Beneficiary Understanding 
Although this report presents beneficiary interview data primarily 
using proportions, this appendix provides the actual number of 
respondents for our key data, as well as respondent understanding by 
eligibility for Transitional Assistance. 
As mentioned previously, the actual number of respondents answering 
each question varies.  In many cases this is because the pre-enrollment 
packet or advertisement did not contain the information relevant to a 
particular question.  In other cases, beneficiaries were unable to 
separate their outside knowledge of the program from the material, and 
so we excluded their response from our quantitative analysis.  In all 
cases, the data in this report are restricted to our respondents and are 
not projectable to the entire Medicare population. 
TABLE 8: Proportion of Respondents Who Understood Key Program Features 
Based on Reading Sponsors Pre-Enrollment Packets 
Proportion of  Transitional  Non-Transitional 
Respondents Who  Assistance- Assistance-
Key Program Feature 
Understood Key  Eligible  Eligible 
Feature  Respondents  Respondents* 
Eligibility  58% (n=99)  63% (n=35)  55% (n=64) 
Program Limitations:  Drugs 
59% (n=68)  44% (n=18)  64% (n=50) 
Covered Can Change 
Program Limitations:  Drug 
74% (n=82)  67% (n=24)  78% (n=58) 
Prices Can Change 
Choice of Cards  54% (n=92)  45% (n=29)  59% (n=63) 
Comparative Information:  
58% (n=100)  50% (n=32)  62% (n=68) 
Annual Enrollment Fee 
All Key Program Features  21% (n=113)  22% (n=37)  21% (n=76) 
* This category includes 13 respondents whose eligibility for Transitional Assistance could not be determined. 
Source:  Office of Inspector General analysis of Medicare beneficiary interviews, 2004. 
To calculate the proportion of respondents who understood all key 
program features, we divided the number of correct answers by the 
number of test questions answered. Although we interviewed 
38 beneficiaries who reviewed advertising materials, one respondent 
reading an advertisement did not provide a response to any test 
question, although this respondent answered other opinion and 
descriptive questions in the interview.  
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TABLE 9: Proportion of Key Test Questions Answered Correctly, by 
Advertisements vs. Pre-Enrollment Packets 
Proportion of 
Proportion of 
Proportion of Test Questions  Respondents Reviewing 
Respondents Reviewing 
Answered Correctly  Pre-Enrollment Packets 
Advertisements (n=37) 
(n=113) 
50% or Less   57%  32% 
51%-79%   16%  22% 
80% or More  27%  46% 
Source:  Office of Inspector General analysis of Medicare beneficiary interviews, 2004. 
Respondent Understanding of Pre-Enrollment Packets, by Respondents 
Eligibility for Transitional Assistance 
Regardless of eligibility status, a greater proportion of respondents 
understood their eligibility for Transitional Assistance than for the drug 
card program.  Of the TA-eligible respondents who assessed their 
eligibility, 80 percent understood that they were eligible for Transitional 
Assistance. However, 74 percent of TA-eligible respondents understood 
that they were eligible for the drug card program.  Of non-TA-eligible, 
86 percent understood that they were not eligible for Transitional 
Assistance, and only 62 percent understood that they were eligible for 
the drug card program. 
More respondents understood that drug prices could change than 
understood that drugs covered could change.  Sixty-seven percent of  
TA-eligible respondents understood that drug prices could change, as 
did 78 percent of non-TA-eligible respondents.  Forty-four percent of 
TA-eligible respondents understood that drugs covered could change, as 
did 64 percent of non-TA-eligible respondents. 
Fewer TA-eligible respondents than non-TA-eligible respondents 
correctly identified that more than one Medicare-approved drug 
discount card existed.  That is, 45 percent of TA-eligible respondents 
correctly identified that there was more than one available card, 
compared to 59 percent of non-TA-eligible respondents.   
Fewer TA-eligible respondents than non-TA-eligible respondents 
correctly identified the cost of the enrollment fee and reported that this 
information was clearly explained. Specifically, 69 percent of  
TA-eligible respondents correctly reported the amount of the enrollment 
fee for the material they reviewed, compared to 75 percent of 
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non-TA-eligible respondents. Similarly, 63 percent of respondents 
eligible for Transitional Assistance reported that the enrollment fee was 
clearly explained, compared to 78 percent of non-TA-eligible 
respondents. 
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Agency Comments 
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  A C K N O W L E D G M E N T S  

This report was prepared under the direction of William C. Moran, 
Regional Inspector General for Evaluation and Inspections in the 
Chicago regional office, and Ann Maxwell, Assistant Regional Inspector 
General. Other principal Office of Evaluation and Inspections staff who 
contributed include: 
Susan Otter, Team Leader 
Mara Siler-Price, Program Analyst 
Nicole Lawhorn, Intern 
Emily Melnick, Senior Program Analyst 
Laura Torres, Program Analyst 
Erin Lemire, Program Analyst 
Beth Middendorf, Presidential Management Fellow 
Tricia Davis, Director, Medicare and Medicaid Branch 
Linda Boone Abbott, Program Specialist 
Technical Assistance:  
Barbara Tedesco, Mathematical Statistician 
Kevin Farber, Mathematical Statistician 
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