Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

TRACKING BENEFICIARIES’ TRUE 


OUT-OF-POCKET COSTS FOR THE 


PART D PRESCRIPTION DRUG 


BENEFIT 


Daniel R. Levinson
 

Inspector General 


December 2007
 

OEI-03-06-00360
 
 

 

 

 

 

 

 

 

 

 

 

 

 

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. These assessments help reduce waste, 

abuse, and mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on 

significant issues. Specifically, these evaluations focus on preventing fraud, waste, or 

abuse and promoting economy, efficiency, and effectiveness in departmental programs. 

To promote impact, the reports also present practical recommendations for improving 

program operations. 

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 OIG's 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. 
 

 

 

Δ EXECUTIVE SUMMARY 

OBJECTIVE 

1.	 To review the processes that Part D plans and the Coordination of 

Benefits Contractor (COBC) use to help ensure the accurate 

tracking of beneficiaries’ true out-of-pocket (TrOOP) costs. 

2.	 To determine the extent to which the Centers for Medicare & 

Medicaid Services (CMS) conducts oversight of Part D plans to 

ensure the accurate tracking of TrOOP costs. 

BACKGROUND 

The Medicare prescription drug program, known as Medicare Part D, 

provides an optional prescription drug benefit for all Medicare 

beneficiaries. Part D plans are responsible for tracking beneficiaries’ 

TrOOP costs. TrOOP costs are the prescription drug expenditures that 

count toward the annual out-of-pocket threshold that beneficiaries must 

reach before catastrophic drug coverage begins. Medicare beneficiaries 

enrolled in Part D plans may have additional prescription drug 

coverage. Tracking TrOOP costs involves coordination and 

communication between CMS, contractors such as COBC, Part D plans, 

and other payers of prescription drug benefits. The amount of 

beneficiaries’ TrOOP costs impacts their cost sharing as well as CMS 

payments to Part D plans. 

To review the processes for and CMS’s oversight of the accurate 

tracking of beneficiaries’ TrOOP costs, we interviewed staff from CMS 

and its contractors and analyzed survey information from a sample of 

138 Part D plans regarding activities, policies, and procedures related to 

TrOOP costs. We gathered and analyzed relevant documentation from 

respondents. We collected data from October 2006 through March 2007. 

FINDINGS 

Information on enrollees’ additional drug coverage, essential for the 

accurate tracking of TrOOP costs, was not consistently submitted to 

COBC in 2006. To track TrOOP costs accurately, Part D plans must have 

information on any prescription drug coverage that enrollees have in 

addition to Part D coverage. Twenty-nine percent of Part D plans did not 

submit their enrollees’ additional drug coverage information to COBC in 

2006. Most of these plans indicated that they did not have processes or 

systems in place to transmit this information. In addition, 36 percent of 

other payers that had active data-sharing agreements with COBC did not 

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E X E E X E CUTIVE S U MMAR Y 

submit their enrollees’ additional drug coverage information for at least 

one of those agreements in 2006. 

Thirty-four percent of Part D plans did not submit prescription drug 

event data in accordance with CMS requirements in 2006. CMS cannot 

verify that plans have calculated beneficiaries’ TrOOP costs correctly if it 

does not have plans’ prescription drug event (PDE) data. The PDE data 

include prescription drug cost and payment data that enable CMS to make 

payments to the plans and otherwise administer the Part D benefit. 

Thirty-four percent of plans, covering 49 percent of Part D beneficiaries, 

did not submit PDE data at the end of the first quarter or in one or more 

months after the first quarter of 2006. These plans were not able to meet 

CMS’s timeframes or had technical difficulties submitting PDE files. 

Sixty-three percent of Part D plans cited problems with transferring 

TrOOP balances when enrollees change plans. Nearly two-thirds of 

Part D plans reported having issues or problems with transferring TrOOP 

balances when enrollees change plans during the coverage year. At the 

time of our review, the transfer of TrOOP balances between plans relied 

heavily on labor- and resource-intensive processes, such as faxing transfer 

records or creating hundreds of compact disks with transfer information for 

enrollees’ new plans. In addition, plans indicated that enrollees’ transfer 

records may contain incorrect, questionable, or inconsistent data. 

CMS has conducted limited oversight of Part D plans’ tracking of 

TrOOP costs. CMS has conducted limited oversight of Part D plans’ 

tracking of beneficiaries’ TrOOP costs. The oversight CMS has conducted 

thus far relied on plans’ self-reported data. As of April 2007, other 

oversight activities were either in the planning stages or in the process of 

being implemented. 

RECOMMENDATIONS 

Tracking Part D enrollees’ TrOOP costs is a complex process involving 

coordination of many entities and data systems, as well as compliance 

with Part D instructions and requirements. Our findings indicate that 

a number of these requirements were not carried out consistently in 

2006. Therefore, we recommend that CMS: 

Ensure that Part D plans collect, process, and submit all data required to 

track enrollees’ TrOOP costs in a timely manner. CMS requires that 

Part D plans collect and submit enrollees’ additional prescription drug 

coverage information to COBC, process prescription drug claims and 

submit PDE records to CMS, and work with other Part D plans to 

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EXECUTIVE SUMMARY 

transfer enrollees’ TrOOP balances. We recently learned that CMS is 

working with the National Council for Prescription Drug Programs to 

establish a standardized electronic system for transferring enrollees’ 

TrOOP balance information from one plan to another in real time. CMS 

should continue to establish or improve automated systems to enable 

Part D plans to meet all data requirements related to tracking TrOOP 

costs. 

Consider options for increasing the number of coordination of benefits 

agreements with other payers and ensuring that data are submitted under 

those agreements. Accurate tracking of TrOOP costs is dependent 

largely on successful coordination and sharing of prescription drug 

coverage information among payers and CMS contractors. CMS should 

ensure that all options for increasing the number of data-sharing 

agreements have been considered. 

Because entities that provide additional drug coverage for Part D 

enrollees are not required by law to report such information, CMS may 

want to consider seeking to expand its authority to enforce agreements 

once they are in place. The President’s 2008 Budget includes a proposal 

to establish a data clearinghouse that would work to determine whether 

private insurance or Medicare should pay for a beneficiary’s health 

benefits. If implemented, such a clearinghouse could provide CMS with 

access to more comprehensive drug coverage information. 

Begin or complete implementation of planned oversight activities related 

to the tracking of TrOOP costs. The implementation of the Part D 

benefit was a large undertaking for CMS, its contractors, and Part D 

plans. Now that the program has been in place for almost 2 years, CMS 

should place more emphasis on conducting oversight activities. 

Examining Part D plans’ efforts to track TrOOP costs should be a 

priority given that these costs determine when beneficiaries reach each 

phase of the Part D benefit. OIG intends to focus future work on 

whether Part D plans have calculated beneficiaries’ TrOOP costs 

correctly. 

 OEI-03-06-00360 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS agreed that OIG’s report identified potential issues regarding the 

accurate tracking of TrOOP costs and that additional work is needed to 

ensure that Part D plans are calculating TrOOP costs correctly. CMS 

did not indicate whether it concurred with OIG’s three 

T RACKING BENEFICIARIES ’ T RUE OU T - O F - P OCKET C OSTS iii 
 

EXECUTIVE SUMMARY 

recommendations in its comments. However, CMS did note that it has 

taken or will take steps in response to each of OIG’s recommendations, 

such as continuing the Part D plans’ self-attestation process, enforcing 

compliance with data-sharing agreements, and supporting legislation to 

mandate insurer reporting of private insurance coverage. CMS also had 

questions concerning OIG’s findings and suggested changes. We 

addressed CMS’s questions and suggestions in the body of the report. 

We ask that CMS indicate in its final management decision whether it 

concurs with our recommendations. 

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Δ TABLE OF CONTENTS 

EXECUTIVE SUMMARY ..................................... i 
 

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

FINDINGS ................................................. 8 
 

Additional drug coverage information not submitted ........... 8 
 

Prescription drug event data not submitted ................. 10 
 

Problems with transferring TrOOP balances ................ 11 
 

Limited oversight activities conducted...................... 12 
 

RECOMMENDATIONS ..................................... 15 
 

Agency Comments and Office of Inspector General Response . . . 16 

APPENDIXES ............................................. 18 
 

A: Estimates and Confidence Intervals..................... 18 
 

B: Agency Comments ................................... 19 
 

ACKNOWLEDGMENTS .................................... 23 
 
 

 

 

 

Δ INTRODUCTION 

OBJECTIVE 

1.	 To review the processes that Part D plans and the Coordination of 

Benefits Contractor (COBC) use to help ensure the accurate 

tracking of beneficiaries’ true out-of-pocket (TrOOP) costs. 

2.	 To determine the extent to which the Centers for Medicare & 

Medicaid Services (CMS) conducts oversight of Part D plans to 

ensure the accurate tracking of TrOOP costs. 

BACKGROUND 

The Medicare prescription drug program, known as Medicare Part D, 

provides an optional prescription drug benefit for all Medicare 

beneficiaries. Part D program expenditures totaled more than 

$47 billion in 2006.1 As of April 2007, over 25 million Medicare 

beneficiaries were enrolled in Part D prescription drug plans. Part D 

plans are responsible for tracking beneficiaries’ TrOOP costs. TrOOP 

costs are the prescription drug expenditures that count toward the 

annual out-of-pocket threshold that beneficiaries must reach before 

catastrophic drug coverage begins. Tracking TrOOP costs involves the 

coordination of many entities and data systems. The amount of 

beneficiaries’ TrOOP costs impacts their cost sharing as well as CMS 

payments to Part D plans. The Office of Inspector General (OIG) 

conducted this initial implementation review to identify potential issues 

with ensuring the accurate tracking of TrOOP costs. OIG intends to 

focus future work on whether Part D plans have calculated 

beneficiaries’ TrOOP costs correctly. 

Medicare Prescription Drug Program 

CMS contracts with companies to provide prescription drug coverage for 

Medicare beneficiaries. These companies sponsor plans that include 

stand-alone prescription drug plans (PDP) as well as Medicare 

Advantage-prescription drug plans (MA-PD) that offer integrated 

coverage for both prescription drugs and other health care. Each 

contract between CMS and these sponsors may include many plan 

1 “2007 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and 

Federal Supplementary Medical Insurance Trust Funds,” p. 5. Available online at 

http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2007.pdf. Accessed April 26, 

2007. 

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INTRODUCTION 

benefit packages. Throughout this document, we refer to PDP and 

MA-PD contracts as Part D plans. 

Standard Prescription Drug Coverage 

Part D plans are required by the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 (MMA) to offer a standard 

prescription drug benefit or an alternative benefit that is “actuarially 

equivalent” to the standard benefit. Part D plans may also offer 

enhanced plan benefit packages. Most beneficiaries are responsible for 

certain costs, which may include a monthly premium, an annual 

deductible, and coinsurance. However, beneficiaries with limited 

income are eligible to receive assistance to pay for some or all of these 

costs in the form of a low-income subsidy. 

The standard drug benefit requires beneficiaries to pay a maximum 

deductible of $265 in 2007. In the initial phase of the Part D benefit, 

after this deductible is paid, beneficiaries contribute 25 percent 

coinsurance toward their drug costs and the plan pays the remaining 

75 percent until combined beneficiary and plan payments reach a total 

of $2,400. After the $2,400 limit is reached, beneficiaries enter the 

coverage gap phase of the benefit in which they are responsible for 

100 percent of their drug costs. The catastrophic coverage phase begins 

when a beneficiary’s TrOOP costs reach $3,850.2 This amount includes 

the beneficiary’s deductible and coinsurance payments. Once 

beneficiaries reach $3,850 in TrOOP costs, they contribute 

approximately 5 percent coinsurance toward their drug costs. Of the 

remaining 95 percent, the Part D plans are responsible for 

approximately 15 percent of drug costs and CMS pays the plans 

80 percent. This 80-percent reimbursement to the plans is called a 

reinsurance subsidy. 

Calculating TrOOP Costs 

Some Medicare beneficiaries with Part D coverage have additional 

prescription drug coverage through other entities, such as State 

Pharmaceutical Assistance Programs, group health plans, Medicaid 

programs, the Federal Employee Health Benefits Program, or 

2 In 2006, the deductible was $250 and the TrOOP costs threshold was $3,600. Available 

online at http://www.rds.cms.hhs.gov/downloads/Final2007PartDParameterUpdate.pdf. 

Accessed May 4, 2007. 

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INTRODUCTION 

TRICARE. However, only certain drug payments are eligible to be 

counted toward the TrOOP costs threshold. 

Drug payments that count toward TrOOP costs include: 

• payments made by a beneficiary or another person on behalf of a 

beneficiary, such as a family member; 

• low-income cost sharing subsidies; 

• payments by a qualified charity; and 

• payments made by a State Pharmaceutical Assistance Program. 

Drug payments that do not count toward TrOOP costs include: 

• premiums paid by the beneficiary; 

• payments made by a group health plan (e.g., employer or retiree 

plan); 

• payments made by Government programs (e.g., Veterans Affairs or 

TRICARE); 

• payments covered by an automobile insurer; and 

• payments made by Part D plans as part of an enhanced plan benefit 

package. 

Coordination of Prescription Drug Benefits 

Part D plans are required by law to coordinate benefits with other 

entities that provide prescription drug coverage (42 U.S.C. § 1395w-133 

and 134). Coordination of benefits enables each payer to determine its 

payment responsibility.3 Coordination of benefits plays a pivotal role in 

the context of calculating beneficiaries’ TrOOP costs because, as 

discussed above, prescription drug payments by some payers count 

toward TrOOP costs while others do not. 

CMS amended the existing contract with COBC in February 2005 to 

include collecting information on Part D beneficiaries’ additional drug 

coverage. COBC collects this information from other payers through 

Voluntary Data-Sharing Agreements, Coordination of Benefits 

 OEI-03-06-00360 

3 CMS outlined coordination of benefits requirements, including requirements related to 

tracking TrOOP costs, in its “Part D Coordination of Benefits Guidance” issued in July 

2005. This document served as the basis for the “Medicare Prescription Drug Benefit 

Manual” chapter on coordination of benefits issued in December 2006. Available online at 

http://www.cms.hhs.gov/PrescriptionDrugCovContra/dowloads/PDMChapt14COB.pdf. 

Accessed December 16, 2006. 

T RACKING BENEFICIARIES ’ T RUE OU T - O F - P OCKET C OSTS 3 
 

 

INTRODUCTION 

Agreements, and other processes and submits the information to CMS’s 

Medicare Beneficiary Database (MBD). Beneficiaries’ additional drug 

coverage information is sent from the MBD to the Medicare AdvantagePrescription Drug system, which then shares a coordination of benefits 

data file with all Part D plans. 

The MMA specifies that Part D plans have the authority to require 

Medicare beneficiaries to report information about additional 

prescription drug coverage they have (42 U.S.C. § 1395w102(b)(4)(D)(ii)). Plans must survey their enrollees regarding additional 

coverage and submit this information to COBC. Part D plans transmit 

files containing enrollees’ additional prescription drug coverage data to 

COBC through the Electronic Correspondence Referral System (ECRS). 

COBC validates the additional drug coverage data and submits it to the 

MBD. 

CMS contracted with a TrOOP Facilitator to assist Part D plans in 

coordinating beneficiaries’ prescription drug benefits at the point of 

sale. The TrOOP Facilitator is responsible for tasks such as receiving 

and maintaining Part D beneficiaries’ eligibility information, 

responding to eligibility queries from pharmacies, identifying payments 

for prescription drugs made by other payers, and forwarding this 

information to Part D plans. 

Prescription Drug Event Data and Reconciliation 

For every prescription filled, the Part D plan must submit an electronic 

summary record, called the prescription drug event (PDE) record, to 

CMS. The PDE record contains prescription drug cost and payment 

data that enable CMS to make payments to the plans and otherwise 

administer the Part D benefit. The Part D plans were required to 

submit their first batch of PDE records to CMS by March 31, 2006. 

Thereafter, plans were required to submit PDE records to CMS at least 

once a month.4 Plans must submit all PDE data, including retroactive 

changes, 5 months after the end of the coverage year. 

The PDE information will be used in the reconciliation process, which 

will compare prospective payments made to Part D plans during the 

coverage year to actual costs as represented by the PDE data. Accurate 

TrOOP costs are essential to the calculation of actual costs and any 

4 CMS issued instructions to Part D plans regarding the PDE data in January 2006. The 

instructions were updated in April 2006. 

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INTRODUCTION 

necessary adjustments to payments to Part D plans. Part D plans 

cannot appeal reconciliation results based on failure to submit data in a 

timely manner.5 

METHODOLOGY 

Part D Plan Sample 

When we selected the sample in August 2006, CMS had 91 PDP contracts 

and 474 MA-PD contracts with Part D sponsors. We excluded from the 

sampling frame 12 PDP plans because they were direct contracts between 

CMS and employers or contracts with insurers that offer plans on behalf of 

employers. We excluded 77 MA-PD plans because they were cost plans, 

Program of All-Inclusive Care for the Elderly plans, or demonstration 

plans.6 We also excluded 1 PDP and 18 MA-PDs that had fewer than 

20 enrollees each as of June 7, 2006. 

As shown in the table below, we divided the remaining 457 plans into four 

strata based on the type of plan and number of enrollees in each plan. The 

plans in stratum 2 and stratum 4 represent the top five PDP and MA-PD 

plans, respectively, by enrollment. We selected a stratified simple random 

sample of 142 Part D plans. The sample was designed to produce 

statistical estimates with an expected precision of +/-10 percent at the 

95-percent confidence level. After selecting the sample, we learned that 

one MA-PD was an employer-based contract that should have been 

excluded from the sampling frame. We removed this contract from the 

sample, for a total sample of 141 Part D plans. 

Table - Sample of Part D Plans 

Stratum Definition 

Number of Part D Plans in 

Sampling Frame 

Number of Part D Plans in 

Final Sample 

1. PDPs with fewer than 537,486 enrollees 73 45 

2. PDPs with 852,712 to 3.3 million enrollees 5 5 

3. MA-PDs with fewer than 121,056 enrollees 374 86 

4. MA-PDs with 179,805 to 637,664 enrollees 5 5 

Total 457 141 

5 “CMS 2005 Prescription Drug Event Training Participant Guide,” p.12-2. Accessed 

online May 6, 2006. This version of the guide is no longer available online. 

6 These types of plans were excluded from the sampling frame because they may have 

had Part D requirements that differed from those of PDP and MA-PD plans. 

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INTROD U C T U C T I O N I O N 

Data Collection 

To identify the processes that Part D plans use to ensure the accurate 

tracking of TrOOP costs, we conducted an online survey and collected 

documentation from our sample of Part D plans between January and 

March 2007. We requested that the plans provide documentation 

outlining their policies and/or processes for tracking TrOOP costs. We 

received survey responses for 138 Part D plans. Three Part D plans did 

not respond to our survey after multiple e-mail and telephone follow-up 

efforts to obtain their responses. We received responses from 48 of 

50 PDPs and 90 of 91 MA-PDs. These plans covered 79 percent of 

Medicare beneficiaries enrolled in Part D plans as of June 2006. 

We conducted an onsite interview with CMS staff in October 2006 to 

determine what oversight processes CMS has in place to ensure the 

accurate tracking of TrOOP costs and to learn the results of these 

processes. The interview focused on CMS’s oversight of the Part D 

plans. We also collected relevant documentation from CMS, such as 

policies and analysis spreadsheets. 

To determine the processes that COBC uses to help ensure the accurate 

tracking of TrOOP costs, we conducted an onsite interview with COBC 

staff in October 2006 and obtained relevant documentation. To gain a 

better understanding of the functions of the TrOOP Facilitator, we 

conducted an onsite interview with a representative of the TrOOP 

Facilitator in October 2006 and obtained related documents. 

Data Analysis 

We aggregated quantitative Part D plan survey results to analyze plans’ 

procedures related to tracking enrollees’ TrOOP costs, including 

communicating with enrollees to obtain additional drug coverage 

information, processing changes to enrollees’ TrOOP balances, 

transferring TrOOP balances when enrollees change plans, and 

submitting required data to COBC and CMS. Based on plan survey 

results, we calculated weighted estimates of the percentage of enrollees 

affected by particular plan characteristics. All statistical estimates 

reflect the stratified simple random sample design and are provided in 

Appendix A. 

We reviewed and analyzed quantitative data files provided to OIG by 

CMS and COBC in connection with our interviews. We analyzed 

narrative responses to open-ended questions that Part D plans recorded 

in the online survey. Finally, we analyzed narrative responses that 

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INTRODUCTION 

CMS, COBC, and TrOOP Facilitator staff provided during onsite 

interviews. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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FINDINGS 

 

Δ FINDINGS 

Information on enrollees’ additional drug 

coverage, essential for the accurate tracking of 

TrOOP costs, was not consistently 

submitted to COBC in 2006 

To track TrOOP costs accurately, 

Part D plans must have 

information on any prescription 

drug coverage that enrollees have 

in addition to Part D coverage. 

The COBC has processes in place to collect information on Medicare 

beneficiaries’ additional drug coverage. One process requires that 

Part D plans submit enrollee survey data and another involves the 

establishment and implementation of data-sharing agreements with 

other payers of prescription drug benefits. 

Twenty-nine percent of Part D plans did not submit enrollees’ additional 

drug coverage data to the Coordination of Benefits Contractor in 2006 

CMS requires Part D plans to survey their enrollees within 30 days of 

enrollment and annually thereafter and submit to COBC information 

regarding any prescription drug coverage enrollees have in addition to 

Part D coverage. Our January 2007 survey of Part D plans indicates 

that 93 percent of plans had conducted an initial enrollee survey. 

However, 29 percent of plans reported that they did not submit their 

enrollees’ additional drug coverage information to COBC in 2006. These 

plans covered 25 percent of Part D enrollees. Most of these plans 

indicated that they had neither a manual process nor an electronic 

system for submitting the required information or they had problems 

connecting to the ECRS. 

Part D plans need information concerning enrollees’ additional 

prescription drug coverage to track TrOOP costs accurately. For 

example, an enrollee may have additional prescription drug coverage 

through a group health plan that makes drug payments on the 

enrollee’s behalf that do not count towards TrOOP costs. If an enrollee’s 

Part D plan is not aware of this additional drug coverage, the enrollee’s 

TrOOP costs will accumulate more quickly because payments made by 

the other plan would not be removed from the enrollee’s TrOOP balance. 

As a result, the enrollee may not be in the correct phase of the Part D 

benefit. 

Part D plans’ records containing enrollees’ additional drug coverage 

information were often rejected by the ECRS. COBC provided data to 

OIG indicating that, as of October 2006, many of the records plans 

submitted containing enrollees’ additional drug coverage data had been 

rejected by the ECRS. In some cases, over 85 percent of a plan’s records 

submitted to the ECRS were rejected. COBC explained that records 

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FINDING 
 S 

submitted to the ECRS were rejected because plans submitted incorrect 

data. For example, a plan may have sent an internal enrollee policy 

number instead of the Health Insurance Claim Number that the ECRS 

requires to identify a Medicare beneficiary. As a result, information on 

beneficiaries’ additional drug coverage cannot be incorporated into the 

MBD. In October 2006, COBC indicated that it had conducted a 

number of training sessions for Part D plans on submitting enrollees’ 

additional drug coverage data to the ECRS. However, COBC also 

reported that plans were just beginning to focus on submitting these 

data, having spent the earlier part of 2006 focusing on other aspects of 

implementing the Part D benefit. 

Thirty-six percent of entities that had data-sharing agreements with the 

Coordination of Benefits Contractor did not submit their enrollees’ 

additional drug coverage information for at least one of those agreements 

To facilitate the exchange of coverage information, COBC establishes 

data-sharing agreements with other payers. These voluntary 

agreements are called Coordination of Benefits Agreements (COBA) and 

Voluntary Data-Sharing Agreements (VDSA). Entities may have more 

than one COBA with COBC. According to data provided by COBC, 

36 percent (57 of 160) of entities that had active data-sharing 

agreements did not provide enrollees’ additional drug coverage 

information to COBC for at least one of those agreements in 2006. In 

particular, 55 percent (42 of 76) of entities with active COBAs did not 

provide enrollees’ additional drug coverage information to COBC for at 

least one of those agreements in 2006. Eighteen percent (15 of 84) of 

entities with VDSAs had not provided enrollees’ additional drug 

coverage information to COBC as of October 2006. As stated above, 

information on enrollees’ additional prescription drug coverage is 

essential for successful coordination of benefits and accurate tracking of 

TrOOP costs. 

There are time- and money-saving incentives for non-Medicare payers 

to establish data-sharing agreements and provide drug coverage data to 

COBC.7 However, other payers of drug benefits are not required to 

provide coverage information to COBC. As a result, even though payers 

have established data-sharing agreements to provide additional drug 

7 One incentive is that employers with VDSAs can obtain Medicare entitlement data 

monthly or quarterly rather than spending up to 2 years to obtain such information through 

other methods. 

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F I NDING S 

coverage data, COBC can only encourage these payers to fulfill their 

obligations under those agreements. COBC also indicated that the 

data-sharing process requires a great deal of technological and other 

resources. For example, establishing a telecommunication line for 

electronic transmission of data alone can take up to 60 days and cost 

$5,000 a month to maintain. In addition, setting up the data-sharing 

files and testing the process can take a considerable amount of time. 

Therefore, data-sharing agreements may be in place for some time 

before the data-sharing process is successfully implemented. 

Thirty-four percent of Part D plans did not submit 

prescription drug event data in accordance 

with CMS requirements in 2006 

According to CMS’s 

“Updated Instructions: 

Requirements for 

Submitting Prescription 

Drug Event Data,” Part D plans were required to submit PDE data at 

the end of the first quarter of 2006 and at least once per month 

thereafter. Without plans’ PDE data, CMS cannot verify that plans 

have calculated beneficiaries’ TrOOP costs correctly. Thirty-four 

percent of plans did not submit PDE data at the end of the first quarter 

or in one or more months after the first quarter of 2006. These plans 

covered 49 percent of Medicare beneficiaries enrolled in Part D plans. 

The plans indicated that they submitted PDE data outside CMS’s 

required timeframes, had technical difficulties submitting PDE data 

files, or had problems or delays obtaining Part D prescription drug data 

from their pharmacy benefit managers. Of the plans that did not 

submit PDE data in accordance with CMS requirements, three-quarters 

failed to submit data in one or more months after the first quarter of 

2006. 

CMS provided OIG with information indicating that CMS had taken 

steps to follow up with Part D plans that were not complying with PDE 

data certification and submission requirements in 2006. CMS sent 

warning letters in June 2006 to Part D plans that had not submitted 

test PDE data files and were not yet certified to submit PDE data to 

CMS. CMS issued corrective action plans in August 2006 to Part D 

plans that remained noncompliant with CMS’s PDE data testing and 

certification requirements. 

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F I NDING S 

Sixty-three percent of Part D plans cited problems 

with transferring TrOOP balances when enrollees 

change plans 

When a beneficiary changes 

from one Part D plan to 

another, CMS requires the 

disenrolling plan to transmit a 

Transfer Explanation of 

Benefits (EOB) to the beneficiary’s new plan of record within 7 days of 

disenrollment. This record must contain the beneficiary’s TrOOP 

balance and the total payments the plan has made to pharmacies on the 

beneficiary’s behalf. If this information is not received by the new plan 

or is not accurate, the beneficiary may not be in the correct phase of the 

benefit (i.e., initial coverage, coverage gap, or catastrophic coverage). 

Overall, 63 percent of Part D plans, covering 78 percent of Part D 

enrollees, reported having issues or problems with transferring TrOOP 

balances when enrollees change plans during the coverage year. These 

problems included manual processes for transferring TrOOP balance 

records and the receipt of incorrect, questionable, or inconsistent TrOOP 

balance data. 

Two-fifths of Part D plans had issues or problems with the resourceintensive nature of the TrOOP balance transfer process 

Forty percent of plans indicated that the labor- and resource-intensive 

nature of the process was an issue or a problem. Plans indicated that 

the transfer of TrOOP balances relied heavily on manual processes, 

such as faxing paper copies of Transfer EOB records to the new Part D 

plan or creating hundreds of compact disks containing enrollee TrOOP 

balance information for new plans. According to the “Medicare 

Prescription Drug Benefit Manual,” CMS is considering options for 

automating this process in the future. 

About one-quarter of Part D plans reported that Transfer Explanation of 

Benefits records contained incorrect or questionable information 

Twenty-eight percent of plans indicated that they received Transfer 

EOB records containing incorrect or questionable TrOOP balances. For 

example, the EOB record might contain the amount of the most recent 

change in the enrollee’s TrOOP balance rather than the total TrOOP 

balance. Nine plans reported receiving EOB records with TrOOP 

balances that were greater than the total payments made to 

pharmacies, calling into question the validity of the information. 

One-quarter of plans indicated that the information in the effective date 

field on the Transfer EOB record was incorrect. According to the 

“Medicare Prescription Drug Benefit Manual,” the effective date on the 

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FINDING 
 S 

Transfer EOB record should be the date that the reported TrOOP 

balance and total payments made to pharmacies were calculated. 

However, plans indicated that this field might include the date that the 

EOB record was created or the enrollee’s eligibility effective date. 

Without correct information concerning the date an enrollee’s TrOOP 

balance was last calculated by a previous plan, the new Part D plan 

cannot determine what subsequent TrOOP cost accumulations should 

be applied to the enrollee’s current TrOOP balance. 

Multiple Transfer Explanation of Benefits records per enrollee made 

accurate calculation of TrOOP costs difficult for some Part D plans 

After a beneficiary changes Part D plans and the Transfer EOB is sent 

to the new plan, it is still possible that the beneficiary’s previous plan 

may revise his or her TrOOP balances based on new or updated 

information it receives from pharmacies or other payers. In such cases, 

CMS requires the previous plan to provide the new plan with an 

updated EOB record reflecting the new TrOOP balance. Twelve of the 

plans that cited issues or problems with the TrOOP balance transfer 

process indicated that they had received multiple EOB records for one 

enrollee. Plans indicated that they received EOB records that were 

exact duplicates or had duplicate information but different TrOOP 

balances. Some plans received multiple EOBs for enrollees who had 

more than one plan benefit package during the coverage year. In all of 

these circumstances, plans indicated that it was difficult to determine 

which reported TrOOP cost amount to apply to the enrollee’s new 

TrOOP balance. 

CMS has conducted limited oversight of 

Part D plans’ tracking of TrOOP costs 

CMS has conducted limited 

oversight of Part D plans’ 

tracking of beneficiaries’ 

TrOOP costs. The oversight CMS has conducted thus far relied on 

plans’ self-reported data. These data indicated that most plans were not 

in full compliance with coordination of benefits and TrOOP tracking 

requirements in at least the first half of 2006. 

CMS’s oversight of plans’ compliance with requirements related to tracking 

TrOOP costs relied on self-reported data from Part D plans in 2006 

As described previously, CMS asked Part D plans to attest to their 

compliance with all of the requirements outlined in CMS’s 2006 

Coordination of Benefits Guidance. CMS provided OIG with the results 

of this effort. Based on plans’ attestations, 405 of 501 plans (81 percent) 

were not in compliance with one or more of all requirements. A total of 

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F I NDING 
 S 

261 of these plans were not in compliance with one or more of four 

requirements specifically related to calculating TrOOP costs. These 

requirements included tracking TrOOP costs in real time, adjusting 

TrOOP balances based on claims received in other than real time, and 

transferring a beneficiary’s TrOOP balance to another Part D plan when 

the beneficiary disenrolls during the coverage year. Plans that scored 

below a certain number of points based on their attestations were 

required to complete a business plan for achieving compliance with all 

coordination of benefits requirements, including those related to 

tracking TrOOP costs. According to CMS, 21 percent of plans (106 of 

501) were required to submit either business plans specifying actions 

they would take to become compliant or attestations indicating that 

actions had already been taken to achieve compliance with all 

requirements. 

As of April 2007, other CMS oversight activities regarding Part D plans’ 

tracking of TrOOP costs were either in the planning stages or in the process 

of being implemented 

CMS finalized protocols for conducting routine audits of Part D plans’ 

processes and procedures in April 2006. These guides include elements 

related to the coordination of benefits and TrOOP costs, such as 

ensuring that plans have systems in place to collect information on 

enrollees’ additional drug coverage and to track expenditures made by 

other payers to determine if enrollees have reached the TrOOP 

threshold. As of April 2007, no audits had been conducted. Our survey 

of Part D plans confirmed that CMS has not conducted any individual 

performance reviews regarding plans’ tracking of TrOOP costs. 

Part D regulations require that CMS conduct financial audits of at least 

one-third of Part D plans each year (42 CFR § 423.504(d)). According to 

CMS staff, these financial audits will include elements related to plans’ 

tracking of TrOOP costs. However, CMS had not finalized the financial 

audit program and audit guide. CMS had not yet obtained contractors 

to conduct the financial audits. According to CMS staff, financial audits 

for contract year 2006 are not scheduled to begin before January 2008. 

CMS staff indicated in October 2006 that its contractor was analyzing a 

sample of PDE data that Part D plans submitted to CMS. The purpose 

of the analysis was to determine whether Part D plan PDE data 

confirmed that plans administered the Part D benefit in a manner 

consistent with both CMS requirements and plan benefit packages’ 

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FINDINGS 

structures. As of April 2007, CMS indicated that no formal findings 

from the PDE data analysis have been issued. 

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EXECUTIVE SUMMARY 

 

 

 

Δ RECOMMENDATIONS 

To calculate TrOOP costs correctly, information on enrollees’ additional 

prescription drug coverage must be submitted by Part D plans as well as by 

entities that have data-sharing agreements with COBC. Plans must also 

transfer accurate enrollee TrOOP balance information to and from other 

plans when enrollees change plans during the coverage year. In addition, 

CMS must have Part D plans’ PDE data to verify that plans have 

calculated TrOOP costs correctly. Our findings indicate that these 

requirements were not carried out consistently in 2006. CMS is responsible 

for the oversight of Part D plans’ tracking of TrOOP costs. Therefore, we 

recommend that CMS: 

Ensure That Part D Plans Collect, Process, and Submit All Data 

Required To Track Enrollees’ Troop Costs in a Timely Manner 

As described in this report, CMS requires that Part D plans collect and 

submit enrollees’ additional prescription drug coverage information to 

COBC, process prescription drug claims and submit PDE records to CMS, 

and work with other Part D plans to transfer enrollees’ TrOOP balances. 

We recently learned that CMS is working with the National Council for 

Prescription Drug Programs (NCPDP) to establish a standardized 

electronic system for transferring enrollees’ TrOOP balance information 

from one plan to another in real time.8 CMS should continue to establish 

or improve automated systems to enable Part D plans to meet all data 

requirements related to tracking TrOOP costs. 

Consider Options for Increasing the Number of Coordination of Benefits 

Agreements With Other Payers and Ensuring That Data Are Submitted 

Under Those Agreements 

Accurate tracking of TrOOP costs is dependent largely on successful 

coordination and sharing of prescription drug coverage information among 

payers and CMS contractors. CMS should ensure that all options for 

increasing the number of data-sharing agreements have been considered. 

Because entities that provide additional drug coverage for Part D 

enrollees are not required by law to report such information, CMS may 

want to consider seeking to expand its authority to enforce agreements 

8 NCPDP is a not-for-profit Standards Development Organization consisting of over 

1,450 members from the pharmacy services industry. 

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RECOMMENDATIONS 

once they are in place. The President’s 2008 Budget includes a proposal 

to establish a data clearinghouse that would work to determine whether 

private insurance or Medicare should pay for a beneficiary’s health 

benefits. If implemented, such a clearinghouse could provide CMS with 

access to more comprehensive drug coverage information. 

Begin or Complete Implementation of Planned Oversight Activities 

Related to the Tracking of Troop Costs 

The implementation of the Part D benefit was a large undertaking for 

CMS, its contractors, and Part D plans. Now that the program has been 

in place for almost 2 years, CMS should place more emphasis on 

conducting oversight activities. Examining Part D plans’ efforts to track 

TrOOP costs should be a priority given that these costs determine when 

beneficiaries reach each phase of the Part D benefit. OIG intends to 

focus future work on whether Part D plans have calculated beneficiaries’ 

TrOOP costs correctly. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS agreed that OIG’s report identified potential issues regarding the 

accurate tracking of TrOOP costs and that additional work is needed to 

ensure that Part D plans are calculating TrOOP costs correctly. CMS did 

not indicate whether it concurred with OIG’s three recommendations in 

its response. However, CMS did note that it has taken or will take steps 

in response to these recommendations. For the full text of CMS’s 

comments, see Appendix B. 

In response to the recommendations, CMS stated that it intends to 

continue the process of asking Part D plans to self-attest to their 

compliance or noncompliance with coordination of benefits requirements, 

including those specific to TrOOP, and intends to follow up with plans 

that report noncompliance. CMS is revising the 2008 Part D Explanation 

of Benefits letter to include TrOOP balances reported by prior plans to an 

enrollee’s current plan. In addition, CMS intends to use PDE data to 

monitor TrOOP accumulation after reconciliation activities for 2006 have 

been completed. CMS reported that it is beginning to enforce the full 

terms of its data-sharing agreements by notifying data-sharing partners 

that their access to Medicare entitlement data will be suspended if they 

do not comply with their agreements. CMS also stated that it continues 

to support legislative proposals for mandatory insurer reporting of private 

insurance coverage. CMS stated again that it plans to conduct financial 

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RECOMMENDATIONS 

audits of one-third of Part D plans for contract year 2006. According to 

CMS, one aspect of these audits will be to examine, in general, how 

Part D plans track TrOOP costs. 

CMS provided comments on two OIG findings. CMS suggested that OIG 

had incorrectly stated that inaccurate tracking of TrOOP costs could lead 

an enrollee to reach the coverage gap sooner. CMS also stated that the 

number of entities with data-sharing agreements that did not submit 

enrollees’ other prescription drug coverage information to COBC included 

entities such as Medicaid agencies that did not provide drug coverage and, 

therefore, did not have drug coverage information to submit. CMS 

calculated different figures and suggested that OIG incorporate them in 

its report. 

We addressed the comments CMS provided about our findings. We 

clarified that an enrollee may not be in the correct phase of the Part D 

benefit if his or her TrOOP costs are not calculated accurately. We 

requested the source data from COBC that CMS used to develop the 

figures in its comments regarding entities with data-sharing agreements 

that did not provide required drug coverage information to COBC in 2006. 

After receiving revised data from CMS, we updated the figures in our 

report regarding entities with active COBAs or VDSAs that did not 

provide drug coverage information to COBC in 2006 as required. The 

figures in our final report differ from those in CMS’s comments because 

the electronic data underlying CMS’s comments covered a different time 

period than our report and was not reconciled against hard-copy 

data-sharing agreements. In addition, as a technical clarification, the 

COBC confirmed in follow-up discussions that several Medicaid agencies 

had data-sharing agreements in place for which they submitted drug 

coverage information in 2006. 

We ask that CMS indicate in its final management decision whether it 

concurs with our recommendations. 

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Δ APPENDIX ~ A 

The table below contains estimates presented in the Findings section of this report. 

Point estimates and confidence intervals were weighted based on the stratified 

simple random sample design and are reported at the 95-percent confidence level. 

Estimates and Confidence Intervals 

Part D Plan Characteristic Point Estimate 95-Percent 

Confidence Interval 

Part D plans that conducted an initial survey of 

enrollees 

93.3% 89.6% - 97.1% 

Part D plans that did not submit enrollees’ 

additional drug coverage information to COBC 

in 2006 

29.4% 22.3% - 36.4% 

Part D enrollees covered by plans that did not 

submit enrollees’ additional drug coverage 

information to COBC in 2006 

25.4% 18.8% - 32.0% 

Part D plans that did not submit PDE data in 

accordance with CMS requirements in 2006 

33.8% 26.3% - 41.2% 

Part D enrollees covered by plans that did not 

submit PDE data in accordance with CMS 

requirements in 2006 

49.2% 42.8% - 55.6% 

Part D plans that cited problems with transferring 

TrOOP balances to or from other plans 

63.2% 55.6% - 70.7% 

Part D enrollees covered by plans that cited 

problems with transferring TrOOP balances to 

or from other plans 

78.4% 73.6% - 83.2% 

Part D plans that cited the labor- and resourceintensive nature of the TrOOP balance transfer 

process as an issue or problem 

39.9% 32.1% - 47.7% 

Part D plans that received Transfer EOB records 

with incorrect or questionable TrOOP balances 

28.4% 21.1% - 35.7% 

Part D plans that received Transfer EOB records 

with incorrect effective dates 

25.0% 18.0% - 32.0% 

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Δ APPENDIX ~ B 

Agency Comments 

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APPENDIX ~ B 

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APPENDIX ~ B 

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APPENDIX ~ B 

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Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Robert A. Vito, Regional 

Inspector General for Evaluation and Inspections in the Philadelphia 

regional office, and Linda M. Ragone, Deputy Regional Inspector 

General. 

Tara Bernabe and Amy Sernyak served as team leaders for this study. 

Other principal Office of Evaluation and Inspections staff from the 

Philadelphia regional office who contributed to this report include 

Cynthia Hansford and Nancy J. Molyneaux; central office staff who 

contributed include Linda Abbott, Kevin Farber, and Scott Manley. 

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