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97–603 PDF 2005

S. HRG. 108–751

MEDICARE DISCOUNT DRUG CARD: MEASURING

THE SAVINGS

FORUM

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC

SEPTEMBER 23, 2004

Serial No. 108–44

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING 

LARRY CRAIG, Idaho, Chairman 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

MIKE ENZI, Wyoming 

GORDON SMITH, Oregon 

JAMES M. TALENT, Missouri 

PETER G. FITZGERALD, Illinois 

ORRIN G. HATCH, Utah 

ELIZABETH DOLE, North Carolina 

TED STEVENS, Alaska 

RICK SANTORUM, Pennsylvania 

JOHN B. BREAUX, Louisiana, Ranking 

Member 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

JAMES M. JEFFORDS, Vermont 

RUSSELL D. FEINGOLD, Wisconsin 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

DEBBIE STABENOW, Michigan 

LUPE WISSEL, Staff Director 

MICHELLE EASTON, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Larry E. Craig ..................................................... 1

PANEL OF WITNESSES

Mark McClellan, director, Centers for Medicare and Medicaid Serivces ............ 2

Jim Firman, president, National Council on the Aging, chair, Access to Benefits Coalition ......................................................................................................... 12

Sharman Stephens, director, Planning and Policy Analysis, Office of Research 

and Development Information, Centers for Medicare and Medicaid Services 14

Mary Grealy, president, Health Leadership Council ............................................ 33

Robert Helms, resident scholar and director of Health Policy Studies, American Enterprise Institute ..................................................................................... 42

Julie James, principal, Health Policy Alternatives ............................................... 97

APPENDIX

Study submitted by the Lewin Group .................................................................... 169

(III) 

(1)

FORUM: MEDICARE DISCOUNT DRUG CARDS: 

MEASURING THE SAVINGS 

THURSDAY, SEPTEMBER 23, 2004 

U.S. SENATE, 

SPECIAL COMMITTEE ON AGING, 

Washington, DC. 

The forum commenced, pursuant to notice, at 2:39 p.m., in room 

SD–628, Dirksen Senate Office Building. 

OPENING STATEMENT OF SENATOR LARRY CRAIG, CHAIRMAN 

The CHAIRMAN. Well, ladies and gentlemen, thank you for your 

patience. Traffic—well, those of you who traffic Capitol Hill understand the congestion and the frustration today, and then, we had 

the prime minister of the provisional government of Iraq on the 

Hill, and that has created another traffic problem. But most are 

assembled, and the rest are on the way. So why do we not get 

started? 

Let me say good afternoon to all of you and welcome you to what 

I think is a very valuable forum. The drug discount cards and 

measuring the savings of those cards; of course, this forum is one 

of several that the Special Committee on Aging here in the Senate 

has hosted. 

We have convened today’s forum to take a hard look at the facts, 

facts about the new Medicare prescription drug card program and 

the real savings it offers to America’s seniors. It is no secret that 

there has been some skeptical chatter about the program, but the 

facts, I am pleased to say, speak louder than the words. First, 

Medicare administrator Dr. Mark McClellan is with us. He is here 

to announce fresh Medicare data showing clearly that the drug 

card program continues to provide seniors very significant savings 

and that these savings are solid and improving. 

But let us not just take Dr. McClellan’s word for it. Also joining 

us are representatives of three major independent studies conducted so far on the drug card program, all of which confirm the 

serious savings available under the program. As anyone familiar 

with the world of health care policy would agree, the organizations 

affiliated with these studies are among the most respected in the 

field, namely, the Kaiser Family Foundation, the Lewin Group, the 

American Enterprise Institute, the Health Care Leadership Council 

and the Health Policy Alternatives. Needless to say, when expert 

groups as diverse as these all come out in general agreement, I 

think it is safe to say that we are on to something or at least certainly on the right track. 

2

I am also pleased that today’s discussion also coincides with this 

week’s announcement that Medicare will soon launch a new program to vastly accelerate enrollment of lower-income seniors, those 

who are eligible for the additional $600 in cash assistance this 

year, and another 600 next year. Now, this program is not perfect, 

and yes, there is some confusion. But this is normal. I am sorry to 

say in a new program. How many of you have always wanted to 

rush out and buy a brand new car first one off the line? Most do 

not. Most much prefer that the marketplace work with it for a 

year. But in this reality, that does not work. Getting people enrolled and working to get people enrolled refines the program and 

develops the program. 

Finally, I believe it is also important to look ahead. Today’s drug 

card program is just the beginning, a stepping stone, if you will, 

toward implementation of the full prescription drug benefit less 

than 2 years away. I hope our panelists can comment on the lessons that we can learn today as we prepare for the tomorrow of 

2006 and beyond. 

Unfortunately, neither my schedule or Dr. McClellan’s schedule 

will permit us to stay for the balance of today’s discussions. However, it is a pleasure to welcome all of you on our panel to be with 

us today, and we look forward to your contribution. 

The CHAIRMAN. Now, let me introduce the director of CMS, Dr. 

Mark McClellan. Mark. 

STATEMENT OF MARK MCCLELLAN, DIRECTOR, CENTERS FOR 

MEDICARE AND MEDICAID SERVICES. 

Dr. MCCLELLAN. Thank you. Mr. Chairman, I appreciate it. It is 

a real pleasure to be here with all of you this afternoon to discuss 

the savings that are available right now to Medicare beneficiaries 

through the Medicare prescription drug discount card and the transitional assistance program that goes along with it. 

I especially want to thank this Committee, the Aging Committee, 

for its hard work on the Medicare Modernization Act, the law that 

made this immediate help for lower-income beneficiaries with financial help and discounts plus discounts for all beneficiaries possible and which we are working as hard as possible to bring the 

most savings to as many beneficiaries as we can right now, and 

that is what I want to talk about. 

I expect that the moderator was held up in traffic going from the 

same event that I was. This morning, Jim Firman and I made 

some joint announcements about further steps that we are taking 

particularly focused on getting low-income beneficiaries to start 

saving. There are literally thousands of dollars in savings that they 

can get right now, and I am very pleased with Jim’s work as the 

chairman of the Access to Benefits Coalition, which is a broad, nonpartisan group of organizations that have one goal in mind, which 

is to get the most help possible to as many Medicare beneficiaries 

as possible with their drug costs, and a key part of doing that is 

getting them informed about the facts of the Medicare drug discount card and getting them enrolled, and I am going to get back 

to that point in a minute, but Jim has been very busy today. 

I also want to thank the CMS staff that has worked very hard 

over the last few months not only to implement this drug card proVerDate 0ct 09 2002 09:06 Jan 28, 2005 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 H:\DOCS\97603.TXT SAGING1 PsN: JOYCE
3

gram on schedule but to continue to work to refine it, to improve 

it, to help it to be even more effective in providing discounts and 

getting assistance to more Medicare beneficiaries. 

Well, it has been more than 3 months now, over 3 months ago, 

that Medicare beneficiaries began getting discounts on their prescription drugs through the drug card program as an important 

first step toward comprehensive drug coverage in Medicare, coverage that is way overdue. The voluntary drug card program is providing immediate relief now to seniors and people with disabilities 

who are covered under Medicare. 

The discount cards have already enrolled and reduced prescription drug costs for over 4.4 million Medicare beneficiaries. That 

number is growing at about 10,000 new enrollees a day, and to put 

this in perspective, this is the fastest takeoff of any recent Federal 

health program, any recent voluntary program. There are now savings, for the first time, through Medicare. Medicare is bringing savings on prescription drugs to beneficiaries who do not have drug 

coverage. At CMS, we are pleased this afternoon to release a new 

set of studies on drug card savings based on our latest research. 

That research finds that seniors can save even more than it looked 

like they were saving in our earlier studies: 12 to 21 percent now 

on sets of brand name drugs, in comparison to the national retail 

average prices paid for by all Americans. 

I want to be clear about this 12 to 21 percent number. That is 

in comparison to the average prices paid by all Americans, that includes most Americans who have long had drug coverage, and so, 

are able to get big discounts on their drug prices through the public 

insurance programs they are in like Medicaid or VA or the private 

insurance programs they are in. Medicare beneficiaries are now 

below average, significantly below average, 12 to 21 percent below 

average, when they use the drug cards. 

You will hear more about the new CMS studies from Sharman 

Stephens on our staff, who has done a tremendous job for a long 

time at CMS and has been an integral part of making sure we are 

analyzing the drug card program as effectively as possible to help 

it work as effectively as possible. But no matter what methodology 

is used here, the savings of 12 to 21 percent on brand name drugs, 

the much larger savings on generic drugs, savings in comparison 

to retail prices that are offered, the findings are similar. 

This goes as well for findings on Internet purchases of drugs. The 

drug cards are offering significantly lower prices, as much as 30 

percent lower in some cases, on drugs compared to reputable Internet sites like Drugstore.com and Costco.com. In fact, Drugstore.com 

is now partnering with a number of Medicare drug discount cards 

to offer even lower prices to Medicare beneficiaries online through 

Drugstore.com. 

So the price reductions are substantial. They are also present 

when you look at retail prices, where the usual retail prices for 

cash-paying customers can be significantly higher than the discounted prices that most people with insurance are able to obtain, 

and those comparisons show savings of typically 20 percent or more 

according to some of the other recent studies that you will hear 

about from the panel members. 

4

It is very encouraging to us to see the consistent showing of significant savings on prescription drugs at local pharmacies, even 

larger savings on mail order drugs and very large savings on generic drugs available through this program. We have also set up 

some new ways to save, including an announcement last week. 

When you go to our Website, or when you call us at 1–800–Medicare, you can not only get information about how much you can exactly save on your prescription drugs that you are taking now, but 

if there are generic versions of the drugs available, we will tell you 

about them and tell you how much you can save on them, and 

again, generic savings can be on the order of 40, 50, 60 percent or 

more, and if there are drugs that work in a similar way to the drug 

you are taking for a cholesterol lowering drug or a drug for stomach acid or a nonsedating drug for your allergies, we will tell you 

about those alternatives as well to focus a discussion with your doctor where it can be most useful. 

It is very hard to go into your physician, just ask about, gosh, 

how can I get savings on my prescriptions. It is much easier if you 

have got a piece of paper in front of you or the notes from your conversation with one of our customer service representatives saying 

that if you switch from Zocor to Mevacor, Lipitor, you could save 

$10, $20, $30 a month. That is an additional way to save that we 

are making possible in order to encourage more competition among 

prescription drugs to get the costs down. 

So with these new studies that we are updating today, we are 

seeing clear and consistent savings that have persisted over the 

whole period of our analysis. I should highlight as well that the 

comparisons I mentioned, the 12 to 21 percent or more, is in comparison to the average prices that Americans paid in the first quarter of this year, so even going back 6 months plus to a time since 

when there have been some reports about list price increases for 

drugs, we are still seeing actually a little bit larger savings than 

in the past. 

Our analyses now also extend to breadth of coverage. You know, 

there were a lot of concerns when this program started that there 

might be some bait and switch, and we said, ‘‘That we were going 

to be vigilant in watching out for that by keeping an eye on what 

is happening with prices.’’ I just told you about some of the main 

features of our studies as well as some of the other studies that 

have been done. 

But we are also looking at the drugs that have been covered. 

People were worried that some drugs that they were taking now 

might not end up continuing to get coverage on their drug card. 

Now, we are making available on our Website and when you call 

us at 1–800–Medicare some specific information on how broad the 

discounts are on each of the drug cards. 

So with respect to that, I am pleased to tell you that all of the 

cards cover almost all of the top drugs used by seniors in this country. Many of the cards cover 100 out of the top 100 prescription 

drugs, and all of them cover at least 97 out of the top 100. That 

has been persistent over this program for the whole time it has 

been in existence. 

We looked further at how well the cards do in covering all of the 

prescription medicines that are out there, all of the drugs marketed 

5

in the United States, and you can get this information when you 

go to our Website or call us at 1–800–Medicare, and the vast majority of cards are covering, all of the cards are covering most of 

the drugs that are marketed in the United States, and most of the 

cards are covering 70, 80 percent or more of all prescription drugs 

in the U.S. A number of cards are over 90 percent of all of the prescription drugs marketed in the United States, so very broad coverage on the cards as well. 

Now, as important as these real and persistent and broad savings are on the drug cards to all seniors and people with disabilities who are struggling with drug costs because they do not have 

good coverage, the drug card especially means a lot to people with 

limited means and no drug coverage. That is because it adds in 

$600 in assistance right on the card this year; it works very similarly to a debit card. When you use the card to fill your prescription, the cash that you have on the card will be taken off right 

then. You do not need to come up with the money yourself, and 

then, there is $600 more in assistance next year as well. On top of that, after the $600 is used up, Medicare cards have 

worked with drug manufacturers to provide additional wraparound 

discounts on more than 200 brand name medications, including 

many of the top drugs, so 6 out of the top 10 prescriptions in the 

elderly are covered by these wraparound programs now, generally 

on multiple cards. The way the wraparounds work is after you use 

up that $600 credit, you get an extra large discount on your prescription. 

You can typically get the prescription for close to if not only the cost of the dispensing fee. That is $15 or less for a prescription that 

might cost $80, $90, $100 otherwise. So if you add that all together, 

the discounts, the credit, the wraparound, this is thousands of dollars in help available right now with drug costs for the beneficiaries who need it the most. They do not have to choose anymore 

between paying for their drugs and paying for other basic necessities. 

Because we know every dollar counts, the cards are free for lowincome beneficiaries. This is why we at CMS have been trying to 

do as much outreach as possible to make sure lower-income beneficiaries especially are informed about the benefits of these cards, 

and that is why I am particularly pleased with the announcements 

that we have been able to undertake recently with the Access to 

Benefits Coalition; Jim, who was program stuck in the same traffic 

I was coming over from the National Press Club today, has been 

doing some tremendous work with more than 90 national organizations in the Access to Benefits Coalition that have a very simple 

nonpartisan goal, and that is to get the most help to lower-income 

beneficiaries with their drug costs as quickly as possible. Again, 

the drug card, the $600 annual credits, and the wraparound discounts are a key part of that effort, and I hope that Jim will have 

a chance to talk a little bit about some of the new steps that ABC 

is taking to make that happen. 

This is very important, because the savings offered by the drug 

card are only available to people who are enrolled, and that is why 

we are working harder than ever to ensure that seniors, their families, care givers, all of them, have the information they need to 

6

make informed decisions to select a card that can give them a lot 

of help right now. 

If you are on Medicare, and you are struggling with drug costs, 

you should know that signing up is as simple as calling 1–800–

Medicare with just a few pieces of information: your ZIP Code, your 

drugs and dosages that are found on the prescription bottles, and 

if you think you might qualify for the $600 credit and all of the 

wraparound assistance, your annual income. 

We have staffed up at 1–800–Medicare. We have got over 3,000 

trained customer service representatives who can walk you through 

the card choices. We will focus in on just a limited number of 

choices. We tend to talk about the top five, but if people want to 

hear about fewer than that or more than that, we can do that as 

well. The call to get all the information you need to find out about 

how to save takes less than 15 minutes. If you are interested, you 

can get a personalized brochure to take a closer look at the cards 

on paper before deciding which one to enroll in, but if you are 

ready to sign up when you call, our customer service representatives can tell you exactly what you need to do to enroll in a drug 

card over the phone. 

Just today, with help from the Access to Benefits Coalition, we 

announced some new steps to make this even easier. We are incorporating information on all of the wraparound programs into the 

guidance that we give people when they call us up or when they 

visit our Website, and we are also making it easier to enroll in the 

transitional assistance over the phone or online as well. 

It is not just us. Again, thanks to the work of the Access to Benefits Coalition, there is now another Website that people can use to 

get quick information and recommendations and help in getting 

signed up, getting enrolled and actually starting to get savings 

right now. 

To ensure that seniors have all of the information that they need 

and that all seniors are educated about how they can start saving 

right away, we are engaging in more partnerships like this one 

with the Access to Benefits Coalition. We are partnering with community-based organizations, with States through their State health 

insurance assistance plans, with other Federal agencies to reach 

out to beneficiaries to make sure they get the facts about the discount cards and to make sure that they start saving. 

Again, this is very important: no senior today should be choosing 

between drugs and other basic necessities. There is a lot of real 

help available right now, and we are working ourselves and with 

our many partners to get this help available as quickly and as easily as possible. 

Now, I mentioned that we have got about 4.5 million people enrolled in the card program now. We are well over the 50 percent 

mark on enrollment, on expected enrollment, but I think we can do 

a lot better. That is why I think the step that we announced yesterday is so important, to add nearly 2 million lower income Americans to this program through automatic enrollment process. 

These are lower income beneficiaries who are in limited Medicaid 

benefit programs that do not provide drug coverage. They are going 

to be getting a drug card in the mail next month. When they get 

the card, they can start using it beginning in November to get the 

7

$600 credit. All they have to do is make one phone call and answer 

two questions. They can call us up at 1–800–Medicare. They can 

call the 800 number for the card sponsor. Just let us know that 

they do not have any other prescription drug coverage now and let 

us know that their income level is still below the level that gets 

them to qualify for the program. We think that is generally going 

to be the case, because we are targeting this automatic enrollment 

to beneficiaries who are already enrolled in Medicare savings programs, these limited Medicaid benefit programs, and then, they can 

start using the card right away. 

So we are going to not only get these letters out in the next couple of weeks but with all of our partners around the country to 

make sure beneficiaries get the facts and know that they can get 

literally thousands of dollars in savings right away if they just 

start using this card. We hope, through this process as well, to 

reach many other lower-income beneficiaries who can get thousands of dollars in help right now as well. 

The drug cards are an important step. They are providing real 

savings for beneficiaries right now, with millions more to come. 

They are also an important bridge to the new Medicare prescription drug benefit that will go into effect in January 2006. We expect that the experience from this card program is going to help get 

more discount card sponsors converted into drug benefit providers; 

it will also help the drug benefit plans do a better job of providing 

the best service, and it is certainly going to help us do the best job 

possible of informing people, working with public-private partnerships to help make sure they get the most benefits possible and to 

provide the most support and the most effective support we can to 

Medicare beneficiaries. 

Through this process, beneficiaries are going to continue to get 

discounts on their drugs. With the drug benefit, the expectation is 

that the price, even lower negotiated prices may be possible. As 

both CBO and CMS have said in the independent analysis that is 

underlying our proposed regulations on the drug benefit, we think 

that the competitive approach to price negotiation that we are following is going to give the best possible prices, prices that are as 

good if not better than the Government could negotiate directly as 

well as more options in terms of making sure that people have access to the prescription drugs they need, not a one size fits all formulary. 

So we are on the way to doing that, and we are going to use this 

experience to make sure that we get as many people enrolled as 

possible to take advantage of both of the benefits. I want to thank 

all of you again, especially the Chairman, for his leadership, and 

thank you all for the opportunity to talk today about the substantial savings that are available through the discount drug card program as we are taking an important step toward full prescription 

drug benefits in Medicare. 

This has been too long in coming. We are working very quickly 

and as extensively as we can with outside partners to get as much 

help as possible to our beneficiaries, and even more is coming in 

the months ahead. 

Thank you all very much. [Applause.] 

[The prepared statement of Dr. McClellan follows:]

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The CHAIRMAN. Well, Mark, thank you very much. 

Folks, do the math. Our targeted group is about 7.3 million. We 

are at 4.4 million now. The program that Jim and Mark have just 

announced today will add about 1.8 or 2 million in a 3-month period of time and more. That is pretty good business, and we applaud you for it and appreciate it. 

I do appreciate, Mark, you joining us and sharing those numbers 

today. It is important that we keep track of this program as it goes 

along, get the real numbers and understand them and the kind of 

cooperative effort that is well underway. You and your staff, I 

think, deserve a great deal of credit for handling a huge task of implementing this new Medicare program in the way that you have. 

It is probably not much of an exaggeration to say that drafting 

the original bill was a picnic compared to the implementation of 

the details, and I will tell you how we struggled in the picnic trying 

to get a bill that we felt would work and would respond to the 

needs of our seniors. 

I guess I can understand, Mark, why you get the award indispensable person from the Alliance for Aging Research that you got this 

past week. That is greatly appreciated, I am sure. 

Next, we will turn the proceedings over to Jim Firman. Jim has 

arrived, after having been, I understand, caught in a motorcade. 

He will be the moderator of the panel. Jim, as you now know, is 

president of the National Council on the Aging as well as leader 

of the recently founded Access to Benefits Coalition. Jim’s ABC Coalition has successfully brought together dozens of organizations 

across the country and is doing tremendous work in reaching out 

to seniors and helping them gain access to the benefits of the new 

Medicare law. 

So, Jim, we thank you very much for being here on what we now 

understand has been a busy day for you. We look forward to your 

moderating and introducing the panelists. Panelists all, thank you 

very much for being with us this afternoon and sharing your information and the research work you have done. 

Thank you. 

STATEMENT OF JIM FIRMAN, PRESIDENT, NATIONAL 

COUNCIL ON THE AGING, CHAIR, ACCESS TO BENEFITS 

COALITION 

Mr. FIRMAN. Thank you very much. Thank you, Senator Craig, 

Dr. McClellan. [Pause.] 

Thank you very much. My name is Jim Firman. I have the pleasure of chairing the Access to Benefits Coalition, which is a coalition 

of more than 90 national, nonprofit organizations and 52 State and 

regional coalitions, all who have come together for only one purpose: to make sure that low-income Medicare beneficiaries can get 

the best possible coverage and savings for prescription drugs. 

We are nonpartisan. We are only about finding people and helping them get the coverage they need, whether it is State programs, 

Medicare cards, the best possible Medicare cards, company patient 

assistance programs, veterans’ benefits, Medicaid. We do not care. 

We want to find the best combination to work for people. 

We are delighted to be here today, because we have been working closely with Administrator McClellan to find ways to get as 

13

many people as possible into the benefits. We are very pleased to 

be able to be part of the announcement yesterday that CMS is 

going to auto-enroll 1.8 million low-income people in the benefit. 

That is a great step forward. Today, we were announcing the new 

tools for consumers, a new Website called Accesstobenefits.org put 

together by the coalition, designed to help people quickly and easily 

figure out the best combination of programs and then enroll in 

those benefits. 

It takes a somewhat different approach than Medicare.gov, but 

they are both wonderful Websites full of wonderful information, 

and we encourage people to use both of those or either of them, 

whatever works. You will find sometimes, we approach a little differently, but pretty much, we come to the same kinds of answers, 

that there are more benefits out there than people realize, and the 

need is for people to sign up for them now. 

But as we have done our research, and we have done extensive 

research in focus groups and talking to older people, what we find 

is that many older people and people with disabilities on Medicare, 

particularly those with lower incomes are skeptical. They have 

heard a lot of things. They are not sure how significant the savings 

really are. They do not know whether they will qualify for them, 

even though we are looking at people who in many cases we know 

are eligible. They do not think that they will be able to access those 

benefits. 

That is why today is so important, because I am delighted to 

have the opportunity to chair this panel, where we can get some 

of the facts, and we can find out what is really going on, what are 

the savings, how many of them, because this is very important, I 

think, for consumers to understand, for the public to understand as 

well. 

So let us get on to the real substance of this panel, and let us 

hear from the folks who have done the research and who can tell 

us their findings. Our first presenter—the way this is going to 

work is we are going to hear four presentations, about 5 minutes 

each, and then, we are going to open it up into a discussion and 

ask questions. I am going to ask some questions. You on the floor 

will have an opportunity to write down and to pass questions up 

as well. But the goal is to help educate all of us as to what is really 

going on in terms of costs and prices. 

So the first speaker will be Sharman Stephens, who is the director of planning and policy analysis in the Office of Research and 

Development Information at the Center for Medicare and Medicaid 

Services at HHS. She has been there since 1996, and before that, 

she was with the Office of the Assistant Secretary for Planning and 

Evaluation at HHS. She is a graduate of the Duke University 

School of Nursing and had received her master’s in public health 

from the University of North Carolina.

14

STATEMENT OF SHARMAN STEPHENS, DIRECTOR, PLANNING 

AND POLICY ANALYSIS, OFFICE OF RESEARCH AND 

DEVELOPMENT INFORMATION, CENTER FOR MEDICARE 

AND MEDICAID SERVICES 

Ms. STEPHENS. Thank you. 

Good afternoon. I want to thank you for inviting me to discuss 

the analyses we have conducted regarding the level of savings 

available to Medicare beneficiaries enrolling in Medicare-approved 

drug discount cards. My remarks this afternoon will focus on a series of CMS studies that have examined the level of savings available to Medicare beneficiaries through these cards. 

We have examined prices offered by the Medicare approved cards 

from a variety of angles. In the initial weeks of program implementation, we found that overall, and as we are showing on that first 

chart over there, for non-low-income beneficiaries, absent the $600 

in transitional assistance, savings of 11 to 18 percent were possible 

over national average retail pharmacy prices for the illustrative 

baskets of commonly used drugs we examined. 

We reexamined the prices posted on the Medicare comparison 

Website last week for the same sets of commonly used drugs examined previously. As shown on the chart, we found that savings are 

now ranging from almost 12 percent to over 21 percent for the baskets of drugs we examined. As Dr. McClellan pointed out, our point 

of comparison in these analyses is to national average retail prices, 

which include both the higher prices paid by people without insurance, normally, we call them the cash-paying customer, and the 

lower prices paid by people with private and public insurance, and 

most people, actually, have coverage. But as a result, we would actually expect that beneficiaries’ savings would be larger for those 

who are currently paying cash prices at retail pharmacies. 

As you can see, on the right side of the chart, because of the annual $600 in transitional assistance, the savings for low-income 

beneficiaries are even greater. Using data from last week and estimating for the 4-month period from September to December of 

2004, we found that when the discounts and the $600 in transitional assistance are considered, low-income beneficiaries during 

this period can save from nearly 44 to 92 percent, compared to national average retail prices. 

These savings can be substantially greater for some beneficiaries 

when the special very low pricing arrangements on over 200 drugs 

now being offered by several brand name pharmaceutical manufacturers, in coordination with the Medicare discount card programs, 

are considered. Forty-six out of these 200 drugs are actually among 

the top 200 drugs used by the 65 and over population. 

It is also important to note, and I am going to be moving over 

to the next chart here, that generic drugs offer all beneficiaries a 

chance to save even more on their drug costs. As shown in the second chart, in a June study on generic drugs, we found that those 

who can switch to generic drugs can save 46 to 92 percent over the 

cost of brand-name drugs we examined. We also found that those 

beneficiaries already taking generic drugs could save 37 to 65 percent over national average retail pharmacy prices by enrolling in 

a Medicare-approved discount drug card. 

15

As a quick update, based on prices posted last week, we saw 

commonly used generic drugs with savings of 45 to almost 75 percent. That is shown on the right side of the second chart. 

Because some beneficiaries may choose to get their prescriptions 

through mail order, we have also examined the mail order market. 

Our analyses found that Medicare-approved drug card prices for 

mail order consistently beat the prices offered by popular mail 

order pharmacies. For example, using 10 commonly used drugs, we 

found that the best Medicare-approved drug cards had prices on 

these drugs ranging from 5 to 33 percent lower than drugstore.com 

and 11 to 34 percent lower than Costco.com. 

On the third chart, the top red line is Costco.com, the second 

line, which is blue, is Drugstore.com, and the bottom line in green 

is Medicare. This third chart illustrates the savings in dollars for 

a few commonly used drugs, in this case, Celebrex, Prevacid, 

Norvasc, and Zocor. 

Often, the retail pharmacy prices of the Medicare cards, are actually higher than mail order, but we were finding that the Medicare 

cards with the best prices beat mail order prices many, many times 

for these popular Internet service pharmacies. 

Our research has also examined the prices from the perspective 

of medicines used to treat common health conditions such as diabetes, hypertension, heart disease, and osteoporosis, that are common 

in the Medicare population. Again, updating a prior study, using 

prices posted on the Web last week, we found that beneficiaries 

with nine common chronic conditions can save anywhere from 

about 10 to 75 percent over national average retail pharmacy 

prices for drugs often used to treat these ailments. The higher percentage savings being associated on a percent terms on the generic 

drugs, but we were also finding discounts of more than 20 percent 

on brand name drugs. 

Our final chart shows dollar savings for four common conditions. 

For example, for beneficiaries using medications to treat high cholesterol, we are seeing savings per monthly prescription of $14 to 

$42. Even at the fifth card down the list, we saw per prescription 

savings of $10 to $42 per prescription. 

We have also recently examined drug card program coverage of 

the top 100 drugs, and Dr. McClellan made reference to this. It is 

comprehensive coverage, and the coverage has been stable between 

when the program started in June and September. 

As you can see, our analyses show that the discount drug cards 

offer substantial, reliable savings to Medicare beneficiaries and 

particularly those low-income beneficiaries who are eligible for the 

annual $600 in transitional assistance and the special manufacturer wraparound programs. 

I want to thank you for the opportunity to participate in today’s 

forum, and I would be happy to answer any questions about our 

analyses. 

[The prepared statement of Ms. Stephens follows:]

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Mr. FIRMAN. Thank you. I am sure we are going to have questions, but we are going to hold all of the questions until we hear 

from the four presenters. 

Our next presenter is Mary Grealy, the president of the Health 

Leadership Council, which is a coalition of chief executives of the 

nation’s leading health care companies. Prior to her tenure at HLC, 

she served as the chief Washington counsel of the American Hospital Association, and prior to that, she was the chief operating officer and executive council of the Federation of American Health 

Systems. 

Ms. Grealy has a bachelor’s degree from Michigan State and a 

law degree from Duquesne University. Welcome. 

STATEMENT OF MARY GREALY, PRESIDENT, HEALTH 

LEADERSHIP COUNCIL 

Ms. GREALY. Thank you, Jim. 

First of all, I would like to thank Chairman Craig on behalf of 

the members of the HealthCare Leadership Council for the opportunity to participate in what is a very timely as well as very important forum. This Committee is to be commended for taking action 

to help Medicare beneficiaries better understand how the Medicare 

drug discount card program can affect both their health and their 

finances. 

I have submitted a statement for the record today, but I would 

like to say a few words this afternoon about the study commissioned by the HealthCare Leadership Council. As Jim said, the 

HLC is a coalition of chief executives of many of America’s leading 

health care companies and organizations, representing all different 

sectors of health care. 

Our guiding mission at the Health Care Leadership Council is 

accessible, affordable high quality health care for all Americans. 

Pursuing that goal, we sponsored a study to determine if the Medicare drug discount card program is indeed making prescription 

drugs more accessible and more affordable for Medicare beneficiaries. We commissioned a highly respected firm, the Lewin 

Group, to answer a simple yet critical question: would an average 

Medicare beneficiary, an individual who did not already have some 

kind of prescription drug coverage, see significant savings by enrolling in the Medicare discount card program? 

This is a question that needed to be answered. The discount card 

program has been the subject of endless political warfare and inflammatory, often misleading rhetoric. We believe that for the sake 

of seniors and others who are on limited incomes and need help 

with their prescription purchases, it is time for us to replace rhetoric with indisputable facts. 

We asked the Lewin Group to take a look at the impact of the drug discount card, the $600 low-income credit as well as manufacturer assistance programs on the 150 prescription drugs that are 

most frequently used by senior citizens. We have provided you with 

that study in its entirety, but allow me to highlight just a few of 

the key findings. As noted in Figure 11, on the first chart here, 

Lewin found the Medicare beneficiaries who enrolled in the drug 

discount card program and began using their cards on July 1 of 

this year will save an average of $1,247 or 35.5 percent between 

34

that date and the end of 2005, when the program ends to make 

way for the full Medicare prescription drug benefit. 

Those Medicare beneficiaries who have incomes below the 135 

percent of poverty level and qualify for the annual low-income credit will save an average of $1,548 over that same 18-month period. 

On individual prescriptions, the best discount cards nationally will 

save beneficiaries about 20 percent or an average of almost $10 per 

prescription, and more than half of the drug discount cards deliver 

savings of over 17 percent per prescription. 

To let you know, by the way, that we found very little variation 

in the discounted prices between and among geographic regions or 

between urban and rural areas. The best available price for any 

medication is generally offered consistently across all markets, and 

that is unusual for the Medicare program. 

Let me touch for a moment on the savings that are being experienced by low-income beneficiaries as well as those that are taking 

multiple drug regimens for the treatment of chronic diseases. The 

Lewin findings in this area are striking. Low-income beneficiaries 

save money not only through the drug discount card; but also 

through the $600 annual transitional assistance credit. Additionally, a large number of drug manufacturers are offering special assistance to transitional assistance program participants. If a qualifying beneficiary uses up his or her $600 transitional assistance before the end of the year, these manufacturers will make their drugs 

available at either minimal cost or at no cost at all. 

The study shows us an example of how these multiple sources of 

assistance will help a low-income beneficiary with a chronic condition. We have outlined this in the other chart that is out there, and 

that is Figure 5A. 

For a senior that is afflicted with diabetes and hyperlipidemia or 

high cholesterol, the average retail spending on the most frequently 

used drugs for those conditions is $3,337. Now, a beneficiary using 

the drug discount card alone will save $878. Now, if they use the 

card and the $600 low-income credit, they will save $1,478. A beneficiary using the card, the low-income credit and manufacturer assistance program for those drugs will save $2,198, or 66 percent off 

the average retail price. 

We are very pleased to present this comprehensive study on the 

drug discount card, and we encourage everyone to share these findings with your colleagues and for Members of Congress to share it 

with their constituents. We will be disseminating this information 

as well through a new coalition called Medicare Today. Medicare 

Today is made up of over 100 organizations representing seniors, 

health care providers, consumers and employers, and is dedicated 

to helping beneficiaries take full advantage of the new programs 

passed by this Congress, and we certainly look forward to working 

with Jim Firman and the ABC Coalition and others in the many 

months ahead. 

It is regrettable that there are seniors who have been dissuaded 

by the political controversy from enrolling in a program that can 

make a significant difference in their daily lives. It is our hope that 

by placing this information in the public domain that we can encourage beneficiaries, particularly those on low or fixed incomes, to 

35

take advantage of this program and begin saving substantial 

money on their medications. 

For seniors that have not enrolled, every day that goes by represents money that they are leaving on the table, and that money 

cannot be recouped. So we want to make sure that that does not 

happen. 

Again, we look forward to working with all of the panelists and 

making sure that we get this information out there to those that 

can use it. Thank you. 

[The prepared statement of Ms. Grealy follows:]

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Mr. FIRMAN. Thank you, Mary. 

Our next presenter is Robert Helms, who is the resident scholar 

and director of health policy studies at the American Enterprise Institute. He has been there for about 11 years, if I do my math 

right. Prior to that, he was the executive director of the American 

Pharmaceutical Institute, and before that, he was assistant secretary for planning and evaluation in the Department of Health 

and Human Services from 1984 to 1989. 

Dr. Helms has a Ph.D. and an M.A. in economics from the University of California and his bachelor’s degree from Auburn University. 

STATEMENT OF ROBERT HELMS, RESIDENT SCHOLAR AND 

DIRECTOR OF HEALTH POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE 

Mr. HELMS. Thank you, Jim. 

I would like to thank the Committee for the invitation. I am 

happy to present this study. It is in your packets and also on the 

AEI Website. This study was done by Joe Antos and Ximena Pinell 

back in June, and it was published by AEI in June. 

I am also going to report on some of the updates that we have 

done since then. It is a straightforward study, somewhat similar to 

the others. I might say that compared to these other studies, we 

do not have as many numbers as the other people, but we certainly 

have the best looking publication. 

With the advice of some physicians, we assigned the most commonly used drugs to these hypothetical patients on Medicare. We 

think we have a good sample. 

We then looked up the prices of these drugs in the retail market, 

and in the mail order market, as listed on the CMS Website as of 

June 1. Since then, we have updated these prices on a number of 

different locations. 

As figure 2 shows, like the other studies, that for a 7-month supply—we are looking at from June through the end of 2004, if people 

go in without any coverage and without any kind of discount card, 

they would pay full retail prices, would spend $2,073. The Medicare 

retail price, using the card, they would spend only $495. The savings, which are almost $1,600, come from, primarily, $600 for the 

subsidy for the people who are eligible for this, $575 of discounts 

from the Medicare program and then $403 from the special manufacturer savings. 

So, for the neediest seniors, those who are below the poverty 

thresholds $12,570 for individuals, $16,862, for couples, and without drug coverage these are substantial savings. But as you see in 

Figure 3, they can save even more; it is consistent with the other 

studies. This shows our evidence from several different—the estimated retail at $2,073 on the left, the 7-month supply; if you went 

and got it from CVS mail order, AARP retail, the Costco mail 

order, the AARP mail order, but also, that the lowest of those, the 

AARP mail order, would be $1,500 for the period of time, and for 

the Medicare retail, it would go down to $495. But if you were willing to go to mail order with the Medicare discount card, you could 

get that down to $388, a savings of 81 percent for this senior. 

43

Now, this is not to say that everybody wants to go to the trouble 

of going to mail order or Canada. For a lot of people, the price is 

not the only thing they value. The convenience of going to their 

local pharmacist and dealing with somebody they know is very valuable for many people. So it is not the only thing that people have 

in mind. 

Figure 4 shows the savings that people could get who are not eli- gible for the $600 subsidy who are just the higher-income beneficiaries. Here, you can see that compared to $2,073 that they 

would have to pay with full retail price, and the best they could 

presently get, well, for AARP retail would be $1,787, and the AARP 

mail order would be down to $1,664. But with the Medicare card, 

they could get this down to $1,575 at retail level, but if they were 

willing to go to the Medicare mail order, they could get it down to 

$1,322. 

Now, as you can see in the last bullet, we did some updates of 

this as of last Tuesday, 2 days ago, and the best prices there for 

the Medicare retail go to $1,552, a slight decline, and for the Medicare mail order, it goes down from $1,322 down to $1,264. So, rather than prices are going up, our best indications are that there are 

probably small declines in prices. This is consistent with what you 

would expect in a competitive market in what is going on here, because our perception is that people are using this program, the 

cards to get ready for part D, which starts in 2006, so they have 

very strong commercial incentives to get more people on their card 

and keep them there. 

Now, Figure 5 just looks at, identifies the top five drugs. We use 

the Families USA selection of those drugs, and in the next table, 

Figure 6, here, you have the price, the range of savings for the 

price differences for the individuals who are the comparison for an 

individual pharmacy; in other words, the individual walking into a 

retail pharmacy without a card versus what they could get at the 

same pharmacy with the card. 

We have made this comparison in more places than we have listed here. Our conclusion is that the savings that are available 

through the Medicare discount card program are similar throughout the country, and the range of savings presented in this chart 

represent discounts off full retail prices. They range from 8 to 36 

percent. 

Summing up, the Medicare prescription drug discount card program is a very good deal for most seniors. We find savings as high 

as 36 percent off the full retail prices and consistently around 30 

percent around the country. The low income seniors can save considerably more by taking advantage of the $600 subsidies throughout the rest of this year and $600 throughout 2005. They can save 

50 to 75 percent by having the card compared to not having it. 

Since the program started on June 1, there is no evidence of card 

sponsors dropping drugs from their formularies or raising their 

drug prices once seniors are enrolled. In fact, as I said before, we 

have seen some evidence that the prices seem to be declining even 

since June. We have also found is that most cards offer nearly 

equivalent savings to seniors. In Boise, ID, for example, 31 of 33 

available card plans price a top-selling set of drugs within 10 percent of the absolute best deal. 

44

That shows us that while it is important to shop around, people 

should not worry too much about getting the absolute best card; 

just get a card and you will get most of the savings. 

The bottom line? Most seniors can get substantial savings by 

signing up for one of the discount cards. They can get most of these 

savings at the local pharmacy if they do not want to deal with mail 

order, or if they do not want to deal with going to some foreign 

source of drugs. Almost all of the savings can be obtained from all 

the cards, so it is more important to get a card than it is to worry 

about getting the best card. 

Let me add, as an economist who has been studying this pharmaceutical industry for years, my view is that a lot of things are 

changing about the economics of this industry. The price transparency that we are going to get in Medicare is going to have a 

larger effect than just the Medicare market. I think it is going to 

speed up the rate of change that the market is imposing on this 

industry now. 

So, thank you. 

[The prepared statement of Mr. Helms follows:]

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Mr. FIRMAN. Thank you very much. 

Our fourth presenter is Julie James, who is a principal in the 

Washington, DC, consulting firm of Health Policy Alternatives. She 

joined the firm in 1998 with more than 25 years’ experience in 

health services research, planning and policy. Before joining HPA, 

she was chief health policy analyst for the Senate Committee on Finance, where she oversaw policy issues, including Medicare and 

Medicaid. 

Thank you. Welcome. 

STATEMENT OF JULIE JAMES, PRINCIPAL, HEALTH POLICY 

ALTERNATIVES 

Ms. JAMES. Thanks, Jim. 

I guess the advantage of being last is that I just have to say 

ditto. Our study, the results are just totally consistent with the 

other studies that were presented today, with one exception. Thank 

you, Bob. I just did not even realize it until you spoke that we did 

have one different finding, so it gives me something to talk about. 

The Kaiser Family Foundation asked our firm last spring to take 

a look at the discount card program and its implementation and a 

little broader than just what the savings are on the various drugs. 

We were also looking at what kinds of cards were out there, who 

was sponsoring them, what their enrollment fees were and the 

whole education and enrollment process and documenting what 

was happening as it was being implemented. 

We have written that, and you all have a copy of the study, so 

I am not going to go into very much detail there. I would like to 

say that we did find, as many of you know, that there was kind 

of a rocky start. It was difficult to get information to the extent 

that we started tracking prices the first 2 weeks the prices went 

up on the Website, and we just had to disregard that information, 

because it was just so unstable. 

But we did enter into constant communication with CMS, and 

they encouraged us every time we found a glitch to let them know 

about it, and they went to great effort to try to fix those, and I 

think everything is working much more smoothly now. There is no 

question that there is information overload when you have that 

many cards, that many drugs, that many pharmacies. I mean, 

there is just this unreal amount of information that you can sort 

through, and I think that the changes they have made in terms of 

how you now get the information are very helpful to beneficiaries 

to try to help them sort out and make their choice. 

I am just going to make a couple of points, because basically, as 

I said, ‘‘While the numbers are not exactly the same, we all had 

a little bit different methodology; we all used a little bit different 

sources; we chose different sets of drugs, although there is a lot of 

overlap in terms of those that are most commonly prescribed, so we 

all came at it a little differently, but we all ended up with very, 

very similar results.’’

Starting out, though, in terms of the type of card sponsors, we 

found that across the nation, an average beneficiary, and let me 

say that our study focuses on the average beneficiary who would 

not be eligible for transitional assistance, because we knew other 

people were looking at that and the impact of the $600. We were 

98

looking at the beneficiary who did not have coverage but would not 

be eligible for the transitional assistance, and we did not look at 

those who would have the exclusive cards that were being sponsored by the Medicare Advantage plans. 

So we were really coming at this in a more narrow way. Anyway, 

we found that there was a good mix in terms of the sponsors of the 

cards. The average beneficiary had about 40 cards to choose from, 

a combination of the national cards and regional cards that would 

be available to them. We did find in looking underneath the cards 

that some of them were exactly the same. They had the same list 

of drugs; they had the same prices; the only thing that was different was a name and perhaps some of the sponsors, and I am 

sure there are various reasons for that. 

But in effect, the real choice, I guess, was a little bit less than 

the actual number of cards that would be presented to you. In some 

cases, for example, we found one card—there were two cards, but 

one of them was only for transitional assistance people, and one of 

them was for everybody else. Otherwise, the cards were exactly the 

same, so there was a little bit of overlap. 

Just about half of the cards were sponsored by entities that call 

themselves pharmacy benefit managers or PBMs. The other half, 

though, was an interesting mix. You had some of the chain drug 

stores, the retail drug stores that got together and sponsored cards; 

you have some managed care plans that were sponsoring cards. 

There was a mix, and there is a chart in the study that outlines 

what that mix is. So I think it is not just the PBMs out there, but 

you have got a mix of people coming at it from different ways. For 

example, because of that mix and where they are coming from, 

some of these cards would offer mail order, and others do not. Most 

do, but there are actually some that do not. 

Now, in terms of the savings, we concur that we did find that 

there were savings. The savings that we found, the numbers are 

a little bit different, because what we used as our point of comparison was a Website that is put out by the attorney general in Maryland for retail prices in Maryland. It is very difficult to find something that you can use as a baseline, and we found this, and that 

is what we used. I suspect that the prices that are on that Website 

are a little bit higher than the average retail prices that CMS is 

using, and that is why our percentage savings are a little bit greater. 

We chose a basket of 10 drugs, and we chose seven cards to look 

at, because it was kind of a difficult process. We had to go through 

the Website like everybody else to gather this information. We did 

not have a master data base that was easy to manipulate. 

We found overall savings of 19 to 24 percent at the retail level 

and 27 to 32 percent in mail order for that basket of 10 drugs. 

However, for any one drug that was in that basket, we found a rate 

of 8 to 61 percent savings at retail and 23 to 89 percent savings 

for mail order. Now, 89 percent savings is pretty mindboggling. 

When you look at those percentages that are so high, those are 

usually generic products, and that would be for example a retail 

$10 generic product that then goes down to $1.10. That is the right 

math, right? I am trying to think of 89. 

99

So at the lower end of the scale would be your brand products. 

Obviously, these drugs cost more, and your savings percentagewise 

are going to be less. The generics, which are often under $10, are 

where you get those huge percentage savings. 

We also compared prices to Costco and Drugstore.com and found 

that in all cases, Costco was higher, Costco mail order. Drugstore.com was very competitive, and actually, their prices fell right 

in the middle between the highest card and the lowest card. But 

what we do not know is what Drugstore.com’s prices were before 

the program started, so we do not know to what extent they were 

actually competing and lowering prices at that point. 

We found, and this is where we differ, I think, from what Bob 

reported, that the choice of card does make a very significant difference. We had four prototype beneficiaries and assigned a different mix of drugs to each of them. Then, we looked to see what 

the impact is, because obviously, you have to look at your total aggregate savings for the basket of drugs that you take. We had one 

prototype individual taking four drugs and found that the difference between the highest card and the lowest card—and we 

looked at all the cards in this case, not just our seven that we were 

tracking otherwise, and we found that he would pay, our fictitious 

Mr. Miller, would pay more than twice as much if he chose the 

highest price card over the lowest price card, and the difference 

would be between $112 a month versus $235 a month. 

Now, for the other three individuals we tested, the difference was 

not that dramatic, but it was still significant. I think the lowest difference was the difference between $234 and $278. So again, that 

is a pretty significant difference for that particular basket of drugs. 

So we found that shopping around and looking at the cards does 

make a difference. 

Finally, we also found—we were interested to see what was happening with prices over time, and we found that they were really 

pretty stable. There were some changes in the beginning. As I said, 

‘‘We dropped the first 2 weeks of data, because a lot of those were 

simply data errors, data entry errors, data reporting errors.’’ They 

were not price changes. Some of them were probably price changes, 

but overall, when we tracked some of these drugs over time, we 

found that they were pretty stable. 

So I guess with that, I will wind up, and we can take questions. 

[The prepared statement of Ms. James follows:]

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Mr. FIRMAN. Good. Thank you. 

Now, we are going to open this up a little bit, and I was writing 

down questions for all of you, so I am going to ask a couple of the 

first questions, but I would just like to think of this as having a 

conversation over the dinner table, and at least in my family, we 

all interrupt each other, so, when we are talking, so you do not 

need to wait for me to follow on the next person. If it gets out of 

hand, I will step in. 

But I will actually, for the first couple of questions, they will 

come from me, because one of the things that the field of health 

services research, and I guess this is what this is, of an order, is 

seeing whether when one has multiple studies and whether they 

produce consistent results. We have heard a lot of numbers here, 

and I really want to see to the extent to which results were and 

were not consistent. 

So I have two questions I want to ask each of you. I just want 

to go down the row so that we can see the similarities and the differences in the answers. The first question is, for a non-low income—this is for a middle class person who does not qualify for 

transitional assistance, who buys their drugs at the drug store, 

which is what most people want to do, and they do not want to go 

somewhere else, what were the average savings in your study for 

a person who uses the card? Do you guys need a little moment to 

do your calculations here? 

Ms. JAMES. OK; I think I just——

Mr. FIRMAN. OK; I just want to hear one, two, three, four, so we 

can all synthesize this and see whether we have the same numbers. The savings? 

Ms. JAMES. The retail? 

Mr. FIRMAN. Retail. 

Ms. JAMES [continuing]. The number that we had was 19 to 24 

percent. 

Mr. FIRMAN. Nineteen to 24 percent. 

Bob. 

Mr. HELMS. Well, I need a calculator, but it went from $2,073, 

which is the full retail, for the Medicare retail down to $495, and 

we did calculate that it was down—the mail order was $388. 

Mr. FIRMAN. Let me interrupt you. OK; you are going to go back 

and do your calculation only because——

Ms. JAMES. I think it is apples and oranges, though. 

Mr. FIRMAN. OK; We have got 19 to 22 percent; is that what I 

heard, Mary? 

Ms. JAMES. Nineteen to 24. 

Mr. FIRMAN. I am sorry; Julie. 

Yes, Mary? 

Ms. GREALY. All right; I will just give you the simple national average, 20 percent. 

Mr. FIRMAN. OK; 20 percent. 

Sharman. 

Ms. STEPHENS. I am probably going to make your life difficult, 

but one of the things, and I have sort of——

Mr. FIRMAN. OK. 

Ms. STEPHENS [continuing]. I have looked actually across all the 

studies, and how you think about this and one of the reasons you 

155

see the numbers, you see and why you are getting different numbers. 

Mr. FIRMAN. We will get into why they are different later. But 

what is the number? 

Ms. STEPHENS. Well, what you saw in ours for retail, dealing 

with predominantly brand name drugs, is that we are running between 12 and 21 percent. Then, if you go to generics, you see a 

slightly different picture. 

Mr. FIRMAN. OK. 

Ms. STEPHENS. If you look at individual drugs versus baskets——

Mr. FIRMAN. Right, so people have a mix of drugs. So we have 

heard 12 and 21, 19 and 22. 

Ms. GREALY. Twenty. 

Mr. FIRMAN. Twenty. 

OK; so——

Six to 25; good, OK. Well, that is—we are seeing some consistency, and they are all savings, and they are all—OK, now, a little 

harder one, for low-income Medicare beneficiaries, again, I know I 

am making you do things that health services researchers do not 

do, but think of more of a lay person like me. I am in this situation. 

A low-income beneficiary, average range of savings. 

Ms. JAMES. We did not look at that. 

Mr. FIRMAN. OK. You are safe on that one, yes. 

Ms. JAMES. For the $600 people, we did not look at that. 

Mr. FIRMAN. OK; Sharman? 

Ms. STEPHENS. OK; go ahead. 

Ms. GREALY. No, I was just going to say, ours is up on the chart 

if you look, and I am trying to do the percent: 47.3 percent. 

Mr. FIRMAN. OK; for——

Ms. STEPHENS. For low-income——

Mr. FIRMAN. Low-income. 

Ms. STEPHENS [continuing]. Beneficiaries. 

Mr. FIRMAN. We understand it is going to vary by the medications they take and different situations. 

Ms. STEPHENS. Because we look at this in baskets, we come up 

with a range. So, we had anywhere from about 44 to 91 percent. 

Now, it also depends on what period of time with which you are 

working. 

Mr. FIRMAN. So 44, in the forties, but a very substantial savings 

in both cases. 

Mr. HELMS. Almost 80 percent. 

Mr. FIRMAN. Almost 80 percent. So we are kind of hearing 40 to 

80 percent or so for low-income beneficiaries. Thank you. That is 

helpful, and the fact that different people with different approaches 

or different all sorts of qualifications, I know each one of you would 

rather give me a bunch of footnotes on that answer. I really do appreciate that. 

A second question that I have, and this is people, as I said, most 

people in our experience, and we have been talking to lots of beneficiaries, you can tell them all these things about savings and what 

they do, but the bottom line is what is going on at my drug store? 

I only want to buy medications at my drug store. So my question 

is to get these savings, are people going to have to—by and large, 

156

can people get them at their drug stores, or are they going to have 

to go somewhere else to get the savings that we are talking about? 

Ms. JAMES. Well, Jim, I think that——

Mr. FIRMAN. It is easy to ask the questions. You guys have got 

to figure out how to answer them. 

Ms. JAMES. Well, I do think that one of the most helpful things 

to help you sort through all of the information on the Website, and 

Sharman can speak to this better than I can, but you can look by 

pharmacy. So if that is your starting point, if you want a particular 

pharmacy, you can start there and look at the cards and only compare the cards that accept that pharmacy. 

Now, we found that many of the cards have very, very extensive 

networks, 50,000 pharmacies, participating. 

Mr. FIRMAN. That is part of the question. These are pretty broad 

networks in the number of——

Ms. GREALY. Jim, we only looked at retail pharmacy. We did not 

do the mail order. So those savings percentages and numbers are 

just for that. 

Ms. STEPHENS. I will say an unequivocal yes. 

Mr. FIRMAN. OK; good for you. 

Ms. STEPHENS. I can tell you, when we do these studies, I am 

pulling from the Website. My staff will confess to many early mornings getting up for the pull on Mondays. When we are doing this, 

we are doing it with ZIP Codes, and we are doing it with a local 

radius. So, these savings are in your locality, in your neighborhood, 

and as Julie said, ‘‘The Website has just recently been enhanced to 

make it even easier to look for your pharmacy, because we know 

it matters.’’

Mr. FIRMAN. Good. 

Mr. HELMS. Can I, Sharman, do you have any evidence that 

there are any pharmacies out there that just refuse to participate? 

Ms. STEPHENS. I have not looked at it, where I have taken a census of the pharmacies and seen if we do not have something, but 

we have quite extensive——

Mr. FIRMAN. I can tell you what we have heard through that. We 

have heard some concerns and some of the particularly independent, smaller, independent pharmacies have found it in some 

cases in rural areas, there have been some problems with pharmacists just having small shops, having difficulty with some of the 

arrangements. So at least, there have been some cases of people 

having some difficulty. 

Mr. HELMS. But I think in our surveys, we have not found one. 

Mr. FIRMAN. Well, there are consumers calling us who have. 

Ms. JAMES. Actually, I have a family member in an assisted living facility, and I called the pharmacy to see who they were participating with, and they were not interested in participating with 

anything. So I do think in that case, that there are some cases——

Mr. HELMS. It is very rare, I think. 

Mr. FIRMAN. Yes, but, OK——

Ms. STEPHENS. But the networks, I mean, when we look at the 

network files, they are pretty extensive. 

Mr. FIRMAN. So the savings are real, and you can probably get 

it, some good savings at your drug store. 

Ms. GREALY. Widely available. 

157

Mr. FIRMAN. Widely available; good. 

OK; another question that I had, and it relates to this. We have 

heard this thing about wraparounds and with the extra savings 

that come from that, and actually, I have some data. I would like 

to share—that we released earlier today. We did an analysis of 

about 20,000 people who had gone to our Website accesstobenefits 

in May and June, and we found that of the people eligible for transitional assistance, 83 percent of them were taking at least one of 

those wraparound drugs, medicines with the extra saving, and 50 

percent were taking two or more wraparound drugs. 

So our sense was that these wraparound savings in total were 

actually much more significant than $600, certainly, for people taking that, and I was just wondering whether, in the analyses that 

you had, whether you had some consistent types of findings of the 

power or the potential savings from these wraparounds. 

Ms. JAMES. Well, I will just say that you can find out which of 

the cards are participating with—and I think when you are talking 

about wraparound, you are talking about the pharmaceutical companies that are offering additional assistance like flat fees for their 

products if you qualify. There are a number of the companies that 

are doing that, and you can find out which of them are associated 

with the various cards. 

I know of at least one instance with one pharmaceutical company 

that actually changed and broadened its policy in order to be out 

there and reach more people. 

Ms. STEPHENS. I will do a plug for the Website. One of the really 

new enhancements for the Website is that we are now calculating 

the savings, so that information is available to beneficiaries. It was 

quite extensive work to work with the card sponsors and the manufacturers to make sure we understood the arrangements so we 

could do the calculations. But now if you go to the website for the 

beneficiaries who are low-income and transitional assistance eligible, the website is calculating savings. 

So for people who have been using the Website, there are some 

new features there. 

Mr. FIRMAN. I want to say that is a really great enhancement to 

the site, and we, on our Website, also have a lot of emphasis on 

wraparounds because of the same reasons. They really do, I think, 

are something that our experience is consumers do not really know 

much about but——

Ms. GREALY. Jim, I was going to say, and not just for the Medicare population, but these are programs that have been out there, 

these patient assistance programs by the manufacturers that have 

not been well publicized. I think what is great about this program 

is it is not only bringing publicity to it just for this population but 

for other low-income populations as well, and I think also, the 

manufacturers have really enhanced the programs and made them 

much more accessible and easier to use. 

Mr. FIRMAN. Well, you know, you made another important point. 

I do not believe in any of the studies that I heard, you were looking 

at the effect of company patient assistance programs which are different than the wraparound programs or the State pharmacy programs or the impact. Our analysis has shown that if people are eliVerDate 0ct 09 2002 09:06 Jan 28, 2005 Jkt 000000 PO 00000 Frm 00161 Fmt 6633 Sfmt 6633 H:\DOCS\97603.TXT SAGING1 PsN: JOYCE
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gible for transitional assistance, 80 percent of those people are eligible also either for patient assistance programs or State programs. 

Even if you look at people who are not eligible for TA but under 

200 percent of poverty, about two-thirds of them are eligible for patient assistance programs, so that there are other savings beyond 

what you have talked about from some of these other benefits. 

The next question I have—it is fun. I get to ask a couple, and 

then you have to——

Ms. GREALY. We have to think of one for you. 

Mr. FIRMAN. I know. As you can tell, these are not scripted questions. I do not even know what I am going to ask, much less you 

guys. 

One of the questions I have is that I remember maybe 2 years 

ago, before all of the Medicare laws came in, I saw several studies 

which showed that the prices within a community, from drugstore 

to drugstore, could vary by as much as 200 percent. You could be 

paying $100 for a drug in one store, and three blocks away, you 

could be paying $200, but there was no way to know about that. 

I personally think that is one of the most amazing things about 

this whole price compare is now that you can look at numbers. So, 

my question is now that you guys have looked at the numbers, are 

the same variations still there? If I went onto Medicare.gov, and I 

put in a drug and the highest to the lowest, would I still find one 

being two times as expensive, or has the band of prices from the 

highest to the lowest narrowed to any significant extent? 

Ms. STEPHENS. I do not know that we have looked at that. Are 

you asking from a pharmacy perspective or from a card perspective? 

Mr. FIRMAN. From a price perspective; in other words, if I were—

pharmacy A, and 2 years ago, pharmacy A could have been charging $200 for a drug, and pharmacy B could be charging $100 for 

the same drug, and that was not uncommon. The question is now, 

if I went and looked at, because of the necessity or the price compare, which has made prices transparent, is the range still there 

the same way? If I went onto Medicare.gov and entered in a drug, 

and I said, ‘‘You know, from highest to lowest,’’ would I likely to 

see one being twice as expensive, or is it more like a 20 percent 

difference? 

Ms. STEPHENS. I think in the Lewin study, you see this finding. 

I think Bob mentioned it as well. We do not see across the cards 

large variation in pricing. So, I think some of that is the feature 

of the program. So whether in pharmacies that are in a cash market phenomenon, the variation in pharmacy is changing, although 

it could be, I do not know. But within the card program for a given 

card sponsor, if you go across the country, which I think you all 

see, we did not see much difference for a given card sponsor. 

Now, between card sponsors, there are pricing differences. 

Mr. FIRMAN. But are they 100 or so, or are they much smaller? 

Ms. STEPHENS. They narrowed over time. 

Mr. FIRMAN. OK. 

Ms. STEPHENS. They have narrowed. 

Mr. FIRMAN. There was competition. So, in other words, if you—

at one level, drugs are a commodity. Celebrex is Celebrex is 

Celebrex, and if I went from one gas station to another, I would 

159

never see one for $1.98 and one for $4. You just would not see that 

kind of variation. Do we think that this price compare and transparency is having that kind of effect on medication? 

Ms. GREALY. I think absolutely. I think as Sharman said, in our 

study, you can see that there is little geographic variation within 

a card. I think that is remarkable for the Medicare program, when 

you look at the variety of reimbursement levels and how disparate 

that is across different geographical markets, but this whole idea 

of the transparency, I think as Bob said, it is really going to drive 

the market competition and lower prices for everyone. 

Mr. HELMS. Yes, we will have to wait for some definitive studies 

of this, but there have been a number of studies of local markets 

that found just what you are talking about, that there is a lot of 

dispersion, surprisingly, in the retail prices. 

Mr. FIRMAN. Now or in the past? 

Mr. HELMS. In the past. In local areas. But my point is the fact 

that you have got a place now that people can easily go look up 

the price and see what Medicare is charging, even if they are not 

eligible for Medicare, they can go shop around, and they have a 

reason to shop some more to find if the can get a better price. 

With the publicity you are getting now from the Internet and 

about Canadian prices, it sends a signal to consumers that it will 

probably pay to search. But the other thing is that the retail market has been affected by a big growth in insurance coverage. That 

has taken away the incentives for the big majority of people who 

have a plan that covers prescriptions. There is not much reward for 

them for shopping around. 

Ms. JAMES. Yes, but I do think it is important to know that the 

Medicare card prices are not the retail prices that they quote when 

you walk into the pharmacy, and so, there is no way to know right 

now anyway; I do not think anybody is looking at that. Although 

if you look at, for example, the data base that we used that Maryland puts out, those are the prices that the pharmacists will quote 

you if you walk in that have nothing to do with the Medicare discount card. 

One of the things I wanted to point out that we did find was that 

prices in the urban areas were higher than in the rural pharmacies 

in Maryland. The discount card prices, however, are the same. So 

that actually meant that if you lived in the urban area, you were 

getting a bigger savings, because your retail prices are higher 

there. 

Mr. HELMS. We found some of the same kind of urban-rural differences in Idaho recently. 

Ms. GREALY. But I think Bob also made a very important point. 

Whenever we are talking about prices and prescription drugs, that 

many people have health insurance coverage that covers their prescription drug benefit. That means that in many instances, they 

have someone already negotiating lower prices on their behalf, and 

that is why you probably have fewer people who are out there 

doing that retail pharmacy by retail pharmacy comparison. Now, 

Medicare beneficiaries will have people negotiating on their behalf 

as well. 

Mr. FIRMAN. So let me ask you a question here: if you are eligible 

for the transitional assistance, the card is free, and you are going 

160

to get $600, so that is kind of a no-brainer. If you are not eligible 

for the transitional assistance, you may have to pay $10, $15, up 

to $30 a year. Are there very many people who will not save at 

least the price of a card somewhere or——

Mr. HELMS. Well, hypothetically, if someone paid $30 and never had a prescription filled, they would be out $30. 

Mr. FIRMAN. Does anybody know what percentage of beneficiaries do not take any drugs? 

Ms. STEPHENS. Very few. 

Mr. FIRMAN. Very few; OK. 

Ms. STEPHENS. Very few. Most of them do use a prescription. In 

2002 about 91 percent of beneficiaries filled at least one prescription. Most Medicare beneficiaries do use a prescription drug. You 

do have beneficiaries who, as I think Bob is indicating, who may 

not have drug costs. I can tell you when we were working on the 

impact analysis, you assume that the people who are going to sign 

up kind of do the math a little bit and that beneficiaries who are 

going to sign up have somewhat higher drug costs so that they get 

a return for making the investment. 

Mr. HELMS. Almost—I do not know the dispersion, but there are 

free cards. You do not have to pay $30. 

Ms. STEPHENS. Yes, there are some cards with zero enrollment 

fee. 

Ms. JAMES. In our study, we show what the fees are, and there 

are five national cards and seven regional cards that have no fee, 

and there is actually one card, one sponsor that has two cards, and 

one of them has a little higher fee, but you get a better price, and 

the other one is for people who do not use very many drugs, and 

so, the fee is lower, but the drug price is, like, 10 percent higher, 

which I thought was an interesting wrinkle. 

Ms. STEPHENS. Actually, if I can make a plug for the Website 

again, people have been terrific about giving us ideas to make the 

Website better including the folks who have been doing studies 

and, working with it. We really, appreciate all of the input that 

folks have been giving us. But again, one of the new enhancements 

for the Website is now, as it is calculating, it is factoring in the enrollment fee into the savings that are being calculated. So it is trying to help beneficiaries with that judgment. 

So that is another thing that has happened with the Website. It 

is now factoring in the enrollment fee. 

Mr. FIRMAN. Good; thank you. 

I have a question that something you said earlier, because the 

CMS Website is very good, and it is really designed, as I understand, to help you get the very best card, figure out what the best 

card is for the best savings. But, Bob, you said something earlier. 

You said—and maybe I heard you wrong, you said get a card; do 

not worry about getting the very best card. Get a card. What did 

you mean by that? I want to know——

Mr. HELMS. I mean, Julie disagrees from their findings, but I 

think what we were saying is that most of them are clustered toward the bottom. I mean, you can shop around and look at all of 

them, but most of them are going to be within 10 percent of the 

lowest price. 

Mr. FIRMAN. So you are saying on the retail price side, there——

161

Mr. HELMS. No, I am talking about on the Medicare prices available with each card. There is not much difference from picking one 

card versus another. 

Mr. FIRMAN. Would people agree with that, disagree with that? 

Mr. HELMS. Julie found some exceptions. 

Ms. GREALY. I think Julie found——

Ms. JAMES. Yes, we found that that was not true, that, in fact, 

actually—I would say, however, that if you are eligible for transitional assistance——

Mr. FIRMAN. We will get to that in a second. 

Ms. JAMES [continuing]. That would hold. But if you are not, 

then, we did find just for a hypothetical individual buying four 

drugs that they could find—one of us found they would pay twice 

as much if they chose the highest card over the lowest. Now, that 

does not mean that some of the cards are not somewhere close together around the middle, but between the highest and the lowest, 

there was a significant——

Mr. FIRMAN. Did you do them about the same time? Was your 

study earlier, maybe, do you think? 

Ms. JAMES. I think it was about the same time. 

Mr. FIRMAN. About the same time, OK. 

Mr. HELMS. We did ours around the first of June. 

Ms. JAMES. No, the data were for June. 

Mr. FIRMAN. So it is the same time period. 

Ms. JAMES. I think it was the same. I think it is just this whole 

idea of highest and lowest. 

Mr. HELMS. We think they are clustered toward the bottom end. 

Mr. FIRMAN. Now, let me push you on one thing, because I agree 

with you up to a point, but I disagree with your point. I want to 

see where the other—and this is where you were beginning to go, 

Julie. That is true; it may not matter, you are going to get the 

same retail prices for most of the—many of the cards, but it probably does matter in picking cards in terms of the wraparound, because the wraparound coverage is—no card has all the wraparounds or different combinations of wraparounds, and our experience, and this is one of the drivers of the Accesstobenefits.org 

Website, is it agrees with you to the extent that retail price part 

does not matter, but you want to get the card with the most possible wraparounds, because those wraparounds are going to save 

you 80, 90 percent off the cost of the drug. 

So I assume you meant other than the wraparound issue. 

Mr. HELMS. Right, people not getting the $600. 

Ms. GREALY. But I think we also thought it was important, and 

especially with the transitional assistance, you are going to save 

money regardless and that you do have the opportunity to change 

cards, you know, in November. So I think there was a big push, 

do not delay too long trying to find the absolute best card, but you 

can get some savings right away. 

Mr. FIRMAN. Certainly do not delay, particularly if you are eligible for the transitional assistance, do not delay——

Ms. GREALY. A day. 

Mr. FIRMAN. Well, too long, because you lose the $600 credit if 

you do not sign up by then. 

162

Julie, I think it was you or somebody raised it, the issue of 

whether prices were stable or not, whether if I went on and looked 

at a card, and it said my price for Zocor was going to be $192, how 

likely is it—are the prices varying a lot, or is it pretty much the 

prices I get, I can count on will be the price when I have to go to 

the drug store a month or two later? 

Ms. JAMES. We found some variation but generally very stable, 

and we have actually checked them just recently as well. Again, 

there are some little blips, but mostly pretty stable. 

Mr. HELMS. Again, the ones we checked seemed to be going down 

a little bit. 

Ms. JAMES. We did not find that. 

Mr. FIRMAN. You did not find the same thing? 

Ms. STEPHENS. Yes, I think the prices have been very stable. I 

think you have also seen some decreases, and I think you have 

seen a few increases. I think the Lewin study which has a table 

that indicates very stable prices and then some increases and quite 

a number of decreases. So I think some of the phenomena that you 

see where I say first time I looked, we were running 11 to 18 percent lower that national average retail prices; now, it appears to 

be 12 to 21. 

Mr. FIRMAN. I had a question, but one—I am sorry, Mary, go 

ahead. 

Ms. GREALY. No, I was going to say, ‘‘I think some of the charges 

that we were hearing early on, one, that prices would go up after 

people had gotten into the program or there would be the so-called 

bait and switch, it just has not played out.’’ So as you said, ‘‘We 

just found a lot of stability in the program.’’

Mr. FIRMAN. Just to ask in fairness, though, I understand most 

of you did your studies on kind of average. You did not use very 

high expensive drugs? Or did you? The reason I ask there was a 

study for the Center for Medicare Advocacy and the Multiple Sclerosis Society which talked about a medicine that I think was costing, like, $2,000 or $3,000 a month which was not in a lot of programs, and that was going up and down. So I just want to first of 

all ask——

Ms. JAMES. We did look at some very high-cost——

Mr. FIRMAN. You did. That is great. 

Ms. JAMES [continuing]. Biotech products and found that many 

of the cards did not cover them. They were not in our sample basket of 10, but we just looked and checked on some, and we did find 

out that there could be reasons for that. It could require specialty 

pharmacy or whatever. But we did find that a lot of cards did not 

have some of the very high-tech drugs. 

Ms. GREALY. We looked at the 150 most often used drugs by seniors. We just thought that would be the most representative. 

Mr. FIRMAN. Sharman, your study, too? 

Ms. STEPHENS. We were dealing with. 

Mr. FIRMAN. The average basket. 

Ms. STEPHENS. The common. 

Mr. FIRMAN. I think it is just important as we are putting this 

out for consumers to understand that if they are in a——

Mr. HELMS. We did the same. 

Mr. FIRMAN [continuing]. OK, in those situations. 

163

OK; well, how about—any of you have any questions of each 

other? 

Ms. STEPHENS. I do want to ask Julie one question: you mentioned, and maybe I did not hear you correctly, that you thought 

one card was transitional assistance only? 

Ms. JAMES. You know, it was the same sponsor, but it was, like, 

card A versus card B, and when I checked them out and called 

them, they told me that if you were transitional assistance, you got 

put in card A, and if you were not, you got put in card B. Otherwise, they were exactly the same. 

Ms. STEPHENS. I wanted to talk a little more, because basically, 

the cards are, you know, that they are to service the entire Medicare population. We do see where some card sponsors do choose to 

have different pricing for the lower income population, where they 

are giving slightly better pricing, but it is the same card. So I want 

to get a little bit more information on that one. 

Ms. JAMES. Yes, I kind of wondered about it, too. 

Ms. STEPHENS. No, it is not like different cards for the transitional population. There may be different pricing within a card but 

not a different card. 

Mr. HELMS. I have a question for Sharman, just curious. 

Mr. FIRMAN. Fire away. 

Mr. HELMS. You announced today that you are going to be sending out the cards to the low-income people, and Mark, if I heard 

him right, said that you are basing this off some eligibility list or 

some sort. You must have the addresses of people who are eligible 

for State Medicaid programs. How is it decided which card they 

get? 

Ms. STEPHENS. OK; let me talk about what we are calling facilitated enrollment, which we announced today. We know about the 

Medicare population that is in what we call the Medicare Savings 

Programs, which is related to Medicaid, but these are people who 

do not have the full Medicaid benefit. 

Mr. HELMS. 1.4 million? 

Ms. STEPHENS. It is about 1.8 million. 

Mr. HELMS. OK. 

Ms. STEPHENS. So nearly 2 million people. These are Medicare 

beneficiaries who do not have full Medicaid benefits, so they do not 

have prescription drugs, but in fact, the State is helping to pay 

Medicare premiums and, in some cases, Medicare cost sharing. 

What we are doing is using the information that we have to arrange for these beneficiaries to be enrolled. These are going to be 

national card sponsors with which we have worked and we will 

be—randomly assigning beneficiaries to the card sponsors who 

have volunteered to help with this effort. 

Information will go out to these beneficiaries, including an enroll- ment package. As Dr. McClellan indicated, to activate the $600, all 

they need to do is either call the sponsor or call us and answer a 

couple of questions, and that will activate the $600. 

Mr. HELMS. So when you mail them out, they actually get a card. 

Ms. STEPHENS. Yes, what we are hoping, to do is to reach the 

beneficiaries thus far have not enrolled. These are beneficiaries 

who we think are eligible for the annual $600 in assistance, and 

we are very anxious to get to them so we can get to them the $600 

164

that they have this year, and then, there is another $600 next year. 

Despite concerns over whether they get the best card our view on 

this one is right now, these people have not availed themselves. At 

a minimum, there is $1,200 on the table to help them and that 

what we are hoping is then, when they contact us they will be able 

to work with us. 

They have the option to change the card but we are trying to 

reach these people and get the word out as much as we possibly 

can. We know from experience just with our mailers that when we 

send the mailers to folks, we do see an enrollment increase. My colleagues at the Website who are sitting here, see an increase to the 

calls at 1–800–Medicare. 

So, we really want to reach these nearly 2 million people. I think 

the Access to Benefits Coalition has an objective, and it really is 

going to take grassroots efforts and as much outreach as we can 

possibly get, but the money is on the table. We need to come get 

them to come in. We hope this will work. 

Mr. FIRMAN. I do want to say that this has been, we are delighted that the announcement has been made, because this is a 

group of people that especially if you look at the data base, QMBYSLMBYs and QI1s, and you then sort out the ones who have already enrolled. This is people who you know are already eligible for 

the benefit, and we think this is a very efficient strategy, and we 

are going to do all we can to help encourage these people, because 

as Sharman said, this is a no brainer: take the $1,200. It may or 

may not be the card with the best wraparounds, but they can figure that out later. Get the $1,200. 

But that leads me to another——

Ms. STEPHENS. Just so people know, we have had 19 cards raise 

their hand; it is 17 sponsors, but 19 cards are going to be participating in this. 

Mr. FIRMAN. So they will each get just under 100,000, if we did 

the math right. Are those all national cards? Are some of them 

local? 

Ms. STEPHENS. This time around, they are all national cards, just 

because of the complexity of doing the algorithms to do the random 

assignment. In order to get this done and to get it done so that we 

are in this window of this year, that is what it took. 

Mr. FIRMAN. By the way, if people have questions, they should 

give them to one of the staff people; write them down and pass 

them up, and we will be happy to take any questions and answer 

them. 

The question I have is I think we all agree that it is a no brainer 

for a person who is eligible for transitional assistance to sign up 

for the benefit. Does everyone agree with that? I assume that is a 

given. You get $1,200 in savings. You may get wraparounds. The 

savings, you said, are between 40 and 80 percent for people. Yet, 

we know there are 7 million seniors who are estimated eligible for 

the transitional assistance; about 1.3 million had signed up before 

the auto enrollment effort, which means that about 5.7 million so 

far on their own have not signed up. 

Why? What is anybody’s sense of why? 

Ms. GREALY. I think there are two reasons. One, there was a tremendous amount of misinformation out there. This was a very 

165

heated political debate, and again, I think a lot of misinformation. 

That is why we think it is important that we move past that. But 

I think more importantly, this often is a population that is just 

plain hard to reach, and I compare your effort, Jim, and our effort 

as I call it door-to-door sales. We are literally having to go person 

by person to work with these folks and to enroll them. They may 

not have access to the Internet; they may not have access to a telephone. 

So it really is going to take a tremendous effort to do this outreach, and that is why I think this facilitated enrollment is such 

a great idea. 

Ms. JAMES. Could I ask, Sharman, on that, what about people 

who are in nursing homes? Would not some of them be those people who have to have special packaging, et cetera, and the cards 

may not address their needs or be able to? 

Ms. STEPHENS. Well, one of the things, and people may not be 

aware of this, there are actually cards that were developed card 

sponsors to work with the nursing home population. The pharmacies are working with the nursing homes. So, there are actually 

specialized cards for long-term care facilities. 

Specifically, we have card sponsors, and we are working with the 

nursing home industry, and part of this is to get the $600, because 

there is a group of people who have not spent down to Medicaid 

who could use this to help pay for drugs. 

Ms. JAMES. There are also, though, individuals who are in assisted living who need to have—what do they call it—special packaging, and I know that not all of the card programs can accommodate that kind of a need. So would the long-term care cards be the 

ones for——

Ms. STEPHENS. Yes, they are who we are working with—now, 

they are working with the nursing homes. 

Ms. JAMES. I am just wondering if there is a gap here, if there 

is a group of individuals—I happen to have a family member, you 

can tell—who fall in this category where literally, I know that the 

pharmacies have told me no, I am sorry, we do not do that. But 

it is not a nursing home, so I am not sure the nursing home card 

works. So you might just think about that. 

Ms. STEPHENS. No, that is a good point. I need to check, Julie. 

Mr. FIRMAN. So I guess the question is are you doing auto-enrollment for the nursing home QMBY–SLMBYs, too? Or we do not 

know? 

Ms. STEPHENS. Is Lynn still here? 

Mr. FIRMAN. I was hoping to ask a question that somebody did 

not know the answer to, but there are so many experts in the room 

that I can tell I will never be able to do that. That is great. Thank 

you for that answer. 

Mr. HELMS. Could I take a stab at your question? 

Actually, I have to ask another question. Whoever came up with 

the 7.5 million that potentially might be eligible for this? The researcher in me says you have to look at the distribution of the people’s demand for drugs. In other words, what is the utilization 

among that population? You are going to have a minority of those 

people who are the big drug users, and they are going to have a 

greater incentive to come sign up. 

166

But you are probably going to have a majority of them who do 

not consume a lot of drugs. I mean, if they do, it would be a big 

advantage, but until that time, they do not have any strong incentive to pay attention to the ads or do anything about it. 

Ms. STEPHENS. Maybe what I can do is help, since one of the 

things I got to do was work on the impact analysis, where I think 

some of these numbers are coming from. 

Just as you said, Jim, we estimated in terms of eligible. If we 

just look at income, you know, and lack of drug coverage, for example, we estimated that 7.2 million beneficiaries were eligible for the 

transitional assistance program. Then, our actuaries, in looking at, 

I think, the phenomenon that Bob is talking about, which is people’s drug spending and also experience in looking at what we call 

uptake, how many people will actually go to enroll, we estimated 

that we thought about 4.7 million people would actually enroll in 

the transitional assistance program. 

We are currently at 1.1, so we have got some people we need to 

go find and get enrolled. 

Mr. FIRMAN. I do want to note before you do that——

Ms. STEPHENS. But based on our actuaries’ estimates——

Mr. FIRMAN. Before you do that, we at the Access to Benefits Coalition looked at that 4.7 estimate, and we said that is not good 

enough. We want to do better. We set an objective of 5.5. So we 

are working together. We have both got a long way to go, but I 

wanted—if it is 4.7 or 5.5, it underscores the importance of the 

automated, facilitate enrollment initiative, because we will not get 

all 1.8 million, but if we get most of those people, that is going to 

go a long way to achieving our shared objectives here. 

Ms. GREALY. But, Jim, I think if you were to take a look at other 

Federal programs or even look at the QMBY-SLMBY and the rates 

of enrollment of people who are qualified and yet not enrolling; you 

look at the SCHIP program. So I commend you on setting that 

goal, but I think if you even look at the experience in other Federal 

programs that offer tremendous help for low-income beneficiaries, 

sometimes, they are not enrolling. 

So that is why I think this facilitated enrollment is a whole new 

approach, and it will be great to see how it works. 

Ms. STEPHENS. No, I think that is right. I want to clarify one 

thing: the letter that is going to be going out to the QMBY/SLMBY 

population is going to say that if you are in a long-term care facility or the other special card that we have that relates to the American Indian population, who may be using pharmacies that are on 

the reservations, that we say please call us at 1–800–Medicare, and 

we are going to help get you to the right card that is working with 

the appropriate pharmacies. 

But I still want to follow up on assisted living, because more and 

more beneficiaries are living in assisted living. 

Mr. FIRMAN. You know, Mary’s point about if you looked at enrollment in other Federal programs, they do not always do that 

well, do you have any more specific data, Sharman, on how is the 

enrollment experience or targets compare to the takeup on other 

Federal benefits? 

Ms. STEPHENS. Well, the most recent experience is really with 

the State Children’s Health Insurance Program, the SCHIP proVerDate 0ct 09 2002 09:06 Jan 28, 2005 Jkt 000000 PO 00000 Frm 00170 Fmt 6633 Sfmt 6633 H:\DOCS\97603.TXT SAGING1 PsN: JOYCE
167

gram. One year into the program, they were at about 55 percent 

of what the estimated enrollment was. 

Ms. GREALY. That was not 50 percent of those eligible. 

Ms. STEPHENS. Yes. 

Ms. GREALY. That was just their target——

Ms. STEPHENS. Yes. 

Ms. GREALY [continuing]. For that first year. 

Ms. STEPHENS. We now are at about 60 in 3.5 months, for this 

discount card program. 

Mr. FIRMAN. By the way, I do not know if there are any questions, but I have not gotten them if they are coming up to the front. 

Ms. STEPHENS. I think the experience we are gaining now with 

the discount card our partners, the local communities, and the organizations that work with this population is actually pretty important, because we have a bigger challenge facing us, which is the 

drug benefit itself. 

There, we are talking about, just a huge population to educate 

and outreach to, and so, I think we can learn a lot from this experience and be in a better position. 

Mr. FIRMAN. We could not agree with you more. That is why the 

Access to Benefits Coalition was formed, to get the people into the 

low-income Part D subsidies. In fact, we are going to be doing a 

major benchmarking study of the best outreach activities that go 

on between now and the end of the year, and then, early next year, 

we are going to zero in and look at them. 

But I also want to go back to this question of Mary’s point of that 

yes, it is true that after all these years, maybe half the people eligible for Medicaid, Food Stamps, or SSI do not take them, and even 

though we know, we think they should, because it is really good 

money, and they ought to do it, so that says to us that—to 

Sharman’s point that we have to do things differently. We do the 

same things over and over again, we are going to get the same result, which is also the definition of insanity. 

One of the things that we have come to the conclusion and why 

we are so excited about the automated enrollment, if you look at 

the history of public benefits outreach and say what has happened, 

whether it is Medicaid, Food Stamps, the Pfizer Share Card, the 

patient assistance program, the EPIC State program, they have all 

approached things the same way: they have said our challenge is 

to find the needles in the haystack. We need to go out and find 

among all these people the few people that are eligible. 

So, literally, everybody repeats the same process over and over 

again. We have concluded looking at this that this is exactly the 

wrong way to approach things, and that is why we get such abysmal results. The strategy is not look for the needles in the haystack; it is look for the piles of needles. Somebody has already 

found almost everybody that we are looking for. CMS, you have 

found 1.8 million of them in one pile called this program. The 

Pfizer Share Card has another pile. Together RX has another pile. 

Every State pharmacy program is another pile. Every home energy 

assistance program is another pile of low income people. 

What we need to start to realize is instead of spending the same 

money and finding these people again and again and again and 

again, say who has already found them, and how can we figure 

168

out—and then, we can focus our efforts on marketing and convincing them, because one of the things we found, we had a project 

we are doing in the State of Pennsylvania where they have this list 

of people who they know are eligible for a $500 property tax, just 

a check in the mail, and they call them up, and they are also eligible for QMBY-SLMBY, you know, $800 a year in savings, and we 

call these people up, and we say great news, you are eligible for 

$500 and $1,200 in savings, and they say, ‘‘Oh, no, thank you. I 

do not want to do that.’’ There are some attitudinal barriers or 

other kinds. 

So we go back to them and say let me explain this to you. You know, this is $800 a year for 10 years. This is $8,000. They say, 

‘‘Well, I am not sure,’’ and they said, ‘‘Well, do you have grandchildren? Yes. Well, would you not rather have $8,000 and give it 

to your grandkids?’’ It sometimes takes a lot of effort. The point is 

it is worth it if you know that a person is eligible to go back to 

them again and again and again. 

So one of the learnings that we are urging everybody to do is find 

the piles of needles that you already have and focus on those efforts. We actually believe that is going to be one of the strategies 

that can make a difference in this effort going forward. 

Are there any more questions from the audience? 

Any questions from the panelists? 

If not, I really want to thank everybody for coming here today 

for all of the work you have done in these studies. It is reassuring 

to see that people are approaching things differently and reaching 

the same conclusions, and those conclusions, to me, are pretty 

clear. If you are 1 of the 7 million people eligible for the transitional assistance, it is an absolutely no-brainer that you should 

take these benefits, and you are going to save 40 to 70 or 80 percent on your medications. 

If you are not eligible for the transitional assistance, and you have drug costs that are significant at all, at least $500 or $1,000 

or more, chances are, which is the case for most elderly people, you 

are going to be able to find discount cards through Medicare.gov or 

elsewhere that are going to save you significant 10, 20, at least, 

percent, which would more than justify a fee, maybe, of $30. 

So this is great. I hope we will have another one of these in a 

year from now, and we can have more data on what has been 

saved, and I thank the audience for participating and the Senator 

for bringing us together in the first place and the Committee. 

Thank you very much, and this forum is adjourned. [Applause.] 

[Whereupon, at 4:28 p.m, the forum concluded.] 

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