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31–519—PDF 2006

S. HRG. 109–726

IMPLEMENTATION OF THE MEDICARE

PRESCRIPTION DRUG BENEFIT

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

FEBRUARY 8, 2006

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman, Committee

on Finance ............................................................................................................ 1

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 4

ADMINISTRATION WITNESS

McClellan, Mark, M.D., PhD, Administrator, Centers for Medicare and Medicaid Services, Washington, DC .......................................................................... 6

WITNESSES

Fleming, William, PharmD, vice president, pharmacy management, Humana,

Inc., Louisville, KY ............................................................................................... 44

Rawlings, Susan E., president, senior services, Wellpoint, Newbury Park,

CA .......................................................................................................................... 46

Bernauer, David W., chairman and CEO, Walgreen Co., Deerfield, IL .............. 48

Schule, Tobey, R.Ph., owner, Sykes Pharmacy, Kalispell, MT ............................ 50

Paeth, Joy, chief executive officer, Area Agency on Aging of Southwestern

Illinois, Belleville, IL ........................................................................................... 52

Willoughby, Pamela, R.N., faith community nurse, St. John’s Episcopal

Church and Bedford Presbyterian Church, Bedford, VA .................................. 54

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

Opening statement ........................................................................................... 4

Prepared statement .......................................................................................... 61

Bernauer, David W.:

Testimony .......................................................................................................... 48

Prepared statement .......................................................................................... 64

Responses to questions from committee members ......................................... 76

Bunning, Hon. Jim:

Prepared statement .......................................................................................... 82

Fleming, William, PharmD:

Testimony .......................................................................................................... 44

Prepared statement .......................................................................................... 83

Grassley, Hon. Charles E.:

Opening statement ........................................................................................... 1

Prepared statement .......................................................................................... 103

Lincoln, Hon. Blanche:

Prepared statement .......................................................................................... 105

McClellan, Mark, M.D., PhD:

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 107

Responses to questions from committee members ......................................... 143

Paeth, Joy:

Testimony .......................................................................................................... 52

Prepared statement .......................................................................................... 223

Responses to questions from committee members ......................................... 228

Rawlings, Susan E.:

Testimony .......................................................................................................... 46

Prepared statement .......................................................................................... 230

Responses to questions from committee members ......................................... 240

Page

IV

Santorum, Hon. Rick:

Prepared statement .......................................................................................... 244

Schule, Tobey, R.Ph.:

Testimony .......................................................................................................... 50

Prepared statement .......................................................................................... 246

Responses to questions from committee members ......................................... 250

Willoughby, Pamela, R.N.:

Testimony .......................................................................................................... 54

Prepared statement .......................................................................................... 253

COMMUNICATIONS

AARP ........................................................................................................................ 255

American Medical Directors Association ............................................................... 260

American Pharmacists Association ........................................................................ 266

American Psychiatric Association .......................................................................... 272

American Society of Health-System Pharmacists ................................................. 277

Forest Laboratories ................................................................................................. 285

Long Term Care Pharmacy Alliance ...................................................................... 289

National Association of Chain Drug Stores (NACDS) .......................................... 293

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IMPLEMENTATION OF THE MEDICARE

PRESCRIPTION DRUG BENEFIT

WEDNESDAY, FEBRUARY 8, 2006

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC.

The hearing was convened, pursuant to notice, at 10:05 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Also present: Senators Hatch, Snowe, Kyl, Thomas, Santorum,

Smith, Bunning, Crapo, Baucus, Conrad, Bingaman, Lincoln,

Wyden, and Schumer.

The CHAIRMAN. The Administrator has asked if he could have 12

minutes instead of the usual 5 minutes for his testimony, and unilaterally I said so. I need to check that with Senator Baucus now.

Is that all right?

Senator BAUCUS. Maybe 11, if you would.

The CHAIRMAN. All right. Maybe 11. All right.

Anyway, Senator Baucus and I will have opening statements before we go to the director.

OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. Obviously, today’s hearing is about the oversight

of our committee on the implementation of legislation that we

passed and have responsibility for, the Medicare prescription drug

benefit.

I wish I could say that implementation has gone smoothly, but,

as we all know, it has not, especially for some of our Nation’s neediest beneficiaries, also referred to as dual eligibles. They are now

being transitioned from Medicaid to Medicare for prescription drug

coverage, and that has not gone so smoothly.

Computer and information problems resulted in some beneficiaries being charged much higher cost-sharing, some beneficiaries could not get their drugs under the new plans, and pharmacists have had difficulty in getting through to the plans for information about specific individuals.

As a result, many pharmacists have filled prescriptions or given

emergency supplies, and that was out of their pocket, advancing

the prescriptions. They are now waiting for payment.

Some plan representatives have been unable to answer important questions, like which plan someone is enrolled in. We have

had instances where some beneficiaries did not receive their cards,

some instances where people actually got two cards.

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Now, we have had States stepping up to pay for prescription

drugs in these problem areas for specific individuals. All of these

situations, we all agree, are unacceptable, and we need to fix those

problems, and fix them fast.

I have confidence that we are going to hear how some of those

are being handled today, and handled successfully. But we are also

going to probably be told about some problems that are just now

coming to light, because, when you are dealing with 44 million people, you tend to have some start-up issues. By all accounts, CMS,

the plans, the pharmacists, and others are working to fix these

problems.

On the problems faced by dual beneficiaries, we knew the transition to Medicare would not be easy. During the development of the

bill, the Finance Committee thought long and hard about switching

Medicaid coverage to Medicare. We considered the challenges that

these beneficiaries face, being frail, older, having impairments.

Change, for populations like that, can be disruptive under the best

of circumstances.

Frankly, in the end, the Finance Committee bill, in 2003, called

for these beneficiaries, after we had given all this thought to it, to

continue their prescription drug coverage under Medicaid, under

the program that they knew and was working.

But there were many members of Congress, on the other side of

the aisle and in the House of Representatives—and in the House

I suppose there are both Republicans and Democrats—who wanted

to convert prescription drug coverage of these beneficiaries from

Medicaid to Medicare.

Now, I appreciate that view of having one national program, but

we were concerned about the transition. We knew it was bound to

be problematic. The Senate happened to debate this issue long and

hard in June of 2003.

There was an amendment on the Senate floor to have dual eligibles’ prescriptions covered by Medicare. That amendment failed by

a vote of 47 to 51, so this committee’s position held tight going into

conference. But as we all know, that conference agreement that

came out called for the transitioning of the dual-eligible beneficiaries to Medicare.

So in the end, the House position won over the Senate position,

and the 47 Senators who thought that we ought to only have one

program instead of the dual eligibles being handled as they historically had, won out, and I guess won out over what I believe should

have been, and what the administration thought should have been.

Now, that is all history. I am not happy that things have not

gone as well as they should have with the legislation that was finally signed.

But I would like to remind my colleagues that it is a little disingenuous that people who seemingly got what they wanted—to

have dual eligibles covered under Medicare—are now upset about

it. Everyone knew full well that transitioning the duals could not

be perfect, and problems would be inevitable. I know what the response will be. It will be, yes, we wanted the duals in Medicare,

but we would have handled the transition differently.

I will not even try to respond to that. There is no response. It

is very easy to sit up and say, well, I would have done a better job.

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If those 47 Senators who thought they knew best, if they want to

know who they are, I will be glad to tell them who they are. I am

not one of them.

We are not here to assign blame or point fingers, but I do think

it is important that the record reflect the events that led to this

point. The history is part of that record. But it is time to move on.

Now is not the time to make excuses. We need to have productive

conversations and decisive actions to correct recent shortcomings.

I am very satisfied that Senator Baucus and I have led off with

this in the meeting that members of the Finance Committee had

with Secretary Leavitt and Dr. McClellan 2 or 3 weeks ago, and

our staffs have been cooperating very much in that intervening

time, between Senator Baucus’s staff and mine, and trying to listen

to the staff members of everybody on this committee, and then in

turn working with the people at CMS.

Dr. McClellan’s testimony will follow up on some of the questions

raised by members during that meeting. In fact, we gave him notice at that meeting that we would have this hearing. We did not

say exactly when, but here we are, and we asked him to be ready

to respond to some of those questions.

The administration has ramped up call center capacity, created

a dedicated phone line for pharmacists, and they required plans to

extend their transition fill policies to 90 days. They also created a

process for States to be reimbursed for costs incurred during the

transition.

I might add that all of these actions were taken administratively,

no legislation was needed. We have specifically asked the administration when legislation is needed, because we need to act on that

very quickly if any is ever needed.

As I said, this is good progress, but we cannot, as a committee

of oversight with responsibility in this area, let up on this until it

is crystal clear that the executive branch of government has gotten

the start-up issues under control.

This committee has tremendous responsibility, both to the beneficiaries and to the taxpayers, and I think we demonstrate that we

take those responsibilities with utmost seriousness.

I will do whatever else we need to do to make sure that the problems are resolved. We need to become better-informed about the

true nature of the problems. That has been happening, as I indicated, at several levels here, but most frequently between Senator

Baucus’s staff and my staff.

Today’s hearing, I hope, will help us continue to carry on where

we started 3 or 4 weeks ago. We have people besides Dr. McClellan

testifying who are on the front lines of implementing the benefit

and helping beneficiaries to enroll.

In addition to Dr. McClellan, we have representatives of two prescription drug plans, William Fleming and Susan Rawlings, representing Humana and Wellpoint, respectively. We have Mr.

Bernauer and Mr. Schule, who represent chain and independent

pharmacists.

Then we have Ms. Paeth and Mrs. Willoughby, people that have

been helping beneficiaries learn about the drug benefits and helping with enrollment. So, I think we are going to have a very productive meeting.

4

I would like to now go to Senator Baucus, and then we will go

immediately to Dr. McClellan.

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Thank you, Mr. Chairman. I appreciate you

holding this hearing. It is, undoubtedly, very important, certainly

to a lot of seniors in our country, pharmacists and States, and

many others trying to make this drug benefit work.

Just a reminder, the Finance Committee played a very key role

in enacting this provision. Therefore, I think we have to be very

diligent to make sure that we oversee it and that the program is

well-run.

In 2003, after years of debate, as just a reminder, we passed this

bill. I was very proud to be part of that. I felt we needed to have

provisions in the law to provide a drug benefit for seniors. Nothing

is perfect. It is extremely complicated and expensive, but I thought

it was the right thing to do, and I am very proud to have worked

to help make that happen.

We know the law was not perfect, it was new, but I thought the

law had the potential to do some real good to an awful lot of people, and that is why I supported it. It has the potential to make

prescription drugs available to millions who could not otherwise afford them. It has the potential to make drugs available that will

lessen pain. It has the potential to save lives.

Unfortunately, the administration, in my judgment, has implemented the new law poorly. After Congress passed the law, the

Centers for Medicare and Medicaid Services, otherwise known as

CMS, had the duty to ensure that Medicare drug benefits were up

and running by January 1, 2006.

Clearly, it was a huge task, very difficult. I think CMS worked

at it, worked hard. Regrettably, their efforts came up short, I

think, in two major areas. First, the government made the new

drug benefit needlessly confusing.

As part of the new law, Congress passed a temporary drug discount card, available in 2004, which was supposed to give temporary relief from high drug costs. Seniors of modest means were

eligible for a $1,200 Federal subsidy for their drug purchases.

But most Medicare beneficiaries did not sign up for the drug

card. Why? Because they were paralyzed, paralyzed by choices.

CMS approved 40 Medicare drug cards in my State of Montana

alone. Far from celebrating the array of choices, most Montana seniors found it so confusing, they gave up. They did not sign up.

Less than a year later, CMS was approving drug plans for the

new drug benefit. I then urged CMS not to repeat the mistakes

they made with the drug card. I urged CMS to approve only plans

meeting the highest standards.

But CMS repeated the mistakes of the drug card. CMS approved

dozens of plans for participation in the new drug program. CMS

approved more than 40 drug plans in my State of Montana.

I support choice. I support competition and a free market. We all

do. It is great that Americans can choose, for example, from hundreds of different models when buying a new car. But when people

5

do not know what they are buying, choice can lead to confusion,

and that is particularly true in health care.

Ask elderly Americans whether they prefer a four-speed automatic or a five-speed manual, and they will probably choose the

automatic. But ask them whether they prefer a drug plan with a

four-tiered formulary to a plan with five, they will probably look at

you with a mixture of confusion and anger.

My second concern relates to the warnings that CMS ignored.

Last year, I asked the independent Government Accountability Office to report on CMS’s plans for seniors eligible for both Medicaid

and Medicare. I asked, what were CMS’s plans for seniors whose

drug coverage was moving from Medicaid to Medicare?

In December of 2005, the GAO reported that CMS’s plans were

insufficient to avoid big disruptions in coverage. CMS disagreed.

CMS said, ‘‘We have worked diligently on the transition from Medicaid to Medicare drug coverage and these individuals will get effective, comprehensive prescription drug coverage on January 1,

2006.’’

Well, that did not happen. GAO was right. Data systems failed.

Pharmacists and States were stuck with the bill for co-payments

that should never have been charged. Some vulnerable seniors left

the pharmacy without the medicines they needed.

We are going to hear later today about some of these issues, including from Tobey Schule, an independent pharmacist from Kalispell, MT. Mr. Schule is one of thousands of pharmacists who have

been burdened with the flawed transition from Medicaid to Medicare.

Last month, Secretary Leavitt and Dr. McClellan briefed members of this committee on problems implementing the new drug

program. They outlined seven specific problems, and they outlined

plans to fix them.

I very much appreciate CMS’s attempts to fix the problems, but

some problems remain unsolved. Dr. McClellan, I look forward to

hearing from you on how and when CMS plans to finally fix them.

In addition to ensuring that the implementation flaws are fixed,

Congress should also address the problem of confusion. We can do

that by learning the lessons of Medigap, that is, the supplemental

health insurance program for seniors with Medicare covering Part

A and Part B.

In 1980, Congress enacted Medigap amendments that they offered to fix marketing abuses and consumer confusion with

Medigap. The reforms required Medigap insurers to meet minimum

standards and have minimum loss ratios. I will never forget, that

was a huge battle. A huge battle, but very much needed.

Ten years later, Congress again took up Medigap reform, passing

legislation to standardize Medigap policies. Ten different Medigap

options would be offered, each with a basic set of benefits. This

gave consumers an apples-to-apples comparison of Medigap coverage.

I think we should do the same with the new drug program. We

should standardize the drug plans. We should make it easier for

people to make good choices about which plan is best for them. I

intend to introduce legislation to do just that.

6

I understand that the drug benefit is young, but I want this benefit to work. We simply cannot afford another round of confusion.

We need broad participation, and that is not going to happen unless we make the program more accessible and more understandable.

I supported enactment of the Medicare drug benefit in 2003. I

still support it. Health insurance needs to cover prescription drugs,

but we need to work to make it work.

I look forward to hearing from our witnesses on how they can

make that happen.

The CHAIRMAN. Thank you very much, Senator Baucus.

Before Dr. McClellan starts out, because we do have six people

on the second panel, we want to make sure that all the questions

get asked that members want to ask of Dr. McClellan.

But I would ask that members follow the red light. This is the

way I would like to have it, because sometimes you never know exactly when the red light goes on. But if you start your last question

before the red light goes on, finish your question, and then the witnesses can answer your question.

Senator BAUCUS. Briefly.

The CHAIRMAN. Yes. Briefly. Then we move on.

Now, I think Senator Baucus and I have watched our red light

very closely. At least, I compliment Senator Baucus for doing that.

So I ask you to do that.

This is my frustration. When he goes, all of you guys are going

to go. Senator Baucus and I have to listen to the last panel and

you guys go eat lunch on time and we never get lunch. So this is

kind of a ‘‘share the burden’’ sort of thing. We all get paid the same

salary, so we ought to do the same work.

Dr. McClellan?

STATEMENT OF MARK McCLELLAN, M.D., PhD, ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES, WASHINGTON, DC

Dr. MCCLELLAN. Thank you, Mr. Chairman, Senator Baucus,

members of the committee. I appreciate the opportunity for this

status report, and especially to talk about the steps we are taking

to fix transition problems, following up on our earlier meeting.

That is why I really appreciate the extra time to explain those

steps in sufficient detail.

As the vast majority of the millions of beneficiaries who have enrolled are using their new drug coverage successfully, plans are

now filling more than a million prescriptions a day. Because of

competition, this coverage is costing much less for beneficiaries,

taxpayers, and the States than people expected.

Back in 2003, Mr. Chairman, you will remember there was a lot

of discussion about whether there would be any plans available at

all. Now they are here, they are lower in cost, and offering better

coverage options.

We believe that we can make competition work even better by

simplifying the presentation of comparable information on plans,

which will assist beneficiaries in choosing a plan and further harness market forces to improve beneficiary satisfaction and hold

down costs.

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A change this big, in this short a period of time, is bound to have

some problems. I am very concerned about anyone who has experienced problems in getting their medicines. We make no excuses for

the problems. They are important, they are ours to solve, and we

are finding and fixing them.

So I would like to describe the specific steps we are taking to address implementation issues, as we outlined in HHS’s first-month

report on the drug benefit last week. We have worked to address

these problems.

We have heard from many pharmacists and others that there are

still plenty of bumps, but things are getting better. New enrollees

and people who have switched plans for February have had significantly less difficulty starting to use their coverage this month.

Certain beneficiaries who enrolled or switched plans late in a

month, particularly dual-eligible beneficiaries, have experienced

real problems when attempting to fill prescriptions, especially early

the next month.

The information system did not have sufficient time to reflect

this change, and hundreds of thousands of beneficiaries switched

plans in the last half of December, contributing to our early January problems.

Our goal is to encourage beneficiaries to make decisions earlier

in the month so that only 20 to 25 percent of those switching would

do so in the last week.

To meet this goal, we have been sharing an educational message.

We encourage beneficiaries to enroll or switch by the 15th of the

month, and try to enroll several weeks before they need to start

using their coverage.

We have updated our on-line enrollment center messages and

modified scripts in our call centers. We are communicating this information to pharmacists, States, and advocacy organizations.

We will continue these educational activities this month, and

they may already be having an effect. In the last week of January,

only about 24,000 beneficiaries switched plans, reducing the problems of incomplete information at the beginning of February.

Although smooth and timely data transfers among Medicare, our

drug plans, Medicare Advantage plans, and retiree plans in 57

States and territories have occurred for most beneficiaries, we have

been working intensively to smooth these data hand-offs.

When information is not exchanged smoothly, the lag time increases between when a beneficiary enrolls and when full information, particularly on dual status and co-pay status, becomes current

for both the plan and the CMS systems.

To address this, we are working on systems enhancements and

smoother transfers with our partners. In mid-January, we contracted with Electronic Data Systems, EDS, to help CMS work together with the plans, the States, and pharmacies to resolve challenging data translation issues.

We expect them to complete a preliminary systems review with

key initial recommendations by the end of February and further review with additional recommendations by the end of March.

We expect to work with plans, States, and our other partners on

a continuing basis to implement their recommendations, achieving

8

the goals that I am going to talk about in a second by mid-April,

and we may retain EDS’s services through the year.

Many plans send CMS daily files reflecting their enrollment

transactions. CMS compares these data to our own files to confirm

Medicare status. Our goal is that plans covering 90 percent of our

enrollee population complete daily data transfers successfully to reduce lags in obtaining up-to-date beneficiary information. Currently, 7 out of the 10 largest drug plans use daily transfers.

To check and further assure the accuracy of the information exchange between plans and CMS, we sent a special updated set of

data files, including full co-pay information, on dual and low-income subsidy eligibility to plans on January 13th, 18th, and 30th,

and we will do so again as part of a full enrollment file later this

week.

Our goal is to achieve, by 10 days before a new coverage month

begins, at least a 95-percent match rate for enrollment and co-pay

information on the dual-eligible beneficiaries who have been the

biggest challenge between Medicare and the plans.

As a result, additional adjustments and batch data processing by

plans near the end of the month can be limited, while addressing

the needs of late-enrolling beneficiaries. We have already seen the

match rate for plan enrollment and co-pay information increase

from mid-January, exceeding 90 to 95 percent before the end of the

month.

CMS continues to work on matching data files with the States,

and our goal is to continue accurate transfers to ensure that appropriate information for dual-eligible beneficiaries is available.

We obtained a match rate of greater than 99 percent for duals

submitted by the States in the fall of 2005, and we expect to maintain this high match rate.

To provide responsive customer service to beneficiaries through

the CMS call centers prior to January 1, we increased our customer

service representatives up to around 7,800. Since then, we have updated the scripts used by our CSRs, including information on questions that need to be asked to properly assist callers.

Although wait times spiked in early January, in the last 2 weeks

they have fallen to under 2 minutes. We are continuing to track

that. Our goal is to keep the average wait time well under 5 minutes.

We have instructed the drug plans to provide sufficient CSRs

and to support quality service by phone. CMS has been monitoring

the status of the plans’ customer service lines to ensure that wait

times are reasonable and response is appropriate.

Plans must provide numbers for both pharmacy technical contacts and for exceptions and appeals requests. Plan performance

has improved. For example, in the beginning of January, wait

times for beneficiaries contacting call centers for nine major plans

averaged close to 12 minutes, dropping to just over 6 minutes by

the end of the month. For pharmacists, the average wait time has

fallen to 3.5 minutes in these plans.

While many plans are now providing timely phone access, some

have not responded adequately, so we are increasing monitoring of

plans’ call center activities to help assure a high level of performance. We are surveying all prescription drug plans to assess whethVerDate 11-MAY-2000 10:56 Jan 08, 2007 Jkt 095484 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 31519.000S SFIN1 PsN: SFIN1
9

er they provide correct information to beneficiaries and pharmacists within a reasonable time.

We expect continuing improvements as we address systems and

data transfer issues. We expect plans to generally answer calls

within 5 minutes by early April, and our goal is to ensure that 80

percent of customer calls are answered within 30 seconds.

To help pharmacists identify what plan a beneficiary is in and

how to bill, CMS collaborated with pharmacists, starting in 2004,

to create an electronic eligibility and enrollment query system that

operates as part of the pharmacist’s existing computer systems.

Response times since January 2nd have consistently been less

than 1 second. In addition, the number of queries to this system

is decreasing because more individuals have their plan cards with

their plan information.

For example, on January 4th, the system received nearly 1.5 million inquiries. On January 31st, it had dropped to around 300,000,

and it has since declined further. CMS has increased its call handling capacity at the pharmacist help line 30-fold, and made it

available 24 hours a day, reducing wait times for pharmacists to

under a minute.

We also worked with Wellpoint to establish a point-of-sale mechanism, whereby pharmacists could obtain payment for medications

dispensed to beneficiaries who demonstrate coverage under Medicare and Medicaid, but for whom plan information could not be obtained.

CMS is providing technical assistance and using the point-of-sale

system through our pharmacy help line, and we have also worked

with pharmacy software vendors to provide software-specific support for point-of-sale and eligibility checks.

We are working with health plans and pharmacies to identify

business processes and procedures, such as coverage determinations, exceptions, and beneficiary reimbursement, where there is an

opportunity to create uniform approaches to reduce confusion and

red tape for pharmacists, physicians, and patients. We expect this

effort to proceed quickly over the coming weeks, and we will fully

support it.

CMS continues to engage in rigorous outreach to the pharmacy

community through national, State, and local pharmacy organizations and their newsletter and e-mail lists, as well as their standards organization and technical societies.

Outreach efforts have also included hundreds of town hall and

State Pharmacy Association meetings around the country, including dozens of such events in Montana and Iowa.

We have held numerous national conference calls, distributed

over 25 Rx Updates to the pharmacy community on a wide range

of benefit topics, and posted extensive information on a portion of

our website dedicated to pharmacists.

Specifically promoting the new pharmacy tools, we produced a

CD-rom that was distributed by all national associations, and held

special training sessions around the country conducted by pharmacists from our 10 regions. We are going to continue these outreach activities fully in the coming weeks.

CMS also worked closely with the States, beginning in 2004, on

auto-enrollment in the low-income subsidy eligibility application,

10

calculation of the State phase-down contributions, training those

who assist beneficiaries, and exchanging information on State beneficiaries with Medicare and Medicaid.

We appreciate that States have supported pharmacists who have

faced difficulties in serving certain dual-eligible beneficiaries, and

we have established a demonstration project to reimburse States

for costs they incur by covering drugs that should be covered by the

appropriate drug plan.

We will also reimburse States for appropriate administrative

costs for providing these services, and for connecting beneficiaries

who are having difficulty to their Medicare drug plan. We expect

the vast majority of States to participate in this program.

Upon receipt of claims data from a State, we plan to provide estimated payment within 4 weeks. By February 15th, we expect to

have a contractor in place to process and reconcile those payments

with plan and State records, as well as guidelines on the submission of drug claims and administrative costs.

We are asking States to implement steps to help assure that

pharmacists have checked enrollment status through a card, plan

letter, or eligibility query, attempted to contact the plan or the

Medicare line in case of incorrect co-pays or coverage information,

and, in the presence of evidence of Medicaid eligibility, billed

through the Wellpoint system.

States that work with us to implement best practices like these

to support pharmacists in using the new Medicare systems have already limited billing to their State systems, often to just a very

small fraction of their dual-eligible beneficiaries.

For example, Pennsylvania, a State with a large Medicare population, which has engaged in vigorous pharmacy outreach and collaborative work with our regional office, has paid only 5,500 total

prescription drug claims through February 5th in their State billing systems.

We expect that most States will implement these steps to minimize State billing by February 15, and, if some billing continues to

be necessary in a State, we will extend the demonstration program

to early March.

To ensure adequate plan performance, we are monitoring trends

and tracking complaints. This has already led to changes in how

we operate, and I would like to illustrate this by talking about drug

coverage requirements.

We set up specific checks to ensure plans provide robust formulary coverage for all needed medications. In particular, plans

must cover all, or substantially all, anti-depressants, anti-psychotics, anti-convulsants, cancer drugs, immuno-suppressants, and

anti-retrovirals for HIV-AIDS. Patients with mental illnesses can

continue essentially all of their current medications through the

year.

We review each deletion from a plan’s formulary to ensure continued access to a broad range of drugs. Plans cannot remove a

drug from their formulary without first going through an extensive

process with CMS and providing extensive advance notice to their

enrollees.

CMS developed specific procedures for timely exceptions and appeals. Using these proceedings, a Medicare beneficiary can get covVerDate 11-MAY-2000 10:56 Jan 08, 2007 Jkt 095484 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 31519.000S SFIN1 PsN: SFIN1
11

erage for a drug not on a plan’s established formulary. We are collecting information on the use of a plan’s appeals and grievance

process.

We required plans to have a transition policy for dual-eligible individuals to get a temporary supply of their current drugs while

they determine whether similar on-formulary medicines will work

for them. We have recently extended this transition period to 90

days.

When we hear of specific complaints regarding the transition policy, we have worked with plans to ensure their timely resolution.

We are enforcing compliance with plan contracts, including call

center responsiveness, formulary requirements, appeals processes,

and pharmacy contracting.

We are addressing issues on a case-by-case basis. It is too soon

to see patterns, but while we are responding to complaints we are

also closely monitoring trends. This tracking information can lead

to corrective action or sanctions, if needed, which we will take, and

they will be considered in our contracting decisions for future

years.

Thank you for this opportunity to discuss the first month of the

drug benefit. While we are pleased that millions of Medicare prescriptions are being filled every day, we are going to continue to

work around the clock all over the country to ensure that every

person with Medicare can use their coverage effectively. I am

happy to answer any questions you all may have.

[The prepared statement of Dr. McClellan appears in the appendix.]

The CHAIRMAN. Thank you, Dr. McClellan.

The first question is, I think I heard you clearly, so it is somewhat repetitive of your statement, but one of the key things that

came out of our first closed-door session 3 weeks ago was a request

by our committee members that you give us a time-line for when

and how these problems will be fixed.

Would you again lay out the key milestones and the goals on

that time line? Because I want to make sure that we have a clear

response to the committee’s request of 3 weeks ago.

Dr. MCCLELLAN. That is exactly what we tried to respond to with

the steps that I outlined in my expanded opening statement.

The key areas include reducing the cases where late enrollment

and switching occurs, because, when people enroll or switch plans

at the end of the month, there is a time lag that is unavoidable between when they enroll in a plan and when all their information

is available in the plan systems and the pharmacy systems. So we

can avoid some of the problems that happened in early January

with a large number of late enrollees and plan switchers by limiting that occurrence.

We have some specific goals set out in terms of reducing the rate

at which those late enrollments occur and an extensive education

program to back that up.

Second, in the area of data hand-off and systems issues, I outlined a series of steps that we are taking right now, and with the

dates included, over the next few months to get to a very high level

of matching between the information in the plan systems and in

our systems.

12

I focused on dual eligibles, because those are the most complex

data transfers. They involve a lot of additional information from

States, on co-pay status with the different co-pay levels. So, if the

systems work for the dual eligibles, it will be even more straightforward for the systems to work for beneficiaries who enroll in a

plan on their own.

In fact, right now we are seeing a very high rate of successful

use of coverage by people who sign up, wait a few weeks until they

get their acknowledgement letter or their drug plan card, and then

go to the pharmacy and get their prescriptions filled smoothly.

Well over 90 percent of those individuals who sign up on their

own are getting their coverage working just fine, and we are going

to keep driving that up as well.

So, we laid out the specific timetable for making those steps happen, keeping in mind that, as long as we have late enrollees who

are trying to use their coverage early the next month, we are going

to have some built-in difficulties in making sure everyone can get

covered smoothly the first time they use their coverage.

We talked about improvements, specific improvements in customer service, and a time line for achieving those improvements in

the plan. We are already at a high level of response time performance within the CMS 1–800–MEDICARE systems.

We talked about some specific further steps for education and

outreach with pharmacists to make sure all community pharmacists are aware of the tools that they have available to use the

Medicare systems effectively.

I outlined a specific set of steps and time-frames for States to

work with us for prompt reimbursement of their costs and for making sure that they are transitioning the remaining minority of

dual-eligible beneficiaries.

In many States, it is just a few hundred or a very low rate of

beneficiaries who are still using the State systems. When States

use these best practices, we can get just about everyone into Medicare coverage right away.

I talked about our compliance steps, particularly in areas like

formulary requirements and transition requirements, and exceptions and appeals, and how we are going to be tracking those. So,

these were intended to cover the specific topics that we raised at

the discussion with you all 2 weeks ago.

The CHAIRMAN. All right. Then I would ask, not a follow-up question, but this for you to do in writing. If you would provide the outline of that time-line to us in writing, and also how you are going

to keep us, as a committee, informed weekly on the progress.

Dr. MCCLELLAN. We absolutely would be glad to do that. These

points are covered in the oral testimony that I just presented,

which I think we have provided to you in writing.

I want to thank your staff and Senator Baucus’s staff for meeting

with us to make sure that we are responsive to the issues that you

have raised, and for being willing to continue to work closely with

us on tracking the progress of the benefit implementation.

The CHAIRMAN. All right.

In regard to the Agency’s 90-day first-fill policy, there is some

confusion about the Agency authority to require plans to do that

and to enforce the requirement. Is there any question about the

13

ability to do that legally, the enforcement of the policy, and what

action it will take if it is determined that the plans are not complying with it?

Dr. MCCLELLAN. We have the authority to assure effective transition coverage for beneficiaries. For reasons that we have detailed

in promulgating this policy, we have laid out why this is necessary

for effective coverage.

I am very pleased that many drug plans had already implemented longer transition periods before we took this action, so

many plans were already in compliance with it. We are going to be

monitoring any specific complaints that come up to make sure that

people do get the required medications under this policy.

Many plans are going ahead and starting to educate beneficiaries

about how they can save money by switching to another drug that

works very similarly. That is fine right now, as long as it is done

on a voluntary basis.

And this extended time period, as we have heard from many

pharmacists, can be very helpful in educating beneficiaries about

how they can save even more money while meeting their prescription drug needs by using a low-cost on-formulary drug.

The CHAIRMAN. All right. In this order, the next four would be:

Baucus, Hatch, Conrad, and Santorum.

Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

Dr. McClellan, could you give me the dates by which you plan

to reach those goals in each of the six areas you just mentioned?

Dr. MCCLELLAN. We did.

Senator BAUCUS. Would you do that right now, please? Just give

me a date. Number one?

Dr. MCCLELLAN. For the late enrollment, pushing duals.

Senator BAUCUS. Yes. When are we going to get that problem

solved? Give me a date. I have lots of questions to ask, so just give

me a date.

Dr. MCCLELLAN. By the end of February we are going to

have——

Senator BAUCUS. By the end of February. All right.

The next one. Systems hand-off. When are you getting that

solved?

Dr. MCCLELLAN. Two steps we laid out.

Senator BAUCUS. Give me a date.

Dr. MCCLELLAN. There is an end of February goal——

Senator BAUCUS. I want a date. Just give me a date.

Dr. MCCLELLAN. [Continuing.] And then there is a mid-April set

of goals.

Senator BAUCUS. So you are saying by mid-April, they will be all

solved, mostly? Mostly solved?

Dr. MCCLELLAN. Except for the late enrollees. Senator, I do not

want to be difficult here, but when——

Senator BAUCUS. We will work with you. I just want to know

what your goals are. We will work with you. I just want to know

what they are.

Dr. MCCLELLAN. All right.

Senator BAUCUS. All right.

Customer service delays.

14

Dr. MCCLELLAN. We have some goals that we are putting in

place right now.

Senator BAUCUS. Which are, and what date? When are we going

to solve the problem?

Dr. MCCLELLAN. Right now, for Medicare.

Senator BAUCUS. When are we not going to hear of problems?

Dr. MCCLELLAN. By April and May.

Senator BAUCUS. April. All right. April.

Education and outreach to pharmacists?

Dr. MCCLELLAN. Ongoing. We have a set of education——

Senator BAUCUS. Date? Date?

Dr. MCCLELLAN. February.

Senator BAUCUS. February. You’ll get that solved in February.

Dr. MCCLELLAN. And then ongoing in February and March to

make sure that every pharmacist gets what they need.

Senator BAUCUS. And States reimbursed?

Dr. MCCLELLAN. We are intending to get States into this demonstration program right away so that they can ramp down the use

of State systems.

Senator BAUCUS. Date?

Dr. MCCLELLAN. Mid-February.

Senator BAUCUS. Mid-February.

Dr. MCCLELLAN. If we need to extend the demonstrations to

early March, we will do that.

Senator BAUCUS. All right.

Then you had compliance, the formularies.

Dr. MCCLELLAN. We are tracking complaints right now. We

should have patterns available in time for us to use in our determinations for plan participation next year, and that will be by

April.

Senator BAUCUS. All right.

I am not being critical, I am just asking the question. So you

think by March/April you will have all this pretty much well in

hand?

Dr. MCCLELLAN. Well, we are making a lot of progress right now.

We have seen that in the much smoother early February period

compared to January.

Senator BAUCUS. I will think about those dates. But in the meantime, I appreciate you giving us dates.

Dr. MCCLELLAN. Yes.

Senator BAUCUS. Obviously you are going to try to work to improve upon those dates, to move them up earlier.

Dr. MCCLELLAN. Yes. I do want to highlight the problem with

late enrollments. When people enroll late in the month and try to

use their coverage early the next month, there is no technical way

to make sure that the data fully catch up in just a matter of a few

days.

Senator BAUCUS. Yes.

Dr. MCCLELLAN. So we are trying to limit that problem by limiting the number of enrollees——

Senator BAUCUS. Late enrollees complicate this. I very much appreciate that. You are right.

Let me read you a quote here. The quote is, ‘‘Imposing some

standardization on any additional benefits that are offered, analoVerDate 11-MAY-2000 10:56 Jan 08, 2007 Jkt 095484 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 31519.000S SFIN1 PsN: SFIN1
15

gous to standardization in the individual Medigap market, would

make it easier for beneficiaries to shop for plans.’’

That was a quote with respect to how to design a Medicare drug

benefit and was made by a very, very wise, intelligent, smart person. Can you guess who that might be?

Dr. MCCLELLAN. Go ahead.

Senator BAUCUS. No. Can you guess who that might be?

Dr. MCCLELLAN. No, not offhand. I have seen a lot of quotes lately.

Senator BAUCUS. Well, it was by you. [Laughter.]

Dr. MCCLELLAN. All right.

Senator BAUCUS. It was by you, a very wise, intelligent, smart

person.

Dr. MCCLELLAN. You threw me off by that introduction. [Laughter.]

Senator BAUCUS. It was the year 2000. That is when you made

that statement.

So if you made that statement in the year 2000, why is that not

a good, wise, smart, intelligent idea today?

Dr. MCCLELLAN. I think it is a good idea. We have heard a lot

of further ideas from many people. Senator Wyden has been doing

some work on this area.

Senator BAUCUS. But basically standardizing the plans, just like

Medigap.

Dr. MCCLELLAN. Giving people apples-to-apples information that

they can understand and use to get the plan that they want. We

have seen that most people did not want the standard coverage

that was included in the law. I know that there was a lot of discussion that went into designing that plan with a deductible, a donut

hole, and 75 percent coverage.

But what we have seen is that the vast majority of the millions

of people who have enrolled have enrolled in plans that are different than that, that do not have a deductible or that do not have

as much of a donut hole.

So we are seeing that there are other, better designs that people

want, and we need to give them better information to find those

plans quickly.

Senator BAUCUS. I am not going to argue with you, but obviously

there is a trade-off. There is a trade-off between choice and competition on the one hand, and ease of use and understanding on the

other. There is no science in this. You just have to make a judgment here as to which makes the most sense in that spectrum.

We all know it is not a perfect analogy, but back in the Medigap

days it was just chaos for seniors trying to decide what Medigap

coverage to purchase.

We standardized it. We improved upon it in 1980, then standardized later. It seems to have worked pretty well. We all hear constantly from seniors, there are way, way too many choices, way,

way too many plans. I have a chart here that reflects that. I mean,

I cannot understand it, it is so complex.

So does it not make sense to figure out some wise, smart way to

kind of standardize this to try to draw the line somewhere between

the extremes? One extreme now is just total complexity. It is a

16

wild, wild west free-for-all, essentially. The other would be just one

standard plan.

Does it not make more sense to maybe have some group figure

out, say, 10 plans, and standardize them along the lines I mentioned, along the lines that you suggested in that Health Affairs article in the year 2000? Does that not make sense to try to get some

order out of all this chaos?

Dr. MCCLELLAN. I think, in a way, as Chairman Grassley has

mentioned, if there are things that we can do administratively,

right now, we can help with these issues right away.

Senator BAUCUS. Yes. But let us just not get too wrapped around

the axle, ideology, and so forth. Let us just get something solved

here that works.

Dr. MCCLELLAN. Well, I definitely want to work together.

Senator BAUCUS. Thank you.

The CHAIRMAN. Senator Hatch?

Senator HATCH. Well, if there is anybody who has not gotten

around the axle and who is willing to work with us and do what

needs to be done, it is you.

Dr. MCCLELLAN. Thank you.

Senator HATCH. You have been there from the beginning. I remember when we had the tripartisan discussions. You were there

every day. You were there every time we needed you as we did this

bill. You are there now. We are all amazed at how many companies

want to participate. I happen to think that is a pretty good thing.

Now, it makes the selections difficult, but it is a wonderful thing

to be able to have a large number of suggested plans. In some

cases, they have been better than what we designed in the bill.

Now, I just want to personally express my gratitude to you for

how hard you have worked on this program. I mean, this is a monumental change.

I am going to praise Senator Grassley and Senator Baucus, who

led the conference committee, along with Chairman Thomas and

others. I mean, they really did a very good job. But it is still a

tough, hard, complicated, very big program.

I have seen great public servants in my time here, in both parties, in both administrations, but I do not know that I have ever

seen anybody who has worked as hard or done as proficient and

good a job as you and your staff have done with regard to this very,

very difficult-to-implement bill.

And, frankly, I think we did the best we could do, and there are

millions of people who are pleased with what we have done. Some

are frustrated. Pharmacists are frustrated.

Let me just ask one question to you. Do you have any thoughts

on when CMS will not be relying as much on the States to fill in

the gaps for the Medicare Part D program?

I know in my home State of Utah, it took staff away from other

essential Medicaid duties to implement the prescription drug program, and they were only reimbursed for part of their costs

through the Federal participation dollars.

State legislatures did not appropriate matching State funds to

have a State Medicaid staff work on implementing the Medicare

drug program. Now, people in my State believe that they should

have 100-percent reimbursement of their administrative costs by

17

the Federal Government. Now, any insight you might have on that

would be greatly appreciated.

Dr. MCCLELLAN. Yes, Senator. We agree that the States should

be 100 percent reimbursed for any costs they have incurred in connecting people with their coverage and helping pharmacists to use

the new Medicare systems.

In fact, in the States that have been able to limit the use of their

billing systems already, these steps are very important, so we want

to fully reimburse those costs.

We think that if all States adopt some of the same kinds of practices that are now being used in States like Pennsylvania, we can

quickly get to a very low level of reliance on the State billing systems, then move forward as we take these other steps, and then

turn those off entirely in the coming days and weeks.

I would like to also thank you for your earlier comments. The

people who really deserve the credit at the Agency are the staff and

our information systems offices, and our beneficiary choices offices,

and the offices that work with the States and the regional offices

all over the country who have been working really hard so that everyone can take advantage of this benefit.

Senator HATCH. Well, back to my original point. I remember

when we did this bill, we were concerned that there be at least two

companies that would compete in these areas.

Dr. MCCLELLAN. Right.

Senator HATCH. Now, personally, I believe, having this plethora

of companies in most States is a very, very good thing, because it

puts a lot of pressure on everybody to get the very best plan they

possibly can.

I personally would not like to see it narrowed down to 5 or 10

and not allow the open-ended competition that really is giving us

some pretty good choices, as far as I am concerned.

Dr. MCCLELLAN. Right.

Senator HATCH. I have other questions, but I will submit them

for the record. Thank you.

Dr. MCCLELLAN. Thank you, Senator.

[The questions appear in the appendix.]

The CHAIRMAN. Senator Conrad?

Senator CONRAD. Thank you, Mr. Chairman.

Thank you, Dr. McClellan. Let me just start by saying I respect

you, I like you, I like and respect the Secretary. I have just done

meetings all across my State, and I wish I could share the anger

that I have experienced at those meetings, because people are furious at your Agency.

All this talk that I have heard from some of my colleagues is so

disconnected from what I am hearing. I will tell you what I am

hearing. And I supported this bill, as you know. I was proud to

have supported this bill. But this has been a fiasco. This has been

botched and bungled every step of the way. I have never seen a

bigger failure of government since Katrina.

Everywhere I go in my State there is an endless stream of complaints. I got calls this morning from people, irate. In fact, I just

got a call from a pharmacist in Bartino, ND who said he is ready

to quit providing coverage to Medicare patients because this has

been so badly handled.

18

Let me just tell you what I have heard at meeting after meeting.

Widespread confusion and growing anger. Too many plans. People

cannot get through on the 1-800 number. When they do get

through, the information is no good.

I heard you say the response time on the CMS line has dropped.

You know why? Because people say calling CMS is worthless. That

is what they tell me. Now, maybe you are getting a lot fewer calls

because they are not getting any good service when they call.

Cannot access the website. When they could get through, the information was either wrong or not available. The first week, pharmacists across my State were livid. They said there was absolute

chaos. They could not get through to plans, could not get through

to your Agency.

People did not have plan cards. Those eligible for Medicaid and

Medicare that would come to the drug store were told they were

not covered. This became such a problem in my State, the Governor

had to step in to solve the problems created by the failure to implement this legislation in any kind of competent way.

Pharmacists were livid over what they told me was the complete

incompetence of your Department. I have been told repeatedly that

there is no way to compare the plans accurately, that some drugs

are not covered by any plans, that the plans are not responsive,

that nursing home residents are not getting the drugs that they

need, that pharmacists are working 15- to 17-hour days, that they

are not being paid by the plans, even according to their own contracts with those plans.

These computer systems do not work. Already, formularies are

changing. I will tell you, honestly, in my time here, I have never

had a worse evaluation of what we have done here than in this program.

Now, you have given us a series of time-lines here. Let me just

ask you this. We have 103,000 people eligible in North Dakota. So

far, only 8,700 have signed up in stand-alone drug plans.

We have had 10,000 dual eligibles. They were just assigned. Unfortunately, in many cases they were assigned incorrectly, because

they went to their pharmacy and they were told their drugs were

not covered. That is why the Governor had to step in to rescue

what was a fiasco.

Medicare Advantage. That is 750 people. Those, I think we could

say, had signed up, so that would get us to 9,400 signed up. Retiree

subsidy, 4,600. Those were assigned by their employers. TriCare.

They were automatic, 9,700. So that is a total of 34,000. But only

9,470 out of 103,000. What are we going to do to improve this situation?

Dr. MCCLELLAN. Well, Senator, you raised a number of important issues, and I know our regional office has been working with

specific pharmacies and with beneficiaries to make sure their concerns get addressed. We have seen, by all the metrics that I talked

about in my testimony, a substantial reduction from those early

weeks in January and the rate of problems.

We have been working closely with the State of North Dakota,

like other States, to make sure they are reimbursed for those costs

and that they are helping to transition everyone into their coverage

as quickly as possible.

19

People who have enrolled in the program already are getting real

help with their drug costs. And while many people have signed up

on their own and more are signing up every day in North Dakota,

the people who are getting better coverage through Medicare Advantage, more secure coverage through new help from Medicare for

their——

Senator CONRAD. Well, let me just stop you. Medicare Advantage.

Medicare Advantage. Before we get very enthusiastic about that,

750 people out of 103,000 possible.

Dr. McClellan, I’ve just got to tell you, this is botched, and

botched on a grand scale. Somehow, together, we have got to get

this thing fixed, and fixed fast. It is not fixed. I mean, I got complaints pouring in to my office because they knew this hearing was

coming. I mean, I have never seen people so angry. I just have

these people tell me, you have got chaos out there.

The CHAIRMAN. Senator, your time has expired.

Senator CONRAD. Thank you, Mr. Chairman.

The CHAIRMAN. Senator Santorum?

Senator SANTORUM. Thank you, Mr. Chairman. Mr. Chairman, I

appreciate the opportunity to question.

Can you give me the percentage of people who are in the program who have not had a problem?

Dr. MCCLELLAN. The vast majority of beneficiaries are getting

their prescriptions filled every day.

Senator SANTORUM. Can you give me a number? Do you have any

idea what percentage of folks are having problems versus folks who

are not?

Dr. MCCLELLAN. Yes. For people who signed up on their own and

signed up ahead of time so that there was time to wait to get their

information into the systems, and they got a letter back or a card

back from their drug plan, well over 90 percent of those beneficiaries had no difficulty in getting their prescriptions the first

time, and that number continues to go up.

And I say ‘‘no difficulty.’’ Some people may have had to make a

phone call or something like that, but because the wait times for

getting connected with their coverage have gone down by calling a

plan or by calling us, that is now much faster.

So, there are millions of Medicare beneficiaries in that category,

including, again, well over 90 percent of people who have signed up

for coverage on their own, who are getting new, better coverage

through a Medicare Advantage plan, and also the vast majority of

our dual eligibles.

Senator SANTORUM. You said the biggest problem is folks who

sign up late in the month.

Dr. MCCLELLAN. Yes.

Senator SANTORUM. It seems to me like there is a rather common-sense answer to that. That is, why do you not just put a cutoff date at some point in time in the month, and say that, if you

sign up after that cut-off date, your coverage does not start until

the following month?

Dr. MCCLELLAN. That is a very good question. The way the law

was designed was based on an enrollment process that does allow

people to sign up until the end of the month.

20

Senator SANTORUM. Oh. So you are suggesting that Congress

made a mistake by allowing people to sign up. So we drafted a bill

that allowed people to sign up until the very last day of the month

and then made benefits available the following day.

Dr. MCCLELLAN. We are trying to——

Senator SANTORUM. Is that what Congress did?

Dr. MCCLELLAN. We are trying to address this problem administratively.

Senator SANTORUM. I do not want to badger the witness here,

but please answer my question. Is that what Congress did?

Dr. MCCLELLAN. That was the basic model in the law.

Senator SANTORUM. So Congress put together a model that said

you could sign up the 31st of January and be eligible for your benefit the following day, and expected there not to be any problems.

I see.

So some could say that it was a botched job on the part of CMS.

Some might suggest that Congress may not have been thinking

quite clearly when it put together a statute that is almost administratively impossible to accomplish by setting up a turn-around

time, as such.

So what you are telling me is, to fix the problem that I think everyone here agrees is a problem, which is allowing people to sign

up until the day before the end of the month and then making that

benefit available the following day, is there anything you can do to

fix that or is Congress going to have to change that?

Dr. MCCLELLAN. We have definitely taken some steps to address

that. I talked about the education work we are doing.

Senator SANTORUM. I understand. But you cannot arbitrarily put

a cut-off date.

Dr. MCCLELLAN. We are investigating whether we really do have

the statutory authority to make this change, and whether making

this change now would carry its own disruptions that we want to

try to keep in mind as well.

Senator BAUCUS. Would the Senator yield just for a point of information? Just very briefly, 15 seconds.

The CHAIRMAN. I will give you additional time.

Senator SANTORUM. Thank you.

Senator BAUCUS. Namely, we modeled this after the plan in

Medicare Advantage, so there is nothing new here. That is, the

date is not new. It is a procedure that was followed previously in

the law under the Medicare Advantage drug program, so it is not

a new procedure.

Senator SANTORUM. I thought in Medicare Advantage there was

a cut-off. Is there not a cut-off in Medicare Advantage?

Dr. MCCLELLAN. There is not a cut-off. But Medicare Advantage

is a different situation. It is, as you know, coverage that has not

affected so many millions of people at the same time. We have seen

gradual and steady enrollment and continue to see gradual increases in enrollment in Medicare Advantage.

In contrast, what we had at the end of December and in early

January was, literally, hundreds of thousands of people joining a

plan late or switching a plan late, which is not a situation that we

had ever had happen in the Medicare Advantage program.

The CHAIRMAN. Senator, proceed.

21

Senator SANTORUM. Thank you, Mr. Chairman.

Another question just on how the program is doing. You say 24

million people have signed up. How does that fit with what you had

projected by this date that would have signed up?

Dr. MCCLELLAN. Well, most people who enroll in a program wait

until close to the end of the enrollment period before making a decision. If you look at the way people make choices in the Federal

employees’ plan or in retiree plans, there generally is a delay when

people make a decision.

So the fact that we have had, by early January, close to 4 million

people sign up on their own who did not have coverage before, the

fact that we have had much greater participation in the retiree programs—a lot of people were worried not only that there would not

be any drug plans, but that retiree coverage would get dropped.

Overwhelmingly, we have not seen that happen. Retiree coverage

is stronger. The decline that had been taking place for the last 15

years has essentially stopped.

Senator SANTORUM. So let me make that point. One of the big

concerns we had here was that there would be an abandonment of

drug coverage by private employers to their retirees.

Dr. MCCLELLAN. Right.

Senator SANTORUM. In fact, we have been seeing that over time.

One of the provisions that was put in the bill was to actually subsidize those plans to make sure that did not happen. That has

worked, is what you are telling me.

Dr. MCCLELLAN. There has been much more take-up of that than

expected, so that 11 million-plus retirees are continuing their coverage, with more support from the Medicare program to keep it in

place. That saves money for us compared to having them be in the

Medicare drug coverage, and it is better for them because it is coverage that people like and want to continue.

Senator SANTORUM. And the final point I would like to make, is

to talk about the savings that have occurred vis-a`-vis what we

thought would be the cost of this program.

Again, there are a lot of complaints about this program, but what

we are seeing is the competition between plans and competition in

pricing has actually brought down the cost that we projected in this

bill. Can you explain how that happened?

Dr. MCCLELLAN. Well, the President’s budget, released this

week, showed costs of the drug benefit being $130 billion lower

than had previously been projected.

A primary reason is the strong competition we have seen among

the drug plans. That has led to much lower premiums than expected. Premiums that seniors are going to pay this year are now

expected to be around $25 a month.

When the bill was being discussed and before we had actual information on these competitive bid prices, the cost for a beneficiary

was expected to be around $37 a month. So, that is much lower.

Not only that, because we have had strong competition, there are

plans available that fill in the deductible, that fill in the donut

hole, that get people predictable flat co-payment amounts, things

that seniors really want, more than what was in that standard

plan designed in the legislation.

22

So we have seen real savings for beneficiaries, real savings for

taxpayers, and, I might add, savings for States as well. In talking

to the State of Pennsylvania recently, they are going to have millions of dollars of savings.

Senator SANTORUM. Our Governor just told us, $180 million in

savings to the Commonwealth of Pennsylvania.

Dr. MCCLELLAN. That is right, because of these lower costs.

Senator SANTORUM. Thanks.

The CHAIRMAN. Senator Bingaman?

Senator BINGAMAN. Thank you very much. Thank you for being

here. Thank you for your hard work on trying to make this system

work.

This bill was signed by the President in December of 2003, so it

has been on the books now for a couple of years. We are into the

third year of the law. It is clear to me that there is a big disagreement between the administration and some of us here in Congress,

at least, about whether or not some changes in this law should be

enacted before this Congress adjourns sometime this year.

I gather the administration’s position is that we should not

change the law. There was a sense of the Senate resolution that

was voted on last Friday that I was not here to vote on—I think

Senator Grassley offered it—essentially saying that legislation is

not needed at this time.

I believe 42 Senators voted to say that no legislation is needed

at this time; 54 voted the other way. So, a majority of the Senate

did not want to go on record as saying we did not need to change

the law.

Now, why can we not work together with the administration and

craft a bill that will fix some of the problems that we are talking

about here? This issue that Senator Santorum just raised, he says,

Congress made a mistake when we wrote the law and said you

could sign up on the 31st of the month and expect to get your drugs

the next day. That was a mistake, so we should change it.

But every effort that I have been involved in to try to get a

change has resulted in a stone wall: we can do this administratively, we do not want to change. Why can we not work together

to make the obvious changes that we all agree ought to be made?

Dr. MCCLELLAN. Well, Senator, I appreciate your interest in

making sure we get this right and get it right for everyone as

quickly as possible. I hope you will not mistake our focus on the

administrative actions that we can take right now to make the program work better, and that we are taking to make improvements

every day, and to make further improvements in the month or 2

months ahead.

That does not mean we do not want to keep reporting closely to

you all and to make sure that we are addressing all the problems

that arise. There is a lot of time left in the legislative session.

There is a lot of time left——

Senator BINGAMAN. So you are open to the possibility of changing

the law before this session is over?

Dr. MCCLELLAN. Our first focus, right now, is on solving the

problems that exist right now. We think we can do those administratively. We will stay in close touch with you about that.

23

Senator BINGAMAN. Let me cite one of those to you. The low-income subsidy that is in the bill, the report I have gotten is that

60 percent of the people who have applied for that are turned

down, and primarily they are turned down because they violate the

assets test, which means, for example, a widow who has combined

assets of $10,000, including the cash value of a life insurance policy, is turned down because she cannot meet the assets test.

Do you not think that it would make some sense for us to go

back and revisit that and either repeal the assets test or modify it

so that this low-income benefit is not denied to so many people? In

my State, I am told that there are 100,000 people eligible for it.

Fewer than 10,000 of them are signed up because they keep getting

turned down.

Dr. MCCLELLAN. As you know, because you feel so passionately

about this assets test, the assets test in the law is a result of a

compromise with a limited amount of taxpayer resources that are

available to help make sure they go to provide the best coverage

possible for as many people as possible who really need it. We have

been focused on making sure that more people who are eligible for

this assets test can sign up for it.

Social Security has been doing a tremendous amount of outreach

work, and we keep learning from our experiences about best practices for doing this as we go along. We are now 1 month into the

benefit.

Social Security has almost 1.4 million people enrolled in the lowincome subsidy, which, if you look back on prior programs that

have had assets tests or other means tests, is a very good number

for the first month of the benefit.

For Medicaid, 40 years later we are still only at 50-percent enrollment. So again, I think our first focus needs to be on making

sure that people who do have the least means to pay for their

drugs can take advantage of this program.

Senator BINGAMAN. Let me ask about one other issue, which is

a little unrelated. There is a provision in the bill, the prescription

drug bill, that allows Indian Health Service and Indian providers

to get Medicare pricing for their contract health service dollars.

That requires some implementation by you folks. It was supposed

to be implemented over a year ago. Nothing has been done on it.

This means a lot of money to the Indian Health Service. It this

something you could get people working on and get that implemented?

Dr. MCCLELLAN. Absolutely. I will follow up with you on that.

We have been doing a tremendous amount of outreach and interaction with tribal pharmacies and with other leaders in Indian

country to make sure they can take advantage of the important

new benefits in Medicare.

[The information appears in the appendix.]

That includes free preventive benefits for diabetes and other conditions that are very common in the Native American population,

as well as making sure that their pharmacies and the people in Indian country take full advantage of the drug benefit. But I do want

to follow up with you on that.

Senator BINGAMAN. Thank you very much.

24

The CHAIRMAN. Some members have stepped out, so I am going

now to Senator Wyden. Then of the members that are here, Senator Thomas would be next.

Senator Wyden?

Senator WYDEN. Thank you, Mr. Chairman.

Going back to my Grey Panther days, Dr. McClellan, my sense

has always been that with seniors, the first impression is just critical. So if we do not get done the kinds of things Senator Baucus

is talking about, it will be uphill for a long, long time to come. I

urge you to move quickly on that.

Now, for the first time you have opened the door to making it

easier for seniors to compare these policies. I think that is constructive, and I want to follow up with you on it. I have been in

contact with the National Association of Insurance Commissioners.

It seems to me we could start moving voluntarily, your Agency

and theirs, to begin to make this information more understandable

to them, then we could move ahead with the kind of excellent legislation Senator Baucus is talking about.

Would you be willing to have your folks call the National Association of Insurance Commissioners, do it right away and begin to

work with them on trying to simplify these policies?

Dr. MCCLELLAN. We would definitely like to hear the perspectives quickly from NAIC on this. I would just let you know, Senator, because I know how important this issue is to you, we have

also had discussions with the health plans about this.

I think you have been hearing from some health plan executives,

too, about ideas that they have, as well as from some of our experts

in the field who are counseling beneficiaries, who are using the

tools that we have now and who are helping us find ways to make

those even more effective for beneficiaries than they are now, because there are, as you say, some gaps and some opportunities that

are apples-to-apples comparisons.

Senator WYDEN. Are you at all open to changing the enrollment

period before there is a penalty? We have had several votes on this.

Here is what I am concerned about. There is so much confusion out

there, that a lot of people will not sign up because they cannot do

these comparisons. Then, of course, they start racking up the penalties.

If we eliminate the confusion, a lot more people are going to sign

up, and we will not even face these enrollment penalty issues. Senator Snowe, I, and others have been very interested in this.

Will you—like you have done on comparisons—say, today, that

you all will take another look at this question of the enrollment period? Because I think there is a way we can get this solved, but

you all need to be flexible on this.

Dr. MCCLELLAN. Senator, let me say right now we would like to

keep talking and reporting to the committee, and all of you, about

the status of our ongoing enrollment efforts. Our focus right now

really is on the steps that we can take administratively, now, to address and solve problems.

As part of that effort, we are tracking enrollment support. We

are still seeing steady enrollment in the program, people using the

tools that are available and help that is available to make deciVerDate 11-MAY-2000 10:56 Jan 08, 2007 Jkt 095484 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 31519.000S SFIN1 PsN: SFIN1
25

sions, people hearing more about plans that their friends and colleagues have used that are getting them assistance now.

So that is really what we are focused on in the short term. I

think your suggestions about ways to improve the apples-to-apples

comparison are things that we can do right away. So, let us talk.

Senator WYDEN. I think Congress is going to change the enrollment period issue for you, is my own kind of judgment. But we can

talk about that again.

One other matter that Senator Snowe and I have been very interested in is, we think a lot of folks are not signing up because

the government is not doing enough to hold down the costs.

Senator Snowe and I have now got a majority of the Senate behind our bipartisan proposal to hold down these costs. Of course,

we have had a lot of discussions with you about this.

How do you think you can hold down costs, for example, with

single-source drugs without something like the Snowe-Wyden legislation? There is no capacity of the government to hold down the

costs when you have single-source drugs unless the government is

able to bargain. Senator Snowe and I have been trying to get that

passed.

Tell me how you would see the government, at this point, with

the government’s hands tied behind the government’s back, hold

down the cost of single-source drugs?

Dr. MCCLELLAN. Well, Senator, I think what we have seen is tremendous efforts to negotiate lower prices and get drug costs down

by the prescription drug plans. That is why the cost of this benefit

is turning out to be vastly lower than people had expected. I, again,

have asked our actuaries, our independent actuaries, about whether we are taking the most effective steps to hold costs down, based

on all the information that we are seeing now.

That includes a lot of new information showing that these plans

have costs coming in much lower than expected, for better benefits

than expected, and they continue to tell us that they do not think

that their additional steps through further negotiation, on top of all

the negotiation that is going on, would further lower costs without

compromising quality of care.

Senator WYDEN. Mr. Chairman, my time is up. I would only say

that the witness did not respond to my question about single-source

drugs. We will have some more discussions about it.

Dr. MCCLELLAN. Let us keep it up. Thank you.

Senator WYDEN. Thank you, Mr. Chairman.

The CHAIRMAN. All right.

Now, since Senator Schumer came back, I am going to go to Senator Schumer. Then it will be Senator Thomas, then Smith, Lincoln, Kyl, then Snowe.

Senator Schumer?

Senator SCHUMER. Thank you, Mr. Chairman.

I would like to address two issues here today that are deeply affecting my State of New York. The EPIC program—that is one of

the State SPAPs, Prescription Assistance Programs—and then formulary switching by drug plans.

As you know, Dr. McClellan, there was a lot of concern when the

Act was written about seniors who already had drug coverage, and

that they would be pushed onto the Medicare program to shift the

26

cost to the Federal Government. To adjust for this, obviously, employers who continued to provide coverage were given a 28 percent

subsidy for their expenses.

But this is not a problem just for companies, it is a problem for

certain States as well, States like New York who have generous

drug programs for their seniors who are at too high an income for

Medicaid but still need help affording prescription drugs.

Governor Pataki recently announced his intention to shift 25 percent of the members of New York’s program, called EPIC, onto the

Medicare drug benefit. That is 91,000 people of the 367,000 currently enrolled in EPIC. Right now, he is only looking at EPIC enrollees who are eligible for the Federal low-income subsidy.

But I am concerned. We have a very tight State budget. They are

cutting back health care costs. EPIC coverage might be phased out

for the rest. That would leave them much worse off than they are

now, just like we were worried about with the employers.

So, first, I want to ask you, how are things going for the employers with the 28-percent subsidy? Second, I am hoping we can expand this 28-percent subsidy to State prescription plans, because

that is not working out.

In the Senate bill we had dealt with that, in the House bill we

did not. If it has worked well for private companies, would you

work with me to try to extend this subsidy to State non-Medicaid

plans?

Dr. MCCLELLAN. Senator, we have exactly the same goal that

you and Governor Pataki do, which is making sure that people who

count on EPIC can continue to do so, get the same or better benefits than they have had before.

Senator SCHUMER. Great.

Dr. MCCLELLAN. We would like to do it in a way that saves the

State the most money possible. The State of New York is expecting

hundreds of millions of dollars in savings as a result of the new

Medicare drug benefit.

Senator SCHUMER. Right.

Dr. MCCLELLAN. One way for EPIC to work would be to get the

employer subsidy directly. The disadvantage of that from a State

standpoint is that the employer subsidy is more modest than the

comprehensive financial help that Medicare can provide through

the drug benefit itself and the low-income subsidy, with EPIC adding onto the drug benefit.

That is exactly what the Governor wants to do, so it provides

more savings for the State, it ensures that beneficiaries continue

to get the high-quality EPIC coverage that they have counted on,

and we will be working very closely with the State to make sure

that is done carefully.

Senator SCHUMER. Good. So I urge you to do two things. One, try

to make sure that all the EPIC beneficiaries are made whole, they

are not worse off after this action. Second, make sure at least that

the State is made whole.

Dr. MCCLELLAN. Right. And we expect the State to be able to

save a lot of money.

Senator SCHUMER. Good.

Dr. MCCLELLAN. We will work very closely with the State.

27

Senator SCHUMER. All right. That is helpful. That is good news.

I am going to keep pushing you on this because this is really important to New York, and to these 367,000 people. EPIC has been

an extremely successful program, as you know. I do not think you

would disagree with that.

Dr. MCCLELLAN. No.

Senator SCHUMER. We’ve just got to keep it at that level. I am

just worried, as things work their way through, things might fall

through the cracks. So I am glad that you have a positive attitude

like this, and expect to be hearing from me regularly on it. All

right.

Next, on formularies. I would like to touch on something several

of my colleagues mentioned to you and Secretary Leavitt last

month. Since drug plans are allowed to change their formularies,

seniors may choose a plan because it has a drug they need, then

they find out a few months later that the drug plan has dropped

that drug. There are a lot of people who need one particular drug;

the elasticity is not the same. So then they are stuck with the plan

for the rest of the year that does not have the drug that they want,

and it is the whole reason they picked that plan.

So I think that does not make any sense. Today, Senator Snowe,

Senator Bingaman—I think there are others on the committee—we

are introducing a bill—it is called the Medicare Drug Formulary

Protection Act—that would prohibit plans from changing their

formularies until the next open enrollment period, so then the person could leave.

It would be wonderful if this legislation were not necessary. Do

you recognize this is a problem? How will you work with us to resolve it?

Dr. MCCLELLAN. Well, Senator, I want to be very clear that drug

plans cannot change their formularies willy-nilly, and we have not

seen this happen yet, except in cases where it is important to

change the formulary, like if a new generic drug becomes available

that can save people in the program a lot of money without compromising safety or without requiring them to change the medication they use, or if there is new information from the FDA that

may influence the way——

Senator SCHUMER. So you are not going to let them change their

formularies?

Dr. MCCLELLAN. But there is a process for making formulary

changes that requires a lot of steps before any change can occur to

make sure that beneficiaries are fully protected.

First of all, the change has to be reviewed by the prescription

drug plans’ P&T Committee. It is an expert committee with independent representation. Second, the proposed change has to be submitted to us, where we make a decision about whether it is——

Senator SCHUMER. And you are going to be tough on those

changes?

Dr. MCCLELLAN. We are going to do it in the interest of beneficiaries.

Third, if there is an approval, the beneficiaries need advance notice, an opportunity to continue on their drug. We have seen a few

of these requests come in, but we will be very——

28

Senator SCHUMER. I am glad to hear that you are not just going

to allow it randomly. That is a big relief to us, and we would like

to work with you on it to make it as narrow as possible.

Dr. MCCLELLAN. Absolutely.

Senator SCHUMER. Or only as necessary as possible.

Dr. MCCLELLAN. We will keep in close contact.

Senator SCHUMER. Thank you, Mr. Chairman.

The CHAIRMAN. Senator Thomas?

Senator THOMAS. Thank you, Mr. Chairman.

Thank you, Doctor, for being here. Let me say that maybe it is

because of our smaller State, and so on, but we have had pretty

good luck with the program, as a matter of fact.

I met with the pharmacists, I have met with AARP, which has

been very involved in it, and by and large it has gone reasonably

well. We do have some unique, I think, issues because we do have

rural areas, one pharmacy in town, that sort of thing.

With regard to the pre-approval process, each plan has its own

process. Some of the pharmacists and physicians are concerned

about the medications for the pre-approval process. Have you been

concerned about that? Has there been difficulty?

Dr. MCCLELLAN. Well, if there are any specific complaints, we

are investigating them and will track them if there is a pattern.

We have not seen any widespread problems with a particular plan,

but we do want to hear about any concerns that any of your pharmacists or beneficiaries are having so we can follow up on those

promptly. We have been doing that through our regional office,

working with people in Wyoming and your office already, and I

want to thank you for that.

Also, I think there are some opportunities for simplifying how

this benefit works for pharmacists. Right now, when they go

through a preauthorization process, they may get one code back

from one plan, a different code back from a different plan, and that

adds to the red tape and the administrative burden in the pharmacy.

Senator THOMAS. Right.

Dr. MCCLELLAN. I am very pleased that there is now a group

that involves a number of plan representatives and pharmacy representatives, senior levels working together to simplify those administrative steps.

We are going to push that process along and support it fully to

make this exceptions process, or the prior authorization process,

work as simply as possible for our pharmacies.

Senator THOMAS. Good. I think that is helpful. There is confusion, of course, because there are lots of formularies out there, and

so on. But in a small town, there is one pharmacy and they carry

a relatively small number. So do you have any plans to help people

understand, in communities of that kind, what might be available

so it makes it a little easier?

Dr. MCCLELLAN. When beneficiaries call us, or go to our website,

or have someone who works with them go to our website at medicare.gov, or when they go to an enrollment event—we have a lot

of enrollment and counseling sessions going on around the State of

Wyoming—they can get information on plans that serve a particular pharmacy.

29

So if someone in one of these rural communities, absolutely,

wants to have convenient access to their pharmacy, they can ask,

is such and such pharmacy in this plan, or I want a plan that gives

me the best deal on my medications that includes this particular

pharmacy, and we will find them a plan that gets them the pharmacy service they need.

Senator THOMAS. One of your other persons to testify, and from

a small town, has indicated that there is some question about the

preparation of pharmacists to be able to deal with the questions

that they have. Have you focused on that at all, assisting pharmacists?

Dr. MCCLELLAN. Senator, that has been a huge priority for us.

That is why we have had our regional staff and the pharmacist

staff of our Agency do events around the country, all over the country, literally, over the past year. For example, we have had an

event in Kalispell, MT for training and information about the drug

benefit.

Senator THOMAS. The bottom line, finally, I know pharmacists

are limited as to what they can do, but they are the people you go

to when you want some information.

Dr. MCCLELLAN. They have been tremendous in this process.

Senator THOMAS. Right.

Dr. MCCLELLAN. We are improving the information available to

them every day.

Senator THOMAS. You are helping them. Thank you for all you

are doing. Thank you.

Dr. MCCLELLAN. Thank you.

The CHAIRMAN. Senator Smith, then Lincoln, then Kyl, then

Snowe.

Senator SMITH. Thank you, Mr. Chairman.

Welcome back, Doctor.

Dr. MCCLELLAN. Thank you.

Senator SMITH. Thank you for going another round of this after

last week.

Dr. MCCLELLAN. I am glad to.

Senator SMITH. Last year, it was either to you or to Secretary

Leavitt I expressed concern that the formularies used not discriminate against mental health medications.

So I was very pleased when CMS indicated to plans that they

would be expected to cover all, or substantially all, medications in

six therapeutic classes, including anti-depressants, anti-psychotics,

and anti-convulsants.

Plans are expected to forego using strict management utilization

techniques that might prevent beneficiary access to these medications. I really appreciated your doing that.

But I have heard, nevertheless, that many plans are not abiding

by CMS’s guidance, and beneficiaries are now having trouble getting these types of prescriptions filled. It is of enormous concern to

me, and I wonder if you can discuss what you are doing in response

to plans not covering this category of medication.

Dr. MCCLELLAN. Well, Senator, I know how important this is to

you. It was your attention to this issue that helped us focus on

making sure we had effective coverage rules in place, last year, and

I share the same concern. I have seen some of the specific reports.

30

What we have done is, when we hear a specific complaint about

a beneficiary not getting a drug for a mental illness that should be

covered, and if they are on an existing therapy, essentially all of

the mental illness drugs are covered under the benefit and they

can continue that coverage through the year.

So if we hear about specific complaints like that, we will follow

up with the specific plan and make sure that it is addressed. We

are keeping track of these problems. If a pattern does emerge, we

have further enforcement actions that we can take against the

plan.

We are working very closely with the APA and many of the advocacy groups on this, but as you hear about specific cases, we want

to know about that, too.

Senator SMITH. Well, it was good to include it in the requirements, the formulary guidance in 2006. My question to you is, are

you going to require it in 2007?

Dr. MCCLELLAN. We are going to have a public comment process

soon on the formulary guidance for 2007, and I will look forward

to discussing the best way forward with that guidance with you as

it comes out.

Senator SMITH. I would appreciate it. I think you do not have a

complete prescription drug plan if you do not cover these categories

of medicines. They have had them in the past through other

means, but now the government is involved in it, and the government needs to give equal weight to mental health as it does to

physical health. So, I would appreciate your attention to that.

After you left the Aging Committee last week, I had a constituent from Tillamook, OR named Robert J. Kenny, who gave testimony you would have liked. It was very favorable to the prescription drug plan.

But he had a few recommendations. He is retired. He spends a

lot of time as a volunteer at the State Health Insurance Program,

or SHIP, in his community. This is what he said: ‘‘There are more

than 4,800 seniors in Tillamook County. Only about 500 of these

have been helped because most of them do not know how to get

that help. My schedule is now running empty.’’

He said, ‘‘We could nationally provide local TV and radio advertisements giving the telephone number of the closest SHIP office,

or its equivalent, which can be called to get real help to those that

need it in a timely manner.’’

He indicated that he enjoyed it, he had great success, and people

left by enrolling with him. He was very pleased with the program,

but I think what he is asking, and what I am urging, is that perhaps we ought to consider some very inexpensive local advertising

that would give out a number of one of these senior centers where

they are anxious to be helpful. When they help, people leave happy

with you, CMS, and the prescription drug Medicare Part D.

Dr. MCCLELLAN. I think that is a great idea. We hear the best

ideas from people who are out there on the ground, people like him

who have done this counseling, know the program and are really

putting their efforts into helping seniors. So we have heard a lot

of good ideas, and I will definitely take this one back.

Senator SMITH. Thank you.

31

The CHAIRMAN. I visited the Marshalltown, IA hospital and sat

in on SHIP volunteers doing that. It is a wonderful resource. I even

heard of instances where, on further information, they get a hold

of people and get them back and say, we advised you this plan, but

we found out this plan is yet better for you, and it just seemed to

me a great enthusiasm among the SHIP volunteers.

Dr. MCCLELLAN. These local volunteers have been very helpful.

We had an event in Jonesboro, AR at an elementary school, where

sixth graders did some of the counseling, advising, and helped

some of the seniors on the Internet, too. So there are lots of sources

of help.

The CHAIRMAN. I did not know you had time to go outside the

city. I would have had you come to Iowa.

Dr. MCCLELLAN. We are getting a lot of local help.

The CHAIRMAN. Senator Lincoln?

Senator LINCOLN. Thank you, Mr. Chairman.

I have kept him pretty busy in Arkansas. He has been to

Jonesboro, Ft. Smith, and your regional office in Dallas has been

enormously helpful.

We started, back in September and October, getting the word out

about our SHIP offices and what they could do in being helpful. I

want to echo what Senator Smith and the Chairman have said,

that we can do more in terms of allowing those local folks to be

helpful. I think we have tried very hard in Arkansas, and we appreciate your supporting that and hope you will continue to do

that.

I would also like to echo the other comments from Senator Smith

about mental illness. We have definitely had some concerns in Arkansas. Many folks saw the heartbreaking article in the Washington Post on Monday.

But I know that in some of our local communities in that instance, the community health center was the one that reimbursed

for their extra costs that the private plan for Part D should have

covered.

Did CMS do anything special as far as outreach and education

for persons with mental illness, and what are they going to do

about reimbursing those centers?

Dr. MCCLELLAN. Senator, we have done extensive outreach on

mental illness issues. This has been a high priority for many Senators, particularly Senator Smith and you.

Senator LINCOLN. Right.

Dr. MCCLELLAN. As a result, we worked very closely with many

organizations and advocacy groups, like the National Association

for the Mentally Ill, NAMI, and many others to help people find

out about this coverage.

And, as you know, many people with mental illness who have not

been able to qualify for Medicaid, or even some people on Medicaid

with mental illnesses who need multiple medications, have, until

now, not been able to get the drugs that they need.

Senator LINCOLN. Right.

Dr. MCCLELLAN. I have been very pleased, in hearing from

NAMI and other groups, about so many people with mental illnesses who are now getting much better coverage.

32

But we need to make sure to continue those outreach efforts. If

you do hear of any specific cases of a beneficiary inappropriately

being denied a medication that they were on before, the drug that

they need to keep their mental illness in good clinical control, we

want to act on those promptly.

Senator LINCOLN. We have seen an awful lot of closure in terms

of our mental health centers. I do not know. Will the community

health centers be reimbursed for those costs?

Dr. MCCLELLAN. If beneficiaries were to have been paid by the

prescription drug plan, we will work with them on reconciling those

payments.

Senator LINCOLN. Right.

There was another article in the Washington Post on Saturday

about the report of FDA’s backlog of over 800 generic drug applications. In the administration’s budget that has come out, looking for

ways to cut Medicare programs, it certainly jumped out at me from

the budget in terms of the volume and the amount of cuts that they

are looking at.

How are we going to do that? How are we going to provide the

most cost-effective way to provide the volume of drugs that are

needed by Medicare beneficiaries if the administration continues to

allow a backlog of generic drug applications to balloon to 800 or

more?

Dr. MCCLELLAN. Well, Senator, I know a bit about this issue

from my previous job as well——

Senator LINCOLN. Right.

Dr. MCCLELLAN. [Continuing.] Where we launched a new initiative to do two things. One, was to speed up the approval of

generics. We have seen a big increase in the number of applications.

One way to do that is to improve the quality of the applications

coming in. In many cases—you would not think this would be

true—it takes a second round or a third round for the generic application to be approved.

So, there have been more generic approvals over time, and we

are seeing the benefits of that right now, not only in Medicare and

Medicaid, but in our whole health care system.

We have the lowest rate of drug spending growth in more than

a decade this past year, in good part as a result of greater availability and lower prices from strong competition in generic drugs.

Senator LINCOLN. So you are saying that that 800 backlog should

not be alarming because you have approved more?

Dr. MCCLELLAN. Well, I can tell you what we are seeing, which

is that when generics can come on the market, they are coming on

quickly and they are coming on at a lower cost than before because

of strong competition.

Senator LINCOLN. Is that not an incentive for us to eliminate

some of that backlog?

Dr. MCCLELLAN. Well, I am sure. I mean, I think that is a better

question for you to direct to FDA, but I know it is a very high priority for them to make sure generics are available quickly when a

brand-name patent ends.

Senator LINCOLN. We had one other question from our nursing

homes. Actually, two questions from our nursing homes at home.

33

The auto-enrolling of dual eligibles. CMS relied on the data from

the Social Security Administration, like the resident’s home of

record. They used that data to randomly assign beneficiaries to

plans.

In some cases, the long-term care residents were assigned to a

plan that was outside their region because their home of record

was different, a different State from their long-term care facility.

Do you have any plans to address that problem, or how you

might?

Dr. MCCLELLAN. Yes, it is a problem. In the initial phases, even

if they were outside the State, the plans can provide drug coverage.

In most cases, most of the plans have broad national networks, and

so, temporarily, even if they were in an out-of-State plan, they

could get the drugs that they need.

But we have been working to identify those specific cases. When

we find out about it, we will assign that beneficiary or work with

that beneficiary to choose a plan that is in their coverage area

going forward.

Senator LINCOLN. All right.

And we are still waiting on guidance from you. Our attorney general came out with a ruling yesterday about being able to choose

our State law. So do you have any idea when we can expect that

guidance from you?

Dr. MCCLELLAN. I am glad you asked about that.

The CHAIRMAN. Give a short answer.

Dr. MCCLELLAN. Yes. We took a look at their answer that came

out just last night. I am not the lawyer, but it looks consistent with

what we had been saying to community pharmacists in Arkansas,

and around the country. We are reviewing that attorney general

opinion right now, and we will get back to you with a fuller response.

Senator LINCOLN. Maybe this week?

Dr. MCCLELLAN. Yes.

Senator LINCOLN. All right. Thank you.

[The information appears in the appendix.]

The CHAIRMAN. I visited two nursing homes in my State during

January on this very issue, and I never had any of my nursing

homes give any complaints about the transition.

Senator Snowe?

Senator SNOWE. Thank you, Mr. Chairman. Thank you for holding this hearing, because I think it is one of the most critical oversight hearings that we could have this year on this significant benefit.

Welcome, Dr. McClellan. I know that you are certainly attempting to address many of the issues that have been associated with

the implementation. I think it is not a surprise that it would be

fraught with difficulties, but I think that the implementation has

been more than just mere growing pains.

I hope that you will adopt the operative word of being flexible in

grappling with some of the key questions that have been raised

here today, and in the future.

I think it is going to be very important in order to encourage

other seniors to enroll in this benefit program. So, I appreciate

what is being done to resolve many of these difficulties.

34

I hope we can get beyond that, because it ultimately could enshrine the concern among seniors about how they view the program, and ultimately they will not sign up in the final analysis.

That also could be to the detriment of the benefit.

Senator Wyden and I, as he mentioned, are concerned about negotiations and being able to pass legislation to vest the Secretary

with that authority and prerogative. You were mentioning that the

savings are accomplished in the current benefit. But, as Senator

Wyden indicated, and I think correctly, most of the savings come

from the subsidy.

So is it not in the Federal Government’s interest to have the ability to negotiate in those circumstances where the plans might request it or their sole source drugs, which GAO has indicated is

where we could derive savings?

Is it not in the Federal Government’s interests, since this program is costing upwards of $700 billion, to make sure that we have

the very best price, if it is necessary, for the Secretary to use that

authority?

Dr. MCCLELLAN. Well, it is certainly in the Federal Government’s

interest, in fact, its responsibility, to get the most effective cost, the

lowest possible cost of the drug coverage while providing up-to-date

access to the medications that people need, and we should keep

talking about this.

But I have not seen any proposals on government negotiation

that would save money, and especially that would save money

without driving people to narrower formularies or restricting access

to medications.

You will remember, when we were having debates about this legislation several years ago, there were some proposals made that

would have relied on government negotiation, but the only way

they kept their costs in the ballpark was by limiting the number

of drugs that could be covered in a class to no more than two. So,

nothing like what we——

Senator SNOWE. That was not our proposal, though.

Dr. MCCLELLAN. No, I know it was not your proposal.

Senator SNOWE. Right. No. That was a fixed——

Dr. MCCLELLAN. The goal is the lowest possible cost without preventing access to needed drugs.

Senator SNOWE. It just seems to me that the singular interest of

the Federal Government is to save money and to have that leverage. It is not requiring the Secretary to negotiate, it is allowing

him to, if necessary, under certain circumstances. That is all.

I cannot understand, when we are spending $700 billion-plus,

that we would not be interested in maximizing our ability to get

the best price, not just relying on the subsidy.

The subsidy does accomplish that in making it better, but that

is the Federal Government’s money. So why are we not trying to

make sure we are also getting the best prices? That is what I am

saying. I do not understand why there is a resistance on this question, I really do not.

Dr. MCCLELLAN. We are seeing much lower costs for the taxpayers as well. The cost of the drug benefit this year is 20 percent

lower.

35

Senator SNOWE. I understand that. But it is all still taxpayers’

money. So the idea is to make sure that we are getting the best

price incorporated in that, in addition to the taxpayers’ subsidy,

which is what this is all about. That is what this is all about.

I just do not understand. It is not requiring, it is allowing. It is

leverage, like you do in the marketplace. It is the same idea, having the same leverage. The Federal Government should have that

ability as well, and certainly, we will continue to try on that score.

In terms of eligibility and participation, it concerns me that only

1 in 10 seniors have enrolled in this program on their own. Are you

concerned about that, that only 3.6 million have really selfenrolled, all the others have been automatically enrolled? Is that

a concern? Because that means that there is not broad-based participation.

People are concerned—rightfully—because of all the confusion,

concerns, complexities, and they have decided not to sign up for the

program. Now, does that concern you?

Dr. MCCLELLAN. We are continuing to see hundreds of thousands

of people, every week, enrolling on their own. One reason that more

people did not have to enroll on their own is because employers did

not drop coverage, also because the Medicare Advantage health

plans are offering stronger benefits.

So, we are seeing most Medicare beneficiaries now taking advantage of this program, and we are seeing hundreds of thousands

more signing up every week. We are very much on track with our

enrollment expectations for this program.

I do share your goal of making sure that anybody who has questions can get those questions answered. They know they can call

1–800–MEDICARE or get help at local events that we are having

all over the country, including in Maine.

Senator SNOWE. Well, it gets back to the question of flexibility,

because on the question of the enrollment period and extending it

to the end of the year, I hope you do not wait until the end on that

issue, because I think it would encourage more people, if they knew

that there was latitude, to think about it and to get help, to think

through whether or not they should participate. That would benefit

seniors.

Also, for formulary protection, as Senator Schumer indicated,

that clearly is important, because that is also another impediment

and barrier for our people signing up. I really do think you do not

want to wait until the end on the question of enrollment, and that

is why so many of us are pushing that question as well.

We ought to extend it so we can get this right, so we get this

program off on the right foot. I know that has been difficult, but

I think we really have to send the right signal so that we can encourage people to sign up, because they will benefit from the savings. Thank you.

The CHAIRMAN. Thank you, Senator Snowe.

Senator SNOWE. Thank you.

The CHAIRMAN. We will start a second round now of 5 minutes.

I hope that we can keep it within 5 minutes.

The Agency has contacted EDS to assess the causes of some of

the start-up issues with prescription drugs. So what is EDS doing,

36

and what have they found to date? What recommendations has

EDS made?

Dr. MCCLELLAN. Well, first, they reviewed the overall picture of

our systems, how the different pieces that needed to work together

for data hand-offs were actually set up, and to make sure that

those were fundamentally sound.

I think they may give us some recommendations on simplifying

a few steps in the overall processes, but overall they have provided

us with an overview that looks like we have the right basic structure in place.

The challenge that we have is in hand-offs between each of the

different parties in making these prescription drug benefit information systems flow, making those work as smoothly and quickly as

possible.

So a big part of the EDS effort is about bringing together representatives from health plan perspectives, pharmacy perspectives,

and State perspectives to make sure we have a shared, consistent

understanding of what needs to happen to resolve the remaining

data transfer issues, and that we are then all working together to

make those transactions go smoothly and quickly.

Every day, we see progress in addressing some of these hand-off

issues. For example, we are seeing more plans successfully use

daily batch processing. We are seeing more transaction questions

being resolved.

I would expect that, as they continue to work with us and hear

from all of these different parties—from Medicare, from the States,

from the plans, from the pharmacists, as they come together—we

will continue to make progress like that. That led to the specific

dates and time-frame that we put in the information that we gave

to you earlier.

The CHAIRMAN. I have a question on another contract. I do not

ask that to assign fault or blame, because I know your staff has

been working very hard.

A number of people are interested in knowing about the genesis

of the contract with Wellpoint. We have not heard from them yet,

but Wellpoint’s testimony states that they were approached in November. After signing the contract, it seems there was not much

time for Wellpoint to get ready, let alone inform pharmacists.

So could you tell us why the Agency did not take that action

sooner of contracting with Wellpoint?

Dr. MCCLELLAN. Well, we took the action based on the availability of a national plan that could serve as a fall-back for providing prescriptions for beneficiaries who did not show up fully in

our information systems. That reflected some discussions and work

done inside the Agency before we put the contract in place.

Over the course of the summer, that is when we heard about

which plans were going to be able to serve beneficiaries. Those contracts were accepted and then finalized in September.

After that, we worked on the best way to provide this sort of fallback service for filling prescriptions. Having a national plan that

could do it, that could serve all areas, was a very important consideration, and then that led to the contract in November.

The CHAIRMAN. All right.

37

Senator Baucus, I have asked my last question, so I will turn to

you, now.

Senator BAUCUS. Thank you, Mr. Chairman.

A couple of points here, Dr. McClellan. I think Senator Snowe

touched on it. From the statistics that CMS has given us, in the

country, about 55 percent of Medicare beneficiaries have coverage.

In my State of Montana, it is only 35 percent.

In the country, the beneficiaries who have signed up in the

stand-alone PDPs are about 8 percent nationwide. Eight percent

voluntary sign-up. Eight percent. In my State of Montana, it is 7

percent.

Beneficiaries in Medicare Advantage programs who are getting a

drug benefit, 12 percent in the U.S., 1 percent in Montana. Then

the dual eligibles is 13 and 10. Beneficiaries in employer plans

taking retiree drug subsidies, 15 and 8. Federal retirees, it is 7

and 9.

So the point I am making, or just want to confirm, frankly, is the

number of beneficiaries who have signed up in the United States

voluntarily, not already automatically into some other plan, is

about 8 percent nationwide. As I said, in my State of Montana, it

is about 7 percent.

So my question is, is that not pretty low in terms of voluntary

sign-up? One Senator here said 24 million Americans signed up.

Well, that is not accurate. We are talking about the voluntary end

of this thing, and Senator Snowe said it was really 3.6 million,

which is a pretty low percentage.

Why is it so low?

Dr. MCCLELLAN. Well, one of our goals was to minimize the number of people who would need to sign up by making sure this drug

coverage worked well with coverage that people already had.

So we have been very pleased that so many people with retiree

coverage are continuing it and taking advantage of the new Medicare subsidies. Also, Medicare Advantage, as you know, Senator,

was not much of an option in Montana before this bill was enacted.

Senator BAUCUS. Right. That is correct.

Dr. MCCLELLAN. Now you have Medicare Advantage plans covering the whole State.

Senator BAUCUS. That is correct. Well, not much. As I said, this

shows about 1 percent.

Dr. MCCLELLAN. Well, the plans are there, but it takes a little

bit of time for people to find out about them and sign up.

Senator BAUCUS. Yes.

Dr. MCCLELLAN. We still have more than 3 months left in the

open enrollment period.

Senator BAUCUS. Good.

Dr. MCCLELLAN. We are still seeing very steady enrollment in

the plans.

Senator BAUCUS. Right.

Dr. MCCLELLAN. And as we mentioned before, a lot of people

tend to wait until later on in a sign-up period to enroll and make

a decision.

Senator BAUCUS. Right. I just want to point out that we have a

long ways to go; nationwide, 35 percent have no credible drug covVerDate 11-MAY-2000 10:56 Jan 08, 2007 Jkt 095484 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 31519.000S SFIN1 PsN: SFIN1
38

erage today for seniors, and in my State of Montana, about 65 percent do not.

I am just concerned about the lower sign-up in more rural States.

I have a hunch that CMS generally, in other efforts to educate people, is more vigorous in urban areas where there are a lot more

people, and not quite as vigorous in rural areas where there are

fewer people and where distances are much greater.

I am just asking you to look at the problem that rural States

have and be much more vigorous in rural States as well.

Dr. MCCLELLAN. I will. And we would like to follow up with you

and your staff on that. For the people who did not have coverage

before in Montana, I believe it is about 21 percent who have signed

up for a prescription drug plan. So if you take the people who kept

their coverage now, we are well on our way.

Senator BAUCUS. Thank you.

If you would also give us a little more breakdown on who the

beneficiaries are. For example, what about Native Americans? We

have a sizeable Indian population in Montana.

Dr. MCCLELLAN. Yes.

Senator BAUCUS. We are a little concerned that they are not getting the same treatment, the same access as others.

[The information appears in the appendix.]

Senator BAUCUS. Turning a little bit to education, or lack thereof,

of pharmacists, you have stated you vigorously reached out to pharmacists. I must say, some of the independent pharmacists that I

have talked to have not heard from you—not from you, personally,

but not heard from CMS—at all.

The concern we have is that the treatment of pharmacists by

CMS is substandard compared to, say, the treatment that CMS

gives to doctors. That is, you educate doctors directly on Medicare

benefits and all that is involved in Medicare. You do not go out and

directly reach out to the pharmacists. Rather, it seems that you are

relying on trade associations to get the information out to pharmacists.

You would not do that with doctors. You would not reach out to

the AMA and have the AMA educate doctors. Rather, you do it directly. Fifty percent of doctors do not belong to the AMA.

Is that somewhat true with pharmacy trade associations, too? We

have a very strong impression in my State that there has been virtually no CMS education and outreach, at least to independent

pharmacists.

[The information appears in the appendix.]

Senator BAUCUS. On our next panel, we are going to hear from

a pharmacist from Kalispell, MT. He was told, well, go to the trade

association meeting. It is in Billings. That is about a 500-mile

drive. That is the only opportunity he has had to try to figure out

what is going on here.

So could you kind of help get your efforts at your Agency to deal

more directly with pharmacists on a much more solid basis?

Dr. MCCLELLAN. We will do that. I would also like to provide

your staff with the outreach that we have already undertaken in

Montana. And you are right. We worked with RxM, with the Montana Pharmacy Association, and with other national groups that

reach many Montana pharmacists, but that by no means is the

39

only outreach we are doing. We have 18 pharmacists on staff at

CMS, doing primarily outreach activities with pharmacists. That is

a lot more than we have doctors.

Senator BAUCUS. Well, get out to Montana a little bit, will you?

Do not just stay in this area. Get out to the rural States.

Dr. MCCLELLAN. They have been enjoying the State. We had 60

events, I believe, in Montana last year, including in Kalispell.

Senator BAUCUS. I participated in a couple, myself.

Dr. MCCLELLAN. Right. And we know we need to do more of that,

so we will keep it up. We want to reach everyone.

Senator BAUCUS. But just so you know, the impression—not impression, the fact—is that independent pharmacists in Montana

have not been contacted. They are at sea. They do not know what

to do.

Dr. MCCLELLAN. Well, we will keep up not only the work with

the associations, but also the events, also the direct mailings, also

the work with their software vendors, and other steps to reach all

of them. We will keep talking with you about that.

Senator BAUCUS. All right. I think you understand. Thank you.

The CHAIRMAN. Senator Wyden?

Senator WYDEN. Thank you, Mr. Chairman.

I want to follow up on Senator Baucus’ question, Dr. McClellan,

because I think, in addition to the education issue, the small, independent pharmacists seem to be saying they do not have any leverage with the plans. They are saying, when it comes to getting paid

and getting promptly reimbursed, that they do not have much

clout.

Is there anything you can do to give them a hand in that regard?

Dr. MCCLELLAN. Absolutely. If any pharmacist has concerns

about the contract terms that they are getting, that they agreed to,

not being followed, they can come to us with a complaint.

I know there is also other monitoring and oversight of these contracting issues from other government agencies that are involved

in making sure the competition is working the right way, like the

FDC and others. We stay in touch with them about the drug benefit.

But we do expect contract terms to be enforced, to be in play so

that pharmacists are paid according to the schedule that they

agreed to, and that there are not undue delays or improper claims

denials. I think there are a lot of other things we can do to help

pharmacists, who have been tremendous in this effort.

I talked earlier about some steps for simplifying administrative

processes to reduce their workload, and I talked about the progress

that we have made in making more comprehensive information

available to them on the beneficiary so they can fill the prescription.

Senator WYDEN. A lot of these small independents have really

put themselves on the line here.

Dr. MCCLELLAN. Yes.

Senator WYDEN. And I think we need to give them more leverage

with the plans.

Now, by your count, Dr. McClellan, how many seniors were

wrongly denied drug coverage since January 1?

40

Dr. MCCLELLAN. Well, we have worked to make sure that any

seniors we hear about get the drugs that they need.

Senator WYDEN. But what is the number? How many seniors, by

your count, were wrongly denied drug coverage? Blumberg, for example, says that there are complaints that hundreds of thousands

of seniors were wrongly denied drug coverage. Your Agency, of

course, is the one we look to for the numbers. By your count, how

many seniors were wrongly denied coverage?

Dr. MCCLELLAN. I would like to make a distinction between the

potential universe of people who could be denied coverage because

their data did not catch up with them, these late switchers that we

have talked about, and people who were affected by some problems

with the data hand-offs. That number looks to us to be in the range

of several hundred thousand beneficiaries. That does not mean that

all of those beneficiaries did not get their drugs.

In fact, whenever we hear about one of these cases, either

through 1–800–MEDICARE or our toll-free pharmacy help line, or

the work that our regional offices are doing with your office, with

local groups, we make sure that those beneficiaries get their coverage.

Senator WYDEN. Would you get back to me with an Agency report on how many seniors were wrongly denied? I want to know,

for example, the kind of context you are talking about.

For example, they may have been subjected to co-payments that,

for a lot of low-income seniors, would be a hardship. So, if you

would get me that, I would like to know—at this point the program

began January 1—how many seniors have been wrongly denied

coverage.

[The information appears in the appendix.]

Senator WYDEN. The last point I would make, I think you know

I voted for this legislation. I have the welts on my back to show

for it. As the former director of Grey Panthers, I took a lot of flack

for this. I want to make this work.

I do not think anybody wants CMS to be known as the Center

for Medicare Snafus. Nobody wants that. But there is some real

work that has to be done, and I would urge you to follow up on

Senator Baucus’ suggestions.

I think he gave us a good set of goals and a framework for us

to proceed. Please contact the National Association of Insurance

Commissioners, as you indicated, right away. We have got a lot of

work to do, and I appreciate the chance to continue working with

you on it.

Thank you, Mr. Chairman.

The CHAIRMAN. Senator Lincoln, for 5 minutes.

Senator LINCOLN. Can I take his minute he left?

The CHAIRMAN. If that is all you will take, gladly.

Senator LINCOLN. Thank you, Mr. Chairman. I will try to be

brief.

I would like to echo Senator Baucus as well on educating pharmacists. Many of our pharmacists in Arkansas did not even know

about Wellpoint or the E–1 queries and the processes that they

needed to do their job. And it was not just our rural pharmacists.

We had them in the major groups, too, Wal-Mart, who did not even

know what the E–1 was.

41

So our hope is that we can rectify that problem, because, without

educating our pharmacists, it is not going to happen.

The State reimbursement. Last week, our office received a copy

of the template for the State reimbursement costs from CMS. In

addition, I think the CMS representative indicated that the Agency

will contract with the reconciliation intermediaries to calculate and

process the reimbursement.

Dr. MCCLELLAN. Right.

Senator LINCOLN. And I have been in and out. I hope this has

not already been dealt with. But it seems that the implementation

of the reimbursement process is still in a lot of early phases. We

are one of those States with about 17,000 beneficiaries who have

been dealt with by the State, to the tune of about $4 million.

As of Friday, your staff indicated that CMS had yet to have contact with these so-called reconciliation intermediaries. Is that correct? Can you give us an update on the time-line for that reimbursement process? Will you have to extend the February 15th

deadline, considering today is the 8th?

Dr. MCCLELLAN. Yes, Senator, I talked about that a little bit earlier.

Senator LINCOLN. All right. I am sorry.

Dr. MCCLELLAN. I will get you some updated information. We

have the template out already which describes what States need to

do.

[The information appears in the appendix.]

Senator LINCOLN. Right.

Dr. MCCLELLAN. And it makes clear what kind of information we

are expecting, so we are already getting some of the claims information in. The contractor is there to process the claim so that the

States do not have to worry about interacting with the specific drug

plans. We have taken a little bit of time to make sure that gets

done right, that it is not going to end up——

Senator LINCOLN. This is what the intermediary is going to do?

Dr. MCCLELLAN. That is right, so that the States——

Senator LINCOLN. And you obviously, hopefully, had contact with

them since Friday, which is when we heard you had not.

Dr. MCCLELLAN. To get this contract in place, the State will send

in the claims information to us. We expect the intermediary to be

in place, doing this process.

Senator LINCOLN. Are they in place now?

Dr. MCCLELLAN. We expect them by February 15th. We expect

that States are going to get estimated payments based on the costs

they have incurred by a month after they submit the information.

Senator LINCOLN. And you do not think that you are going to

have to move that deadline on the 15th?

Dr. MCCLELLAN. In terms of the 15th deadline, we are expecting

the vast majority of States to take us up on this reimbursement

plan and get in place some steps that can limit the amount of billing to the State system by the 15th. If we need to extend beyond

that, we will.

Senator LINCOLN. What about the administrative costs that the

States have incurred over the past month and a half?

42

Dr. MCCLELLAN. Administrative costs for providing the drugs

and for getting people connected with their Medicare plans would

be fully reimbursed in this program as well.

Senator LINCOLN. Will you extend that?

Dr. MCCLELLAN. Yes.

Senator LINCOLN. If it is incurred after February 15th, will you

extend that?

Dr. MCCLELLAN. If necessary. In fact, we have seen some of the

best results in States that have been able to identify staff who can

work with us and the plans to get people fully enrolled, and we

want to fully reimburse those costs.

Senator LINCOLN. What happens if there is a difference of opinion between what the State comes up with as a figure regarding

reimbursement and the reconciliation intermediary does? I mean,

if there is a discrepancy there, are you going to establish an appeals process? How will they reconcile that?

Dr. MCCLELLAN. Well, we will work directly with the State to

make sure that all reasonable costs are reimbursed. We have developed this framework. One reason it took a few days is, we wanted

to get input from the States.

We have been working with a set of representatives, the National

Association of State Medicaid Directors, to make sure we set this

up right. I am sure we will——

Senator LINCOLN. I just have 1 more minute, and I have one

more question to get on your mind.

The Inspector General at the Department of Health and Human

Services recently issued a report to determine the extent to which

Medicare prescription drug formularies included drugs commonly

used by dual eligibles under Medicaid.

In the report, they found that only 8 percent of the dual eligibles

in Arkansas were randomly assigned to prescription drug plans

that covered all of the most common drugs used by dual-eligible

populations.

It was the lowest percentage of any State in the country. Compare that with our neighboring regional State Missouri, where 25

percent of their dual eligibles had access as they were randomly assigned to PDPs.

Do you think there is any answer to why that discrepancy happened? How can we be sure that the 61,000 residents of Arkansas

who are dual eligibles are going to get the access to the drugs that

they need through their PDPs?

Dr. MCCLELLAN. Senator, we did a further analysis. All the OIG

did was to look at a list of drugs that were covered. We did a further analysis that looked at the actual Medicaid dual-eligible population, which drugs they actually take, and how well that matched

up with the plans that they were assigned to for a whole set of

States around the country.

What we found was that 93 percent of the drugs that beneficiaries used were covered by the plans they were on. This is because people tend to be in plans that cover the most common

drugs.

The drug plans have very robust formularies, typically covering

80 or more out of the top 100 drugs used by seniors. There are not

43

a lot of seniors who are on two or three different medicines for

their stomach acid or their hay fever.

Senator LINCOLN. Right.

Dr. MCCLELLAN. So we can get you that information.

Senator LINCOLN. Please do. If you will share that with me, that

would be most helpful.

[The information appears in the appendix.]

Dr. MCCLELLAN. And then I also want you to know that our

transition policies, our coverage, and our other requirements for enabling beneficiaries to continue drugs that they are on now that

they need, especially drugs for mental illness, HIV-AIDS, other

conditions, those are very broad as well. So, there may be some

switches down the road for a hay fever medicine or something like

that, and these can actually save beneficiaries and the program

money.

Senator LINCOLN. Right.

Dr. MCCLELLAN. We want to implement those.

Senator LINCOLN. Well, I apologize that we are having to go step

by step with you on so many of these specific issues.

Dr. MCCLELLAN. It is all right.

Senator LINCOLN. But, quite frankly, we are getting them step by

step in our offices. So, I would just encourage you to please keep

up the educational process of pharmacists and seniors, States, and

the SHIP offices, which we have talked about here.

As you know, we started early in Arkansas trying to get as many

of the organizations, the Area Agency on Aging, the SHIP, the local

community folks, involved in that educational process.

Thank you, Dr. McClellan.

The CHAIRMAN. Thank you. We are done with you for today.

[Laughter.] For today.

Dr. MCCLELLAN. I am sure I will see you again, Senator.

The CHAIRMAN. I think the hearings are very important. Of

course, Senator Baucus and I will decide on future hearings. But

I think the extent to which you have this communication, as you

can, weekly with our staffs and give us updates on how you are

coming on meeting the time-lines, I think that we will not have to

take as much time in an open hearing. But I will be responsive to

members that want to have you back for another hearing. Thank

you very much.

Dr. MCCLELLAN. Thank you very much, Mr. Chairman.

The CHAIRMAN. Yes.

Would the next panel come, even as I read your names? Dr. William Fleming, vice president of pharmacy management, Humana;

Ms. Susan Rawlings, president, senior services, Wellpoint; Mr.

David Bernauer, chairman and CEO of Walgreen; Mr. Tobey

Schule, who is a pharmacist from Montana that Senator Baucus

will introduce; Ms. Joy Paeth, CEO of the Area Agency on Aging

of Southwestern Illinois; and Ms. Pamela Willoughby, faith community nurse, Bedford, VA.

So we are going to hear from people who are dispensing drugs

directly to patients, and we are going to hear from people who are

going to be speaking about the issues of informing the public about

the programs so that they can sign up.

44

I am going to ask Senator Baucus to speak about Mr. Schule before we start with Mr. Fleming.

Senator BAUCUS. Thank you, Mr. Chairman.

I am really proud to have Tobey Schule here. Tobey Schule is

from Kalispell, MT. He got his degree in pharmacy from the University of Montana. He has practiced for about 30 years, maybe

even longer than that, throughout the State, including Kalispell,

where he is the co-owner of Sykes Pharmacy.

Mr. Chairman, Sykes is a real institution in Kalispell, MT in the

Flathead Valley. I go there often. It is a wonderful place to kind

of find out what is going on in the valley.

His son Travis is here with him as a pharmacist at Sykes. He

has been joined by his family. His daughter Jenice is also here. I

just want to tell you that the people he serves, there are a lot of

elderly, a lot of mental health patients, a lot of walk-ins, a lot of

patients at assisted living facilities, nursing homes, mental health

centers.

He is also a member of the Montana Pharmacy Association. It is

my great pleasure to have Tobey come all the way from Kalispell,

MT to come to Washington, DC.

Now, we talked earlier this morning. He says he is a little nervous, but I think by now he has kind of gotten the swing of things.

I said to him, Tobey, just do not worry. Just tell it like it is. Have

a good time and just say what you think and feel.

But Tobey, we are very happy to have you here.

Mr. SCHULE. Thank you.

The CHAIRMAN. And we welcome all of you, of course.

It is standard procedure for us to accept from you a very long

statement for the record, and then of course we have asked you to

summarize in 5 minutes. So, everything that you give us will be

printed in the record. We will go through all, then we will ask

questions.

Dr. Fleming?

STATEMENT OF WILLIAM FLEMING, PharmD, VICE PRESIDENT,

PHARMACY MANAGEMENT, HUMANA, INC., LOUISVILLE, KY

Dr. FLEMING. Thank you.

Mr. Secretary, Senator Baucus, and other members of the committee, thank you for allowing me to testify about the important

new outpatient prescription drug benefit. I am William Fleming, a

pharmacist and vice president of Pharmacy for Humana, headquartered in Kentucky.

For 20 years, Humana has been serving Medicare beneficiaries

through health plans that offer affordable, comprehensive health

care coverage. Today, we provide health insurance to nearly 9 million members.

Humana has launched stand-alone Medicare prescription drug

plans in 46 States that offer low premiums, a broad formulary, and

comprehensive health education programs. Today, over 2 million

members belong to our plans, including over 600,000 dual eligibles.

We have three basic plan designs: a standard plan, an enhanced

plan, and a complete coverage plan. Humana offers plans with premiums below $20, and as low as $1.87 in seven rural States. Each

45

of these plans has the same formulary, covering all Part D medications.

Humana has more than 53,000 pharmacies in our network, including thousands of independent and long-term care pharmacies.

Since January 1, we have processed nearly 8 million prescriptions.

I have included some success stories in my written testimony.

For many enrollees, this new benefit is important to them. I want

to share our experiences, including the challenges and opportunities for improvement.

Humana began preparing for implementation when the final regulations were published. Here is what we did. We created a dedicated Part D operation. We enhanced our systems and processes.

We increased our customer service staff 5-fold, and we developed

contingency plans for potential problems.

CMS converted to a new information management system in November. While CMS tested our ability to connect with this system,

there was not an opportunity to test end-to-end processing. In our

partnership with CMS, we have worked diligently to identify and

resolve many system issues, but there is still a lot of work to be

done.

The Part D program is the first time a new benefit offers varied

levels of subsidies. CMS has had to rely on States’ information, information from Social Security, and internal information.

Because of the data translation issues between CMS, PDPs, and

pharmacies, many dual-eligible and low-income beneficiaries have

experienced access-to-care issues.

In January, we experienced 50 percent higher call volume and 30

percent longer call times than predicted. Over the next few weeks,

our customer service staff will grow by more than 50 percent.

Our beneficiary and pharmacy help desk call center statistics

have improved dramatically over the past month. At the end of

January, over 6 of 10 beneficiary calls related to access of care

were answered in less than 30 seconds, and 96 percent of beneficiary calls related to enrollment were answered in 30 seconds or

less. Moreover, for our pharmacy help desk, two-thirds of the calls

are now answered in 30 seconds or less.

Humana believes, and it is our policy, that our enrollees, especially the poorest, need 60 days to transition into this new benefit,

90 days for the one-one effectiveness, as dictated by the CMS policy, and our policy is more than is required. From the very beginning, Humana reached out to pharmacists, beneficiaries, community leaders, and others to address implementation issues.

While there are many lessons learned, I offer the following suggestions as to where policy improvements can be made. Part B

versus Part D drug coverage. This is an enormous source of confusion for all involved.

The same drug may be covered under Part B or Part D, depending on the place of treatment or diagnosis, meaning that each potential Part B-coverable drug must be evaluated. I provide examples in my written testimony.

Enrollment time-frames. Regulation or legislation permits beneficiaries to enroll or change enrollment up to the last day of the

month. If a beneficiary enrolls in a plan on January 31, it is difficult, even with the most efficient systems, to have that election

46

effective on February 1. Through our trade association, we are

working with CMS on alternatives.

In conclusion, we have heard good stories about beneficiaries saving money. While there are operational challenges, I encourage you

to be vigilant in monitoring issues and evaluating which of those

need system-wide regulatory changes versus case-by-case improvements.

We commend Congress for establishing this program, and we

urge the committee to support the program and ensure consistency

while recognizing the tremendous value it is providing to millions

of beneficiaries across the Nation.

Thank you.

The CHAIRMAN. Thank you very much for being on time. We appreciate that.

[The prepared statement of Dr. Fleming appears in the appendix.]

The CHAIRMAN. Ms. Rawlings?

STATEMENT OF SUSAN E. RAWLINGS, PRESIDENT,

SENIOR SERVICES, WELLPOINT, NEWBURY PARK, CA

Ms. RAWLINGS. Chairman Grassley, Senator Baucus, thank you

for the invitation to address the committee today. My name is

Susan Rawlings, and I am the president in charge of senior services for Wellpoint, Inc.

The majority of my career experience has focused on Medicare

programs and retiree health plans that deliver products, programs

and services that meet the needs of our senior and disabled populations.

I am here today to talk to you about Part D implementation, of

course, but first let me start off by saying that for those Wellpoint

customers and pharmacists whom we have not been able to serve

up to our own internal standards, we apologize. We are not discouraged, though. We are working day and night and we are making

progress, and that, I will share with you today.

Prior to the launch of Part D, we provided access to care for over

1 million Medicare members, and we continue this tradition with

the new Medicare Part D program.

We offer the new Medicare prescription drug benefit through our

Medicare Advantage prescription drug plans, or MAPDs, which

also include three new regional PPO programs around the country,

and we also offer the stand-alone prescription drug plans in all 34

regions that span the Nation.

We contract with 51,000 rural, urban, and suburban pharmacies

across the country, and our network continues to grow. We currently have an estimated 1.2 million Part D members, and approximately 60 percent of those are auto-assigned dual eligibles. We

have already processed 3.5 million claims through our system as of

the end of January.

Wellpoint is fully committed to supporting effective implementation for Part D for all Medicare beneficiaries, together with our

partners at CMS. Our highest priority is to make sure seniors and

disabled Americans are getting their prescriptions filled on a timely

basis and are paying no more than they should.

47

We are paying special attention to the transition to Part D for

dual eligibles, and especially those missed in the auto-enrollment

process. The facilitated enrollment program was created just for

that purpose, to be a safety net for those dual-eligible beneficiaries

who were somehow missed during the open enrollment and autoenrollment. Wellpoint is a CMS contractor for this program.

The process that was created allows the pharmacist to submit a

claim for a prescription for a non-enrolled dual eligible and enables

the beneficiary to leave the pharmacy with their prescription.

Everything the pharmacist needs to know about the process is

written on a standard instruction sheet that has been provided to

independent pharmacies, chains, and pharmacy associations in our

contracted network.

If a pharmacy follows the steps described on the sheet, the dual

eligible will be enrolled into a Wellpoint plan and can immediately

access their new drug benefits.

The pharmacy is, however, a very key partner in making this

program work efficiently and effectively. For example, the pharmacy is responsible for verifying the individual’s Medicare and

Medicaid eligibility, and that means really just looking at their

cards. It also is required to enter appropriate minimal information

into our system, such as name, address, birth date, and the valid

Medicare number.

These modest requirements promote faster prescription processing and act as important safeguards that protect pharmacists,

plans, and CMS from potential abuse of the program.

This process is, in fact, little different than the process a pharmacist would use to bill any public or private plan.

Now I would like to highlight a number of proactive steps we

have taken to help all Medicare beneficiaries. We have increased

staffing and the hours of operation at our call centers for both

beneficiaries and pharmacists. We have added additional technological capacity and capability.

We have voluntarily extended our formulary transition from 30

days to 90 days, beginning January 1, and we have extended the

facilitated enrollment prescription quantities allowed from 14 days

to 30. For the pharmacy community, we have enhanced our communications efforts using multiple strategies.

So what positive results have we seen? Our customer service is

improving. For example, our average speed to answer on our customer service lines has improved over 30 percent from the first

week to the last week of January, and, in fact, in our facilitated

enrollment process we have already processed, through the end of

January, 575,000 claims, which we estimate has enabled 120,000

beneficiaries to receive their drugs.

I would like to take this opportunity to recommend some additional strategies that CMS might consider to further improve the

Part D implementation process. We very much appreciate CMS’s

efforts to work with us collaboratively on these recommendations,

and we do recognize that many of these are already in progress or

under consideration.

First, continue to intensify efforts to provide correct, accurate eligibility information. Resolving this single issue will accelerate the

pace at which the overall program is functioning smoothly.

48

Second, clarify that beneficiaries who choose to switch plans and

enroll after the 15th of the month may not have their enrollment

materials before the first day of the month. That would help alleviate confusion among beneficiaries, including those for whom the

data files may not yet correctly indicate their eligibility.

Third, increase pharmacy outreach to create one-stop shopping

for help. Because CMS’s outreach has been very effective, CMS

could also train their call centers to handle additional pharmacyrelated calls, particularly calls about the facilitated enrollment

process.

The Part D program is already making a big difference in the

quality of life for many Medicare beneficiaries. We share the concern for the beneficiaries expressed by many stakeholders, including this committee.

I also want to acknowledge, though, that this unprecedented

public/private partnership between our industry, pharmacies, beneficiaries, and CMS brings together the talent and determination

that can solve these problems.

Thank you. I would be happy to answer your questions.

The CHAIRMAN. Thank you.

[The prepared statement of Ms. Rawlings appears in the appendix.]

The CHAIRMAN. Mr. Bernauer?

STATEMENT OF DAVID W. BERNAUER, CHAIRMAN AND CEO,

WALGREEN CO., DEERFIELD, IL

Mr. BERNAUER. Thank you, Mr. Chairman, and thank you, Ranking Member Baucus. It is a great pleasure to be here.

My name is Dave Bernauer. I am the chairman and CEO of the

Walgreen Company. Walgreens is the largest retail pharmacy in

America, employing over 20,000 pharmacists, myself included, albeit a very rusty pharmacist. But we filled over 500 million prescriptions in the last year, and have already filled millions of prescriptions in the Medicare Part D benefit, so I think we can talk

about that.

There is no question in my mind that, over the long term, this

Medicare Part D benefit is going to improve the health care and

quality of life for tens of millions of Americans. There are some

short-term issues, for sure.

We recognized early on at Walgreens that, given this zero to 60,

or zero to 20 million 1-day start of this program, there were going

to be enormous problems. We have been educating our pharmacists

for well over a year through regular bulletins and updates on what

is going on.

We also knew it was going to be a problem for the patients, so

we really had several approaches. One is, we got volunteers. Over

1,400 of our pharmacists went out and had multiple visits, in the

hundreds and even thousands, in senior centers, assisted living

centers, and so on with seniors, helping them make decisions.

We had 2 weeks last fall where we had Medicare days where we

had people available to sit down with seniors in the stores and talk

to them about their problems and challenges with signing up for

a program.

49

But probably what I am most proud of is a collaboration between

our IT people and our pharmacists to come up with what we call

a Medicare Savings Advisor, where we can drop into a special program the drugs that that individual is taking, whether they are a

Walgreens customer, and we can just drop it in from our system

or actually key them in, and then give them a customized, printed

report that shows them what the top three or four plans are for

them to sign up for.

This has been greatly appreciated. We have printed more than

500,000 of these reports, and well over half of those were just in

January alone. So we think the word is getting out, and we are seeing more and more people come in. It has been a terrific benefit

for those people who are looking for a plan.

I would like to address, though, what has happened over the last

40 days and put some perspective to that. As I was driving this

morning—and it took us nearly an hour to drive 6 miles—I could

not help thinking about the parallel of rush-hour traffic.

What this plan was like, dropping 20 million people into something new all on the same day, was the equivalent of asking a million new commuters to come into Washington, DC this morning at

8 o’clock. We just absolutely flooded the systems, whether you were

talking about the pharmacy, the phone system, the help centers,

the computer systems, we just put tremendous strain on them.

Over the years, we have learned that any time an employer of

100,000 people or more changed, our pharmacists shuddered because of the extra burden that that causes.

In this case, we had tremendous pressure over that period. I

think that it is very important to keep that perspective as we look

at the problems that happened. The good news is, that rush hour

is pretty well over.

Eighty percent of the prescriptions are taken by 20 percent of the

people. Those 80 percent, for the most part, have already had prescriptions filled. Once they have prescriptions filled, we have IDed

them.

We know who they are, we know what their benefits are, and

from that point on they are going to be fine. So it is really the new

people that are coming in to the program that are the biggest challenge.

So I want to talk about all the current data problems. I am convinced those are getting fixed. I think there are three things, some

of which have been talked about quite a bit already this morning

that need to be fixed. The first one is this lag period. If we cannot

fix it through regulation, then I think legislation is absolutely the

right way to go.

Senator Baucus, you made the point that we modeled it after the

Medicare Advantage program. The difference is, that has basically

been a paper claim system, or certainly was when it started. Pharmacy is an immediate electronic adjudication that happens today,

so prescriptions are a much different animal, and that is the reason

for the problem there.

Second, the standardization of messaging from the plans could

have a huge impact on the efficiency of this system, so that when

our pharmacist gets a message back from the plan, it just does not

say ‘‘drug not covered,’’ but tells us whether the drug is not covered

50

because it is a Medicare issue, not covered under Medicare, or it

is a plan issue. Then also, it should tell us what drugs are covered

in that class of drugs so that we can have an intelligent discussion

with the doctor.

Then, third, CMS really needs to encourage doctors, physicians,

and the patients themselves to get transitioned from the drugs that

they have been on to the drugs that are covered within the formulary they are on.

If we do not do that soon, when April 1 comes up and that runs

out in this transition period, we are going to have another rush

hour on April 1 like we had January 1. So, we really need to work

on that issue, and that has not been brought out previously.

Finally, as a taxpayer, I would really like to make just a quick

statement about the unintended consequences that we risk if we do

not look at generics as being the real driver in lowering costs.

Under Medicaid plans, for example, States pay more than $120

for each prescription. Even after rebates for branded prescriptions,

it gets to about $110. A generic costs them about $20 in total.

So getting that generic mix is much more important than getting

the rebates from the branded manufacturers. As Dr. McClellan

said, the plans have really done a good job of getting rebates, pretty close to what Medicaid has got. But, much more importantly, is

the fact that they are getting a much higher mix of generics versus

brands than what is being experienced in Medicaid today.

Along with that, I am very concerned that, with the reconciliation bill, we are reducing the reimbursement to pharmacies on

generics, when there is only about a $2 spread with the Medicaid

plans today on the average generic reimbursement versus the

brand, and the profitability for the pharmacies.

Private pay has a difference of about $6.50 today between those,

because they recognize they want to incent pharmacists to increase

generic utilization. What we did with the reconciliation bill is just

absolutely reverse that, and I am afraid it is going to end up costing me as a taxpayer, and all of us as taxpayers, a lot more money

because we are shifting the incentives the wrong way.

Thank you very much for the opportunity to speak. I would like

to invite you, and all the members of the Senate Finance Committee, to come out to a Walgreens store or another pharmacy and

talk to pharmacists in the store. Many of the people in the CMS

group did that over the last month. It was very helpful for them.

[The prepared statement of Mr. Bernauer appears in the appendix.]

The CHAIRMAN. Mr. Schule?

STATEMENT OF TOBEY SCHULE, R.Ph., OWNER,

SYKES PHARMACY, KALISPELL, MT

Mr. SCHULE. Chairman Grassley, Senator Baucus, I appreciate

the privilege and opportunity to speak to you about Medicare Part

D and how it is affecting my patients and pharmacy.

I am the co-owner of an independent pharmacy in Kalispell, MT.

Over 90 percent of my walk-ins are elderly. We also provide weekly

medication exchanges for three assisted living facilities and the

mental health center in our community.

51

Medicare Part D has become a major factor in my pharmacy. I

contracted with every company offering plans in Montana, and I

would like to address my concerns with this new benefit.

The implementation of Part D has caused confusion and frustration for my patients. With over 40 plans to choose from, my patients said that they were scared and intimidated by all of the options.

This program does not need to be so complicated. Many were baffled by the information they received from the insurance companies

and the Medicare handbook. Patients who could make sense of the

material were instructed to check the Internet and to see what coverage was appropriate for their individual situation. I question this

approach, since the vast majority of my elderly patients do not

have computers.

Access through 1–800–MEDICARE was not much better. The

phone systems are automated, and many of my elderly patients are

unable to navigate through them.

There were a few meetings in Kalispell where my patients could

seek answers, but after attending these sessions, many patients

came back to the pharmacy even more confused.

Education for pharmacists was not much better. I heard of one

event sponsored by CMS to educate pharmacists, and that was in

Billings, MT, which is 500 miles from my store.

I relied most heavily on my drug wholesaler for information. In

mid-December, I asked how to determine Part D coverage. Through

this call, I learned about the E–1 transaction, which showed eligibility. I now use this system many times a day.

Many of my patients have both Medicaid and Medicare, but the

billing system did not recognize them as dually eligible. They could

not afford the high co-pays that the system said that they should

be charged. I handled each patient in a case-by-case basis.

Fortunately, we are a small pharmacy and we know all our patients, so we gave them the medications on the spot. I cannot help

but think how many patients across the country must have gone

without their medication. We are now working through billing

issues, trying to determine how we will be reimbursed.

I am very concerned for my patients because we must change

their medications to match formularies for plan. I expect to see increases in physician visits, labs, hospitalizations. Medicare should

have a plan to track the costs associated with medication changes.

Some plans are offering the mail-order pharmacy, and I do not

think that mail-order should even be an option for Medicare Part

D. If patients are getting some medications through mail-order and

others from their local pharmacy, there is no continuity of care.

We have spent a tremendous amount of time on the phones with

different companies getting billing information or prior authorizations to fill. We have been on hold as long as 4 hours. In other

cases, we were simply disconnected. This is unacceptable.

I think it is unacceptable to show co-branding on insurance

cards. It is confusing the patients, leading them to think that they

can only go to certain pharmacies. There was no negotiation between pharmacists and insurance companies on reimbursement

rates. To continue serving my patients, I am forced to accept the

low rates offered.

52

Also, insurance companies are slow to pay claims. My pharmacy has over $45,000 in unpaid claims from Medicare Part D. I am not

sure how long independent pharmacists will be able to stay in business with the low reimbursement rates.

Thank you again for inviting me to appear today. I will now answer questions.

The CHAIRMAN. You did very well. You did not act nervous.

[Laughter.]

Mr. SCHULE. Thank you.

[The prepared statement of Mr. Schule appears in the appendix.]

The CHAIRMAN. Ms. Paeth?

STATEMENT OF JOY PAETH, CHIEF EXECUTIVE OFFICER,

AREA AGENCY ON AGING OF SOUTHWESTERN ILLINOIS,

BELLEVILLE, IL

Ms. PAETH. Thank you for the opportunity to speak about our experiences with the Medicare prescription drug benefit.

I am from an Area Agency in Southwestern Illinois. We are located just east of St. Louis, Missouri and serve 115,000 older persons in a 7-county region in Illinois. Our primary purpose as an

Area Agency is to build systems, coordinate services, and above all,

provide answers on aging.

It was natural for us to go full speed ahead to assist with the

Medicare prescription drug coverage. We began by assisting older

adults with the prescription drug cards in 2004. This led us to

learn about the Access to Benefits Coalition, ABC, and some of

their tools, such as Benefits Check-Up.

We believe the resources, training, tools, and new collaborators

are what helped us to successfully assist older adults, caregivers,

and persons with disabilities with the Medicare prescription drug

coverage.

In building our coalition, we began with our traditional aging

network and continued to expand from there. As an Area Agency,

we were always strong collaborators, but now we were communicating with organizations that were never part of our traditional

network.

Recognizing that media played a large role in that process and

that we shared the same media market with two Missouri Area

Agencies on Aging, it was critical that we provide the same message to all of our communities. With the three AAAs and the ABC

coalition locally, we were set.

Our coalition had the ability to reach out to approximately 3,600

older adults with the assistance of the financial resources from the

national ABC for the region. These resources helped to do things

that may seem simple to many, but were critical to the aging networks being able to accomplish this task.

The coalition’s members added high-speed Internet access, additional phone lines, temporary workers, laptops, and wireless Internet connections. Our strategy was to simplify the message, not an

easy one. We provided one phone number. They never have to

make another phone call; we transfer them directly to their community. We, whenever possible, had a live person answer the call.

The real challenge was to assure that the person on the line

could correctly answer the caller’s questions. CMS was instruVerDate 11-MAY-2000 10:56 Jan 08, 2007 Jkt 095484 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 31519.000S SFIN1 PsN: SFIN1
53

mental in providing training for the coalition. CMS’s embrace of

the existing aging network made this daunting task doable.

We also placed a great emphasis on training the small local

pharmacies, as well as the larger ones, and, along with the training, each pharmacy was given materials they could include with

their customers’ prescriptions, noting the appropriate AAA’s phone

number so they could call should they have questions about the

Medicare prescription drug coverage.

Outreach and education became more and more challenging as

we approached the fall. A typical event would bring in approximately 30 to 40 people before the Medicare prescription drug coverage, and now an event like that would bring over 200 people.

There was a definite point in time, however, when we knew that

the education and outreach was done and it was time to help people enroll. However, this happened prior to the plans being available.

Whenever possible, we handed out the Plan Finder worksheets

and then we continued to work closely with our Social Security Administration. This proved to be an effective strategy when assisting

people with the low-income subsidy.

At that point, we were able to access resources from the National

Association of Area Agencies on Aging through the Administration

on Aging and CMS to focus on areas that had a high population

of persons with low incomes. There is also a focus on low-density

and hard-to-reach areas with this same grant.

At the same time, a team from NCOA’s My Medicare Matters

campaign was deployed to assist with the entire ABC region. This

helped us eliminate backlog and keep up with incoming calls. Our

challenge, as was mentioned earlier, was that 300,000 older adults

and persons with disabilities were using the State’s plan, which is

now a wrap-around plan.

They were required to apply for Medicare prescription drug coverage, which required three steps: applying for the low-income subsidy, making sure the plan was appropriate that they were autoenrolled in, and once again applying for the Illinois coverage.

January 1, this is where we hit most of our challenges with the

Illinois coverage. The software was not always working from the

PDP, and to be able to switch to the plan required the State to do

the switch; the network could not help the individual.

There were also regions in the State that had no coordinating

PPOs or HMOs. We have some more now, and that has been helpful.

The numbers of questions we are now getting have decreased;

however, the ones we are getting are more complicated. Some of

the challenges we have today are, customer service lines for some

of the plans have long waits, and the network of AAAs and SHIPs

have no dedicated line to these plans.

There has also been a delay in entering the person’s data in the

system, so we cannot access that. Our Medicaid problems have revolved around the individual not being automatically enrolled or

knowing if they are LIS-eligible. These are the most frustrating

challenges, because there is nothing we can do to help the person,

and we are the entity with whom they have built trust.

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Insurance brokers also have been enrolling people in plans that

are not appropriate, sometimes using their only switch, so they are

in a plan that does not have any of their drugs for the remainder

of the year. This is not all right.

Pharmacies have not been getting the appropriate information

from the E–1 queries, and we are helping them struggle to find

that kind of information. All of these challenges, however, are really minor for a new program, and the majority are being addressed.

I have to say, though, having the financial resources in the aging

network dedicated to supporting Medicare prescription drug outreach and enrollment activities has been the only way we have

stayed educated and able to assist.

As May 15th approaches, our resources go away, but the need to

help seniors, particularly those with low incomes and concerns regarding Medicare prescription drug coverage, will remain.

We want to continue to hear stories, such as, I used to pay $2,800 a month for my prescriptions and now I am paying $1,400

for the entire year. That is why we do what we do. Thank you very

much.

The CHAIRMAN. Thank you, Ms. Paeth.

[The prepared statement of Ms. Paeth appears in the appendix.]

The CHAIRMAN. Now, Ms. Willoughby?

STATEMENT OF PAMELA WILLOUGHBY, R.N., FAITH COMMUNITY NURSE, ST. JOHN’S EPISCOPAL CHURCH AND BEDFORD PRESBYTERIAN CHURCH, BEDFORD, VA

Ms. WILLOUGHBY. Mr. Chairman, Senator Baucus, it is my privilege to speak here today. I am the Parish nurse at St. John’s Episcopal Church and Bedford Presbyterian Church in Bedford, VA.

Because of this unique position, I was called by David Edwards

of the Central Virginia Area Agency on Aging. Would I be interested in becoming a tier-one partner, since there was no one in

Bedford City or County to sign up those eligible?

Nine volunteers met at St. John’s with Margaret Moon, a health

insurance specialist from Philadelphia. She explained the program

in general and referred us to medicare.gov on the web. We knew

the big picture but none of the how-to details.

I made a Medicare Part D flyer for the weekly newspaper and

the Bedford County Ministerial Association to reach the target population through the church bulletins and newsletters.

The volunteers work every Thursday, 3 or 4 hours, and I work

an additional 15 hours a week. Clients call my cell, appointments

are made. It is important to match the volunteer’s expertise with

the individual client. Each appointment requires at least an hour,

more or less, to enter the prescription data and compare the top

three plans.

It is not unusual for clients to take upwards of 17 prescriptions,

and we have to refer to the Epocrates software in my Palm Pilot

and/or call the pharmacists on many occasions. The drugs are not

always easy to find.

Oftentimes, the clients take the print-outs home to study them

and then come back the following week to sign up. Approximately

252 clients have been signed up in the computer lab as of February

9th. We learn something new about the program every week, and

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this is shared among us and makes it easier to answer the many

questions.

The program is not easy. It requires study, dedication, and commitment by the volunteers who make our program possible. But we

absolutely think it is a worthwhile program. The feedback is very

positive, and people are most grateful.

I try to give each client my business card so they will have a contact person for positive and negative feedback in the upcoming

open season if their health should change or they need to choose

a different plan. Many of the now seven volunteers sign up clients

at their home.

According to the 2000 census for Bedford City/County, there were

9,160 eligible clients, and we have only signed up about 3 percent

as of February 6th. Some have come on crutches, in wheelchairs,

been mentally challenged, blind, or deaf.

It is a broad spectrum of people, well-educated with doctorates

and computer literate to those who are educated or not, and with

or without computer skills. Children come for their parents, neighbors bring friends.

The common denominator is, ‘‘It is so confusing, can you help

me?’’ There is a website in Virginia for questions or to identify

problems, but with no feedback it has not been useful.

There are a few problem areas I feel should be addressed. Lagging data entry. The client must activate their own letter of confirmation if they qualify for additional assistance. Clients have the

annual cost, but need to know the monthly cost for their prescriptions.

Designers must look critically at the May 15th deadline. It is not

that the people do not want the coverage, it is just that it is terribly complicated and many do not know where to turn for help.

A major effort must be made by Federal, State, and local groups

to assist those eligible, and it must be done one-to-one. We have

basically communicated this is an issue for the elderly; it is in fact

a societal issue. The donut hole needs to be filled. Many of those

eligible cannot afford the increased monthly premiums for gap insurance.

In conclusion, this plan is a compassionate idea, written by career politicians, insurance, and pharmaceutical executives, implemented by bureaucrats, administered by special interests, with enrollment designed by the computer savvy, aimed at folks who are

largely technologically challenged. This is the definition of Medicare Part D from an elderly woman who was being helped to sign

up.

Thank you.

[The prepared statement of Ms. Willoughby appears in the appendix.]

The CHAIRMAN. Yes. Thank you, Ms. Willoughby. I appreciate

that very much. You bring us opinions right from the grassroots.

That is very good. You did as well, Ms. Paeth, Mr. Schule. Thank

you very much.

My first question is something I am going to want each one of

you to answer, but I think in terms of a very short answer, because

each one of you could probably speak the whole 5 minutes on this

issue.

56

I am trying to get at if there is a trend here. One of the goals

of today’s hearing was to talk about people on the front lines implementing the benefit.

I know your written testimony refers to this, but I would like to

have a summation. In your opinions, has the situation improved

from what it was like in the first few days of the benefit becoming

available?

Now, I think I want to rephrase that, not that it has improved

just a little bit, reached a plateau and has not improved any better.

But have you seen some gradual improvement? I will start with

you, Dr. Fleming, and go across there.

Dr. FLEMING. Yes, Mr. Chairman. There is a lot of work left to

be done. We have seen the system improve dramatically since the

implementation on January 1st. The fundamental problem that we

have seen with this implementation is the lack of end-to-end testing that we were are able to do before the benefit was implemented.

We certainly did a lot of work in trying to make sure we could

connect with CMS with all the systems. But one of the challenges

that we had was the end-to-end of CMS to the plans, the plans to

pharmacies, CMS to Social Security, and making sure those things

worked end to end, such that, when the member went to the pharmacy, they got their medication. It is improving.

The CHAIRMAN. Thank you.

Ms. Rawlings?

Ms. RAWLINGS. Thank you. Actually, I feel it is improving as

well. I think we have seen a number of different specific improvements. One, the electronic transmissions, as he is speaking of, have

gotten much quicker and much more accurate and improved, and

our customer service lines have improved as well.

The CHAIRMAN. Mr. Bernauer?

Mr. BERNAUER. Yes, as I said. But I would not want to say that

it is going to the degree that we should say, all right, this is going

to be all right, and kind of go on to something else. I think there

are some big opportunities to improve this.

It is such an immense plan and it is going to have such impact

on the country going forward, that we need to get it right. The

three things I mentioned about standardization, the lag time, all

those are very important to still fix for us.

The CHAIRMAN. Mr. Schule?

Mr. SCHULE. I am not convinced that it is actually getting any

better. I think where it is better for us is the fact that we have

more people that we have gotten previous claims for. I am not getting the response times that I am hearing today.

I had a situation Monday that took 2 hours before I could get a

patient covered. I think, on an individual basis, no, I do not think

it is really improving. But maybe because we have not got the

numbers right now, it seems better.

The CHAIRMAN. All right.

Ms. Paeth?

Ms. PAETH. Well, we are delighted with the changes in the Plan

Finder, the website. That has been greatly improved since December, so that has been helpful. Our questions, as I said, are more

challenging now.

57

We are still having to find the answers because no one in the

network has gotten that challenge yet, and they have not had that

question come up. So, having to find the answers. But the coalitions that we have built with the local pharmacies have been helpful, so the network has pulled together to find those answers to

questions.

The CHAIRMAN. Ms. Willoughby?

Ms. WILLOUGHBY. From November to today, I have seen a gradual improvement, especially with the computer program.

The CHAIRMAN. All right. Thank you.

I am going to go to Dr. Fleming. My question is not criticism of

your company, but to use your expertise. When people call in to

somebody, they find that they are not talking to a person very

knowledgeable to answer their questions. That has been particularly true about transition fill policies. We know that the policy is

changing at 90 days.

I think I will ask three questions instead of going back so we will

not take a lot of time. How does Humana keep its representatives

up to date? How do you monitor call center representatives to make

sure they are giving the right information? What happens if you

find a representative is not doing a job very well?

Dr. FLEMING. All great questions. We have a 6-week training

program for our call center specialists. The training includes communication training, senior sensitivity training; product training

about the different levels of benefits and the offerings that are

there; training on Medicare and the different things that happened

within the Medicare world; systems training, training on how to

use our technology, systems, and tools to identify members, document stuff, and get them information; and other Humana administrative processes.

We do monitor our representatives for taking calls. Each of our

representatives are monitored, I believe it is 10 calls per month.

We monitor what is happening with their calls. We look at, and

want to continually improve, how they respond, the information

they give, and make sure they are answering the question right the

first time for all of our members who are calling in.

At the same time, we do have a system and a tool called Mentor,

which is our internal product for when we make a change. For example, let us say we change the transition policy and a question

is coming up about transition policy. It will flash up on their screen

and remind them of what the policy is.

Certainly, training is a big deal. How we educate our associates,

how we train them, and how we discipline them. We take it very

seriously, and Humana has done that, really, we think very well

over the years.

The CHAIRMAN. Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

Tobey, you did a great job. I think you were outstanding. I mean

it. I am not just blowing smoke here. I mean, you were direct and

to the point. You gave a good summary of the reaction you have

and the seniors that come to you have, and what they are facing.

So it is direct. You are just telling it like it is, and I think everybody appreciated it. I know I did, and I think I can speak for everybody. I might tell you that Senator Blanche Lincoln walked over to

58

me as she was walking out and said, boy, you have a great man

in Tobey Schule. I was reading his statement. I underlined everything. It is so good. So, thanks for what you are doing.

Could you maybe flesh out just a little bit where, still, the greatest problem is? You said you did not see a lot of improvement. But

if you had to put your finger on something that really has to be

addressed, maybe it is the immediacy, maybe it is the urgency,

what would you have us really focus in on and fix first?

Mr. SCHULE. The thing that I would like to fix first is probably

our dual-eligible patients. We are seeing several patients whom we

are not able to get on this plan without making medication

changes. They are not fitting the formulary.

We had spent the last few years with the Montana Medicaid system, we got people stabilized on formularies, the restricted formularies we were using there. I guess I really question why we did

not just have an automatic Medicaid-type formula, pretty much the

same as it was. I know with Montana Medicaid, they had drugs of

preference based on money coming back, reimbursement from the

drug companies.

So I think the biggest thing, to me, right now, is I am really concerned about the patients and their health care. I think we have

missed the boat for our elderly.

Senator BAUCUS. I appreciate that. This is such an important

issue, clearly, for so many people in our country. I brought back to

Washington one of the main persons in Montana who is on the firing line, the front line. She is back here, sitting behind me. Her

name is Gillian Morgan.

She hears all these complaints and concerns from seniors who

come into her office, so I brought her back here for this hearing so

I could talk to her directly to get an even better sense of what is

going on.

Here is what she picks up. A lot of it is the formularies, that seniors, for the first time, are confronted with the formulary. It is very

confusing. Not to be critical to what Dr. McClellan said, her experience is that the formularies are being changed and it is causing

more confusion.

There are so many times that she has to try to call CMS, and

now she has developed this fax form and she is trying to get information to CMS to get them to talk to the doctors, to get the doctors

to call either the pharmacists or the plan, or whatnot to work out

what drug really is necessary or appropriate in this situation.

Either you, Tobey, or others, do you ever face the same kinds of

formulary issues?

Mr. SCHULE. We do. On some medications, I can say we can easily change people from one thing to another. However, when I work

with our mental health patients, you do not mess with their

psychotropics or you end up with a hospitalization. We see this

over and over. When patients do not have the money to get their

medication, they end up in the hospital.

Senator BAUCUS. Do you see concerns there, that mental health

patients are not getting the drugs they need?

Mr. SCHULE. Because we do the mental health center in Kalispell, we have roughly 120 patients that we fill weekly boxes on.

We have probably 10 of those patients, because of the formularies,

59

we had looked at trying to change or were given a chance for a 30-

day override.

But the problem is, it only goes 30 days. Now we are coming in

to the next 30 days and they are not approved to stay on that

medication. It is going to put them back into a facility to stabilize

them again to get on the new medication. If there was a way to

track this, I think it is going to cost us a lot of money versus by

just paying for the medication.

Senator BAUCUS. You mentioned you are out, I think you said, about $45,000 and need to be reimbursed, just out of your pocket

that you paid. I think it was $45,000. Let me ask Mr. Schule.

Mr. SCHULE. That was last Friday. We did a quick number.

The CHAIRMAN. But you have advanced that for people.

Mr. SCHULE. Yes. That we are waiting to get paid on.

Senator BAUCUS. So in your experience, what is your expectation

of how quickly you get reimbursed, and the point where you do not

have to be reimbursed for out-of-pocket?

Mr. SCHULE. Yes. I mean, I would like to see it get back to a

point—I mean, we all have our businesses to run. We learned our

business. We got it set so that, on our Medicaid, for example, that

twice a month when we were being paid by our Montana Medicaid,

our budgets we based on those things.

And I realize the whole system is overwhelmed. I just got some

claims Friday, and it is a month since we saw anything, and it was

not complete for the month. So I am beginning to wonder how that

is going to transition. Are we going to finally get it back? Part of

that money, the claims were submitted later after we sorted out

that that patient was eligible.

Senator BAUCUS. Well, this has been very helpful. Thank you

very much, Tobey, and all of you. Ms. Willoughby, I know you are

a little nervous here, too, so thank you for what you are saying. We

will keep working on this.

I know my time has expired, but just one very quick point. Your

best advice as to what we in the committee can do to help straighten out some of the problems. We both agree, the Chairman and I,

that this is a good program, it helps people. We all agree with that.

So what can we do? Do we just keep lighting a fire under CMS

and have them come up here all the time? Is it legislation? Just

your advice on how we kind of get from here to there so that you

do not have these kinds of problems, just as quickly as possible.

Anybody? Really, my time has expired.

But Ms. Willoughby, maybe you can respond.

Ms. WILLOUGHBY. More communication.

Senator BAUCUS. More communication. Between?

Ms. WILLOUGHBY. CMS and the people actually signing people

up.

Senator BAUCUS. CMS and the people on the ground, the pharmacists, seniors, and all that. All right. Good. Thank you all very,

very much. I know you have come great distances, and I appreciate

it.

The CHAIRMAN. Yes. Thank you all very much, too.

The hearing is over.

Senator BAUCUS. Mr. Chairman, I forgot to mention, Senator

Rockefeller wanted me to say he could not be here. He has other

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commitments to make. He has a lot of questions he would ask of

the witnesses and follow-up, too, but he regrets that he could not

be here for this hearing.

The CHAIRMAN. I should have reminded you that you could get

some questions for answer in writing. So would you please cooperate with us on answering the questions in writing, if there are

some submitted to you? Thank you very much.

[Whereupon, at 1:02 p.m., the hearing was concluded.]

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