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S. HRG. 109–389

MEETING THE CHALLENGES OF MEDICARE DRUG

BENEFIT IMPLEMENTATION

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

WASHINGTON, DC

FEBRUARY 2, 2006

Serial No. 109–17

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING 

GORDON SMITH, Oregon, Chairman 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

JAMES M. TALENT, Missouri 

ELIZABETH DOLE, North Carolina 

MEL MARTINEZ, Florida 

LARRY E. CRAIG, Idaho 

RICK SANTORUM, Pennsylvania 

CONRAD BURNS, Montana 

LAMAR ALEXANDER, Tennessee 

JIM DEMINT, South Carolina 

HERB KOHL, Wisconsin 

JAMES M. JEFFORDS, Vermont 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

BILL NELSON, Florida 

HILLARY RODHAM CLINTON, New York 

KEN SALAZAR, Colorado 

CATHERINE FINLEY, Staff Director 

JULIE COHEN, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Gordon Smith ....................................................... 1

Opening Statement of Senator Herb Kohl ............................................................. 3

Opening Statement of Senator Elizabeth Dole ..................................................... 4

Opening Statement of Senator Thomas Carper .................................................... 6

Opening Statement of Senator Bill Nelson ........................................................... 7

Opening Statement of Senator Hillary Clinton ..................................................... 8

Opening Statement of Senator James Talent ....................................................... 10

Opening Statement of Senator Ken Salazar ......................................................... 11

Prepared Statement of Senator Conrad Burns ..................................................... 12

Opening Statement of Senator Conrad Burns ...................................................... 13

Opening Statement of Senator Rick Santorum ..................................................... 13

Prepared Statement of Senator Blanche Lincoln .................................................. 87

PANEL I 

Mark B. McClellan, M.D., administrator, Centers for Medicare and Medicaid 

Services, Department of Health and Human Services, Washington, DC ........ 15

Linda McMahon, Operations, Social Security Administration, Washington, DC 51

PANEL II 

Robert J. Kenny, Medicare Part D beneficiary, Tillamook, OR ........................... 89

Michael Donato, Medicare Part D beneficiary, Mansfield, OH ............................ 95

Sharon Farr, Center for Individual and Family Services, Mansfield, OH .......... 99

PANEL III 

Timothy R. Murphy, secretary, Executive Office of Health and Human Services, Massachusetts Department of Public Health, Boston, MA ...................... 107

Susan Sutter, president-elect, Pharmacy Society of Wisconsin, Horicon, WI; .... 119

Mark B. Ganz, president and chief executive officer, Regence Group, Portland, 

OR; on behalf of the National Blue Cross and Blue Shield Association .......... 129

APPENDIX 

Prepared Statement of Senator Larry Craig ......................................................... 139

Prepared Statement of Senator Susan Collins ...................................................... 139

Prepared Statement of Senator Russell Feingold ................................................. 140

Prepared Statement of Senator Rick Santorum .................................................... 141

Article submitted by Senator Santorum ................................................................ 143

Prepared Statement of Senator Mel Martinez ...................................................... 144

Questions from Senator Santorum for Robert Kenny ........................................... 144

Questions from Senator Santorum for Susan Sutter ............................................ 144

Testimony submitted by Long-Term Care Pharmacy Allicance .......................... 146

Statement submitted by National Association of Chain Drug Stores ................. 150

Statement submitted by American Society of Health System Pharmacists ....... 158

Statement of the American Psychaitric Association ............................................. 165

Statement submitted by AARP ............................................................................... 169

Statement submitted by the American Pharmacists Association ........................ 177

Testimony of Jack Vogelsong, Commonwealth of Pennsylvania, Department 

of Aging ................................................................................................................. 185

Testimony of Kenneth Goodman, chief operating officer, Forest Laboratories .. 194

(III) 

(1)

MEETING THE CHALLENGES OF MEDICARE 

DRUG BENEFIT IMPLEMENTATION 

THURSDAY, FEBRUARY 2, 2006 

U.S. SENATE, SPECIAL COMMITTEE ON AGING, Washington, DC. 

The committee convened, pursuant to notice, at 10:03 a.m., in 

room 216, Hart Senate Office Building, Hon. Gordon H. Smith 

(chairman of the committee) presiding. 

Present: Senators Smith, Talent, Dole, Martinez, Santorum, 

Burns, Kohl, Wyden, Lincoln, Carper, Nelson, Clinton, and Salazar. 

OPENING STATEMENT OF SENATOR GORDON SMITH, 

CHAIRMAN 

The CHAIRMAN. Ladies and gentlemen, if everyone would take 

their seats, we welcome you all here. We thank you for coming. 

This is our first hearing in the Aging Committee of the year 2006 

and there is hardly a topic we could address that is more timely 

and more important to the lives of our seniors than the new prescription drug benefit. Obviously, it has gotten a lot of people’s attention as it has been implemented. It has not been problem-free, 

but this is not a hearing just to pile on. It is a hearing to look for 

solutions, so we appreciate very much our witnesses who have 

taken the trouble to be here and we want you to feel at home here. 

I understand some are feeling quite nervous about this. But this 

is a great national effort to fill a part of the Medicare promise that 

should have been done long ago. 

But again, our goal today is to evaluate CMS’s ability to address 

current problems in a timely manner and to anticipate future problems before they occur. Only when this happens can we regain and 

earn the confidence that beneficiaries want to have in this valuable 

program. 

It is most unfortunate that many of the problems have involved 

what are known as dual-eligibles, which are people who are on 

Medicaid, which is a State responsibility, and now have been shifted to Medicare, which is a Federal responsibility. These are often 

the poorest and most vulnerable Americans who rely on medications to manage their chronic physical and mental illnesses. We 

knew there would be challenges associated with their transition 

from Medicaid into the new Medicare drug benefit, but it seems 

that perhaps not enough was done to ensure a seamless transition. 

Last March, this committee held a hearing where experts offered 

solutions to the very problems the program has experienced. I felt 

their recommendations had merit, strongly enough so that Senator 

2

Kohl and I sent a follow-up letter to CMS. While I applaud CMS’s 

efforts to address the current situations and problems that have 

arisen, I have to question whether any of this would have developed if the recommendations we made had been adopted. 

However, again, let us look forward. I hope to have answers to 

a number of key questions. First, is the accurate enrollment information about dual-eligibles available to plans and pharmacists to 

ensure beneficiaries can receive their medications at correct prices? 

Second, have the call center hold times improved so that beneficiaries and pharmacists can get access to accurate information in 

a timely manner and resolve problems? Third and finally, are lowincome beneficiaries still being denied drugs or charged inappropriate deductibles and copayments? 

I know that progress is being made to improve communication 

between all parties, but I am hearing reports that not all plans and 

pharmacies are aware of the options to address problems. This is 

certainly the case with what is called the first fill policy, which requires plans to cover the cost of a 30-day emergency supply of 

medication when a beneficiary needs a drug that is not covered by 

his or her formulary. While all plans reportedly had first fill policies in place on January 1, many pharmacists and plan representatives were not aware of them, and even if they were, they couldn’t 

get the authorization necessary to dispense the drug. 

I want to note and commend my own State that took action and 

created stop-gap programs to pay the cost of emergency medications. I am committed to ensuring that States are reimbursed for 

their expenses. Again, Medicare is a Federal, not a State, program. 

While the focus of this hearing is on the immediate challenges 

associated with the implementation of the Medicare drug benefit, 

there are some programmatic changes that are needed. One such 

change is the extension of the institutional copayment exemption 

to dual-eligible beneficiaries who are receiving care in homes and 

community-based centers. Under current law, dual-eligibles who reside in nursing homes are not required to pay copayments for generic or brand name drugs. However, those living in assisted living 

facilities or who receive services through adult day care programs 

or other types of community-based services are required to pay 

these costs. 

Considering that dual-eligible beneficiaries in both nursing home 

and community-based care settings generally have the same 

amount of resources available to them. This is simply not right. It 

put dual-eligibles in States like Oregon, which provide most of 

their long-term care services in a community setting at a disadvantage and may even create a disincentive for individuals to choose 

community-based care options in the future. By the way, some of 

those options are less expensive than nursing homes, but my point 

is simply that the seniors should have the choice of where they receive their care. 

Yesterday, I introduced a bill along with Senator Bingaman that 

would extend the copayment exemption to dual-eligibles receiving 

their care in home or community-based settings. I believe this 

small change to the Medicare drug program will have an enormous 

impact to ensuring that low-income beneficiaries have continued 

access to their drugs while protecting their right to receive care in 

3

the setting of their choice. I hope my colleagues will consider this 

bill. I think it is an improvement. 

I look forward to today’s discussion and I hope we have a 

thoughtful and productive dialog. I am proud of the Aging Committee. We are the first to take up this issue and I know it is of 

real timely urgency for seniors. We have excellent witnesses, including two beneficiaries who will discuss the success and challenges associated with the program’s implementation. 

With that, I will turn to my colleague, Senator Kohl, for his 

opening remarks. 

OPENING STATEMENT OF SENATOR HERB KOHL 

Senator KOHL. I thank you, Mr. Chairman, and I also welcome 

our witnesses who will be here today. 

Dr. McClellan, I am glad to see you back again to discuss Medicare Part B implementation. As I am sure you know, we have some 

serious problems on our hands, and as I am sure we would agree, 

we need to put aside any partisan thoughts to work together to get 

this program running so that seniors are better off than they were 

before we passed the drug benefit. I do not believe we are there at 

this time. 

Every day, we hear stories from seniors and individuals with disabilities. Some find themselves switched from Medicaid into a 

Medicare drug plan that does not cover the drugs that they need. 

In other States, hundreds of dollars of incorrectly charged copays. 

Still others wrestle with the choice between the dizzying number 

of drug plans, all covering different drugs and different costs, and 

few that Medicare can explain in any detail. 

A good number of these problems, I think you would agree, come 

from a flaw in the original plan, the primary reason that I and others voted against it in 2003. Medicare Part D is not what many 

seniors thought they were promised, a simple drug benefit delivered through the reliable, popular Medicare program. Instead, private insurers distribute the drug benefit, and I believe it is set up 

as much for their profit and convenience as it is for that of our seniors. 

Nowhere is that more obvious to me than in the provisions of the 

drug benefit law that prohibits, as you know, the Federal Government from negotiating with drug companies for lower drug prices. 

Forty-one million Medicare beneficiaries demanding fair prices, I 

believe could have backed the drug companies down, but the law 

will not let them even try. 

Striking that provision, and I am a cosponsor of legislation to do 

that, I believe might be the single most powerful action we can 

take to increase the popularity and the benefit of Medicare Part D 

among seniors. I would hope that the administration would endorse 

fixing that provision. I believe it would not only be good policy, but 

a strong signal that seniors are, indeed, our primary concern. 

I would bet that, Dr. McClellan, you are as disappointed as anyone at the troubled roll-out of Medicare Part D. Seniors don’t have 

enough information, as you know, to choose a drug plan and they 

get inaccurate or inconsistent advice when they call Medicare. Senator Nelson has introduced a bill that would extend the enrollment 

deadline from May 15 and give every beneficiary a chance to 

4

change their plan at least once at any point in 2006, and that 

seems to me something that we could and should do. 

We also have to take immediate action to help those hit hardest 

so far, the so-called dual-eligibles, the very poorest and sickest seniors and disabled individuals who were switched to the Medicare 

drug benefit on January 1. We hear stories of patients denied medicines because their paperwork is delayed or their new plan does 

not cover what they need. We know the Administration must be as 

concerned as we are with that result and we look forward to talking about what we can do to turn it around. 

But it is not only seniors who are overwhelmed. Pharmacies, as 

you know, are struggling to navigate the new system. Today, we 

will hear from Sue Sutter, a pharmacist from Dodge County, WI, 

about the extreme steps they have taken to make sure that no patient is turned away. Even in the face of being unable to verify payment, many pharmacists have still dispensed medications to their 

clients and some pharmacies have been forced to the extreme of 

taking out lines of credit to cover their costs. Many States, including Wisconsin, have had to step in to cover drugs, as you know, to 

avert a public health emergency. 

I believe we can act now to fix these problems. Dual-eligibles 

must have guaranteed access to the drugs they need and some real 

help to get into the proper drug plan. The Federal Government 

must reimburse seniors, pharmacies, and States who have stepped 

in to fill the holes. We should extend the enrollment deadline for 

seniors to sign up for the benefit so that they would have enough 

time to pick the drug plan that best suits their needs, and we 

should also let seniors change their drug plans this year if the one 

they choose changes mid-year and no longer provides coverage for 

their drug. We should also allow, as I said, Medicare to negotiate 

directly with drug companies for lower prices for seniors and taxpayers if we cannot explain why they should be disallowed from 

doing that. 

Earlier this week, I met with seniors, individuals with disabilities, pharmacists, and advocates in Milwaukee who have been 

working around the clock to help people get the drugs they need. 

The administration needs to show that same commitment and 

must look at what can be done to rectify the problems that exist 

with Medicare Part D. 

Again, I thank you all and I certainly thank our Chairman for 

holding this important hearing. 

The CHAIRMAN. Thank you, Senator Kohl. 

As is our tradition, we will go on those who arrived first, so it 

is Senator Dole, Senator Carper, Senator Nelson, Senator Clinton, 

and Senator Talent. 

OPENING STATEMENT OF SENATOR ELIZABETH DOLE 

Senator DOLE. Thank you very much. Thank you, Chairman 

Smith, for holding this hearing to examine and address the challenges in implementing the new Medicare prescription drug program. 

Twenty-four million Americans, including more than 778,000 

North Carolinians, are enrolled in Medicare Part D, and today, 

these folks are receiving more affordable access to life-saving mediVerDate 0ct 09 2002 14:36 May 19, 2006 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 H:\DOCS\27432.TXT SAGING1 PsN: JOYCE
5

cation. For a majority of these individuals, the program is working 

properly and they are receiving their prescriptions at a much lower 

cost than before. In fact, pharmacies across the Nation are filling 

one million prescriptions a day to Medicare Part D enrollees. 

However, there are some beneficiaries, in many cases the neediest among us, who are having considerable trouble transitioning 

into the new program. This is simply unacceptable and clearly not 

what was intended. It is critical that we identify these problems 

and work together to ensure that this new program serves each 

and every beneficiary successfully. 

I have heard from a number of pharmacists, providers, and beneficiaries in my home State of North Carolina about both the successes and challenges they have encountered in the first month of 

the new Medicare drug program. While I am delighted to hear that 

so many Americans who did not have prescription drug coverage 

before are now benefiting from this program, I am also very concerned about those who are encountering obstacles as they try to 

fill their prescriptions. 

I have heard reports, as I am sure we all have, about beneficiaries who are being charged the wrong copayment, pharmacists 

and beneficiaries who are not able to get in touch with the plans, 

and computer systems that are working inadequately. What is 

worse is that in many cases, it is the dual-eligible individuals, 

those who qualify for both Medicare and Medicaid benefits, and the 

low-income subsidy populations, that are having the most trouble. 

Because these beneficiaries often have more serious health concerns and depend on their prescription drugs the most, it is even 

more important that these problems be addressed quickly. 

The new Medicare prescription drug plan is the largest change 

to Medicare since the program’s creation 40 years ago, and with 

any change that scale, that magnitude, it is nearly impossible to 

avoid startup challenges. But now we have got to identify those individuals who are vulnerable and make certain their needs are 

met. We have got to make certain that the new drug program is 

working for all beneficiaries, pharmacists, and providers alike. 

We have already seen tremendous progress in solving some of 

the initial difficulties. Data submissions have been streamlined. 

Customer services have been enhanced. Pharmacy support has 

been expanded. I thank Dr. McClellan and CMS for taking steps 

to quickly improve the systems that were faltering and to assist 

those experiencing problems. I also thank the many pharmacists, 

providers, case workers, State and Federal officials, friends and 

family members who are working together to assist beneficiaries in 

their community. 

I am disappointed by the unconstructive rhetoric and blame 

game that some are resorting to. We must work together, not point 

fingers, to solve these problems. 

In conclusion, let me just say that in the coming days and weeks, 

it is vital that all parties involved continue to make a concerted effort to strengthen the new Medicare drug program. Congress must 

ensure that diligent work is being done to meet the needs of every 

beneficiary. Millions of Americans are better off, thanks to the benefits provided by this landmark program, and there is no reason 

why every enrollee should not share the same experience. 

6

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Dole. 

Senator Carper. 

OPENING STATEMENT OF SENATOR THOMAS CARPER 

Senator CARPER. Thank you. I want to welcome our witnesses 

today. Thank you very much for joining us. It is good to see both 

of you and I express my thanks to you, Mr. Chairman, and to our 

colleague, Senator Kohl, for pulling us together so that we can 

begin to exercise our responsibility and our oversight responsibility 

as this new benefit is implemented. 

We all know, it has already been said, the implementation process has been bumpy, rocky. Maybe it was difficult given the magnitude of the kind of program that we are introducing here. I voted 

for this benefit in the expectation that we would make improvements and as a first step toward ensuring that all seniors and disabled persons have access to prescription drug coverage under 

Medicare. However, this is only going to work if we continue to improve the program’s implementation almost on a daily basis, and 

I know that is what you are trying to do and that is what we are 

trying to do in my State of Delaware. 

I just say to my colleagues, I think maybe it is going a little bit 

easier in Delaware. We had our tough moments and still have 

them, but we have an extraordinary cooperation between State and 

local folks, working with CMS, working with Social Security, working with folks in the private sector to try to smooth it out as best 

we can. 

I know we have all heard how confusing this program is and 

about the transition problems that are associated with the new 

benefit. Some beneficiaries have gone, as we know, without needed 

medications. Pharmacists have dispensed medications they have 

not been paid for. Medicare and health plan phone lines have been 

overwhelmed, such that resolution of these problems are even 

harder to come by. 

In my State of Delaware, we have done, as I said, I think a pretty good job of trying to implement the process and a lot of people 

have worked very hard to make that possible. I think we have been 

able to avoid the worst, but for a lot of people, there has been a 

lot of heartache, as you know. Now we have got to sort through the 

problems that we see and we have to fix them. 

I am going to suggest several steps. The first one would be that 

the Centers for Medicare and Medicaid services must address as 

quickly as possible all the many problems that you have heard 

about and that we have heard about in this past month or so. This 

includes that States, that pharmacists and beneficiaries are appropriately compensated for costs that they have incurred as a result 

of transition problems, and CMS should provide Congress with regular updates on the progress of resolving these issues, and this is 

an opportunity to provide one update in person. We hope that others would follow. 

Second, I believe we will need to streamline and simplify the 

benefit. As it stands now, CMS, I believe, approved too many plans, 

each one with different rules, different standards for pharmacists, 

different standards for appeal. Put quite simply, the program as 

7

implemented today is just too confusing. I will remember for a long 

time a conversation I had with Senator John Breaux and former 

Secretary Tommy Thompson a year or two before the adoption of 

the program and talking to them about my mother, about their 

mothers and how difficult this stuff is going to be for them to understand on a very good day. What we have done is we have put 

in place a program that is, for a lot of our senior citizens, almost 

incomprehensible. 

Third point, we need to ensure that CMS has the proper structures in place to oversee participating health plans. CMS must ensure the plans are doing what they are supposed to be doing and 

that any lack of compliance is immediately identified and corrected. 

Finally, we need to ensure that the Social Security Administration continues to conduct outreach to low-income populations. 

Today, I think only about a million people have been found eligible 

for the subsidy out of an estimated, I think, eight million people 

who are believed to be eligible beneficiaries. 

I just say in conclusion, we can do better with this drug benefit 

and I hope that today’s hearing is a real good step toward fixing 

some of the problems that we have all experienced and worked to 

correct. 

Thanks, Mr. Chairman. 

The CHAIRMAN. Thanks, Senator Carper. 

Senator Nelson, how are we doing in Florida? 

OPENING STATEMENT OF SENATOR BILL NELSON 

Senator NELSON. Well, you can imagine with the significant senior citizen population we have in our State, and Mr. Chairman, I 

will be very brief and just summarize because you all have a tough 

job and you need to know what we are hearing and it has been said 

here. 

We are going to have an opportunity to vote on this today, on one 

of the things that has already been mentioned here. The Chairman 

has mentioned it. I have filed an amendment on the tax reconciliation bill that will delay for 6 months the deadline of signing up 

that will help a lot of the folks that I have been talking to who are 

quite confused with over 43 plans to choose from. They are not only 

confused, they are frightened because of that deadline coming and 

if they make a mistake. So that is a part of the amendment, as 

well, that they would have the opportunity to change that without 

having to wait a year. 

Now, you have also heard the commentary here about the dualeligibles. I will tell you, your attention is riveted in a town hall 

meeting when senior citizens are sitting or standing in front of you 

and literally tears are coming down their face because they had 

their prescriptions under Medicaid and now the pharmacist is refusing to give it to them as they have been transferred under Medicare. 

Then the third thing that I would just quickly mention is that 

Senator Clinton and I filed a bill last week, and I just heard you 

say, Mr. Chairman, that you filed one, as well, and this is prescription drug copayments in those that are in assisted living facilities. 

Now, if you are low-income nursing home, you don’t have to pay 

the copayments. But if you are low-income and you happen to be 

8

in assisted living facilities, and it may be that you are there because you have got a mental problem and the medications are absolutely essential, you see the problem. They are not getting their 

medication. Senator Clinton and I have filed a bill that would cancel those copayments for low-income individuals. 

Good luck as you are implementing this with everything that we 

are seeing come up to the top. 

The CHAIRMAN. Maybe we should combine your bill with the bill 

Senator Bingaman and I introduced. Senator Clinton. 

Senator NELSON. The more the merrier. 

OPENING STATEMENT OF SENATOR HILLARY CLINTON 

Senator CLINTON. Mr. Chairman, we would certainly welcome 

that and we will work together, because that is one issue that must 

be fixed immediately. I have been in pharmacies from Buffalo to 

Rochester to Syracuse to New York City. I have been to hospitals. 

I have spoken with many pharmacists, doctors, nurses, seniors, 

people with disabilities, their family members, their advocates. Because I worried that the bill itself was fatally flawed in its design, 

I voted against it, but once it passed, I certainly determined that 

I would try to do everything I could to make sure that New Yorkers 

understood it, could access it, and make the best of it. 

To that end, I issued in our State a brochure that my excellent 

staff put together. We have sent out tens of thousands of these in 

English and Spanish. But as the date approached for the January 

1 implementation, I became even more concerned and introduced 

legislation to try to fix some of these problems that I was convinced 

were going to happen. 

The GAO came out with a report that highlighted and really set 

off the alarms about a number of these problems, and yet despite 

the concerns of many about what was going to happen, we were unsuccessful in either slowing down the process or making it work 

better and the results are the ones that I have seen firsthand over 

the last several weeks in my State, and I have to identify completely with what both Senator Kohl and Senator Nelson have said. 

I mean, it is an absolute embarrassment, outrage, deep heartbreaking disappointment to be in the presence of people who are 

so distraught, confused, upset and feeling abandoned. 

I know any program is difficult, but I would remind us we implemented the entire Medicare program in 11 months back in 1965, 

and we didn’t have computers. We had a simple program people 

could understand and an effective effort to make sure it came into 

being as smoothly as possible. 

Now, the first thing, Mr. Chairman, I would suggest is that we 

get some agreement on the facts here, because we cannot possibly 

deal with what we as elected representatives are coping with, 

which is an overwhelming outpouring of constituent requests, unless we know the facts. I think it is important to start with the fact 

that the administration continues to claim that we have 24 or 25 

million beneficiaries. Let us look at those figures. 

First, the 6.2 million dual-eligibles already had prescription drug 

coverage. They were covered by Medicaid. They got their drugs. 

Most of them got it for free. It was seamless. Their doctors understood how to access it for them. Four-point-five million Medicare 

9

Advantage enrollees had Medicare managed care plans that offered 

prescription drug coverage. They already were covered. Sevenpoint-four million retirees already had coverage from their previous 

employers for their drug needs. Federal retirees, veterans and their 

families, 3.1 million, already had existing drug coverage. So we 

have about 3.5 million new enrollees in our country who signed up 

for the new benefit. 

In New York, we only have 110,000 new beneficiaries, and who 

can blame them? People are taking a wait-and-see attitude. They 

don’t want to be signed up with some plan that may not even have 

their drug on the formulary. Their doctors are telling them, wait. 

Don’t rush into this, because I don’t want to have to be rediagnosing you. You have been fine on the drugs that I have given you 

for a decade. I don’t want to have to write notes and ask for permission to give you the drug that I think you should have. So people are taking a wait-and-see attitude, except for the dual-eligibles, 

who were automatically enrolled, who had no choice over what the 

plan they were going into said or what kind of copayments they 

would be required to make. 

So I think that we need to have, as the first order of business, 

an agreement that we are going to talk about facts, not spin, not 

rhetoric, not propaganda. We are going to talk about facts because 

people’s lives are at stake, and I take this very seriously. 

There are a number of fixes that we have been putting together 

on both sides of the aisle. One, you heard about. The Chairman, 

Senator Nelson, and I, we would like to make sure that the dualeligibles living in group homes, in assisted living facilities, like a 

young man that I met recently outside of Albany had a bill for the 

first time ever that he was supposed to pay to get the drugs he 

needed will not have to face that. 

Second, I would like to see the pharmacists in this country reimbursed. They have been on the front lines. They have been the ones 

who have had to tell customers, ‘‘I am sorry, this isn’t covered,’’ or, 

‘‘Mrs. Jones, I know you used to get your drugs for free, but now 

you are going to have to pay me $42. Oh, you can’t pay? Well, I 

am going to give it to you anyway and we will try to get this 

worked out.’’ They are the ones who have been on hold to the Medicare hotline or to the plan’s hotline, trying to get answers for their 

customers about what they were entitled to and how much it was 

going to cost them. So I certainly hope we will reimburse the pharmacists. 

With respect to the recent announcement about reimbursing the 

States, let us make sure that that is not cutoff at February 15 because I don’t think a lot of these problems are going to be fixed by 

February 15, and I don’t think any State that has stepped up to 

the plate, as so many of ours have, should be penalized because the 

Federal Government designed a fatally flawed plan and is implementing it in a manner less than acceptable. 

Now, I also am deeply concerned about the large numbers of 

beneficiaries with mental illnesses who have had trouble getting 

their medications. Now, as beneficiaries finish their one-time transition supplies of medications not covered on drug plan formularies, 

they will have to switch medications or file for an exception to the 

plan’s formulary policies, and I predict this will be the next big 

10

challenge, Dr. McClellan, that will be faced by the Part D program, 

as millions of beneficiaries try to take advantage of the exceptions 

and the appeals process, and I hope you have plans in place, and 

I would request that your agency provide this committee with data 

on the numbers of beneficiaries who file appeals to plans, the number of successful appeals, and rejections by plans, and information 

on the timeliness with which plans handle appeals. 

Finally, there continue to be widespread reports of drug plans requiring prior authorization for beneficiaries to receive needed medications. Now, some reports have plans requiring forms for each 

drug, while others are requiring doctors to fill out forms as long as 

14 pages for drugs that a beneficiary has been taking for years. 

Now, your agency’s request that plans discontinue this practice 

does not seem to be working based on the information we have, and 

I hope that you will require, not request, require that the plans 

cease this practice and enforce that requirement. 

Mr. Chairman, we have legislation with a comprehensive fix that 

I hope we can get bipartisan support on. I, for one, believe we 

should scrap this and start over. We are spending hundreds of billions of dollars on an inefficient delivery of a plan that could be 

done in a much more cost-effective way. We have taken taxpayer 

dollars by the billions and transferred it to the pharmaceutical 

companies and the insurance companies as a way to entice, even 

bribe, them to provide drug coverage to the poorest of the poor and 

the sickest of the sick. That is not in keeping with either our values or, frankly, what should be expected of high-performance government. 

I look forward to getting responses, but I hope that we will start 

with an agreement that no spin, no rhetoric, let us talk facts and 

let us get facts before this committee so that we can discharge our 

responsibilities to the people who are dependent on us. 

The CHAIRMAN. Thank you, Senator Clinton. 

We will now hear from Senator Talent, Senator Salazar, Senator 

Burns, and Senator Santorum, and if you could keep them abbreviated, we would appreciate it. Our witnesses, three panels of 

them, are waiting. Senator Talent. 

OPENING STATEMENT OF SENATOR JAMES TALENT 

Senator TALENT. I will be brief, Mr. Chairman. I have had a 

number of town hall meetings around Missouri talking about this 

new coverage and listening to seniors. It is the third round of town 

hall meetings I had on prescription drug coverage. I have encountered in my time in public life many, many senior citizens who 

were in a position where they were choosing between the necessities of life and prescription drugs because they had no coverage 

because Medicare did not have prescription drug coverage as a 

base, and that is not the case now. There are thousands of people 

in the State of Missouri who were paying thousands of dollars out 

of pocket a few months ago who are not paying that anymore and 

that is a huge plus for the program. 

But we have a lot of issues that we have to deal with, also, and 

many Senators have mentioned that. I am looking forward to having the chance to ask you about that. 

11

I am concerned—it is funny, because as I was thinking about this 

and where we were going to have difficulties, I thought the autoenrollment process would probably go pretty well because we already had those people on the computers and I thought we would 

just be able to shift them over. We have had 14,000 Missourians 

for whom the auto-enrollment process failed. I appreciate your assurances that the State is going to get reimbursed. I want to make 

certain that that happens. 

I also have concerns from a pharmacist’s point of view about how 

this is working out. I have heard from a lot of pharmacists in that 

respect, and also issues in getting information from the plans as 

people try and make choices about what plan that they are going 

to pick. 

I appreciate the fact that you are here today and I am going to 

desist from any further statement and just ask that my opening 

statement be put in the record. 

The CHAIRMAN. Without objection. 

Senator Salazar. 

OPENING STATEMENT OF SENATOR KEN SALAZAR 

Senator SALAZAR. Mr. Chairman and Ranking Member Kohl, I 

very much appreciate the work you do on this committee and I very 

much look forward to working with you, since this is my first meeting before this committee. 

On the subject that we are dealing with here today, I know the 

horror stories that we have heard all around the country. They are 

no different at all in my State than some of the stories that have 

been talked about here this morning already. In Colorado, we have 

17 companies that are providing 42 plans to Medicare beneficiaries. 

The implementation of the program has caused numerous people in 

my State to come to me and to my other colleagues and to tell us 

about the concerns that they have with the implementation of the 

program. 

In the first few days of the program, many of the pharmacies did 

not have the correct information, and I saw and heard from people 

who were trying to scrounge together money from friends and relatives to try to pay for prescriptions. Some of them were able to 

do it. Some of them, frankly, had to go without. 

I don’t want to go over all the concerns that have already been 

talked about by my colleagues, but there is one particular concern 

that I do have that I want to reemphasize and that is the payments with respect to pharmacies that have been providing prescription drugs on a promise that they are going to get reimbursed 

by the government. In my native San Luis Valley, there are perhaps one or two pharmacists in each of the six counties of my valley. These pharmacists are often the center of health care for the 

community and especially for the elderly. When they see the elderly hurt, the pharmacists themselves hurt. I have heard from these 

pharmacists who are paying the up-front costs of the CMS requirement that pharmacists must provide a 30-day supply of drugs to 

dual-eligible beneficiaries and then to be paid back by the plan the 

beneficiary is enrolled in. Placing the burden on these pharmacies 

risks the livelihood of these small businesses. I urge CMS to ensure 

that each of these pharmacists is paid quickly and accurately. 

12

Finally, I look forward to working on a bipartisan basis with the 

members of this committee and the other members of the Senate 

and Congress to try to make sure that we can take care of the 

humongous problems that have been illustrated with respect to the 

implementation of this program. 

The CHAIRMAN. Thank you. 

Senator Burns 

Senator BURNS. I would ask that my full statement be put in the 

record. 

The CHAIRMAN. Without objection. 

[The prepared statement of Senator Burns follows:] 

PREPARED STATEMENT OF SENATOR BURNS

Today, as we discuss the implementation of the new Medicare drug benefit, I 

think it is important to remember that this is an entirely new program—barely a 

month old. Before it, drug coverage in the Medicare program was very limited. Seniors whose employers did not provide drug coverage could get it only through what 

was then known as Medicare+Choice, through Medigap policies, or worse, would 

have to go without coverage at all. 

With that in mind, I voted for the new benefit. As of mid-January, over 24 million 

seniors have been enrolled—53,000 in Montana, with thousands more enrolling 

every day. Millions of these Americans did not previously have any coverage, and 

now they do. Of those who have enrolled, the vast majority are finding that the new 

benefit covers the drugs they need and will save them money. 

However, as we are all aware, the implementation has not gone smoothly in all 

cases. I’m sure that what I am hearing from my constituents in Montana is no different from what my colleagues on this committee are hearing. 

I think that every state has had difficulties encountered by low-income dual eligibles. A number of states, as well as a number of pharmacies have stepped in to 

cover the costs of providing these beneficiaries with needed medications. 

Seniors are finding that the program is extremely confusing. 

Some calls from pharmacies and seniors are put on hold for hours. Often this long 

wait results in merely being given the opportunity to leave a message that is often 

not returned. 

Pharmacies, particularly small ones in rural parts of Montana, are extremely concerned that reimbursement is too low. We cannot afford to have these small pharmacies close in states like mine where beneficiaries often must travel great distances to get their drugs. 

Finally, I am personally concerned about the limited efforts CMS is making to 

reach out to rural and remote areas, most specifically on our Indian Reservations. 

While many Native Americans were automatically enrolled at the beginning of the 

year, many were not. 

To date, I have heard of no efforts to reach out to Native Americans to explain 

to them the importance of enrolling and assisting them with this process. In a state 

the size of Montana, outreach to these remote areas is critical, and I am concerned 

that CMS doesn’t fully understand how much territory we have to cover out there. 

We have not had as much success as I would like to see in getting eligible tribal 

members signed up for Medicare in general, and I worry that the problem is worse 

on the Part D program. 

The result, I fear, is that many on the reservations will miss the deadline. 

I am very concerned about all of these problems, and my office has been helping 

hundreds of Montanans get the help they need from CMS to get enrolled. 

However, these problems do not mean that this is a bad program or that Congress 

must initiate wholesale legislative changes. I am concerned that some have seized 

upon these difficulties in a cynical attempt to score political points. We must not 

do this! Those that have already labeled the program a failure are only discouraging 

seniors, who many need the help, from enrolling or even investigating their options. 

Far too much is at stake—people’s lives are at stake—and I am unwilling to play 

politics with the lives and health of our seniors. 

To begin making drastic changes now risks exacerbating problems that can and 

currently are being fixed by CMS. Our focus now should be ensuring that all seniors 

who want to be enrolled get enrolled by May 15th. 

13

OPENING STATEMENT OF SENATOR CONRAD BURNS 

Senator BURNS. This doesn’t surprise me. This program is a 

month old and we Americans are in this business that everything 

has to be instant—tea, coffee, everything that we do—and we are 

supposed to just go out there and have a new program, put it in 

place, and all at once, it is perfect. 

I would ask my colleagues that just throwing out a bunch of stuff 

and try and help and get the program in place serves our purpose 

and then we know what to fix. Right now, we don’t know what to 

fix, but I would tell CMS this. Your first manual that went out on 

this was a bureaucrat’s dream, but it was a nightmare to seniors. 

You had to have a lawyer and an accountant there with you to 

work your way through it. About a third of ours are signed up and 

we have got until May 15, and I think we should dedicate ourselves, both as elected representatives, to help put this program in 

place because we have people now getting drugs that couldn’t get 

them before. 

Yes, there is a lot of confusion out there because sometimes some 

folks live on confusion. I would just ask, let us all get together and 

make it work and then we know what to fix. When we are as old 

as 11 months it took to put Medicare in place, we might see some 

holes and we might find that this program might be a pretty good 

program, that it might be working. But like Americans, we want 

everything instantly. We want it to just pop up and do this when 

you have got a lot of folks out there that are dual-eligibles. There 

has already been a commitment made to the pharmacists that they 

be reimbursed on the dual-eligibles and what they have been holding in limbo. That commitment has already been made, I think, 

and I think we should bring that to light here. 

We continue to get a lot of calls. We continue to work with our 

resource centers and our offices to answer as many questions as we 

possibly can. But just to come out here and throw up your hands 

and say it is not going to do it, that we are going to start changing 

it now, is not the correct approach to this. We may find that everything falls into place. 

I voted for it and I know it is going to be costly, but I will tell 

you, I have got people in Montana—we have just come back from 

the National Prayer Breakfast and there Bono came up with a 

great statement, and it applies to me in Montana in the same. 

Where we live should not determine whether we live. So we have 

some special needs in rural areas. 

I would certainly advise everybody, let us make it work. Let us 

find where the holes are. Then let us fix them, or let us make them 

work on the ground. Thank you very much. 

The CHAIRMAN. Thank you. 

Senator Santorum. 

OPENING STATEMENT OF SENATOR RICK SANTORUM 

Senator SANTORUM. Thank you, Mr. Chairman, and I, too, appreciate your willingness to hold this hearing and to get to the bottom 

of some of the problems and concerns. I think we need to take a 

step back and say that it is a good thing that we are here. 

For almost two decades, we have been trying to get a prescription drug program passed through numerous administrations, 

14

through numerous Congresses, and we were not able to do it. We 

were not able to find compromise, and with compromise comes a 

meshing of a whole bunch of different ideas of how to do things 

best and often you don’t get the optimal solution. I think no one 

who voted on the prescription drug bill that passed a couple of 

years ago would have said that that was their optimal plan or this 

was designed perfectly, from the Congress, I might add, but it was 

the best we could accomplish given a very divided atmosphere here 

in Washington, DC. 

So it is somewhat remarkable to expect that something that is 

the product of deep division, lots of haggling, lots of changes that 

occurred throughout the legislative process, is going to result in a 

perfect system that would be implemented without error. Those 

who stand here and suggest that somehow or another that the 

whole thing should be thrown out may have forgotten that it took 

us 20 years to get the whole thing passed in the first place and 

that just throwing it out would doom seniors, 24 million of whom 

are signed up today and receiving benefits, to a situation where 

they would be getting less care than they are today. So we should 

not be so flippant in casting out babies with bathwaters when it 

comes to a program that was hard fought to get accomplished in 

the first place. 

So while I commend the Chairman and suggest that there is 

much to be done in improving this situation, the idea that we are 

going to play, once again, politics with prescription drugs instead 

of trying to get down to the hard work of trying to fix this system 

and its implementation, I think is below the dignity of this committee. 

I am happy that Dr. McClellan is here. As he knows, we have 

had many conversations in the last few weeks about the situation 

in Pennsylvania. I have spoken to Secretary Leavitt on more than 

one occasion and have encouraged him and am still working with 

him to have him come up to Pennsylvania. 

But that does not mean that we need to start all over or throw 

this program out. We need to continue to look at it, see if we can 

implement it correctly, solve the problems that exist, make changes 

if some are necessary here in the Congress that in all likelihood we 

created in the design of the program, and then go about the process 

of making sure that seniors get the kind of care that we have told 

them that we are delivering to them. 

I can tell you that in Pennsylvania—I have just gotten numbers 

from the problems that exist in my State—for excessive cost-sharing claims, we have about 250 people a day that have made claims 

to the State to help on that regard and the State has paid out 

about $100,000. For emergency supply claims, there is about 175 

to 200 people per day that have cost the State so far about $55,000. 

For super priority prior authorizations for dual-eligibles, we have 

had 180 claims that have cost the Commonwealth $15,000. 

Now, each one of these is a problem, but I would not suggest that 

these numbers suggest that we should throw the program out and 

start all over again when you are talking about tens of thousands, 

if not hundreds of thousands, of people being served in the Commonwealth. 

15

So I would just suggest, Mr. Chairman, that we get down to business in figuring out what the problems are, how we can fix them, 

how we can improve them, and what Congress’ role in creating the 

problems and what our role should be in trying to fix them. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Santorum. 

We have on our first panel two witnesses. We are grateful, Dr. 

McClellan and Ms. Linda McMahon, for your presence here. Dr. 

McClellan is the administrator for CMS and Linda McMahon is 

deputy commissioner of Operations at the Social Security Administration. 

To my colleagues, we will have 5-minute rounds of questions 

afterwards, so Mark, take it away. 

STATEMENT OF MARK B. MCCLELLAN, M.D., ADMINISTRATOR, 

CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC 

Dr. MCCLELLAN. Thank you, Mr. Chairman, Senator Kohl, all of 

the members here who care so passionately about this program. I 

appreciate the opportunity to give you a status report on the new 

prescription drug coverage. 

Currently, more than 24 million Americans are receiving help 

through this program. This includes millions who previously had 

no coverage, millions who now have better coverage than their 

Medicare Advantage plans, more complete, more comprehensive, 

and millions now getting real help keeping their retiree coverage 

in place, coverage that has been going away over the past 20 years. 

Drug plans are now filling millions of prescriptions each day. Every 

day, tens of thousands of new beneficiaries are using their new 

drug coverage to save money, to get peace of mind, and to stay 

healthy, and because of competition, because of choice, this coverage is costing much less than people expected, with premiums 

one-third lower for beneficiaries than had been predicted as recently as last summer. 

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

some problems and I am very concerned about anyone who has experienced problems in getting their medicines at the pharmacy 

counter the first time they tried to use their coverage. In particular, some problems with data translation between Medicare and 

the drug plans and States may potentially have affected—potentially—a few hundred thousand of the six million people with Medicare and Medicaid, particularly those who switched plans late in 

December. At the same time, some pharmacies have had difficulty 

in using the support systems intended for those beneficiaries. 

We make no excuses for these problems. They are important, 

they are ours to solve, and we are finding and fixing them. 

We have outlined some urgent actions that we are taking in a 

1-month report that was just released by the Department of Health 

and Human Services. This includes actions with our information 

systems, the health plans, pharmacists, and States, all to help all 

of our beneficiaries use their coverage smoothly. 

On our systems, we built and tested each component and we are 

working with the health plans and the States to continue improvVerDate 0ct 09 2002 14:36 May 19, 2006 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 H:\DOCS\27432.TXT SAGING1 PsN: JOYCE
16

ing them. Prior to January 1, to insure that all duals that we knew 

about were appropriately covered, we exchanged data files with the 

States to compare our respective lists. The data matched at a rate 

of more than 99 percent according to an outside review. To verify 

that our enrollment information matched plan information, we 

transmitted, again, files with dual-eligible and low-income subsidy 

individuals to the plans on January 13, 18, and again on January 

30. We are working to provide significantly faster responses to information submitted by plans on their new enrollees and the drug 

plans are working with us to submit data in ways that can be processed successfully and quickly. 

With the plans, we have set up specific checks to ensure that 

they provide adequate formulary coverage of all needed medicines, 

particularly those for specific disease populations, such as HIVAIDS and mental illness that have been a particular concern to 

this committee. We developed specific procedures for timely exceptions and appeals. In using this procedures, a Medicare beneficiary 

can get coverage for a drug not on a plan’s established formulary. 

In addition, we required plans to have a transition policy for 

dual-eligible individuals, as you all noted, to get a one-time supply 

of their current medications while they determine whether a less 

expensive, very similar medicine will work for them or if they need 

to continue their current drugs. I have made it clear to the drug 

plans that these transition policies must be followed and we will 

take further enforcement actions, if necessary. 

Many plans have extended their transition policy for the large 

number of beneficiaries who started their coverage in January. To 

help ensure a smooth transition for these beneficiaries, Medicare is 

notifying plans that the transitional coverage period in effect now 

will continue for 60 more days. 

To help pharmacists identify what plan a beneficiary is in when 

a beneficiary shows up without a card or other billing information, 

we collaborated with pharmacists starting in 2004 to create an 

electronic eligibility and enrollment checking system that operates 

as part of the existing pharmacy computer systems. Response times 

since January 2 have been less than 1 second and the number of 

queries is decreasing steadily, because that means more individuals 

have their cards or their billing information when they go to the 

pharmacy. 

I and my staff have visited pharmacies. We have seen firsthand 

what they have done to help make sure even those beneficiaries 

who have difficulty are getting the medicines they need, and we 

have been very impressed with the tremendous work of the nation’s 

pharmacists and we are listening to their ideas for improving the 

program. That is one reason we just announced some new steps, 

like supporting efforts by plan and pharmacy groups to implement 

consistent and clear messaging systems in pharmacy billing, and 

that is why we are paying close attention to customer service and 

pharmacy service. 

I am pleased that over the last few weeks, many plans have 

made great strides in implementing effective pharmacy service 

lines, and to ensure that they all do so, we are increasing our monitoring and reporting on plan help lines as a basis for further enforcement actions, if necessary. 

17

We have also worked closely with the States, beginning in 2004, 

on automatic enrollment and on the low-income subsidy eligibility 

application, the calculation of the State phase-down or claw-back 

contributions, on training to assist beneficiaries, and on exchanging 

information between Medicare and Medicaid. When pharmacies 

were having difficulty filling prescriptions for certain dual-eligible 

beneficiaries, as you all have noted, a number of States turned 

their Medicaid systems back on to assist those individuals, and we 

appreciate the help that States have provided to support pharmacists serving these beneficiaries. We have put in place a payment program to reimburse States for the direct and administrative costs that they incurred. 

We are seeing that States that work closely with us, like the 

State of Pennsylvania, on supporting pharmacists and using the 

new Medicare systems and connecting people to their Medicare coverage have been able to limit billing to the State systems to relatively small amounts, often just a very small fraction of dually eligible individuals, as they connect those people with their coverage. 

We intend to work closely with all States to use these approaches 

to complete the transition to Medicare coverage for the remaining 

dually eligible beneficiaries. 

I want to talk for a minute about the millions of beneficiaries 

who are choosing to enroll in Medicare coverage and get new savings and protection available right now. It takes a little time to 

process people through the eligibility and enrollment systems. After 

you enroll, you will generally get an acknowledgement letter in a 

week or so and then your drug plan I.D. card in 3 to 5 weeks. That 

acknowledgement letter and the card contain important information that makes it easier for the pharmacist to help you use your 

coverage the first time. So we are encouraging people who enroll 

or change a plan to do so in enough time to get that information 

into the system. 

If you enroll before the 15th of the month, you should have the 

information you need by the beginning of the next month when 

your coverage starts. In those cases, we have seen over 90 percent 

of individuals use their coverage for the first time without difficulty. People who sign up later will still get their medicines, but 

they are more likely to spend extra time working through some details. As we continue to find and fix problems, we are seeing fewer 

of these cases. 

We are going to continue working around the clock to help every 

Medicare beneficiary who enrolls to use their new coverage and we 

are seeing that using the coverage means real savings. Now, for the 

first time, we have independent budget estimates of the costs of the 

drug coverage that are based on the actual experience with the 

strong competition to provide coverage. Medicare’s drug benefit will 

have significantly lower premiums and lower costs to Federal taxpayers and States as a result of stronger than expected competition 

with lower drug costs. Beneficiary premiums are now expected to 

average $25 a month, down from the $37 projected in last July’s 

budget estimates. Taxpayers will also save. State contributions for 

a portion of the Medicare drug costs for beneficiaries who are in 

both Medicare and Medicaid will be 25 percent lower over the next 

18

decade. All of these savings result from lower expected costs per 

beneficiary. 

I want to thank you for the opportunity to discuss this first important month of the Medicare prescription drug benefit. While we 

are pleased that millions of Medicare prescriptions are being filled 

every day, we are going to continue working around the clock all 

over the country with all our partners to ensure every person with 

Medicare can use their coverage smoothly, and I am happy to answer any questions you all may have. 

The CHAIRMAN. Thank you very much, Doctor. 

[The prepared statement of Dr. McClellan follows:]

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The CHAIRMAN. Linda McMahon. 

STATEMENT OF LINDA S. MCMAHON, DEPUTY COMMISSIONER 

FOR OPERATIONS, SOCIAL SECURITY ADMINISTRATION, 

WASHINGTON, DC 

Ms. MCMAHON. Thank you, Mr. Chairman, Members of the Committee. On behalf of Commissioner Barnhart, I want to thank you 

for inviting me to discuss Social Security’s efforts to implement the 

new Medicare Part D Low-Income Subsidy Program. 

As you know, I am Linda McMahon, deputy commissioner for 

Operations at the Social Security Administration, and I have been 

with the agency for 15 years. As you know, SSA was given the responsibility by Congress to take extra help applications and to 

make eligibility determinations for individuals who were not automatically eligible for the subsidy. We are also responsible for deducting Part D premiums from Social Security benefits when Medicare beneficiaries tell the Prescription Drug Program (PDP) provider that they want that payment option. 

SSA was given these Medicare Modernization Act (MMA) responsibilities because of our network of nearly 1,300 offices and 35,000 

field employees across the country and because of our prior role in 

administering some parts of the Medicare program. Upon passage 

of MMA, we immediately recognized that development of a simplified application for the extra help was essential for successful 

implementation of that part of the program. Working with CMS, 

we conducted extensive testing of the extra help application form. 

In fact, the paper application changed significantly over time and 

went through many drafts before it was finalized. 

Our Office of Systems staff also contributed to the design of the 

application to make sure that the information on the form could be 

electronically scanned into our computers. That made it easier for 

applicants and people who assist them to apply and it minimized 

the number of employees that we need to process those forms. 

Then we worked to develop alternatives to the traditional paperbased application, and in July of last year, we unveiled the Internet version of the application. That allows people to apply online 

for help with costs associated with the Medicare prescription drug 

plan. The online application has been a tremendous success and 

more than 2,000 Internet applications are being filed daily. 

Telephone inquiries were also part of our efforts to make the 

extra help application process as simple as possible. We provided 

extensive training to our teleservice representatives so that they 

could answer subsidy-related questions. We developed an automated application-taking system, allowing the teleservice representatives to refer callers directly to specialized claims taking 

employees who could then take the applications by phone. 

Finally, we developed a computer matching process with the Internal Revenue Service to validate certain income information provided by applicants. Using this computer match allowed SSA to 

build a process that would not require applicants to submit proof 

of resources and income as long as their statements on the application were in substantial agreement with the computer records. 

Now, to ensure that this simplified process that I have just described was put to use, we have worked hard to inform Medicare 

52

beneficiaries about the extra help available for prescription drugs. 

For example, during the past year, Social Security has held more 

than 66,000 Medicare outreach events throughout the country, and 

we have hosted a number of application-taking sessions in Social 

Security offices. We continue to work with States and other organizations to identify people with limited income and resources who 

may be eligible for the extra help. 

Although the new prescription drug plan did not begin until January 2006, SSA began mailing subsidy applications to potentially 

eligible individuals in May 2005, and this initial effort allowed us 

to begin making eligibility determinations for extra help as early 

as July 2005. 

Now, as has been pointed out, as important as the initial mailing 

of the applications was, follow-up contacts with those individuals 

who did not return the application has been and continues to be 

just as important to us. As an example of our ongoing efforts to 

help enroll as many eligible individuals as possible, we are contacting Medicare beneficiaries who have requested Part D withholding from Social Security benefits and who were mailed a subsidy application but didn’t return it. We will be contacting them by 

phone or by mail and we want to see if we can assist them in applying for the extra help. We will also continue to use our routine 

agency mailings, such as COLA notices, to inform the public about 

the subsidy. 

So, what has resulted from all this effort? Well, as of January 27, 

almost 4.4 million people have applied for the extra help. We processed almost 4.1 million, or 93 percent of those cases. Almost 

700,000 cases did not require a decision by SSA because the person 

was already deemed eligible or they had filed a duplicate application. But of the 3.7 million applicants who do require a decision, 

we have now made determinations for over 3.4 million of them and 

found nearly 1.4 million of those individuals eligible. That is a 40 

percent eligibility rate. 

In conclusion, I want to express Commissioner Barnhart’s appreciation and my personal thanks to Congress for providing SSA with 

the resources that we needed to begin this challenging process. 

Your assistance in fiscal years 2004 and 2005 made it possible for 

us to hire more than 2,500 employees to work on implementation 

of MMA provisions. It also allowed extensive training for thousands 

of on-duty employees and made possible the design of critical new 

computer systems. Your support has truly been crucial. 

We look forward to working with the Committee as we progress 

with implementation of the extra help program, and we appreciate 

this opportunity to tell our story and will be happy to answer questions. 

The CHAIRMAN. Thank you very much, both of you, for, again, 

your presence here and your testimony. 

[The prepared statement of Ms. McMahon follows:]

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The CHAIRMAN. Mark, I think, obviously, the question in all of 

our minds is, while many of the problems we are raising today are 

problems we foresaw last March when we had a hearing here, but 

clearly the transition didn’t go as smoothly as we would’ve liked. 

I mean, why, with all that advance notice, has there been such a 

difficult transition? 

Dr. MCCLELLAN. We did have a lot of discussions about the transition issues for the new Part D benefit and I really commend the 

committee on a bipartisan basis for paying close attention and having many constructive ideas about how we could make the transition go smoothly. You will recall when we talked last spring, we 

raised a lot of issues around long-term care pharmacies, about 

making sure that plans would comply with the necessary support 

that those pharmacies needed for their nursing home beneficiaries. 

We talked about coverage of needed drugs for people with mental 

illnesses and other conditions where the specific drug really 

mattered. 

In many of these areas, we were able to make further enhancements in the program to address concerns, about everything from 

packaging issues in nursing homes, to new kinds of support to help 

nursing homes identify the plans their beneficiaries are in and bill 

them properly, to expanding and being clear about the broad formulary coverage requirements for people with mental illness, HIVAIDS, and other serious conditions. 

We also talked about the transition issues for people who were 

dual-eligibles around January first and steps that we could put in 

place to make sure they got their medications at the pharmacy and 

we took those suggestions, like getting in place this automatic information system that many pharmacists have been able to use to 

avoid the phone calls that they routinely have to face when people 

start a new program. 

The CHAIRMAN. Isn’t it true you have also extended the enrollment deadline from 30 days to 90? 

Dr. MCCLELLAN. The transition coverage has been extended to 90 

days. 

The CHAIRMAN. Ninety days. 

Dr. MCCLELLAN. We talked last spring about the importance of 

transitional coverage and we are watching that very closely, as are 

the plans, to make sure we have got that in place for a long enough 

period for people to smoothly decide whether or not the drugs they 

are on now could be switched with alternatives. But again, we have 

got broad formulary requirements in place now for the drugs for 

conditions like mental illnesses and cancer and AIDS where it really matters. 

So that dialog with you all has been extremely helpful and we 

are going to continue taking every step we can to make this transition go smoothly. It was a big change on January 1 with the entire 

dual-eligible population moving over, as required under the statute, 

and suggestions, the input that you all had in this process has been 

very helpful for limiting the number of cases where people have 

had significant difficulties and we will keep working very closely 

with you to address the cases that we are seeing, to find the problems and fix them. 

63

The CHAIRMAN. I am also mindful that Secretary Leavitt announced or assured the States that their costs in this transition 

would be reimbursed. 

Dr. MCCLELLAN. We did. We had an announcement about that 

last week. We have been working closely with the States on the 

best mechanism for providing this reimbursement and many of the 

State Medicaid directors, other State officials that I talk with frequently have had some very constructive ideas on how to do it. We 

have seen many States working closely with us, just like Senator 

Santorum mentioned, Pennsylvania’s close work with our regional 

office. The same thing is happening in Oregon, Delaware, and 

many other States to limit the number of cases where there are difficulties and to get people connected with their coverage quickly. 

So we have put forth a reimbursement program based on a demonstration, a model waiver. We have the details of that program 

coming out right away, basically just a checklist that States can go 

through for following these best practices to get people connected 

with their coverage and we will handle the reimbursement. The 

State submits the claims to us. We work on reconciling—we do the 

work for reconciling them with the plan payments, and for any difference in higher Medicaid payments than what these competitive 

plans are paying, we will make up that difference, too, and we will 

also pay for any reasonable administrative costs in the process. 

The CHAIRMAN. I have heard horror stories, Mark, about long, 

long call waits for people trying to get information. Have you 

beefed up the call center? 

Dr. MCCLELLAN. We have, and I know we have been working 

very closely with your staff on monitoring how the call center’s 

work is going. In the very early days of the program, we had relatively long waits on our line at 1–800–MEDICARE. I am proud 

to say that we have kept those average wait times, even during the 

first week in January when we had the largest number of these 

complaints and transition questions. We had the wait times under 

5 minutes. We have been monitoring it closely since then. It is 

under a minute for the most recent days and definitely no more 

than a few minutes at any time during this month. 

We are also very pleased at how many of the prescription drug 

plans have responded. Many of these plans quickly, after the first 

week or two, staffed up their own help lines for customers, for 

pharmacists, and others. We have been monitoring those wait 

times and we have seen them come down substantially to acceptable levels of just a few minutes for many of the plans and we want 

to make sure all the plans get there, and that is why we announced 

yesterday that we are going to be taking some further steps to 

monitor and even publish the performance measures for these 

plans. 

The CHAIRMAN. Senator Kohl. 

Senator KOHL. Thank you, Mr. Chairman. 

Dr. McClellan, why not allow Medicare to negotiate maximum 

discount from the pharmaceutical companies? These are actual tax 

dollars we are talking about, and if the program meets anywhere 

near its expected projected costs over 10 years, $750 billion—who 

knows what it will cost—a 20 percent discount is $150 billion. 

64

Wouldn’t you expect taxpayers to expect the government to get 

these prescription drugs at the minimum price necessary? 

Dr. MCCLELLAN. I expect our program to get the best possible 

cost for implementing this program. That is why we are very 

pleased with the results that we are seeing so far based on the actual costs of the program that is coming in, where the drug plans 

are competing and getting the costs of coverage down way below 

what had been projected. We are seeing cost projections now, these 

numbers that we released today, showing costs that in 2006 are 

going to be 20 percent lower for the Federal Government than had 

been forecast. As our actuaries and other independent experts had 

said at the time, they do not believe that with the steps that we 

have in place to encourage strong competition, to encourage price 

negotiation to get lower prices to beneficiaries, that any additional 

government price negotiation would save more money. 

Our concern about more government negotiation is, as you know, 

the way the government can get lower prices, the same thing that 

many of the plans have done but we regulate very carefully, they 

do it by narrowing the formularies. This is how the VA plan, which 

has a considerably narrower formulary than we have required the 

Medicare plans to have, means that many people would not be able 

to continue taking the drugs that they are on right now, the ones 

that their doctors have prescribed and that they have decided, or 

they may want to decide they want to continue, even if they are 

not on a formulary. 

So we are very concerned about making sure that our 

formularies are broad enough and that the plans negotiate and get 

the lowest possible costs of coverage, and that is exactly what is 

happening. That is why the costs of this drug benefit for each person covered is coming in so much lower than people had expected, 

and that means savings for beneficiaries in the lower premiums, 

savings for the Federal Government, and savings for States, that 

25 percent lower claw-back payment that I mentioned earlier. 

Senator KOHL. Well, that is well and good and I am sure that 

argument in your mind is a very strong one, but when you have 

a single buyer, in this case Medicare, negotiating for a huge discount based on the size of their purchase, all the evidence is that 

you get a much bigger discount than if you have, like 46 different 

plans negotiating their own much smaller discount based on their 

purchases. All the indications are that the bigger your buy, the bigger your discount, and apparently you are saying that that law of 

business is not true. 

Dr. MCCLELLAN. Well, these drug plans include—many of these 

plans are large health care organizations that already cover millions of Americans under 65, millions of Federal workers and retirees, and so have very large population bases, so they can drive 

those stronger discounts. Again, that is what we are seeing. If you 

include not just the low prices—there have been some studies that 

have come out recently that kind of tilt the scale by counting Medicaid rebates in the Medicaid price side but don’t count the rebates 

that the private plans are also getting and that they are required 

to incorporate in the payments they get from us and the bids that 

they put in. When you do that, you see low costs. 

65

That is why we are hearing from many States that in their Medicaid plans, where the State does the negotiation, their costs are 

expected to be higher than under the drug plans. That is why we 

are having to supplement what we are paying some of the States 

in this repayment program beyond what the drug plans would pay 

for the same drugs. 

Senator KOHL. I appreciate that. I would just end the subject in 

terms of my inquiry this morning by saying that after 1 month, to 

make a projection is almost ludicrous, and to expect us to sit here 

and say, well, that is the deal, 1 month in, that is the deal, you 

know—you know that you should not make that with any certainty. It is just a number you are throwing out. It is no different 

than so many of the projections that come out from this administration about the costs of the deficit, the costs of this, the costs of 

that, and it turns out to be wildly inaccurate. So we take what you 

say this morning as being sincere, but as certainly not the last 

word. 

Dr. MCCLELLAN. I agree with that. We should keep watching 

very closely on this and every other aspect of the program. This is 

the first time, though, that our independent actuaries have been 

able to incorporate actual data from the cost of this benefit as it 

is actually being delivered in doing their estimates. 

Senator KOHL. On another subject, the pharmacies that have 

been filling prescriptions and not getting paid, Senator Burns said 

a minute ago that they are going to get reimbursed, but as you 

know, nothing has been determined with certainty with respect to 

that. As you also know, many of them are paying out money from 

their pocket, money they don’t have, and they need to be reimbursed immediately and they deserve to be reimbursed as soon as 

they present the evidence. How we are going to get that thing 

done? 

Dr. MCCLELLAN. Well, as I have talked to pharmacists and pharmacy leaders around the country, which we do on an almost daily 

basis—which I do on an almost daily basis and our staff all over 

the country is doing regularly, as well, this is now getting to be one 

of the top levels of concern, and one of the reasons is that we have 

had a change in the way the pharmacy contracts work. Up until 

now, for many of the people who are covered by the drug benefit, 

they were previously covered in Medicaid, which had one payment 

schedule, typically paying once a week, or people who were paying 

cash, and those are people who would pay right at the time, often 

very high rates, but right at the time, right at the pharmacy 

counter. 

Under the contracts that the pharmacies have with the drug 

plans, they get paid several times a month based on claims submitted, and so we have had a period over the last couple of weeks 

where the claims have started going in but the checks haven’t 

started coming out. Now, we are watching very closely to make 

sure that the drug plans pay according to the contractual payment 

schedules that they have set up. Those payments have started to 

come out recently. Some plans pay every 10 days. They have already sent out millions of dollars in payments. Others pay every 

15. 

66

Those checks are going out starting right now, and we want 

pharmacists to know that if they are having problems getting the 

contractual terms met, that is one of the areas where CMS monitors complaints and we will help enforce those contracts. But there 

are a lot more things that we can do to help pharmacists that I am 

sure are going to come up later in this hearing and I want to talk 

about those, too. 

Senator KOHL. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Carper. 

Senator CARPER. Thanks. Thank you for your testimony. I 

thought it was helpful. I want to ask for a clarification, if I can, 

from Ms. McMahon. I said in my opening statement that I think 

that there are about eight million eligible beneficiaries, low-income 

beneficiaries for this program, and I said, to date, only about 1.1 

million people had been found eligible. That was through December 

31. I think I heard you say that——

Ms. MCMAHON. As of January 27, that number is 1.4 million that 

we have determined eligible. 

Senator CARPER. Here is my question. Does that mean that there 

are roughly another just under seven million eligible low-income 

beneficiaries that we still have to potentially be signed up for this 

benefit? 

Ms. MCMAHON. Well, I would have to put the answer to that this 

way. We sent out almost 19 million notices to people to say, ‘‘you 

are potentially eligible’’. We knew that not all of them would be eligible, but we wanted to cast the widest net we possibly could to 

make sure that anybody that had any hope of being eligible, we 

would contact, and we are trying to follow up with those folks. 

What is the actual right number of people? One of the things we 

are finding out is that there are more people who have higher resources than we expected, which in a way shouldn’t be a surprise 

because a large part of the population are people who went through 

the depression and World War II. They saved money. Maybe they 

don’t spend like my generation does. So they have higher resources 

than we expected. In fact, even with $10,000 and $20,000 resource 

limits, they have maybe $17,000 more over that. So we don’t know 

exactly how many people are eligible. 

Senator CARPER. We know it is more than 1.4 million. 

Ms. MCMAHON. Yes, we do. 

Senator CARPER. I would just urge you to increase your efforts, 

continue your efforts to help us find them, help them sign up, OK? 

Ms. MCMAHON. We are going to do that, and in fact, we are hoping that we can get ideas——

Senator CARPER. That is all I want to say. That is all I want to 

say because I have got a lot of questions here I want to get into——

Ms. MCMAHON. All right. 

Senator CARPER [continuing]. But thank you. Dr. McClellan, this 

is a question that could be for either of you. Just help me on this. 

If a person signs up, picks one of these plans, in my State we have 

got a whole lot of plans, I think a whole lot more than I expected, 

and I think it is part of the confusion for pharmacists and for seniors, as well. But if somebody signs up, as I understand it, in a particular plan, they think it is best given the medicines they take, do 

I understand that the plan itself can change and maybe, say, drop 

67

out coverage, decrease coverage for some of the medicines, and we 

will say that happens in April, then do I understand that the beneficiary, the senior citizen, has to wait until the end of this calendar 

year in order to be able to change plans and pick out a plan that 

better suits their needs? 

Dr. MCCLELLAN. Well, first of all, as you know, Senator, the drug 

plans all have to meet our broad formulary requirements. These 

are broader than the requirements in many Medicaid prescription 

drug programs, broader than the VA formulary requirements. 

Eighty of the top 100 drugs are typically covered by plans, so that 

the plans are having broad formularies to start with to make sure 

all medically necessary drugs are available. 

Plans can change their formularies, and I want to talk about two 

different kinds of cases. One is when something new happens in 

medical knowledge or medical treatment availability, so there is 

new information suggesting that a drug shouldn’t be used in certain circumstances or a new generic version of a medicine becomes 

available. Those are things that the plans should incorporate in 

their formularies to help make sure people get the right treatments 

for their conditions at the lowest cost. 

Plans have an ability to change formularies otherwise, but only 

if they replace one drug with another drug that is in the same category, works in the same way, and offers as good of benefits to the 

patient. But in order to do that, several things have to happen 

first. First, they have to submit this information to us to have a 

CMS approval for making any such formulary change. Second, they 

have to give advance notice to their beneficiaries so that there is 

plenty of time for the beneficiary to determine whether they should 

stay on the drug they are on now or whether going to this other 

less expensive alternative is better for them. 

So far, we have seen no cases of that occurring. We also had 

some experience with this with the drug card that was in place for 

a couple of years and that millions of people use to lower their 

prices. There were also concerns that this would happen then. We 

monitored. Again, we saw essentially no cases of such formulary 

shifting. We are going to watch very closely to make sure the plans 

continue to provide the level of coverage that they have promised 

from the beginning. I think they have generally every intention of 

doing that, but we are going to verify that that happens. 

Senator CARPER. Be vigilant. Be vigilant. 

Dr. MCCLELLAN. Yes. 

Senator CARPER. We have established in Delaware a Delaware 

Prescription Assistance Drug Program when I was privileged to be 

Governor of our State. A lot of States have them, as you know. 

Dr. MCCLELLAN. Yes. 

Senator CARPER. CMS recently announced the waiver process 

would allow States to be reimbursed for costs that they incur in 

paying for drugs for dual-eligible beneficiaries. However, a number 

of States like my State, and I think like probably half of the States 

that are here represented on this committee, States where we are 

incurring costs for other low-income beneficiaries, like those in our 

own State Prescription Assistance Program, I am told that—I met 

with our Secretary of Health and Social Services recently and I 

learned from him that our State’s Prescription Assistance Program 

68

has over, I guess, over 10,000 enrollees now, which is a lot for a 

tiny State and has really stepped up to the plate to help enrollees 

navigate the new benefit and we are trying to blend the two together so that we really dramatically increase coverage and use the 

strength of both programs. 

In some cases in Delaware, we are incurring costs for the Delaware Prescription Assistance Program enrollees who have enrolled 

or tried to enroll in a Part D plan but have not yet been recognized 

by the plan as enrolled. Here is my question. Will CMS open the 

waiver process to States like my own and like others who have established their own Prescription Assistance Programs and who 

have incurred unnecessary costs in other State programs? I would 

ask that if you can get into that now, fine, but if now, I just really 

would ask that you and your folks address it. 

Dr. MCCLELLAN. The reimbursement plan that we have discussed does apply to State assistance programs for other low-income individuals, other partial dual individuals who were enrolled 

in the Medicare program and either they or their—because of 

issues with the pharmacy, they didn’t get the coverage they should 

have received. So that is part of our program. 

I want to say, as well, that the program in Delaware, like in 

many other States, is terrific. It is going to get a lot of help from 

the new Medicare coverage because you now only have to wrap 

around the basic Medicare benefit, and Senator, I would like to 

make sure we follow up specifically with you to resolve these issues 

in Delaware. We have had a very close working relationship with 

you and the State and I want to make sure that continues as we 

work through these transition issues. 

Senator CARPER. My time has expired. I would just add, if I 

could, one last sentence, Mr. Chairman. The folks that are in our 

Delaware Prescription Assistance Program are not dual-eligibles. 

They are not dual-eligibles. They are low-income. 

Dr. MCCLELLAN. Let me follow up with you. If they are not dualeligible or low-income, we will work directly with you and the State 

on addressing this. 

Senator CARPER. Thank you so much. 

The CHAIRMAN. Thank you. 

Senator Clinton. 

Senator CLINTON. Thank you, Mr. Chairman. I want to start by 

trying to get some clarification. Senator Burns said that CMS is 

committed to reimburse pharmacies. My understanding based on 

what Secretary Leavitt told the Finance Committee is that he did 

not want to make such a commitment at this time to reimburse 

pharmacies and that, in fact, the pharmacies will need to seek reimbursement through private drug plans. Is that correct? 

Dr. MCCLELLAN. Well, pharmacists that have done a terrific job 

in stepping up with the implementation of this program need to be 

paid for the drugs that they provided and we are going to make 

sure that the contracts with the drug plans are enforced, and if 

there are any difficulties in making those payments, we will help 

ensure the payments do take place. 

Senator CLINTON. Well, that is an important commitment. I 

would just suggest, though, that given all the confusion, oftentimes 

pharmacists don’t even know which plan a beneficiary is enrolled 

69

in. They are going to have to go back and get that information. 

These contractual obligations may be difficult for them to enforce. 

I think many of us expect that these pharmacies will get reimbursed one way or another and we will look to CMS to ensure that 

that does happen. 

I have a series of questions, Dr. McClellan, and I would appreciate brief answers because I know we all have a lot of information 

we are trying to get out. 

Will you support our legislation to waive fees and copayments for 

dual-eligibles in assisted living facilities? 

Dr. MCCLELLAN. We are strong supporters of getting people into 

assisted living. We need to hear more about how this legislation 

would work. We are already working with a number of States that 

are picking up those copayments and combining it with some of the 

home and community-based waiver services, some of the other programs that already exist to help people in assisted living. 

So we would like to hear more about the legislation, and in the 

meantime, we are going to do what we can under current law to 

help States fill in those copays, and many States are already either 

doing that or considering doing that. As you said, they are limited 

copays from the overall budget standpoint of a State. They are very 

important for those particular individuals and we want to do all we 

can to help people get out of institutions. It is a strong commitment 

of this Administration and we will work with the States and definitely want to talk with you further about your legislation. 

Senator CLINTON. Well, we will move quickly on that because 

right now, there is a tremendous burden being imposed. So as 

quick as you can get some assessment as to the best way to do 

that, we need to hear it because we can’t let this just linger on, so 

I appreciate your willingness to work with us. 

I am also concerned about the additional problems that we are 

encountering with respect to mental illness. Will you provide us 

with data on the numbers of beneficiaries that file appeals to plans, 

the number of successful appeals and rejections by plans, and information on the timeliness with which plans handle appeals? 

Dr. MCCLELLAN. We definitely want to work with the committee 

on that. I think that is an important part of the oversight and our 

continuing interaction on making sure that implementation goes as 

smoothly as possible. I would point out that with our extension of 

the transition period for another 60 days, people who are on medications now are going to continue them. I also point out that we 

have very broad formulary requirements, essentially all drugs for 

mental illnesses, especially for people who are already stabilized on 

those drugs. So I wouldn’t expect to see a lot of information on appeals from this particular area for a while because of these other 

steps that we have taken. But we definitely want to keep a close 

eye on that with you. 

Senator CLINTON. Now, your announcement that you will reimburse States requires that States cease using State reimbursement 

systems and return to the Medicare prescription drug system by 

February 15. In light of the problems we have seen, would you reconsider continuing to assist States that may have to step in and 

pick up costs for their citizens who are not getting their benefits? 

70

Dr. MCCLELLAN. Senator, the payment program does include an 

opportunity to extend its period beyond February 15. What we expect, based on what we are seeing from many States already, is 

that there are specific steps that States can take to minimize billing into the State systems. Those kinds of steps, we expect States 

should be able to put in place by the middle of February if not 

sooner, and that is going to drive down the use of State reimbursement in the cases where States haven’t done that yet. 

Senator CLINTON. But in the case of the exceptions——

Dr. MCCLELLAN. But if there are still exceptions needed, if there 

is still additional limited help needed beyond that, that definitely 

is part of the waiver process, as well, and we would discuss that 

with the particular State. The goal here that we have is the same 

as the States have, is to get these beneficiaries, all of these beneficiaries, transitioned to their Medicare coverage as quickly as possible. 

Senator CLINTON. Dr. McClellan, with respect to the plans requiring forms, some as long as 14 pages, for doctors to fill out, you 

have requested that the plans discontinue this practice, but at least 

according to our information, it does not yet seem to have taken 

hold. Will you require the plans to end this practice? 

Dr. MCCLELLAN. We have been watching this very closely, too. I 

am pleased that many of the plans have taken steps or already 

have in place steps to have a smooth and straightforward exceptions and appeals process. We have also worked very closely with 

pharmacy groups, medical groups, and others to develop a model 

form that is very straightforward, exactly as you are discussing. 

I think we have talked about how some of the benefits of competition here, getting to lower costs, but obviously what many beneficiaries want right now is more simplicity and I think you are 

going to start seeing the market respond and the plans respond to 

that. That is what people want, is a straightforward way as possible to use these benefits. We are going to help push that along 

by working with the plans and pharmacy groups on things like a 

standard exceptions and appeals form. So I think you will be hearing more about that in the days ahead. Remember, we have got 60 

more days with the extension of our transition coverage period to 

help make sure these processes work as smoothly as possible. 

Senator CLINTON. I highly commend the idea of a single form. It 

has been my experience that insurance companies thrive on complexity and confusion in the health care arena, so the more it can 

be simplified, I think the more money we will save, the quicker we 

will get the services out to the people who need them, and the burden will be removed from doctors who shouldn’t be spending their 

time filling out forms to make a case for a drug that they have prescribed for years for their patient. 

Mr. Chairman, I really thank you for having this hearing. I hope 

we have a continuation of these hearings. I share my good friend 

Senator Kohl’s skepticism about costs. I, a long, long time ago, took 

a course in consumer law and the concept of bait-and-switch has 

stayed with me ever since, so this has to be watched extremely 

closely if it is going to have the benefits that we want it to have 

for people. Thank you. 

The CHAIRMAN. Thank you. 

71

Senator Talent. 

Senator TALENT. Thank you, Mr. Chairman. 

Director McClellan, on page two of your statement, you have a 

graph which I have been trying to understand. In the statement introducing it, you say that there were 15 million people with drug 

coverage on December 21 and 24 million on January 14. Would you 

explain that a little bit? 

Dr. MCCLELLAN. The increase in enrollment related to more people signing up on their own, more retirees registering for coverage 

to get support for their retiree coverage, as well, and that is what 

has gotten to the number that now exceeds——

Senator TALENT. So those retirees had the coverage, but what 

they now have is a subsidy in addition to it? 

Dr. MCCLELLAN. They didn’t have a subsidy, and what they 

didn’t have was much security in keeping that coverage in place. 

As you know, in Missouri, a lot of retiree plans have been dropped 

or cut back. The plans now have new support from us to keep them 

in place and to keep high-quality benefits there, and there are hundreds of firms and thousands of beneficiaries in Missouri who are 

taking advantage of this new help. 

Senator TALENT. So what you are saying is that there are nine 

million additional people who are receiving some benefit because of 

the new program. 

Dr. MCCLELLAN. I would say it is even more than that. It is true 

that many of the people who are in the Medicare Advantage health 

plans—those are the HMOs and the PPO plans in Medicare that 

existed before, in many cases, before 2006, those plans did have 

some drug coverage in many cases. They all offer extra benefits 

and lower cost for the people who enroll in them. That is why many 

seniors, and more and more seniors are signing up for those plans. 

What the drug benefit allowed them to do was enhance that coverage. So instead of having $250 worth of help for a quarter that 

just ran out, people now have a relatively comprehensive drug benefit and it costs less and it offers more coverage, less of a doughnut 

hole, no deductible, things like that, that are not available in the 

basic Medicare benefit. So people in Medicare Advantage——

Senator TALENT. Superior to what they had under the HMOs? 

Dr. MCCLELLAN. Exactly. Similarly, the retiree coverage trends 

over the last years have been steadily downward. We have seen 

that halt with the result of the new subsidy being implemented. 

Then there are millions more people, including many, many in Missouri, who are getting new drug coverage who didn’t have it before 

and saving a lot of money. 

Senator TALENT. So the nine million figure is people who didn’t 

have any drug coverage before who now have it, plus people who 

were on HMOs who are now on Medicare Advantage and getting 

improved coverage. 

Dr. MCCLELLAN. I think the figure is even larger than that. I 

think that is—what you are looking at is a change in enrollment 

between the last part of December and early January. Going into 

the last part of December, there were already many people who 

had enrolled either through a Medicare Advantage plan or a retiree 

plan or something like that. 

72

Senator TALENT. Well, since we may evidently have a debate on 

whether to scrap the whole thing, it might be a good idea for us 

to get down exactly the benefits people are getting, and my sense 

of it is that there are millions of people around the country——

Dr. MCCLELLAN. Oh, yes. 

Senator TALENT [continuing]. Who are getting a substantial additional benefit, either coverage that they did not have or better coverage or stabilization of the private retiree coverage that they had. 

Dr. MCCLELLAN. That is right, and they are——

Senator TALENT. I am certainly running into a lot of people in 

Missouri who are saying, ‘‘Boy, I was paying out of pocket before 

and I am not now,’’ so maybe we ought to really get a total of the 

number of people in the country who would lose benefits if we went 

back to square one. 

Dr. MCCLELLAN. That is many millions of people who would lose 

benefits——

Senator TALENT. Because that is the balance on the other hand. 

I mean, it is good to have a hearing on the problems, and I have 

been living with that because I have been out, as you know——

Dr. MCCLELLAN. I know you have. 

Senator TALENT [continuing]. Because I have called you from the 

road on some occasions where I had cell phone coverage, and I have 

been living with some of those issues, also. But we have to have 

the balance and realize why we did all this and what is going to 

happen if we go back to square one with it. 

Let me ask you a couple of questions. I am going to submit more 

for the record. One, and I have taken some real-life questions from 

people who have had issues. This one lady is trying to find out 

whether a particularly rather exotic and necessary drug that she 

has been taking since July of last year is covered under the plan 

that she was auto-enrolled in and she is having trouble getting a 

response from CMS. We hear about this. I mean, I hear some people say, ‘‘I called, I got through, no problem.’’ Then I have other 

people who say, ‘‘We are getting a run-around.’’ 

How big is the problem, in your judgment, for people who are 

calling CMS and what is the difficulty? Is it that during peak hours 

everybody is calling and not enough on off-hours or whatever? 

The second point that was raised with me, I thought was a very 

good one, and maybe we need to do this rather than you, but the 

Agencies on Aging have done heroic work on this, the senior centers——

Dr. MCCLELLAN. Yes, absolutely. 

Senator TALENT. I mean, I don’t know how they rolled out Medicare originally without these, but they have just been tremendous——

Dr. MCCLELLAN. Absolutely. 

Senator TALENT [continuing]. Just great about it and so constructive, and they have had to put a lot of time and effort into it. I 

wonder, do you have any plans, or do we need to do this legislatively, to maybe help compensate them because they really put an 

enormous amount of effort. They didn’t do it to get money from the 

government. They did it to help the seniors. But it would be good 

to compensate these because they have spent a lot of time and effort on it, and that was raised with me. 

73

Do you want to comment on those two, and then I will submit 

the other questions? 

Dr. MCCLELLAN. Absolutely, Senator, and thank you for all your 

effort. I appreciate the phone conversations and keeping in close 

touch about how things are working on the ground in Missouri. 

Senator TALENT. That is very polite of you, because I have called 

up to complain on occasions——

Dr. MCCLELLAN. That is no problem. It is part of the job. The 

Area Agencies on Aging, senior centers, other local partners, we 

have tens of thousands of them around the country, are doing a 

huge amount of work to help people find out about the new benefits 

and take advantage of it and they really are a tremendous resource. They are helping people get through. They hear a lot of 

things. My gosh, there are a lot of plans. What does this mean for 

me? They turn it into, practically, you know, here is the plan that 

is relevant for you. Here is how you can sign up and save money 

in just a matter of minutes. They are helping around the country 

millions of seniors do that. 

We have doubled our budget for supporting the State Health Insurance Assistance Programs. We have enhanced our collaborations 

with the Administration on Aging, which provides funding and enhanced funding for many of these groups. We are also adding to 

this effort with a grassroots network around the country. There are 

many faith-based organizations, many advocacy organizations, 

many seniors organizations that don’t get government funding but 

now are working more closely together with these federally and 

State and locally sponsored groups than ever before. In States 

where this has happened most successfully, it has really taken a 

lot of the load off these Area Agencies on Aging to enhance and extend their resources substantially, so we truly value their support 

and we are going to continue this higher level of funding. 

Senator TALENT. It has really validated the Older Americans Act 

structure, Mr. Chairman——

Dr. MCCLELLAN. Oh, absolutely. 

Senator TALENT [continuing]. Because they have just been absolutely essential. I am sorry, 30 seconds. I know others have the 

same issue. My pharmacists are less concerned about what they do 

with transition issues. Obviously, they are concerned because people need to get the pharmaceuticals they need to get reimbursed, 

but the way the system is set up, independent pharmacies in smaller towns are going to be at a structural disadvantage in terms of 

reimbursement. You and I have talked about this. Tell me what 

your thinking is on it now and maybe what we can do to help them 

that will not undermine the basic structure of law, and then I am 

done. Thank you. 

Dr. MCCLELLAN. The community pharmacists are doing terrific 

work, especially in rural communities. From hearing from them, 

there are several things that we know that we can do to help that 

I think they would find useful. One of them is making sure that 

the contracts that the plans have with the pharmacies are enforced, and that includes also other requirements like network requirements. In many of these rural communities, as some of you 

have mentioned, there is just one pharmacy there. Maybe Senator 

Salazar mentioned it. They are the main focus of support in the 

74

community. Well, those pharmacies need to be part of the network 

in order for the plans to meet our access requirements under the 

drug benefit. So we will make sure that the plans meet the access 

requirements and that means that they are going to have to pay 

the pharmacies enough for them to meet their costs and participate 

in the program. 

Also, many of the community pharmacies have faced added burdens because of differences in the messages that they are getting 

from the different plans because they may not have been able to 

use all the support tools that we have set up and we intend to be 

available for every pharmacy right off the bat. We have taken some 

new steps to work with the software vendors and the other organizations that support these community pharmacists, as well, so that 

we can help make sure they are able to continue to provide a high 

level of service. 

This is going to be an ongoing concern for us. This is a big 

change in the way pharmacies bill, especially many community 

pharmacies, a big change in the way their work process goes and 

their business process goes. So I think the best thing for us to do 

is to keep in close touch about these issues and make sure that we 

are continuing to respond to the ideas that we hear out in the field 

about making the benefit work as smoothly as possible. 

The CHAIRMAN. With the indulgence of my colleagues, the order 

is next Senator Burns and Senator Martinez. Senator Nelson has 

one burning question and needs to be across town in a minute. Do 

you mind if he asks that first? 

Senator BURNS. Let him burn the barn down. 

The CHAIRMAN. All right. Senator Nelson? 

Senator NELSON. Thank you to my colleagues. This is just a follow-up to the earlier conversation. Dr. McClellan, could you tell us 

for the record CMS’s, your shop’s, position with regard to extending 

the Medicare deadline for 2006 and also whether CMS supports allowing seniors to change plans once during 2006 if they make a 

mistake? 

Dr. MCCLELLAN. Senator, we are not supporting that legislation 

at this time. What we are focused on right now are the main topics 

that have already come up at this hearing, which is to make sure 

that everyone is able to take advantage of the new coverage, and 

we have seen a lot of progress on that because we have identified 

the problems, have been taking steps to fix them, and we are 

seeing millions of prescriptions getting filled. We are seeing tens of 

thousands of people signing up every day. That is still the No. 1 

topic on calls to 1–800–MEDICARE. We are helping people find out 

about what the coverage means for them and sign up in a matter 

of minutes. So anybody who has questions calls at 1–800–MEDICARE and go to the many events going on around the State of 

Florida right now to find out about the coverage. 

So that is where we are focused right now. I am sure we are 

going to have a lot more discussions about this in the days and 

weeks ahead, though. 

Senator NELSON. Thank you, Mr. Chairman. We are going to 

take this issue up later today in the amendments to the tax reconciliation bill, and thank you to my colleagues for your kind opportunity for me to ask the question. 

75

The CHAIRMAN. Thank you, Senator Nelson. 

Senator Burns. 

Senator BURNS. Thank you, Mr. Chairman. 

I asked the question a while ago as far as what actions we take 

as Congressional offices and our attitude toward the program and 

why it is so important. I go back to the days when they issued the 

card, you know, the drug card. The rhetoric was so negative that 

a lot of people did not even attempt to go sign up for their discount 

card and therefore went and paid a lot of money out of their pockets when they could have been saving about $600 a year——

Dr. MCCLELLAN. Or more. 

Senator BURNS [continuing]. Or more, because they were afraid 

of it. So I think the way we approach this will not only decide the 

fate of the program, but it will also provide seniors with some confidence that this is designed for them, and as we see glitches along 

the line, we will fix those. That is a point of legitimate debate here 

as a policymaker goes. So that is why I said that a while ago just 

absolutely throwing it out and saying, well, it is a bad program and 

then scare them further does not accomplish a great deal if this is 

for the benefit of them, and that is the reason I asked for that. I 

still say that—and we have got to have some way as Congressional, 

but I will say that the resource centers, senior citizen centers in 

Montana have been marvelous and that works. 

Now, we have a little different circumstance in Montana. How 

about my reservations? When we say rural areas, Dr. McClellan, 

as you know, in Montana, we have got a lot of dirt between light 

bulbs out there and these smaller rural pharmacies have a hard 

time making a go of it in our smaller farm communities and now 

they are asked to do some things that sometimes puts a real financial burden on them. It was my understanding that that commitment had been made, and I think it has been, but we have got to 

make sure of that. 

Have we made any kind of an effort by your office for an outreach to my reservations, because as you know, we are dealing in 

a different kind of a circumstance there than we are, say, with the 

average Montanan? 

Dr. MCCLELLAN. Absolutely. I have participated in a number 

meetings with tribal leaders from around the country, including 

representatives from some of the tribes in Montana. The drug benefit is for people who are Native Americans, who are Alaska Natives, just as much as for any other beneficiary in the program. The 

drug plans have to offer contracts to the pharmacies on the tribal 

lands. Many of the plans are now serving people in Indian country 

and I am going to continue monitoring that very closely to make 

sure that we work out—there are some special issues in how, for 

example, Indian Health Service Funds interact with the drug benefit. But people who are living in tribal lands definitely should pay 

attention to this program. It can be real help for them, just as 

much as any other American, in lowering their drug costs. 

Senator BURNS. We are going to start a program of outreach to 

those reservations and I would ask if you can have some resources, 

maybe some people or something that we could—and if you have 

done some real background work on it, that is most helpful. 

Dr. MCCLELLAN. We can. 

76

Senator BURNS. That outreach, I think, is really needed. I was 

talking to the Chairman of all the reservations that I have in Montana the other day and that seemed to be a topic of discussion. Of 

course, sometimes, you know, their people, they have a communications problem, too. We all have communications problems. So that 

outreach is very, very important. So we will be in touch with you 

and I thank you for your testimony here today. You have clarified 

a lot of stuff as far as I am concerned. 

But how can we benefit you? What role do you see we should 

play in carrying that message and to make this work? We want to 

make it work to the maximum if we possibly can. 

Dr. MCCLELLAN. I think your continued close work with us on 

identifying problems and letting us know about it. One of the 

things I have been most impressed with is the way that district 

staffs, the local staffs of your offices, have worked closely with our 

regional offices around the country when you identify someone who 

has a problem to get them into our casework system and get that 

problem fixed, and also to enable us to solve any systematic problems. 

You know, we talked a little bit earlier about this very big concern I have about a particular group of people who are dually eligible, who have Medicare and Medicaid and were previously getting 

their drug coverage from Medicaid, who we are working right now 

to make sure they can all take advantage of the coverage effectively. That has been our biggest concern. 

For the vast majority of seniors who sign up for this coverage, 

I think the main thing for them to know is if you give it a little 

bit of lead time, things will work very smoothly. So for a typical 

senior signing up, they can save half on their drug costs or more. 

There are lots of places they can go in Montana and every place 

else for help. About a week after they enroll, they will get a letter 

in the mail from their drug plan. Keep that until you get your drug 

plan I.D. card, which will come in a few weeks. If you allow that 

couple of weeks or so between when you sign up for the coverage 

and when you start to use it, you are likely to have a very good, 

smooth experience the first time you use your coverage and you are 

going to start saving on your medicines and have that peace of 

mind from drug coverage, which is a new thing in Medicare. 

Senator BURNS. The only thing I am trying to do is cut down on 

the number of phone lines I am going to have to have to make it 

work. But we want to work with you and we want to work with 

the seniors because I don’t want them left behind. I don’t want 

anybody left out of this program that can take advantage of this 

program because it is designed for them——

Dr. MCCLELLAN. That is right. 

Senator BURNS. To get it in place. Then if we have got some 

problems later on, then let us tackle those problems. 

Thank you, Mr. Chairman, very much. 

The CHAIRMAN. Thanks, Senator Burns. 

Senator Martinez. 

Senator MARTINEZ. Thank you, Mr. Chairman. 

Dr. McClellan, we appreciate your being here today——

Dr. MCCLELLAN. Thank you, Senator. 

77

Senator MARTINEZ. All the work that you are doing to make this 

program be a success, which I know it will be in time. It is already 

a success, but even a better success in time. 

In my State of Florida, we have many nursing home residents 

and a number of them, quite a number of them, in fact, are part 

of the dual-eligible population and were auto-enrolled in Part D 

programs. However, many of the programs they were enrolled in do 

not cover the drugs that they need. Under the Federal and State 

regulations, nursing homes are responsible for providing prescription drugs to their residents, but they are prohibited by Part D 

marketing guidelines from helping dual-eligibles choose a plan that 

meets their needs. 

So will CMS consider revising its regulations to allow nursing 

home professionals or pharmacists to assist residents in selecting 

Part D plans designed to meet their needs? 

Dr. MCCLELLAN. Thank you very much, Senator, for asking that 

question. The nursing home administrators and staff, the long-term 

care pharmacy staff in the nursing homes are a great resource for 

information about the new drug coverage and they are working 

very hard with us to help all nursing home beneficiaries take advantage of it. This is a big help for many people in nursing homes 

and many States. The Medicaid payment rates have not been good 

and many of the other nursing home residents are spending thousands of dollars of their own money on prescriptions, so this is a 

very important benefit for them and we want it to work. 

Our guidelines, and just to clarify this, do allow nursing home 

administrators and pharmacists to provide objective information 

about the drug plans. We try to draw the line with steering. So 

there may be a particular plan that—a drug the pharmacist may 

like that is OK from the pharmacist’s standpoint, but when you are 

advising a beneficiary, it is important to use objective information, 

like what the beneficiary’s costs are going to be, whether their current drugs are all on the formulary. Things like that are absolutely 

fine for the nursing home administrators, other nursing home staff 

to talk to their beneficiaries about. 

If we need to clarify this further with some of the nursing homes 

in the State, I would be delighted to work with you on doing so. 

We have worked very closely with many of the nursing home associations, ACA, ASA, the Alliance, and others to make sure people 

in the nursing homes know what they are allowed to do, and they 

are allowed to provide objective information to help people choose 

a plan. They just can’t steer based on financial, you know, direct 

financial incentives or something like that. But we want to make 

this work for everyone in the nursing homes. 

Senator MARTINEZ. As we run into problems on that, we may get 

with you about seeing how we can break through, but——

Dr. MCCLELLAN. We would be delighted to do that. We have an 

ongoing outreach effort with the nursing home associations and 

through our regional offices with the State and local associations, 

weekly phone calls, things like that that we can use to help get any 

needed clarifications out. 

Senator MARTINEZ. Let me say, I want to say a good word for 

your regional offices. 

Dr. MCCLELLAN. Oh, they have been terrific. 

78

Senator MARTINEZ. We have worked very closely with them. They 

have done a terrific job and have really been of assistance to our 

folks as they have tried to help people with the program. We had 

a series of meetings, as many others have done, to try to help folks 

to get enrolled and so forth and they have been a real great resource and we appreciate it. 

Dr. MCCLELLAN. I will take that back to them. Thank you, Senator. 

Senator MARTINEZ. With the implementation of the Part D program, Medicaid coverage of prescription drugs for dual-eligible population was transferred to the Medicare prescription drug program. 

Do you see any possibility of transferring those beneficiaries exclusively to Medicare so that all of their care would be under one roof 

eventually? 

Dr. MCCLELLAN. Well, it is a very—the advantages of coordinated care for dual-eligibles are obvious. They have some of the 

highest costs in our health care system and have some of the highest rates of complications from medication interactions, from preventable complications like bedsores and other problems that lead 

to hospital admission, worse outcomes, and higher cost. 

There are a number of plans in Medicare now called special 

needs plans that provide a broader range of services, including, in 

many cases, coordination with the long-term care services in State 

Medicaid programs. We are looking at ways that we can support 

Medicaid and Medicare work more closely together to provide this 

kind of coordinated care, and as you know, the State of Florida is 

working with us on a new waiver program in Medicaid that would 

give people with a disability and their caregivers more control over 

how they can actually get these kinds of integrated services so it 

is a lot easier to put some of the Medicaid traditional long-term 

care support services together with coordinated care for medical 

benefits and drug benefits with a reform program like Florida is 

working on right now. 

I don’t know that there is going to be major legislation on this 

right away, but I think under our demonstration authorities in 

Medicare, with the new plans in Medicare and with steps like the 

State of Florida is taking, there are some real opportunities to provide much better coordinated care with fewer complications and 

lower costs to dual-eligibles. So we will pursue that with you, as 

well. 

Senator MARTINEZ. Sounds good. One last issue is the pharmacists and the State of Florida getting paid if plans take too long 

in doing so, so we would be interested in seeing how you will monitor this once a reimbursement system is established to make sure 

that timely payment is made to those that are due. 

Dr. MCCLELLAN. We will be monitoring that closely. We have 

had this time lag now as people switch from one payment system 

to another that hopefully we are going to be getting past with the 

checks really starting to go out last week, this week, and so forth, 

but we will be monitoring that closely. 

Senator MARTINEZ. Thank you. Thank you, Dr. McClellan. 

The CHAIRMAN. Senator Wyden. 

Senator WYDEN. Thank you very much, Mr. Chairman, and 

thank you for all your leadership and Senator Kohl’s, and also a 

79

bouquet to my colleague from Arkansas who is letting me go ahead 

of her because we have got the intelligence stuff. 

Senator LINCOLN. Oh, we love bouquets. 

Senator WYDEN. You are gracious, as always. 

Dr. McClellan, when I came to the Congress after being director 

of the Gray Panthers for 7 years, I saw that a lot of senior citizens 

would have a shoebox full of private health insurance policies. They 

would have 10, 15, sometimes 20 policies. I wrote a law that 

drained that swamp so that now there are essentially ten policies 

in the private sector where people can actually compare the coverages one to another and actually use the market to make choices 

for them. 

I don’t understand why CMS won’t do that for this prescription 

drug program. I refer you to the testimony of an Oregonian that 

Senator Smith invited, Mr. Kenny, who advocates that. Let me tell 

you what I think has been the consequence of your not using the 

kind of approach I am talking about, that is senior friendly so that 

older people can compare the choices. I think you have done great 

damage during this roll-out to the cause of private sector choice in 

American health care. 

I voted for this program. I want to make it work. What has happened is instead of using an example like we had with these private policies sold to supplement Medicare, we now have in the 

State of Oregon more than 70 choices, more than 70 choices. So 

older people say they can’t compare. They can’t look and say, well, 

maybe this one rather than that one. 

So I think you ought to be moving in a hurry to make this more 

user friendly, more understandable, and there is a model out there 

right in front of you that you can use, the Medigap model for the 

policies older people bought to supplement their Medicare. It is at 

the last page of Mr. Kenny’s testimony where he specifically says 

something like that would be helpful. Can we start on that right 

away, trying to make sure that we do have innovation in the private sector. We are all for that. But making these choices more understandable and specifically will you support looking at this 

Medigap kind of model? 

Dr. MCCLELLAN. Well, Senator, I know how much you have 

worked to make competition succeed for seniors and for other 

Americans and I do want to keep working closely with you on improving how this program is working, as well. What we have seen 

so far is more of a response from the private sector than many people, I think you and I included, expected there was going to be in 

this program when the law was passed. That is why the law didn’t 

include, or may be one reason why the law didn’t include these specific kinds of standards for types of plans. 

The advantage of that is that we are seeing the costs come in 

much lower and benefits come in better than expected. People can 

now get drug coverage through Medicare that is better than the 

standard Medigap policy drug coverage for about a tenth of the cost 

of that Medigap drug coverage. So there are some real advantages 

to the competition and choice that we have seen so far. 

But I absolutely agree with you. I talk to a lot of these seniors 

around the country, as well, that when they first approach this program and they haven’t had a chance to talk to a counselor or talk 

80

to somebody at 1–800–MEDICARE about which choices are relevant for them and how they can find out how to take advantage 

of the program, that can be a real challenge for them and we are 

trying to break through that now. I do think, also, that now that 

we have seen competition work to bring down costs and improve 

choices, we are going to see competitive give seniors the next thing 

they want, which is more simplicity and more understanding of 

how these choices actually work, and we will be pushing that process along. I want to keep talking with you about the best way to 

do that. 

Senator WYDEN. I am still unclear why you think it doesn’t make 

sense for government to try to structure these choices for older people so that instead of 70 policies—I am not wedded to a specific 

number—we have whatever the number is so that people can actually sit at their kitchen table and compare them, because I don’t 

think that the private sector in and of itself is going to produce 

more simple, more understandable policies. It didn’t happen with 

Medigap. It didn’t happen. It happened because people like former 

Senator Dole and the late Senator Heinz worked with me, and we 

said that government and the private sector are going to structure 

the choices. So I will ask you once again, are you saying you won’t 

look at that? 

Dr. MCCLELLAN. I am saying that we do want to look at ways 

to make it easier for people to make—even easier for people to 

make choices among plans. 

Senator WYDEN. Even easier? It is bedlam out there. When you 

use the word ‘‘even easier,’’ talk to Mr. Kenny who is 78 years old 

about what his friends say. 

Dr. MCCLELLAN. And I——

Senator WYDEN. Older people are saying, you can’t even sort this 

out with an advanced degree. They don’t say that with Medigap, 

with their private policies to supplement Medicare——

Dr. MCCLELLAN. I think looking toward simplification is absolutely the next step in this process, now that we have got the benefit in place. If we had tried to put in a standardized benefit back 

when the law was passed, we would have ended up with a deductible with a doughnut hole with things that people clearly don’t 

want and they are not choosing now. We are seeing people choose 

plans that have the kind of coverage they want and now we need 

to—I agree. We need to help them get to more simplicity. But I 

think the drug plans are competing to do that, too, and that is 

what we want to help along. 

Senator WYDEN. I didn’t propose a Medigap-type amendment to 

this legislation for a reason, because I wanted the private sector to 

have the first crack at it. But I didn’t conceive that the roll-out in 

the last few months would be bungled this way. I don’t think it had 

to be this way. I think you could have worked with the private sector without a law on a voluntary basis and persuaded them, look, 

let us come up with some uniformity in the terms and make it possible for people to compare the choices. It could have been done voluntarily. It wasn’t done voluntarily. 

Now we have got a mess on our hands and I hope that you will 

work with myself and others because I think it didn’t have to be 

81

this way. There is a model that could be an alternative. Read Mr. 

Kenny’s statement. He calls for that in his testimony. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Wyden. 

Senator Lincoln. 

Senator LINCOLN. Thank you, Mr. Chairman, and thanks for 

holding such an important hearing today. Many of us have been 

swamped by calls in our offices by our seniors and disabled across 

the State who are truly frustrated about the, as you say, the 

choices, which we do want choices, but certainly their ability to access the technical assistance they need to understand those choices, 

so we appreciate your patience. I do, certainly. I am at the end of 

the totem pole here. 

Dr. MCCLELLAN. I appreciate all your——

Senator LINCOLN. I voted for adding this prescription drug benefit to Medicare and I want it to work and I think I have demonstrated that. I have met with more than—over 3,000 seniors 

across our State. We held meetings which your district division offices out of Dallas were very gracious in helping us with, trying to 

make sure that we could be prepared and that people would have 

the knowledge and information they needed to make wise choices. 

We could quickly see that it was difficult. In time, I came back 

to Washington and joined my colleagues, concerned about the short 

6-week transition period for particularly our dual-eligible beneficiaries. I had hoped that we could work with you to make that 

transition period longer. It is hard to believe that while everyone 

else on Medicare was given 6 months to make that transition, this 

group of individuals, which often can be considered some of the 

most at risk, perhaps, were given only 6 weeks. So I hope that as 

we move forward and we look for ways to improve on this legislation, as we did with the extension of that transition period, that as 

opposed to fighting, our deep desire is that you will work with us 

to look at the ways we can correct. 

If there is anything that we did in moving into this proposal, and 

I think many of us that have supported it and want to continue to 

support the effort, is that we don’t look at it as a work of art but 

a work in progress and that we can recognize the things that we 

can do better and that you will work with us in Congress to change 

those in a way that will make a difference. 

As I said, these are beneficiaries that are, in many instances, our 

most vulnerable, and in Arkansas, it is a disproportionate share, a 

greater share of our seniors that fall into that category, and, as is 

the Arkansas way, our pharmacists, our medical providers have 

been working diligently to make sure that these individuals who 

are their neighbors and their friends in the community are going 

to get what they need. 

I guess what we want to know from you is how we can, and you 

particularly at CMS, can continue to make these individuals, particularly our pharmacists, whole. 

My office has received a tremendous number of calls from pharmacists who are concerned about the timing of their reimbursement——

Dr. MCCLELLAN. Right. 

82

Senator LINCOLN [continuing]. From these prescription drug 

plans. The plans have in their contracts that they will be reimbursed every 2 weeks, and yet when the pharmacists finally make 

contact with the plans, one, they are not able to negotiate anything 

with them, and they are told that they won’t get their payments 

in 2 weeks. It is crazy. I mean, I know that some of the larger 

pharmacy groups out there have got the technology and the capability to overcome that. They also have the resources to be able to 

make it through that period of time, but a lot—as Senator Burns 

mentioned, in rural America, your local pharmacists don’t have 

that. 

I have had at least three of my pharmacists call and say they 

have had to take out a loan from the bank in order to make it 

through and pay their suppliers and that is just inexcusable. I 

mean, these are people who are dedicated to their constituency and 

their customers and their community, and to take out a $500,000 

loan just to make it through the month is something that, in my 

opinion, is not only unintended in this legislation, but it is unacceptable. So I hope that as we have led seniors to the doorstep of 

this opportunity of a new prescription drug component that we will 

not leave them or the people that serve them at that doorstep. 

I guess my question to you is, what are you going to do in terms of the timing of this? Arkansas to date has spent about $3.8 million 

now, almost $4 million. You say you want to make it all whole, and 

I want to believe you on that, but I also think that the timing on 

this is incredibly important. I mean, are you going to guarantee us 

in 30 days that these people are going to be paid? Are you going 

to go back to these plans and be an advocate on their behalf? 

Dr. MCCLELLAN. First of all, Senator, I would like to thank you 

for all your close work with us on the implementation of the benefit. As you mentioned, your office is working closely with our regional office, answering people’s questions, helping any individuals 

who are having difficulty, and helping more people enroll. I think 

that is why Arkansas has one of the highest rates in the Nation 

of enrolling in this program——

Senator LINCOLN. We want it to work. 

Dr. MCCLELLAN [continuing]. The program is having a big impact for people in the State who have been struggling with their 

drug costs. The State is going to be reimbursed. We have been in 

very frequent contact with Governor Huckabee, who has been a 

real leader on this issue and helping pharmacists, that we are having difficulty at the beginning and in working with us on getting 

an effective reimbursement plan in place. So the State is going to 

be reimbursed for those costs. But I want——

Senator LINCOLN. Do we know the timing on that? 

Dr. MCCLELLAN. Well, the model—we are releasing a specific 

template, just a checklist. That is all the State has to fill out in 

order to get into this reimbursement program. That will be available as soon as today. We hope that the States like Arkansas will 

be able to quickly complete this agreement with us and then the 

reimbursement process will actually involve the State sending us 

the claims that they have that they haven’t been able—where the 

pharmacist couldn’t bill the Medicare plan properly and we will do 

the reconciliation with the drug plans and we will also pay for any 

83

additional costs to the extent that any competitive drug plans come 

in at a lower cost than Medicaid. We will make that up, as well. 

But I want to talk about the pharmacists specifically——

Senator LINCOLN. Good. 

Dr. MCCLELLAN [continuing]. Because they do have a timing 

issue, and I have heard that from talking to many of these independent pharmacies around the country and their associations. 

They went from being paid by Medicaid, often on a weekly basis, 

to these contracts that you mentioned which often have 15-day payment cycles. Some of them are less. Some of them are less. Some 

of them are 10 days. Some of them are a little bit longer. Those 

checks are just now starting to come in. In the meantime, it has 

been a real stretch for many of the community pharmacies to meet 

their short-term expenses and to pay the distributors and others. 

We have been in contact with basically everyone involved in the 

whole pharmacy drug distribution chain, the wholesalers and others. Many of them have relaxed the terms for payments during this 

transitional period to help pharmacists through that process, and 

now, now that those contract terms are coming due, we are watching very closely to make sure that the plans do pay on schedule so 

that they can get those costs covered and get through this transitional period. 

Senator LINCOLN. Do you feel like you have the sufficient authority to regulate the plans? 

Dr. MCCLELLAN. The plans have contracts with the pharmacies 

and——

Senator LINCOLN. But they won’t negotiate with them. They 

won’t talk to them. 

Dr. MCCLELLAN. Well, our regulatory authority goes to making 

sure that plans meet our standards for having access to pharmacies. So if a pharmacy, especially in a rural area, it is the only 

pharmacy around, isn’t getting a rate that they think is acceptable 

and permits them to serve Medicare beneficiaries, if they don’t participate, the plan won’t meet our standards for having——

Senator LINCOLN. So do they go through an appeals process? I 

mean, is that what you have in place? 

Dr. MCCLELLAN. Well, the plan wouldn’t even get approved if it 

doesn’t meet our pharmacy access standards. 

Senator LINCOLN. But the point is if they are not meeting that 

and they are still the plan that exists for that individual, that constituent, what is the pharmacist—what do they have? What power 

do they have? Do they have an appeals process? Do they come to 

you and say, this plan is not adhering to the contract? 

Dr. MCCLELLAN. If it is not adhering to the——

Senator LINCOLN. Are you going to fight that contract for them? 

Dr. MCCLELLAN. If it is not adhering to the contract, we want to 

hear about any complaints about failure to adhere to contracts 

and——

Senator LINCOLN. That is what they have been doing, is calling 

you about the timeliness. 

Dr. MCCLELLAN. Well, we will take action, and we have heard 

about a few of these already. Some of the ones that we have seen 

so far were cases where the plan submitted, the pharmacy submitted its claims for services delivered, say, in the first couple 

84

weeks of January. Then the plan has 15 days to pay and those 

checks are starting to go out now. We have this transitional issue. 

So we are watching very closely to make sure that happens the 

way it is supposed to happen, and if we see any systematic pattern 

of complaints about plans not following their pharmacy contract, 

we absolutely are going to follow up on that with the plans. We 

have specific compliance——

Senator LINCOLN. So you feel you have enough authority——

Dr. MCCLELLAN. We have specific compliance staff and compliance officers and specific contacts on compliance issues with the 

plans to make sure they are adhering to the contract terms. 

Senator LINCOLN. You feel comfortable that you have enough authority and enough individuals on point to do that? 

Dr. MCCLELLAN. At this point, we do. We are watching complaints that come in and making sure that contracts are being adhered to, and if we—we will let you know if there end up being bigger problems——

Senator LINCOLN. Where could I or a pharmacist get more information about these contracts? 

Dr. MCCLELLAN. The contracts between the plans and the pharmacies are filed. Plans have to make available a contract for any 

pharmacy that potentially wants to do business with them. There 

is an ‘‘any willing pharmacy provision,’’ and in order to meet our 

pharmacy access standards, the plans must have pharmacies available and convenient access for all of their beneficiaries. The plans 

have filed information with us showing that they have got a standard contract——

Senator LINCOLN. So the pharmacists call CMS to get that contract? 

Dr. MCCLELLAN. Well, the pharmacists will have that contract 

directly because they have entered into the contract with the plan. 

So they have got their contract information directly and what we 

want to know about is, is a plan failing to adhere to the terms of 

their contract——

Senator LINCOLN. OK, and so——

Dr. MCCLELLAN [continuing]. That is something that the pharmacist is——

Senator LINCOLN [continuing]. Hopefully, you are the one that 

will help them as an advocate if there is a problem. 

Dr. MCCLELLAN. Yes, as well as the pharmacy associations often 

help with these contractual issues with plans and we do want to 

provide some assistance, as well. 

Senator LINCOLN. We also have a State law——

Dr. MCCLELLAN. If I could just add one more issue on this topic, 

early on, especially, the pharmacists were having real trouble sorting out billing issues because they couldn’t get through to plans or 

couldn’t get through to us. 

Senator LINCOLN. Yes. 

Dr. MCCLELLAN. As I said already in this hearing, we have taken 

some major steps to make sure any pharmacist can contact Medicare virtually immediately, with no waiting, on our toll-free pharmacist help line. That is working very smoothly now in terms of 

quick access for pharmacists with questions or complaints. Pharmacies also should expect a high level of performance from the 

85

drug plans. Many of the drug plans have taken some great steps 

over the last several weeks to improve pharmacy access to them so 

they can resolve any of these contract or payment issues, and we 

expect all the plans to do that——

Senator LINCOLN. There was definitely a big problem in contacting——

Dr. MCCLELLAN [continuing]. That kind of smooth and direct 

contact with the plans can also go a long way to helping with these 

issues and that is why we are going to increase our monitoring of 

plan performance on their pharmacy lines. Again, we have seen 

lots of plans make big improvements. They are doing very well on 

quick access——

Senator LINCOLN. Their Washington offices probably called in, 

because I found when I couldn’t get hold of you or to somebody in 

CMS that could answer my question, I called their government relations office here in Washington and started sending my constituents to them because the questions there just simply were inexcusable in terms of being required to pay deductibles and copays and 

other things that were clearly out of sync with what we had produced in the legislation. 

Dr. MCCLELLAN. I am glad we are seeing progress there, but we 

are going to obviously keep watching this very closely until all 

these problems are fixed. 

Senator LINCOLN. We have sent you a letter. Arkansas has a 

State law that allows patients to choose their own pharmacy. In 

long-term care settings, we are one of the few States which has historically interpreted the rule to allow each individual to decide 

which pharmacy they want to use. We sent you a letter on the 

ninth of January hoping that you could promptly clarify the intent 

of the patient’s rights to choose a pharmacy as it exists under State 

laws. Can you give me an indication when I might get some guidance issued from you? 

Dr. MCCLELLAN. I can. In fact, we have been working directly 

with community pharmacists on this. We have had an exchange of 

letters with the National Community Pharmacy Association to 

make clear a couple of things. One, we do expect some standards 

for long-term care pharmacies and plans that are contracting with 

them to meet. Basically, a plan must support the required level of 

services for a long-term care pharmacy and it must provide access 

to needed long-term care pharmacy services for every beneficiary in 

the plan, whichever long-term care pharmacy they happen to be 

using. 

We have also made clear in this exchange of letters that the 

plans—that there is no restriction in our policy on which pharmacies a nursing home can contract with to provide services. In 

fact, in a number of States, we are seeing more competition where 

community pharmacies are taking advantage of the fact that we 

are trying to set up a level playing field here to supply access to 

services and pharmacies. 

So there is nothing in our rules that prohibits beneficiaries from 

getting the long-term care pharmacy choice that they need. It is 

really more of an issue directly for the nursing home and we want 

the nursing homes to know that if they want or if their beneficiaries want to contact with or get their services from different 

86

long-term care pharmacies, that is absolutely permitted under the 

Medicare rules. 

Senator LINCOLN. Or local? 

Dr. MCCLELLAN. That is right. 

Senator LINCOLN. Not just long-term, but local pharmacies, too. 

Dr. MCCLELLAN. Local pharmacies. Obviously, local pharmacies, 

too. 

Senator LINCOLN. Just last, in the nursing home situation we 

have in Arkansas, they say their pharmacies are still experiencing 

a rejection rate of 25 percent. Twenty-five percent of the time, they 

are getting rejected, and the plans are still charging copays to the 

nursing home patients, which are actually prohibited, I think, 

under the law. 

Dr. MCCLELLAN. That is right, and this is an example——

Senator LINCOLN. Can you tell me how you are addressing that? 

Dr. MCCLELLAN [continuing]. I talked at the outset about this 

being one of the biggest problems that we are working on right now 

and that we are taking steps to fix. It has several sources. One is 

making sure that the plans all have complete and accurate data on 

the nursing home status of their beneficiaries and that they are 

using it. To help make sure that happens, we have sent out the 

complete lists of all the dual-eligible and low-income beneficiaries 

in a plan to those plans. We most recently sent another list of this 

information out on January 30. We also are handling casework and 

complaint issues. So if we see a pattern of a specific plan not having the right copayment information in, we can go work directly 

with that plan to try to get it addressed. 

We still need to make more progress on this, but it is absolutely 

one of our top priorities to make sure everyone has the correct copayment information, including the zero copay information in the 

nursing homes——

Senator LINCOLN. Well, I would just say that in enforcing these 

plans and the policies, many of the pharmacists are reporting that 

when they call the plans, the staff that are answering the queries 

from the plan don’t know about the policies. 

Dr. MCCLELLAN. One of the technical issues that we have been 

dealing with with certain plans over the last few weeks is that 

there is a—I don’t want to get too technical here, but there is a 

specific piece of information that we send out in the files that have 

information on beneficiaries in the plans on the nursing home status of a beneficiary and we do want to make sure that all the plans 

are using that. Most of them are using it just fine now, and we 

have, again, double-checked to make sure they have got the right 

information in place. So I think you should expect to see continued 

progress on this, but you should keep letting us know if you are 

seeing particular cases——

Senator LINCOLN. Don’t worry. 

Dr. MCCLELLAN [continuing]. I know you will, but that is why 

this is one of our very top issues for long-term care pharmacies 

right now. 

Senator LINCOLN. I just hope and pray that you won’t be afraid 

to make changes that need to be made in order to make this a success. There is clearly from so many of us, we realize that a prescription drug component of Medicare is essential, but I don’t think 

87

anybody has all the right answers and I hope that as we work 

through this, we are willing to make the changes that need to be 

made to make this a success. No pride of authorship or no, you 

know, I don’t know, possession, of possessiveness in terms of what 

we have done here, but if we get it fixed and we can get it fixed 

in a way that will sustain it as a program and not, again, lose the 

confidence of the seniors out there, whether they are the dual-eligibles and the most vulnerable or whether they are those that are 

healthy and yet going to be looking to Medicare in the future, to 

engage in what we need to have them engage in, because participation is going to be critical in the long-term success of this. 

So thank you for your help and I appreciate it. I know, Mr. 

Chairman, if I may ask unanimous consent to include my statement in the record, I apologize for running late. But I do appreciate 

working with you, and again, I hope you all keep answering your 

phone lines because we are going to keep calling. 

Dr. MCCLELLAN. We absolutely will, Senator. 

Senator LINCOLN. OK, thanks. 

Dr. MCCLELLAN. Thank you for your leadership and your passion. We have taken some new steps that we just announced yesterday on exactly these issues and we will keep making changes to 

fix these problems. 

Senator LINCOLN. I would say that you would get a resounding 

applause here if you gave a greater emphasis on timing, because 

that is what is killing people out there in the hinterlands. 

Dr. MCCLELLAN. For the pharmacies, I know. 

Senator LINCOLN. For the pharmacies, particularly, but the 

States, as well, I mean, to have a better idea of when those resources are coming and when they can expect. If it is just setting 

a deadline for yourself or for us, in a way, that we are going to 

make sure that that happens within a certain period of time, it 

gives them a great reassurance, not to mention the financial institutions that are backing them, so thank you. 

The CHAIRMAN. Thank you very much. 

[The prepared statement of Senator Lincoln follows:] 

PREPARED STATEMENT OF SENATOR BLANCHE LINCOLN

Mr. Chairman, thank you for holding this important hearing today on the problems our constituents are having with the new Medicare prescription drug benefit, 

or Part D. 

I voted for adding this prescription drug benefit to Medicare, and I want it to 

work. I know it’s not a perfect law, and I have voted several times in the last two 

years to improve it. Last year, I and many of my colleagues grew concerned about 

the short, six-week transition period for ‘‘dual eligible beneficiaries,’’ those 6.4 million Medicare beneficiaries who also qualify for Medicaid because they are low-income. 

These beneficiaries are among the most vulnerable of America’s citizens. They are 

disproportionately women and minorities and live alone or in nursing homes. Nearly 

three quarters of them have an annual income of $10,000 or less. Thirty eight percent of them have a cognitive or mental impairment. Over a third of them are disabled. Less then half have graduated from high school. And, they use at least 10 

more prescription drugs on average than non-dual eligible beneficiaries. They are 

more likely to have chronic conditions like heart disease, pulmonary disease, or Alzheimer’s Disease. 

While everyone else in Medicare was given six months to enroll in a prescription 

drug plan, these dual eligible beneficiaries were given only six weeks. Moving 6.4 million seniors and individuals with disabilities to an entirely new system is a major 

undertaking. Even MedPAC, an independent advisory committee, had warned that 

88

even large, private employers need at least six months to transition their employees’ 

drug coverage from one pharmacy benefit management company to another. 

It is obvious that the dual eligible beneficiaries have experienced the most problems since January 1st, and I believe the problems they have had were entirely predictable. I voted to add six months to the transition period for this vulnerable population, but officials from the Centers for Medicare and Medicaid Services said that 

our amendment was unnecessary. They said that they were ready. 

Since January 1st, my office has been swamped with calls from upset seniors and 

pharmacists. Dual eligible seniors weren’t in the computer system, the phone lines 

at the plans and at CMS were jammed, and pharmacists were uniformed of the various processes they needed to use. Seniors were placed in plans that did not cover 

their specific medications and were told to pay high deductibles and co-pays that 

they weren’t allowed to be charged under the Medicare law. Pharmacists are not 

getting paid on time and have to take out loans to pay their bills and keep their 

doors open. Half the states, including Arkansas, have had to step in and fill in the 

blanks where CMS’s transition plan has failed. 

These problems could have been avoided. I feel that the administration failed to 

fully prepare for the implementation of this new program even after repeated warnings from me and other members of Congress. But, now that we are in this situation, we must fix it. The government must not leave our most vulnerable seniors 

at the doorstep to fend for themselves. I want to work with CMS to fix these problems and avoid them in the future. This hearing and other hearings are a necessary 

part of that process. Thank you, Mr. Chairman.

The CHAIRMAN. Dr. McClellan and Linda McMahon, as you can 

see, notwithstanding all that is going on in this world, this is what 

is going on in our communities. 

Senator LINCOLN. That is right. 

The CHAIRMAN. You have been on the hot seat and we thank you 

for your candor and your participation here, and with that, we will 

call up the next panel. 

Many of my colleagues have been pulled in different directions, 

but we do want to hear from all of you who are on these panels 

because what you have to say is important to the Senate record. 

This is being broadcast by C–SPAN and there are undoubtedly 

many seniors who are anxious to hear what is being said this 

morning and your testimony, as well. 

Bob Kenny is the first witness of the second panel. He is a Medicare beneficiary who hails from my home State of Oregon. He is 

from Tillamook. No doubt many viewers have been eating cheese 

from that area. He used the Internet to enroll in the prescription 

drug plan, and as a volunteer with the State Senior Health Insurance Benefits Assistance Program helped many other seniors enroll, as well. He will share his experience and offer his insight on 

how the drug benefit program has been working so far. 

He will be followed by Mr. Mike Donato, who is a dual-eligible 

beneficiary from Mansfield, OH. Mr. Donato previously received his 

prescription drug coverage through Medicaid. He will share with us 

his experience with the new Medicare drug benefit thus far. 

Then we will hear from Sharon Farr, who is Mr. Donato’s counselor, and she will be discussing her role at the Center for Individual and Family Services. 

Bob, welcome. Thank you for being here.

89

STATEMENT OF ROBERT J. KENNY, MEDICARE PART D. 

BENEFICIARY, TILLAMOOK, OR 

Mr. KENNY. Good morning, Mr. Chairman, Senator Kohl. I am 

delighted to be here today to give the message that there really are 

successful sign-ups for Medicare D. I work with Medicare D both 

on a personal basis and as a volunteer for the Senior Health Insurance Benefits Assistance program, SHIBA. 

At 78 years of age, I have recently undergone a triple bypass operation and have mild emphysema. My drug cost would be about 

$300 a month without Medicare D. With my Medicare D prescription plan, my total cost, including premium, will be cut to $141 a 

month, a savings of 53 percent, or a total of $1,908 a year. In addition, I just recently changed to a preferred drug from a non-preferred and will save an additional $30 a month that way, and I 

plan to save more money by going into mail order. 

How did I go about signing up? Because of my SHIBA training, 

I knew the shortest route would be to use the government website 

Medicare.gov. I went to that site armed with my list of six prescription drugs and my Medicare card. The site was new to me, so I did 

site exploring and then started in earnest. I told the site that I 

wanted to compare plans, filled in the personal information and 

after that my drug usage. It was time consuming, about threequarters of an hour. The comparison showed the plans from the 

least to the most expensive with the yearly cost for each. I checked 

pharmacies to make sure mine was included and identified the parent company of the plan as a stable firm. In addition, I went over 

the math to verify the yearly cost figure. Having decided that the 

lowest-cost plan was acceptable, I enrolled. 

My membership card arrived in a little over 2 weeks. Shortly 

after January 1, I registered my plan with my pharmacy and ordered medication. The medication was quickly approved and provided at the proper discounted price. Since that time, I have filled 

more prescriptions with the same results. 

I am sure that my good results in some measure reflected my 

half-day Medicare D training and my computer savvy. 

My work as a SHIBA volunteer began in 1993. According to the 

last census, my county of Tillamook in Oregon has a population 

with 19.8 percent seniors as compared to 12.4 percent for the U.S. 

as a whole. I have counseled about 30 Medicare D patients since 

mid-November. The seniors that come to me for Medicare D are 

often very confused by the publicity that tells them they should be 

confused, or they have been talking to a plan salesman, or they 

have been looking into plans and are really confused. 

In most cases, this confusion was either eliminated or considerably reduced by going through the steps required by Medicare.gov. 

Few of my clients know how to use a computer, and those that do 

may not have Internet access. At the end of the appointment, however, almost all were thrilled by the amount that they would save 

in drug costs. There has been only one client of mine who found 

there would be no reduction in her costs. She was a lady in extremely good health who did not spend enough to cover the $250 

deductible. Even this lady decided to enroll anyway in order to 

avoid the 1 percent per month penalty which would be added to her 

premium if she did not enroll before May 15. 

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Lest I paint too pretty a picture, I know there are real problems 

in some areas. I work with the general population of seniors and 

that has yielded good results. At the same time, I have heard from 

those who work with dual-eligibles, those with Medicare and Medicaid, that they have seen serious difficulties in everything from 

getting clients into the right plan to straightening out computer 

records so medications could be dispensed. 

In spite of all the real problems you are hearing about, Medicare 

D is a good thing for an overwhelming proportion of those eligible. 

In our county, there is even a plan available which will produce 

savings with drug costs of as little as $35 a month. Not many seniors have drug costs that low. 

The Medicare.gov website is, in my opinion, now doing a good job 

leading people through the process. When the sign-up period started in November, it was often not available due to excess traffic, 

had errors in plan information, and was much harder to use. Since 

then, the information has been corrected, major improvements have 

been made, and the site is both faster and easier to use. 

In spite of my satisfaction with the results and a real conviction 

that Medicare D is good for the elderly, it is obvious that improvements can be made. I would recommend to the committee the following changes be considered. 

Provide a paper application for those that do not have computer 

access, and by that I mean a paper application to apply for the 

comparison. The actual enrollment is already available either by 

phone or by paper application. 

On the Medicare.gov website at present, medications and their 

dosages must be entered one at a time in order to allow the program to make the notation. This results in a processing wait each 

time a single drug or change in dosage is entered. It would be 

much more efficient if all drugs and their dosages could be entered 

at the same time, resulting in a single but longer wait. 

Stop the auto-enrollment to reduce confusion and save manpower. 

Standardize the formulary for all plans to provide improved comparability. 

As with supplemental plans A through J, reduce the number of 

prescription plans, not vendors, to a manageable number which can 

be compared one to the other. If you think about it, that is already 

almost in existence. It simply has not been categorized. If you look 

at the plans, they already either do or do not cover the $250. They 

either do or do not cover the doughnut hole. They either do or do 

not have mailhouse pharmacies. They either pay nothing for 

generics or a small charge. The small charges are very close together. For non-generic drugs, they either pay 25 percent or they 

have a fixed amount. Where it is a fixed amount, they are very 

close together. So there would be very little change and very little 

restriction of competition to standardize the plans. 

There are more than 4,800 seniors in Tillamook County. Only 

about 500 of these have been helped, mostly because most of them 

do not know where to go for help. My schedule is now running 

empty. We could nationally provide local TV and radio announcements giving the telephone number of the closest SHIBA office or 

91

its equivalent which can be called to get real help one-on-one in a 

timely manner. 

Thank you. 

The CHAIRMAN. Thank you very much, Bob. That is a terrific real 

world experience and some suggestions that we will certainly take 

to heart. We have a hearing in the Finance Committee next week 

on this same topic and I am going to grab your testimony and push 

your ideas. It is very good of you to come this long way to participate in this important discussion. 

Mr. KENNY. Thank you for having me. 

[The prepared statement of Mr. Kenny follows:]

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The CHAIRMAN. Mr. Donato. 

STATEMENT OF MICHAEL DONATO, MEDICARE PART D 

BENEFICIARY, MANSFIELD, OH 

Mr. DONATO. Hi, Senator Smith. My name is Mike Donato. I live 

with my mom, Daisy, in Mansfield, OH. I was diagnosed with 

schizophrenia and bipolar disorder in 1995. I have been on the Social Security Disability program since then. 

Senator, I take medications for many health problems, everything from asthma to high blood pressure. I particularly depend on 

mental health drugs to live in the community with my friends and 

family. When I am not on medications, I tend to get sick and end 

up in the emergency room or the hospital. This is my first time in 

Washington, DC and I don’t want to offend anybody, but it is fair 

to say I don’t like hospitals. Nice people, but the food is pretty bad. 

I would say that things got off to a pretty rocky start with this 

new Medicare drug program. For example, I am in an AARP plan, 

but I never got a letter from them. Sharon Farr from the Center 

for Individual and Family Services, had to find my enrollment online. In fact, she has been helping me a lot these past few weeks. 

You will hear from her in a moment. 

When I went to Walgreen’s in early January to get my prescriptions filled, they said I owed them a total of $700. I was afraid and, 

honestly, pretty panicked, Senator Smith. Where I come from, that 

is a great deal of money. Most of all, though, I was worried about 

my mom. Daisy was very nervous about what would happen to me 

if I couldn’t get my medications. Lord knows she doesn’t have the 

money to buy all my drugs I need to live. 

Today, I sit here feeling pretty lucky. Now that Sharon has got 

me enrolled in this new Part D program and we have ironed out 

all the problems, I can take all nine of my medications I need for 

the very first time. I was never able to do that under Medicaid. I 

also know for a fact that I couldn’t have handled all this without 

Sharon’s help. 

But what about the seniors? What happens to people who don’t 

have the help I had? I hope you will give them the assistance they 

need. I think Daisy feels the same way. 

Thanks for having me here. I will answer your questions the best 

I can. 

The CHAIRMAN. Thank you, Michael. I don’t have a question. I 

just—you are a living example that this is a program that is working for you. For all the problems you have heard spoken of this 

morning, it is obviously worth the effort and the struggle to keep 

getting this program implemented and get it right. 

Mr. DONATO. I agree. 

The CHAIRMAN. Thank you. 

[The prepared statement of Mr. Donato follows:]

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The CHAIRMAN. Sharon Farr. 

STATEMENT OF SHARON FARR, ACCOUNTS RECEIVABLE 

SUPERVISOR, CENTER FOR INDIVIDUAL AND FAMILY SERVICES, MANSFIELD, OH 

Ms. FARR. Good afternoon, Chairman Smith and members of the 

committee. My name is Sharon Farr. I am an accounts receivable 

supervisor at the Center for Individual and Family Services in 

Mansfield, OH. I supervise a staff of five case managers working 

with 140 persons with serious mental illnesses eligible for both 

Medicare and Medicaid who qualify for the new Part D prescription 

drug benefit. Today, I will briefly outline some significant challenges that one of my clients, Mike Donato, and many other dualeligibles with mental disorders, are experiencing with the new 

Medicare prescription drug benefit. 

Let us focus on Mike’s case for just a moment. As you just heard, 

he takes medication for nine health conditions, including schizophrenia, bipolar disorder, diabetes, asthma, and high blood pressure. In late 2005, Mike was auto-enrolled into AARP prescription 

drug plan. When he attempted to get his prescriptions filled in 

early January, Mike did not appear in the Walgreen’s computer 

system as dual-eligible. The pharmacy charged him a $250 deductible plus the copayment for all the medication Mike takes, about 

$700 in all. It is very important to note that his Social Security 

Disability check amounts to $694 per month for all his living expenses. Mike’s mother stepped into the situation at that point and 

gave him $67 so he could at least purchase his mental health medication. 

When I contacted AARP, I was told to wait 48 hours and a computer glitch would be corrected, but nothing happened after 2 days. 

I then began calling the Center for Medicare and Medicaid services, 

AARP, and Walgreen’s, all with the objective of enrolling Mike as 

a dual-eligible so we could qualify for subsidies due him. I was calling these organizations three times a day for a solid week. At one 

point, I was on the phone for 31⁄2 hours and endured multiple 

phone cutoffs. Meanwhile, the AARP website had no mechanism of 

identifying dual-eligibles upon enrollment. 

By the way, Community Mental Health Centers across the country are reporting very similar experiences, particularly with respect 

to PDP prior authorization processes. Many consumers who, for example, are stabilized on anti-psychotic medications now find that 

the same drug is subject to PDP fail-first policies, requiring case 

managers to navigate often confusing new systems. 

Finally, 3 weeks after his Part D odyssey began, Mike showed up 

in the Walgreen’s computer system as dual-eligible. Mr. Chairman, 

I don’t mind telling you that we had a little celebration. Mike can 

now afford all nine drugs in his medication regimen, which is 

something he could not do under the Medicaid program. Walgreen’s 

was very accommodating through the process and even refunded 

Mike’s mother her $67. 

Throughout this process, I have been working with both the National Alliance on Mental Illness and the National Council on Community Behavioral Health Care, who have provided invaluable assistance. 

100

Both NAMI and the National Council hope that CMS will successfully resolve the information technology problems that have 

plagued Part D to date. In addition, our colleagues in the mental 

health field, and including the American Psychiatric Association 

the National Mental Health Association, insist that PDPs provide 

a 30-day emergency supply of medications as required by the current CMS transition policy. It is also essential that CMS renew the 

all or substantially all formulary guidance requiring broad coverage 

of anti-psychotic, anti-depressant, and anti-convulsants for 2007 

contract year and beyond. This is critically important to making 

the drug benefit effective for people with severe mental illnesses. 

In addition, as front-line safety net providers, we need a workable 

and transparent exception process to ensure that dual-eligibles are 

able to quickly access medications that are subject to prior authorization and step therapy. 

In closing, there are some immediate issues that need the attention of Congress. For instance, CMHCs have found that copayment 

structures for dual-eligibles is unwieldy and confusing. This requirement has generated thousands of additional visits to CMHCs 

across the nation, and the tremendous staff time amounts to an unfunded mandate on safety net community mental health providers. 

In fact, I estimate that my five case managers have spent 200 to 

300 hours attempting to enroll dual-eligibles in the new benefit. 

Moreover, people with Alzheimer’s disease, mental retardation, and 

mental illness eligible for Part D need additional help, specifically 

one-on-one pharmaceutical benefits counseling. The House and 

Senate Appropriations Committee required CMS to provide additional assistance through the $150 million MMA education and outreach program, but it has not been materialized to date. 

Thank you for listening. I look forward to answering any questions you may have. 

The CHAIRMAN. Sharon, thank you very much for focusing on the 

mental health component or category in all of this. It is very important to me that this not take a back seat to other prescription 

drugs. I also thank you for serving and helping Michael. 

[The prepared statement of Ms. Farr follows:]

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The CHAIRMAN. Senator Kohl. 

Senator KOHL. Thank you. Just a brief comment. I would first 

like to thank both of our Medicare beneficiaries for traveling so far 

to be here with us today and to make your comments. Mr. Kenny, 

I am pleased that your experience in enrolling in the Medicare 

drug benefit was a good one and that you have been able to counsel 

others that don’t have access to the resources that you do. 

Mr. Donato, the Medicare drug benefits certainly should not be 

an obstacle to proper health care, but as you have demonstrated, 

that is exactly what it has been for too many Medicare beneficiaries. Of course, you are very fortunate to have a strong advocate working on your behalf. 

However, with all due respect, Chairman Smith, the stories we 

have heard today are far different from what I have been hearing 

in my State of Wisconsin. Just this past Monday in Milwaukee, 

Amy McHutchin, who is from the Wisconsin Coalition for Advocacy, 

painted a far different picture and I want to quote something she 

said to me. 

She said, ‘‘In just under a month, I have worked with numerous 

Medicare beneficiaries with severe mental illness, recent organ 

transplants, diabetes, and other life or death illnesses that have 

had trouble accessing their medications. Many were turned away 

from pharmacies empty-handed or left the pharmacies having 

spent their month’s grocery or rent money for their medications. 

The calls also seem to be much more urgent in nature as we near 

the end of the month, where beneficiaries have no longer been able 

to secure a temporary supply of medications from their pharmacy 

and have been without their medications for several days.’’ This is 

an expert in Wisconsin who made that quote to me. 

I share this with the committee because I want to be clear today. 

For far too many people, this drug benefit has not worked properly 

and we clearly have a responsibility to acknowledge them and to 

focus and refocus our efforts on making sure the many challenges 

people have been facing are adequately addressed and not in any 

way papered over. 

Mr. Chairman, I thank you. 

The CHAIRMAN. Thank you. I am grateful to our second panel 

and we will now call up our third. 

The third panel will consist of Mr. Timothy Murphy of the Commonwealth of Massachusetts, Secretary of Health and Human 

Services. His state was one of the first to implement a stop-gap 

program to pay the costs of emergency supplies of medications for 

beneficiaries. He will discuss the state’s role in the Medicare drug 

benefit as well as its efforts to receive reimbursement from CMS 

and drug plans for costs associated with its stop-gap program. 

He will be followed by Ms. Sue Sutter. She is here representing 

the Pharmacy Society of Wisconsin. Senator Kohl will introduce 

her. 

Then Mark Ganz, who is my friend and fellow Oregonian. He is 

the CEO of the Regence Group and is representing the National 

Blue Cross and Blue Shield Association. He will discuss his company’s approach to implementation of the drug benefit, including 

its work with pharmacies and other interested parties to resolve 

problems encountered by beneficiaries. 

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We thank all three of you for being here. Tim, take it away. 

STATEMENT OF TIMOTHY R. MURPHY, SECRETARY, EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES, MASSACHUSETTS DEPARTMENT OF PUBLIC HEALTH, BOSTON, MA 

Mr. MURPHY. Thank you, Chairman Smith and Senator Kohl, for 

this opportunity to speak on this important issue. I also just wanted to introduce to the committee Beth Waldman, who is the Medicaid director for Massachusetts, who is joining me today, also with 

Paul Jeffrey, who runs our pharmacy services, so if any questions 

that we can answer for the committee. 

I would also request, Mr. Chairman, that I just have my written 

testimony put into the record. 

The CHAIRMAN. We will include it. 

Mr. MURPHY. What I have done for the committee is also prepared a presentation, which I believe you have, just to walk 

through the Massachusetts experience. 

Just by way of background, what you should know about Massachusetts is that we have two programs. One is obviously for the 

Medicaid or the dual-eligibles, and then we also have a State Pharmacy Assistance Program called Prescription Advantage, which is 

a very successful program. We serve in Massachusetts on our Medicaid program about a million people. It is about 17 percent of our 

population. Our dual-eligibles are about 190,000 individuals. Just 

to give some percentages on that, it is about 51 percent elderly and 

49 percent are disabled. Our Prescription Advantage, or our SPAP, 

is 72,000 individuals, and that is for lower and moderate-income 

seniors that have received services from the Commonwealth to help 

with prescription benefits. 

In addition, I would also say, and I think this is important to 

note, that there is about 700,000 elders in Massachusetts that will 

now benefit by having prescription Part D available to them. 

In anticipation of Part D, we anticipated certain transitional 

issues that would occur with the program, and prior to January 1, 

the legislature passed and the Governor signed a bill that accomplished a couple of things. One was for a formulary assistance, and 

while we recognize that the Federal requirement did have a 30-day 

transition, we wanted to backstop that and make sure that that 

would be available, so the State agreed that that would pick up if 

someone went and changed to a new insurance product and a particular drug was not included, that the pharmacist could fill that 

prescription for 30 days and that the Commonwealth would pick up 

that cost. In addition to that, we also did a cost sharing assistance 

and such that we took down the copays on Part D to what they had 

been historically under the Medicaid program in Massachusetts. So 

we had done that in advance just to make sure that as we were 

moving to a new system, which we were very excited about, that 

we would not have issues with a number of our participants. 

I would note on page four that we did, unfortunately, experience 

more transitional issues than we had anticipated. Our Office of 

Medicaid in 2002 established a Pharmacy Advisory Council. We 

work very closely with a lot of the major pharmacies within the 

Commonwealth to ensure that when we are delivering services 

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cious way possible. We have had historically challenges with that, 

and I think through the work of Director Waldman and Paul Jeffrey that we have come a long way in Massachusetts. 

So we were watching very closely as soon as the Medicaid Part 

D launch date of January 1 hit to have a good understanding of 

what was going on within our community, and what we did find 

was that a number of dual-eligibles were experiencing great difficulty being able to fill prescriptions, specifically, and you have 

heard this all today so I don’t want to spend too much time on it, 

but there were issues about overcharging of copayments, extensive 

system glitches. 

I think that this is one thing that CMS has been working hard 

on to fix, but data matches and the hand-offs between States to the 

Federal Government to the various plans, obviously, a number of 

complications. So people weren’t seen within the systems when 

they were going into the pharmacies. Particularly, you had situations where individuals were signing up for the benefits or being 

auto-enrolled in the last week of December and then showing up 

the first day of January looking for a service and that was very difficult for individuals. 

In addition to that, numerous phone calls from consumers, their 

families, from pharmacists, from doctors spending a great deal of 

time on the phone trying to talk to plans, you know, 30 minutes, 

60 minutes, and obviously in the early weeks that was very challenging. So we did have situations where people were leaving pharmacies without drugs. 

On page five of the presentation, Governor Romney, after kind 

of surveying what had occurred during the first week in January, 

directed myself and the Office of Medicaid to put in place a system 

such that people would make sure that there was a seamless transition to Medicare Part D, and primarily what we did, both for the 

dual-eligibles and for people who were on the SPAPs, was that we 

would step in as a primary payor. If you will, we lifted the edits 

in our system such that pharmacists could then go and bill our 

Medicaid program. Those emergency measures went into place on 

January 7 for the Medicaid program, on January 11 for our SPAP 

program, and then we were encouraging the pharmacists and working with our council for them to bill Part D and also to use the 

Wellpoint system. But we did allow them to use the Mass Health, 

our Medicaid program, as a primary payor. 

I am pleased to report, however, that conditions are improving 

since we instituted these emergency measures. Through the countless hours of work of our program with consumers, with pharmacists in particular, we have been able to make dramatic improvements in such that what we have been able to do on January 

26 is we have changed what the emergency measures that we are 

taking. So we are no longer allowing Medicaid to be, if you will, the 

first payer. We are making sure that the pharmacists are required 

to use the Wellpoint system or to bill the Medicare Part D plans, 

and they have to do that first before they are able to come to us 

on our program as a payor. 

On page seven, I think that there is some interesting data that 

I would like to share with you that demonstrates the effectiveness 

of what we have seen. What we did is we took snapshots of JanuVerDate 0ct 09 2002 14:36 May 19, 2006 Jkt 000000 PO 00000 Frm 00112 Fmt 6633 Sfmt 6633 H:\DOCS\27432.TXT SAGING1 PsN: JOYCE
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ary 9, January 23, and January 31 to see where we were, and we 

looked at claims submitted to the Part D program, how many 

claims we paid, and then what was our average cost of a claim. 

So as an example, on January 9, we had 43,400 claims submitted 

to our plan. By the time January 31 rolled around, after we had, 

if you will, lessened the emergency measures by putting some edits 

back into our system, only 18,200. 

In addition to that, our claims paid declined from 35,000 on January 9 to 5,000 claims on January 31, and our average cost per 

claim went from $45 on January 9 all the way down to $12 on January 31. So I think what we are seeing is that there are clearly 

systems issues that have occurred. CMS has been working very 

closely with us at the regional level in Boston and at the national 

level, our team at Medicaid has been working very closely with 

them to identify specific issues for individuals, systems issues for 

our total program, and they have been responsive. 

I would note that on January 25, Secretary Leavitt flew up to 

Boston, sat down with Governor Romney and myself to explain 

where he saw where the problems were, to talk about the demonstration project they were going to put forth as fixes for the Medicaid Part D roll-out. It is refreshing in that both Secretary Leavitt 

and the folks at CMS are stepping right into this, understand what 

the issues are, trying to work with the States. We obviously want 

to have a constructive engagement with them. We obviously would 

like to be reimbursed for the costs that we have incurred, and so 

we are hopeful, of course, that that will happen. 

Just some more facts just to give you a sense of what we have 

experienced in Massachusetts. Since we put emergency measures 

in place for the dual-eligibles, we have paid over 400,000 claims 

that would have been under the Medicare Part D. The total value 

of those claims, $16 million, and we have serviced 100,000 unique 

members of our 190,000 individuals on the Medicaid program. 

Smaller information, or smaller numbers, I should say, for our 

SPAP but also equally as important to convey to this committee. 

I would say in closing, Mr. Chairman, that we recognize that 

there have been significant issues that have occurred as part of 

this transition. We knew that some of those would happen. This is 

a massive system changeover, and for those of us who do this for 

a living in terms of dealing with large health care programs, when 

you are changing over IT systems and starting huge new programs, 

you always go through this. We also recognize that at the individual level, these are very stressful circumstances when you are 

looking to get prescription drugs and you go in and you are not 

found within a system. People have an expectation when something 

worked on December 31, why doesn’t it work on January 1? We 

need to pay attention to that and make the right type of steps to 

remedy those situations. 

Again, I think HHS and CMS have worked very closely with us. 

I know that they take this serious. We are looking forward to having a good dialog with them, and I would just suggest in closing 

that we want to make sure that the timeline and the process for 

reimbursement is easy for the States. We believe that we are being 

helpful in this transition and we need to have that recognized. We 

want to make sure that in the demonstration project that it is well 

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defined as to what the administrative costs are to be reimbursed. 

Make that very clear for us so that we can get timely reimbursement back from the Federal Government. 

We would propose that the February 15 date be a date to aim 

for, but one that people need to take into consideration to see 

where we are at that particular time and that the SPAPs also do 

get reimbursed. 

I thank you for your time. 

The CHAIRMAN. That is excellent testimony. I hope that, based on 

what you have heard at this hearing today and your experience in 

Massachusetts, you are optimistic. That is my sense. 

Mr. MURPHY. Yes, I am. 

The CHAIRMAN. You wouldn’t scrap the program? 

Mr. MURPHY. No. I mean, I would just state that we obviously 

have a number of folks on Medicaid, 190,000, who are receiving 

this benefit. But I think sometimes lost in the conversation are the 

700,000 other seniors and disabled within Massachusetts that this 

is a new benefit and it will take some time for those people to recognize that through more education, but I know that Governor 

Romney and I find that to be particularly exciting. 

[The prepared statement of Mr. Murphy follows:]

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The CHAIRMAN. Senator Kohl, do you want to introduce Ms. Sutter? 

Senator KOHL. Yes. We are very pleased to have Sue Sutter from 

Horicon, WI, with us today. She and her husband own two rural 

community pharmacies and Sue is the President-Elect of the Wisconsin Pharmacy Society, so we are delighted to have you and are 

excited to hear your testimony. 

STATEMENT OF SUSAN SUTTER, PRESIDENT-ELECT, 

PHARMACY SOCIETY OF WISCONSIN, HORICON, WI 

Ms. SUTTER. Thank you, Senator Kohl. Good afternoon, Chairman Smith, Senator Kohl. Thank you for conducting this hearing 

and for providing me the opportunity to address you. 

Yes, I am Susan Sutter and I am very proud to be a pharmacist 

and proud to be from Wisconsin. My husband and I have both been 

practicing pharmacists and own these two pharmacies in Horicon 

and Mayville, which are approximately an hour from Madison and 

Milwaukee, for over 25 years, and I am the president-elect of the 

Pharmacy Society of Wisconsin, which is the State’s professional 

society of pharmacists. 

When it comes to Medicare Part D, I have been asked, which side 

am I on? It is critical for your consideration of my comments today 

to understand that my husband and I, as well as our pharmacist 

colleagues, are on the side of our patients. Pharmacists and seniors 

have been frustrated together with the rocky start of this new program. 

It is important to emphasize that the provision of a pharmacy 

benefit for Medicare recipients is a valuable addition to the health 

care of everyone enrolled in the program, especially those without 

prior prescription drug insurance. However, implementation and 

use of the Part D benefit has been an enormous challenge for everyone involved. Calling these challenges merely glitches diminishes what tens of thousands of pharmacists and pharmacy technicians have had to do in our attempt to provide medications to our 

patients when the system has not worked the way it is supposed 

to work. 

CMS has worked diligently to address many of the Part D problems and some have lessened, but significant problems remain and 

millions of seniors are yet to enroll in the program. 

I won’t waste your time today pointing fingers. Rather, my appeal to you is to acknowledge that the problems exist and for you 

to demand that they be corrected immediately. 

I will begin with the complexity of the program. It must be made 

easier to understand, easier to enroll, and easier to use. I recognize 

that can’t happen overnight, but steps to simplify and standardize 

the Part D program can and should begin in earnest. 

As part of my written testimony, I have provided for your consideration a list of 15 specific problems and 15 corresponding recommendations for resolving those problems. Time does not permit 

me to review this list, but please consider it a pragmatic tool for 

making Part D work. Some of the solutions I have outlined must 

be implemented by the prescription drug plans, some may require 

changes at CMS, and others may require Congress to act, but each 

deserves serious consideration. 

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The health care needs of Medicare patients are as diverse as 

their last names. Because PDPs have built their programs on 

norms, many of those diverse needs are not being met. For example, discharges of some hospitalized patients are being delayed because their at-home medications can’t be authorized. Thousands of 

seniors at home in assisted living facilities, mental health clinics, 

have lost the special packaging of medications they relied upon to 

take their medications safely and correctly because a PDP won’t 

authorize these packaging. These examples are prevalent and they 

have significant cost and quality of care consequences. 

I have been surprised to see that CMS makes requests, not mandates, to the PDPs to get the program right. I think that is unacceptable and perhaps so does CMS. It appears that CMS does not 

have sufficient authority to regulate PDP policies and activities. 

They should be given that authority and they should use it, and 

there should be significant financial penalties assessed to the PDPs 

when they fail to perform. 

To illustrate this point, after learning of coverage problems in 

the first week of January, CMS asked for a second time that all 

PDPs remove prior authorization requirements and allow a 1-

month transitional supply of each medication for every Part D enrollee. Some plans have complied with this request, but many have 

left various hoops and hurdles in place to make it overly difficult 

to provide essential medication therapies. Insurance plan rules 

have overruled patient needs and it should be the other way 

around. This burdensome process must change. 

Medicare Part D was created so that recipients would be properly 

treated. In closing, I must emphasize that the nation’s pharmacy 

providers must also be fairly treated. It hasn’t happened and it 

won’t unless Congress steps in. We pharmacists simply want to 

care for our patients and be paid for the services we provide. Rather than recognizing the valiant effort and sustained contribution of 

the nation’s pharmacists over the past week, the Part D benefit is 

undercutting the financial viability of the very pharmacy infrastructure that it depends on. 

I look forward to your questions and I ask for your leadership 

and resolve in ensuring fair treatment both for recipients and the 

providers of the Part D benefit. Thank you. 

Senator KOHL. Thank you for your testimony. 

[The prepared statement of Ms. Sutter follows:]

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Senator KOHL. I have just one question I would like to ask you. 

I am sure you have experienced, as other small and medium-sized 

pharmacies in Wisconsin and across our country have, going to the 

length of having at times to take out lines of credit or to extend 

credit for which they don’t have the resources and shouldn’t be 

doing it, but to see to it that their patients are served. What has 

been your experience and what do you suggest we do to remedy 

this situation as quickly as possible? 

Ms. SUTTER. Certainly. There are a number of financial things on 

different levels. First of all, the amount of time, uncompensated 

time, the work that we are doing administratively within these 

pharmacies because of what was not set up properly and proper 

training at the PDPs, we have hundreds of hours across these 

pharmacies and across the country. In addition to that, pharmacists like ourselves have given free drugs, medications, to our 

patients with the hope and understanding that we will get some 

type of reimbursement. Certainly other pharmacies, and I have 

heard it a great deal in the last week, have gone to the point of 

needing line of credit because most of our wholesaler bills are now 

due. 

That is only the first line of the financial issues. Senator Lincoln 

earlier commented about the issues with the contracts with the 

PDPs. It is take it or leave it. Yes, there are rural pharmacies that 

can use the access requirement to possibly get negotiations with 

these PDPs, but we still have two. One of our pharmacies meet 

that access requirement. We have two that have not negotiated in 

good faith to contract with us. 

But I also want to state, there are pharmacies in the urban area 

where the density requirements or the access requirements, you 

are still asking patients to change pharmacies. One of the things 

that I hope that everyone understands, having gone through what 

they have gone through in this first month, is that many, many, 

many of these patients have patient-pharmacist relationships and 

you are taking away their choice of staying with the pharmacist 

that they trust. These contracting problems that we are having, 

they may have a certain set of pharmacies in an urban area, but 

they have to leave the clinic pharmacy that they have a relationship or a specialized pharmacy through a health system that they 

have been using. 

So as we address those issues, I want you to understand that the 

contracting, the overall contracting issue is going to be an ongoing 

financial issue for us. 

Senator KOHL. Thank you. Your testimony, your experience, the 

kind of perspective you bring to this issue is really important to 

this committee and I appreciate very much your coming here today. 

Ms. SUTTER. Thank you, Senator. 

The CHAIRMAN. Tim, you just heard Sue’s testimony. Is that familiar to you in Massachusetts? 

Mr. MURPHY. Yes. It was interesting, because when other folks 

were talking about that today, I turned to Paul and asked, what 

have we heard in Massachusetts, and it is a little different in that 

it is clear that a number of pharmacists have given free drugs to 

folks to kind of, if you will, tide them over while they were trying 

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setts, because we acted so early, though, in terms of, if you will, 

turning the edits off of our Medicaid system to allow people to bill, 

that we were able to address this problem such that our pharmacists aren’t in the same situation that you are hearing from 

other parts of the country today, and so we haven’t heard situations of people taking lines of credit or things like that, and I 

would turn to Paul just to make sure I am not overstating that 

case. It is consistent. 

The CHAIRMAN. Sue, you had many good ideas there and we will 

continue to push them. Thank you. 

Ms. SUTTER. Thank you. 

The CHAIRMAN. Mark Ganz, Regence Group, Oregon. Welcome. 

STATEMENT OF MARK B. GANZ, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, REGENCE GROUP, PORTLAND, OR; ON 

BEHALF OF THE NATIONAL BLUE CROSS AND BLUE SHIELD 

ASSOCIATION 

Mr. GANZ. Thank you, Chairman Smith, Senator Kohl, for the 

opportunity to testify about an issue that touches so many. My 

name is Mark Ganz. I am president and chief executive officer of 

Regence Blue Cross Blue Shield, a taxable not-for-profit health insurer. We are one of the oldest plans in the country and the largest 

in our region, serving over three million people in Washington, 

Idaho, Utah, and Oregon. 

Regence has been serving Medicare beneficiaries since the program began in 1965, so we know a lot about their needs and their 

expectations. To make Part D a success, we knew it would take 

one-on-one, face-to-face engagement, a huge investment of people 

and resources for our company. So it was only after careful deliberation that we decided to take on this challenge. 

A key reason that we got involved with Part D was that we knew 

we could save seniors money on their medications. Regence operates one of the few in-house not-for-profit pharmacy benefit programs in the country. Our nationally recognized program has saved 

our members more than $370 million in drug costs over the past 

5 years. We were, quite frankly, very excited about the opportunity 

to expand these savings to Medicare beneficiaries. 

Also, I had personally experienced the plight of beneficiaries who 

existed without drug coverage. My mother has been spending more 

than $8,000 a year on drugs, paying full price at the pharmacy. 

She called me for help on Part D and we spent a few hours going 

over her drug list and different plans to see which might work best 

for her over the Thanksgiving holiday. As a son, it was a humbling 

reminder that this person who once took care of me now needed me 

to help take care of her. Thanks to the Part D program, she will 

save at least $4,000 a year. That is a big deal for her as she approaches 80 and beyond. For me, that is what this program is 

about. 

We all share a commitment to Americans who need Part D and 

need our help to make it work for them. This commitment is what 

has guided our service to seniors for more than 40 years and is precisely how we approached our implementation of Part D, one person at a time. 

130

So what did we do to gear up for Part D? First, we prepared ourselves, our partners, including all of the pharmacists, and our 

members for what was coming. We reached out to them early and 

often. 

Second, we did our best to anticipate the inevitable problems and 

glitches. We developed ‘‘what if’’ scenarios so we could identify 

risks and develop solutions ahead of time. 

My written testimony outlines the proactive steps we took beginning last summer. Let me simply say that it was a massive mobilization effort that required an all hands on deck attitude at our 

company, and our planning has largely paid off. 

Even so, when October 15 arrived, we were immediately 

swamped. The response to this program was far beyond anything 

we had anticipated. Here are just a few examples. 

In 1 month, we have enrolled 63,000 people, more than three 

times the total we enrolled in that market segment the prior 2 

years combined. 

Call volume to our government program line has more than tripled, from 12,000 to over 40,000 per month. Many seniors have 

called us ten, even 20 times for advice. 

At the nearly 300 seminars and outreach sessions that we did, 

we engaged more than 17,000 people personally who wanted to get 

advice and answered questions, and I personally was engaged in 

some of those outreach sessions. 

So how are we doing today? Overall feedback has been positive 

from our State governments, from pharmacies, and from our members. I don’t want to mislead you. We have not been perfect. We 

have had our share of problems—fortunately, not with my mom, 

yet, although I am sure I will hear from her if we do. 

But our primary objective has remained intact. We give seniors 

the benefit of the doubt if any question arises and we tell the pharmacies, fill the prescription. We will pay you. We are taking the financial liability, and if we end up overpaying, we do not intend to 

go and seek the reimbursement. We are just paying it now. We will 

sort out the discrepancies later. As a result, Regence members are 

getting their medications and they are calling to say, thanks for 

being on their side. 

Here are a few more numbers. As of January 23, we have filled 

120,000 prescription drug claims. As of January 20, we had paid 

out to pharmacies $7.5 million in medication claims. 

While we are proud of our success, we are not sure that that performance is all that unusual. We believe that the health care industry has been working hard to help people through this major 

transition. During the moments of frustration, it might be tempting, even satisfying, to focus on the flaws and point the finger. But 

for those of us on the front lines, it is more important right now 

to persevere, work with our partners to solve problems, and keep 

a laser focus on the people we are here to serve. 

Any human endeavor, especially one that involves 43 million 

Americans, will have challenges and have human errors. At 

Regence, our goal has been to minimize problems and maximize access and personal engagement, one beneficiary at a time. We think 

it is working and the effort is worth it for our members. 

131

So on behalf of the 5,500 Regence employees that I am here representing, I am honored to share our story with you. Thank you for 

inviting me and I am happy to answer any questions. 

[The prepared statement of Mr. Ganz follows:]

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The CHAIRMAN. Mark, your very insightful and helpful testimony 

is particularly memorable regarding your mom. Do you at Regence 

find that you are able to work with the seniors to get through the 

frustration and get them enrolled? Do they appreciate the amount 

of savings that are there for them? I mean, your mom, I am sure, 

is aware that there are $4,000 annual savings available to her. 

Mr. GANZ. Right. I think it is early on, so I think that the appreciation will increase as people see the actual savings and can compare it to the full price they have been paying in the past, because 

they are not only going to get coverage, but they are also getting 

the benefit of a greater focus on generics and other things that will 

actually help lower their costs. So I think that that will increase 

over the year. I mean, we are very early on in this program. 

But yes, I think the main thing we have heard from seniors is 

they have appreciated the personal outreach. That is how they like 

to process. That is how they learn. They are not going to learn it 

from just getting a brochure in the mail. They need to really go 

through it. 

The CHAIRMAN. Our thanks to all three of you and our other two 

panels. You have added measurably to our Senate record and we 

clearly understand from you that it is not perfect, but it can get 

a lot better if we keep working on it. So thank you and thank you, 

Senator Kohl. I think this has been a very informative hearing for 

all members. 

We are adjourned. 

[Whereupon, at 1:09 p.m., the committee was adjourned.] 

(139)

A P P E N D I X 

PREPARED STATEMENT OF SENATOR LARRY CRAIG

Thank you, Mr. Chairman, for convening this important hearing to assess the implementation of the new Medicare Part D prescription drug program. I think one 

month into the roll-out of the program is an opportune time to reflect on the 

progress we have made, the short-comings we have already identified and to discuss 

possible solutions to some of the problems we face. 

I do not want to suggest that all of the news surrounding this program is unfavorable. In fact, just the opposite is true. I think the American public has a lot to be 

proud of when we look back on our first month. CMS is reporting that over 1 million 

prescriptions per day are being filled for our nation’s most vulnerable citizens. In 

addition—contrary to many predictions at the time of enactment—dozens upon dozens of companies are participating in a market-based system to provide medications 

to tens of millions of citizens. In my own State of Idaho alone, there are 19 different 

companies offering over 40 plans from which beneficiaries can receive prescription 

medications at significant discounts. One of those providers, The Regence Group, is 

here today to testify about their experience in implementing this important new program. I want to thank them for their willingness to come and offer their perspective 

and advice. 

Of course, not all of the news is good either. As I mentioned at the outset of my 

statement, a few serious short-comings have been identified in the implementation 

of this program, particularly in the transition of our Medicaid patients from state 

coverage to Medicare coverage. This complicated transitional period has been 

weighed down by a lack of understanding at the retail pharmacy and consumer level 

as well as a lack of timely and helpful service at the industry and governmental 

levels. Pamphlets and mass mailings are important. But, I think most of you would 

agree there is no substitute for one-on-one human interaction where questions can 

be posed and answered correctly. I know CMS and industry have been training call 

center employees for months and recently have even increased their call center efforts. That is a welcome and important step. Now, it is time to pass on the best 

available, most accurate information to our beneficiaries, pharmacists, and providers. 

Mr. Chairman, just three years ago, Congress and the President set out on a bipartisan mission to provide affordable prescription medications to America’s seniors 

and Medicaid-eligible citizens. Together, we put our best efforts forward, forged 

many compromises, and to a large degree have accomplished what we set out to 

achieve. Is our program perfect? No. But, I believe that constructive reviews, such 

as this hearing, coupled with the best intentions of the American people will ultimately perfect this program for the betterment of all of our deserving seniors and 

citizens in need. 

Thank you again, Mr. Chairman. 

PREPARED STATEMENT OF SENATOR SUSAN COLLINS

Mr. Chairman, thank you for holding this hearing to discuss critically important 

issues related to the implementation of the Medicare Part D drug benefit. 

The addition of a prescription drug benefit represents the broadest expansion of 

Medicare since the program’s inception in 1965. This important new program has 

the potential to provide prescription drug coverage—for the first time—to more than 

11 million Medicare beneficiaries who previously had to pay for their prescriptions 

out of their own pockets. Moreover, the program has the potential to improve coverage for millions more who had coverage that was less generous than the new Part 

D benefit. 

Unfortunately, however, the implementation of this new benefit has been fraught 

with serious problems and missteps. Given the magnitude of the new program, I 

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think that everyone anticipated some start-up difficulties. But it is now evident that 

the Centers for Medicare and Medicaid Services has made some major errors and 

miscalculations. Of particular concern is the fact that some of our poorest and sickest seniors are the ones who have had the most trouble with the new benefit. We 

must therefore make every effort to identify and rectify these problems as quickly 

as possible. 

I understand that CMS has taken some steps to address a few of the problems 

that have been identified. For example, they have dramatically increased the staff 

at the call center for pharmacists, and they have also improved the speed and accuracy of the ‘‘E–1’’ computer system that can be used to check a beneficiary’s enrollment. The Committee will be hearing later from a pharmacy representative who I 

hope will tell us whether these changes have made their jobs any easier. 

Maine was the first state to step in and say that, if a pharmacist is unable to 

confirm that a Medicare beneficiary is enrolled in a Part D plan because of a computer glitches or another problem—the state will cover the costs of the drugs. Governor Baldacci is to be commended for stepping in to provide this safety net, and 

I am committed to making sure that my State is not saddled with millions of dollars 

in costs due to the federal government’s problems in implementing the new benefit. 

Secretary Leavitt has given me personal assurances that Maine will be reimbursed for the money it is spending to prevent any disruption of benefits for our 

seniors. I have also joined a bipartisan group of my colleagues in introducing legislation that would require the Department of Health and Human Services to do so. 

As problematic as the start-up has been, this new Medicare benefit has the potential to provide much-needed relief from high prescription drug costs, particularly for 

those seniors and disabled individuals who previously had no coverage at all. It is 

therefore imperative that we work together to identify problems quickly and make 

the changes necessary to make the program work. 

Again, I want to thank the Chairman for calling this hearing. 

PREPARED STATEMENT OF SENATOR RUSSELL FEINGOLD

I thank the Chairman for holding this hearing today. The implementation of the 

Medicare Prescription Drug Benefit has been of great concern to me as well as my 

constituents in Wisconsin, and I am pleased that the Committee on Aging is examining some of the serious problems that have occurred since January 1st of this 

year. I am also pleased that Senator Kohl has invited Sue Sutter, a community 

pharmacist from Wisconsin, to come and testify before the committee today. Sue and 

her husband, John, own two pharmacies in Wisconsin, and I know that she will provide a much-needed perspective on the effects of this program on independent pharmacies in rural communities. 

Supporters of the Medicare Prescription Drug Benefit have touted it as the vehicle 

that would supply affordable, easily accessible prescription drugs for seniors. The 

program has so far fallen far short of that goal. The outcry that I have heard from 

pharmacists, beneficiaries, and health care providers over the past few weeks makes 

clear that the implementation of the program has been a disaster. This program has 

not provided either affordable or easily accessed drugs to many Medicare beneficiaries. Instead it has presented providers and beneficiaries with frustration, confusion, expensive medications, and sometimes no medications at all. It is unacceptable for individuals to go without life-saving medications, yet this is what has been 

happening in Wisconsin and across the country since this program commenced. 

Since the beginning of January, I have received panicked phone calls from people 

in my state saying that they were unable to receive drugs that they had been routinely getting at their pharmacy every other month. Many calls were from people 

who could not receive essential drugs such as insulin, anti-psychotics, or 

immunosuppressants for transplant patients. At the same time as I was hearing 

from people suffering from pain because they did not receive their pain medications, 

I received press releases from the Centers for Medicare and Medicaid that expressed 

satisfaction with the launch of the program, and boasted on the millions of participants in the program. There may be millions participating in the program, but too 

many of them cannot receive their drugs and too many pharmacists are unable to 

comply with the complicated regulations in the program. CMS should be focusing 

its efforts on addressing this emergency rather than disseminating public relations 

messages. 

I hope that this hearing will provide a forum in which important questions will 

be answered, and that solutions will be found to the multi-faceted troubles that 

have occurred as a result of this program. I have written Secretary Leavitt and Dr. 

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McClellan repeatedly to voice my concern about Medicare Part D, but I have not 

yet received a single response. 

Some of the problems that I hope are addressed by the administration today include the supposed contingency plans for implementation that have failed. The transitional plans offered by the private drugs plans have often been inadequate. While 

a 30-day supply of drugs has been encouraged by CMS, it has not been required. 

I think it is time that CMS remember who this plan is supposed to serve: the people, not the drug and insurance companies. 

I also hope that the many problems regarding dual eligibles are addressed in this 

hearing. I was disheartened to learn that some beneficiaries had to pay for their 

drugs on their credit cards, their only other option being to go without their medications. Those with little income will be paying for these drugs for months, with interest, and this is a sad burden for the federal government to place on the neediest 

in society. Other dual eligibles are entirely without drugs or have had gaps in their 

treatment. This is unacceptable, and I hope this is addressed today. 

Additionally, I hope that CMS will properly address the issue of reimbursement 

for the state governments. Many states, including Wisconsin, came to the aid of the 

public when the federal government would not by enacting emergency provisions. 

Now, these states are depending on the federal government to act responsibly and 

reimburse them for funds that were spent out of tight state budgets. To date, the 

administration has put in place a complicated system that forces states to bill various private drug plans. This is an undue burden for states short on cash and personnel, and I hope that CMS will provide an adequate alternative. 

We cannot sustain a great nation if we do not care for our elderly, sick, disabled, 

and home-bound. These are the people this drug plan is supposed to be serving, and 

I fear that they have been dismally let down the past month. Let us not wait any 

longer. There is an opportunity at this hearing to find solutions, and I hope that 

this opportunity will be seized by my colleagues and the administration. 

PREPARED STATEMENT OF SENATOR RICK SANTORUM

Good morning, I would like to thank the Chairman for holding today’s hearing 

and providing an opportunity to discuss a very important topic—the implementation 

of Medicare Part D. I would also like to thank today’s panelists for taking the time 

to share their own experiences with the implementation of this important benefit 

and their suggestions for how it can be improved. As a member who represents a 

state with one of our nation’s largest senior populations, ensuring that my constituents have access to medically necessary prescription drugs is one of my highest priorities. 

Since Medicare Part D implementation began, all of us have heard the anecdotal 

reports of confusion and frustration that have stemmed from the inherent challenges of implementing the most comprehensive improvement to the Medicare program since its inception over forty years ago. As I have personally communicated 

to Secretary Leavitt and Dr. McClellan, it is unacceptable if even one of our most 

vulnerable citizens has encountered any difficulty in obtaining medically necessary 

drugs. Any problems that have been identified since the Medicare drug coverage 

began must be addressed immediately. I look forward to accompanying Secretary 

Leavitt to Pennsylvania later this month so that he can see first hand what my constituents are experiencing. 

The Aging Committee is taking an important first step in delving into issues related to Medicare Part D implementation, and next week’s Senate Finance Committee hearing will build upon today’s discussion. Many of the questions and concerns we are hearing about Medicare Part D implementation mirror those from the 

early days of implementing the original Medicare program in 1966—problems which 

have long since been resolved. Over the past forty years, Congress has strengthened 

and improved Medicare to ensure that program has kept pace with improvements 

in health care. I would caution my colleagues that hastily drafted legislative ‘‘fixes’’ 

to improve this nascent program would be premature as the program is only in its 

second month, and each day we are hearing positive reports of continuing improvements. Just as Congress has acted to strengthen and improve Medicare over the 

past forty years, I am confident that Congress will continue to work with CMS to 

act as necessary to strengthen and improve Medicare Part D. Honest discussions 

such as today’s are an essential step in ensuring that such improvements are the 

result of a policy driven process. 

Last week I received a letter from a senior in Doylestown, Pennsylvania. She 

wrote, ‘‘Senator Santorum, thank you for supporting the Medicare prescription plan. 

Today I paid $9.60 for a 90 day supply of my hypertension medication which in 2005 

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cost me $45.’’ Thanks to Medicare Part D, this Pennsylvania is not only saving on 

her drug costs, but she has the peace of mind of knowing that her financial health 

is protected against catastrophic drug costs. We cannot lose sight of the enormous 

potential of this benefit to improve the health of millions of Americans; yet, this potential cannot be fulfilled unless the problems the program is experiencing today are 

successfully resolved.

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PREPARED STATEMENT OF SENATOR MEL MARTINEZ

First, I would like to thank the Chairman and the Ranking member for holding 

this critical hearing. 

Clearly, the implementation of Medicare Part D has been a massive undertaking. 

And, with most undertakings of this proportion, problems can and have arisen. 

But we must not lose sight that the kinks in the system are being addressed and 

their impact minimized more each day as the process continues to move forward. 

A project of this magnitude is going to have rough spots as it starts. The goal 

must be to improve and so so in a timely manner. 

However, I have been greatly concerned about the impact on some of Florida’s 

most vulnerable population the roughly 400,00 dual eligibles that reside in the 

state. 

It has been reported that a portion of these low income individuals are experiencing great difficulty in gaining access to much needed medications. 

To stave off a crisis situation, I am very pleased that the Centers for Medicare 

and Medicaid Services (CMS) announced a state reimbursement plan for costs associated with the successful transition of dual eligible Medicare beneficiaries into their 

new Medicare coverage. 

Governor Bush, after consultation with Florida House and Senate leadership, also 

signed an Executive Order providing authorization for Florida’s Agency for Health 

Care Administration (AHCA) to apply for this waiver. 

Florida’s temporary waiver will provide one more tool for AHCA to handle casesparticularly those in the low-income subsidy category-to transition successfully to 

Medicare without the burden of unwarranted deductibles, co-insurance or excessive 

co-payments. 

This waiver will allow the state to focus its efforts on those who are still confronting problems and to resolve those issues as quickly as possible. 

With that said, I look forward to hearing from Dr. Mark McClellan for an update 

on the situation and the views of the other panelists we have here today. Thank 

you. 

QUESTIONS FROM SENATOR SANTORUM FOR ROBERT KENNY

Question. What advice would you offer to a Medicare beneficiary who may be reluctant to find out about or enroll in Medicare drug coverage? 

Answer. The new Medicare Part D Prescription Drug Coverage bill seems to be 

either liked or disked. I will not attempt to settle that argument here. 

The real question needs to be, ‘‘Now that it is here, should I join or not?’’ The 

answer is, ‘‘Yes, join.’’

Yes, join even if you do not like the law, the people who wrote it are anything 

else about it. Join even if you think it is big, dumb and overly complicated. 

Yes, join if you spend as little as $35 a month for prescription drugs. There is 

a plan that will save you money. Yes, join even if you do not spend $250 to use 

the deductible. Most of us use more drugs as we age and even if you are not spending it now, there is an excellent chance you will spend much more than that in the 

future. Joining now may seem like a waste of money but there is a 1% a month 

additional charge if you wait to join until after May 15, 2006. Plans are available, 

in our area, for as little as $6.93 a month, so it does not cost much to avoid the 

stiff penalty. 

QUESTIONS FROM SENATOR SANTORUM FOR SUSAN SUTTER

Question. You criticized the prescription drug plans’ efforts to provide support to 

pharmacists-can you speak to how effective education efforts have been on the part 

of CMS and prescription drug plans since January 1st? How do you believe these 

efforts could be approved? 

Answer. Quite frankly, pharmacists have gone from a severe lack of information 

from the plans prior to January 1st to ‘‘information overload’’ from both CMS and 

the plans as the challenges and problems of implementation have been identified. 

Pharmacists are now faced with tons of documents from the plans which can only 

be implemented if the pharmacist continues to shift their professional time to these 

administration issues instead of serving their patients and their needs. The problem 

with the volume and variety of information we are now receiving confirms what I 

stated in my testimony—the Medicare Part D benefit needs to be simplified and 

standardized. 

Until the larger issue of standardizing the plan can be addressed, CMS should 

be directed to clearly delineate what information CMS will provide and that which 

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should come from the plans. For example, CMS could define what areas of information all plans must have policies on and direct the plans to provide that information 

in a concise common format for easy review for the pharmacist. 

All of this written information does not help patients receive their medications if 

the individuals on the plan’s ‘‘help’’ desk are not adequately trained or educated to 

implement the plan’s policy correctly. After two months, some plans still have pharmacists working through a maze of phone numbers or individuals to get a problem 

resolved. 

Finally, let me share a personal example of obtaining information, but finding it 

difficult to use the information to actually serve the patient. A patient (not a dualeligible) came in my pharmacy yesterday to have his medication refilled and presented his Part D card that he had finally received. I asked when his benefit was 

effective and he stated January 1st. I offered to send his January claims to his plan 

and refund any difference. I made the offer because I had read that CMS requested 

that the plans open their claims processing ‘‘windows’’ (which often are only open 

for 30 days or less) to accommodate this type of situation. I received the message 

‘‘claim too old’’ and confirmed through the PBM’s help desk that the patient would 

have to file paper claims to be reimbursed. I contacted the plan’s Director of Pharmacy to confirm that the plan had decided to ignore CMS’s request. He stated that 

the plan wants the claims to be accepted but that the PBM is saying no to the plan 

and it remains a point of ‘‘discussion’’ between the plan and the PBM. In summary, 

it only confuses the situation to communicate directives from CMS if the plans, or 

in this case, the plan’s PBM, can ignore the request. Again, CMS needs the authority to mandate, not simply request, such directives to the plans. 

Question. Have recent efforts on the part of CMS, such as pharmacy call-in sessions, been helpful in clarifying confusion? 

Answer. Pharmacists appreciate CMS’s outreach efforts but not all pharmacists 

are able to participate in the call-in sessions. In addition, the session conducted on 

Part B versus Part D drug coverage was very useful. However the most common 

problem for pharmacists is that the Part D plans themselves are not clear on the 

issue. CMS must follow through and audit the Part D plans’ proper coverage of 

these drugs. 

The most effective method CMS has used is communicating through the pharmacy 

professional associations. As a member of several of these associations, I appreciate 

the outreach to them. 

Going forward, CMS should identify one method of communication—one spot on 

the CMS website or one e-mail listserv—to communicate with pharmacists. If such 

an effort was made, pharmacists would know there was a simple, quick way to find 

information on Part D and look for updates. 

Thank you for your interest in the challenges pharmacists are facing with the implementation of Medicare Part D.

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