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96–738 PDF 2004

S. HRG. 108–727

HELPING THOSE WHO NEED IT MOST:

LOW-INCOME SENIORS AND THE NEW MEDICARE

LAW

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC

JULY 19, 2004

Serial No. 108–40

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING 

LARRY CRAIG, Idaho, Chairman 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

MIKE ENZI, Wyoming 

GORDON SMITH, Oregon 

JAMES M. TALENT, Missouri 

PETER G. FITZGERALD, Illinois 

ORRIN G. HATCH, Utah 

ELIZABETH DOLE, North Carolina 

TED STEVENS, Alaska 

RICK SANTORUM, Pennsylvania 

JOHN B. BREAUX, Louisiana, Ranking 

Member 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

JAMES M. JEFFORDS, Vermont 

RUSSELL D. FEINGOLD, Wisconsin 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

DEBBIE STABENOW, Michigan 

LUPE WISSEL, Staff Director 

MICHELLE EASTON, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

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

Opening Statement of Senator John Breaux ......................................................... 2

PANEL I 

Mark McClellan, M.D., Ph.D., administrator, Centers for Medicare and Medicaid Services ........................................................................................................ 3

PANEL II 

Gail Wilensky, Ph.D., John M. Olin senior fellow, Project Hope, former administrator, Health Care Financing Administration, Bethesda, MD .............. 44

Byron Thames, M.D., trustee, American Association of Retired Persons, Orlando, FL ............................................................................................................... 59

Jane Delgado, Ph.D., M.S., president and CEO, The National Alliance for 

Hispanic Health; founding member, The Access to Benefits Coalition, Washington, DC ............................................................................................................. 71

Patricia B. Nemore, attorney, Center for Medicare Advocacy, Inc., Washington, DC ............................................................................................................. 91

APPENDIX

Material submitted by Laura Summer and Lee Thompson, Center on an 

Aging Society, Georgetown University Health Policy Institute ....................... 121

(III) 

(1)

HELPING THOSE WHO NEED IT MOST: LOWINCOME SENIORS AND THE NEW MEDICARE 

LAW 

MONDAY, JULY 19, 2004 

U.S. SENATE, 

SPECIAL COMMITTEE ON AGING, 

Washington, DC. 

The committee met, pursuant to notice, at 2 p.m., in room SD–

628, Dirksen Senate Office Building, Hon. Larry E. Craig (chairman of the committee) presiding. 

Present: Senators Craig, Breaux and Stabenow. 

OPENING STATEMENT OF SENATOR LARRY E. CRAIG, 

CHAIRMAN 

The CHAIRMAN. Good afternoon, everyone, and welcome to the 

Senate Special Committee on Aging. The new Medicare law enacted last fall represents the most substantial expansion and improvement in the program since its creation 39 years ago. Not surprisingly, debate about this new law was and remains quite spirited. However, there is one aspect of the new program about which 

few should disagree. It is this: the new Medicare law offers dramatic new assistance, billions of dollars of it, for seniors of modest 

and low income. 

Those seniors who are struggling the hardest to pay for their prescriptions are precisely the seniors whom this bill targets most generously and that is as it should be. 

We are here today to explore the specifics of what this legislation 

will mean for seniors in greatest economic need. Our discussion 

will begin with an updated look at how the new prescription drug 

card is doing and in particular ways in which CMS and its partners are working to bring the low income $600 transitional assistance to as many seniors as possible. 

On this front, we will hear encouraging news from CMS Administrator Mark McClellan—Mark, welcome to the committee—who 

we are pleased to have with us today. I understand, for example, 

that seniors are now signing up for the cards at a rate of 25,000 

per day. Yes, that is right. Twenty-five thousand per day and also 

that the drug price savings continues to be impressive. 

CMS meanwhile continues to aggressively expand its outreach 

and enrollment efforts including improvement in the Price Compare web site and also through grant assistance to communitybased organizations and to national coalitions. One of these, the 

Access to Benefits Coalition, will also be providing testimony today. 

2

Even more importantly, we will also hear testimony about the 

new law’s full drug benefit schedule to begin in 2006, and the ways 

in which low-income seniors stand to benefit tremendously under 

the new assistance that is now just 17 months away. 

Nearly half the new law’s funding is targeted especially to lowincome seniors and more than one in three seniors will qualify for 

assistance. For the vast majority of these seniors, this will mean 

zero premiums, zero deductibles and no gaps in coverage and 

copays of just a few dollars per prescription. 

It is difficult to imagine a stronger package. It is not to say this 

will be easy. This is a tremendously complex program, and it is 

being implemented on a very ambitious time table. 

Our witnesses today will offer guidance on such critical questions 

as how we can tailor our outreach efforts more effectively. Reaching 

as many qualified beneficiaries as possible should be a top goal. 

When debate over adding prescription drug benefits began several years ago, the guiding motivation was first and foremost to 

help those seniors who were struggling to make ends meet, to those 

seniors who were sometimes forced to choose between food and prescriptions. For those seniors in the greatest need, this new law is 

truly a godsend. 

We have a remarkably accomplished panel of witnesses today, 

but before I turn to our panel, let me turn to my ranking colleague 

and partner here, Senator John Breaux of the great state of Louisiana. 

STATEMENT OF SENATOR JOHN BREAUX 

Senator BREAUX. Thank you very much, Mr. Chairman, and 

thank all of our witnesses who will be presenting testimony in 

what is an incredibly important subject for all of our nation’s seniors. The Medicare legislation that Congress passed arguably was 

the most important change in Medicare since 1965 when we passed 

Medicare. It was very significant. 

People do not run to Canada for hospitalization. They do not seek 

off on bus trips to Canada to see doctors in Canada. Why? Because 

Medicare covers both hospital visits and Medicare covers doctor visits. When Medicare is completely fully implemented in the drug 

program, the necessity of seniors to go to Mexico or to Canada or 

to an internet to order drugs from who knows where will cease to 

exist because for the first time in the history of the program seniors will have an adequate guarantee of drugs available to them 

and their families at a price that is affordable just as Medicare covers adequately the cost of hospitalization and the cost of doctor visits. 

Getting from where we are today to where we want to be is not 

an easy task. Neither was it an easy task to implement Medicare 

back in 1965 when we created a national insurance program that 

covers hospitalization or later when the program was expanded to 

cover doctors as well. 

You do not do these things overnight. That is why the first part 

of the journey toward complete insurance coverage for pharmaceuticals was a stopoff, if you will, with a Medicare drug discount 

card. I said at the time we were working on the program that the 

thing that I feared the most was that we would give seniors too 

3

many choices. I am a big believer in people, particularly in the 

health care field, of having choices to choose the program or the 

plan, the hospital, the doctor, that is best for them. 

I said at that time it would be very confusing for a senior to walk 

into the local drugstore and pull out his wallet or her purse and 

have 10 or 12, 15 different discount cards trying to figure out 

which one is best for them. 

Truth is now there are over 70 discount cards. There are not 15; 

there are 70 to pick and choose from. So in the beginning of this 

program, it is not going to be easy, but the assistance that is offered is certainly worth the effort to try and ensure that you are, 

in fact, picking the best card for your needs. Or children who are 

helping their parents or grandchildren who are helping their parents or senior citizen centers and various parts of the country that 

are helping the senior pick the best card for them. 

Mr. McClellan and Medicare, to their credit, as I understand it 

now, there is a program where you can sort of dial in, give a list 

of the drugs that you are on, and the computer system will kick 

back to you which is one of the better cards for you to utilize. 

So this is a monumental and historic accomplishment. No accomplishments of that size and scope can be done without a few bumps 

in the road. So I am glad, Mr. Chairman, we are having a hearing 

today to see where those bumps are, how we are going to smooth 

them out, until we get to that point in time where prescription 

drugs are treated from an insurance standpoint just like hospitals 

and doctors are today. Thank you. 

The CHAIRMAN. John, thank you very much for that fine statement, and now we will search for the bumps in the road because 

I think your analysis of it is very apropos. 

Our first witness today is Dr. Mark McClellan, the new Administrator for the Centers for Medicare and Medicaid. As we all know, 

Dr. McClellan has what may well be the hardest job in Washington 

these days: overseeing implementation of the vast and complex new 

Medicare law. But if anyone is up to the task, I suspect you are, 

Mark. A former Commissioner of the Food and Drug Administration, Senior White House Health Advisor, professor and medical 

doctor, Dr. McClellan brings to this job an unprecedented array of 

experience. So we welcome you before the committee and are anxious to receive your testimony. 

Please proceed, Mark. 

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

Dr. MCCLELLAN. Mr. Chairman, Senator Breaux, thank you for 

having me here this afternoon to discuss the new Medicare prescription drug benefit and thank you for your leadership in working 

together to bring overdue comprehensive drug coverage to the millions of low-income Medicare beneficiaries who too often have to 

struggle with paying for the cost of their drugs, on the one hand, 

and paying for their other basic necessities on the other. 

While Medicare beneficiaries can get relief from high drug prices 

and high costs, the comprehensive help available for low-income 

beneficiaries is especially important, as you all noted. We deeply 

4

appreciate the strong and constructive interest from so many people involved in policymaking and advocacy from so many perspectives in helping us implement the new law. 

The new prescription drug relief for beneficiaries of limited 

means is critically important to get out as soon as possible, and we 

look forward to further public discussion and comment after we 

publish our proposed rules on the drug benefit to help make sure 

we are providing these comprehensive benefits as effectively as possible to the most vulnerable seniors and people with disabilities 

and Medicare. 

While we are working to implement the new prescription drug 

benefit, we are also using the authority that Congress gave us to 

provide relief right now to beneficiaries who do not have good drug 

coverage through the Medicare prescription drug discount card. I 

am pleased to say that in a little over a month, as you mentioned, 

Mr. Chairman, approximately four million people have signed up 

for the program enrolling at a rate of about 25,000 every business 

day. 

This includes close to a million lower income beneficiaries who 

are receiving the $600 credit in transitional assistance and some 

additional discounts. These beneficiaries are all receiving substantial savings on the drugs they need with prices for brand name 

drugs about 11 to 18 percent lower than what Americans pay on 

average even with the discounts they get from private insurance 

and Medicaid programs and they are getting much larger savings 

on mail order and generic drugs. 

We are also pleased that seven major drug manufacturers are 

now offering large wraparound discounts for the low-income beneficiaries who use up their $600 credit. 

The many brand name drugs with wraparounds include six of 

the top ten in terms of beneficiary spendings: Zocor, Lipitor, 

Celebrex, Fosamax, Norvasc and Vioxx. Generally, these prescriptions will cost at most $5 to $15, even after the $600 credit has 

been used. So this amounts to literally thousands of dollars of lowincome assistance with drug costs available right now this year and 

again next year before the full drug benefit starts. 

In addition, the Office of Management and Budget has provided 

guidance to all Federal agencies that transitional assistance available to low-income beneficiaries does not affect eligibility or benefits for any other Federal program. 

Since the drug card program started just 6 months after the 

Medicare law was enacted, we continue to take steps to improve it, 

including new steps to make it easy to start getting real savings 

quickly on line at Medicare.gov and to make sure that when you 

call us at 1–800–MEDICARE anytime 24/7, you can quickly reach 

a trained customer service representative to get the personalized 

help you need and then find out about how to get real savings from 

the drug card, generally all done in well under 20 minutes. 

We have also started some unprecedented collaborations with 

state health insurance assistance programs and private advocacy 

groups such as the groups making up the Access to Benefits Coalition to educate beneficiaries about this important new help. This 

is all leading up, as you mentioned, Mr. Chairman, to the comprehensive benefits that will be available to low-income beneVerDate 0ct 09 2002 11:39 Dec 21, 2004 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 H:\DOCS\96738.TXT SAGING1 PsN: JOYCE
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ficiaries who enroll in the new Medicare prescription drug program 

beginning in 2006. 

Although this voluntary benefit will be available to all of Medicare’s 41 million beneficiaries, Congress specifically provided very 

generous help to those who need it the most, those with limited 

means or catastrophic costs. 

Of those beneficiaries expected to enroll in the drug benefit, 

three groups of low-income beneficiaries will receive premium and 

cost-sharing subsidies such that their drug costs will range from almost nothing to only a few hundred dollars depending on the type 

of assistance for which they qualify. 

The first group of approximately 6.4 million full benefit dual-eligible individuals will pay no premium or deductible and only have 

$1 to $3 copays for each prescription. 

The second group, an estimated three million individuals with in- comes lower than about $12,600 for an individual and $16,900 for 

a couple who meet the assets test, will pay no premium or deductible and only a $2 to $5 copayment for each prescription. 

The third group of approximately 1.5 million Medicare bene- ficiaries with incomes of about $14,000 for an individual and 

$18,700 for a couple who meet the asset test will pay premiums 

based on a sliding scale, a $50 annual deductible and a 15-percent 

copayment on each prescription. 

Institutionalized persons who are full benefit dual-eligibles are 

exempt from this cost sharing completely. When dual-eligible beneficiaries move from the Medicaid system to the new Medicare benefit, millions will no longer be subject to restrictions that many 

states have had to impose to limit costs but that may also limit 

quality of care such as restrictions on the number of prescriptions 

that can be filled each month or very strict formulary requirements. 

So that is better, more comprehensive coverage for millions of 

Medicare beneficiaries and new comprehensive coverage for millions more with limited means. All together about a third of beneficiaries and almost half of minority beneficiaries can get the security of paying only a few dollars for the prescription drugs that 

they need. 

We are moving ahead to use the new law to bring overdue relief 

to Medicare beneficiaries who are now struggling with the cost of 

prescription drugs. We look forward to continuing to work closely 

with you to provide more and more effective relief. Thank you for 

your time and I’m happy to answer any questions that you all may 

have. 

[The prepared statement of Dr. McClellan follows:]

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The CHAIRMAN. Mark, thank you very much for that testimony 

and opening comments. During debate on this bill, I think the biggest focus was on those seniors who did not otherwise have drug 

coverage and who just could not afford it themselves. Does the new 

low-income assistance in the 2006 benefit meet that need? 

Dr. MCCLELLAN. It does. As I mentioned before, there are over 

six million dual eligible beneficiaries who will be able to get access 

to a comprehensive benefit that must cover all classes of drugs, 

very broad formulary, very important and national and universal 

appeals rights, plus millions more who have limited means but who 

are not able to enroll in state programs now because the states 

have not been able to provide coverage for them. 

So all together it is about a third of Medicare beneficiaries, as 

you said, who are going to have access to a comprehensive benefit 

as part of this overall Medicare legislation. 

The CHAIRMAN. In that category, most of the qualifying low-income seniors in 2006 will pay, so we now understand, zero premium, zero deductible and a few dollars per prescription. How does 

that compare to the kind of drug coverage the average non-senior 

is likely to find out in the private marketplace today? Is there a 

comparison? 

Dr. MCCLELLAN. Yes, very favorably. The drug coverage available to many people with limited means today has significant copayments. Usually the copays are lower for generic drugs than for 

brand name drugs, and the Medicare benefit has that same structure. But this is a more comprehensive benefit for people with limited means and these millions of beneficiaries do not have access 

to this kind of coverage in the private markets today and that is 

why it is so important to bring it into Medicare right now. 

The CHAIRMAN. Mark, weeks prior to the ability to enroll and 

then following that, there was a considerable amount of criticism 

as it relates to seniors just were not signing up. The figure I used 

in my opening comments and you have used it of 25,000 now signing up per day, when I first saw that figure I thought they must 

be thinking about 2,500. So talk to us about that. Has enrollment 

accelerated recently? What are the reasons for this? 

Dr. MCCLELLAN. Well, it is definitely continuing at a steady clip. 

We went back and looked at previous experience when the Federal 

Government tried to implement other major new benefit programs 

that offer very affordable coverage and help people with their 

health care costs substantially. In general, it takes some time. For 

example, in the CHIP program, the Children’s Health Insurance 

Program, which now provides coverage to many millions of lower 

income children and their families, that program took more than 

a year to reach the million enrollees mark because of issues with 

states working with the Federal Government to set up access to the 

program and important issues about education and outreach, letting people know that these benefits are there and helping them 

through the decision process so they could sign up, so they could 

decide this was a really good deal for them and sign up for it. 

So it took a little time, but enrollment picked up, and these kinds 

of barriers to enrollment are present anytime a new Federal program starts, and we are working harder than ever to overcome 

them. So in this case, we tried to look back on that experience and 

31

learn from it. In addition to the steps that we are taking through 

our 800 number, through advertising, through mailings to beneficiaries, through mailings from the Social Security Administration, 

we form new partnerships with state health insurance assistance 

programs and recently we have been getting partnerships underway with many private organizations that are very good at doing 

outreach and education for low-income beneficiaries. 

I think this is a win-win effort for us. It helps get people informed and enrolled in the Medicare prescription drug benefit program. It also is a good foundation for the education and outreach 

that we intend to do as part of the comprehensive low-income drug 

benefit that is coming next year. We have got a little bit more time 

to do that, but we want to take full advantage of all of that time. 

So with new partnerships, with proven effective approaches to 

doing outreach, I think the numbers are picking up, but you know 

no program works unless it delivers real benefits, and this program 

is delivering real savings when it comes to the prices that beneficiaries who get the drug card can pay when they go to their local 

pharmacy, and it is especially delivering benefits in terms of literally thousands of dollars in help this year and next year for the 

low-income beneficiaries who do not have drug coverage today. 

That is the ultimate thing that is driving the significant enrollment in this program, and that is why we are so pleased to have 

so many partners on the outside in this unprecedented effort to get 

millions of people signed up faster than ever for a new Federal benefit program. 

The CHAIRMAN. Back in March, CMS testified before this committee that you anticipated savings from the cards of between I 

think 10 to 15 percent on total spending and with about 25 percent 

on individual drugs. Your testimony today suggests that actual savings are in many cases proving better and that especially is true 

of I believe generics. 

Dr. MCCLELLAN. Yes. 

The CHAIRMAN. What are the reasons why the savings seem to 

be even better than expected and do you expect price savings to 

continue to go down as the program stabilizes? 

Dr. MCCLELLAN. Well, we are seeing significant new savings I 

think for two main reasons. One is that seniors are able to band 

together now more effectively and stick together long enough to get 

negotiated discounts on prices from drug manufacturers. 

So seniors are very good comparison shoppers now and many of 

them have been able to find through a pharmacy discount card or 

something like that some small sources of discounts at their local 

pharmacies. Well, this does better. It adds to that by getting them 

those negotiated discounts which are being passed on from the 

drug manufacturers. 

The other very important step is making the price information 

available. Now not every senior goes and looks at every piece of 

price information on the 60,000 drug products at the more than 

50,000 pharmacies around the country, but the fact that that information is out there has created a new ability to comparison shop 

for drugs much like people in the past have done for many other 

products and services, their groceries, their vacations, their mortgages, you name it. We have seen over the past 2 months with this 

32

program that prices available come down, come down, especially for 

cards that were initially higher priced, but across the board, we 

have seen reductions, not increases in drug prices, prices for brand 

name drugs, over the first couple of months that our price comparison has been active. So it is a new way of comparison shopping 

coupled with a new ability for people to band together and get the 

big discounts. 

The CHAIRMAN. Great. That is good news. Let me turn to my colleague, Senator Breaux. John. 

Senator BREAUX. Thank you, Mr. Chairman, and thank you, Dr. 

McClellan, for your testimony. We had authorized in the Medicare 

bill automatic enrolling for low-income Medicare beneficiaries, and 

you all were considering that approach. Can you bring us up to 

date on what you all have decided on on automatic enrollment? 

Dr. MCCLELLAN. Yeah, I sure can. Auto enrollment can be a good 

way of getting the enrollment numbers up quickly. It means that 

we do not have to do the retail process of going door to door, which 

we are doing right now with a lot of these outside organizations to 

get the numbers, to get people informed and get those who can 

benefit to enroll. 

We started an auto enrollment process with states that have 

pharmacy assistance plans and those auto enrollments have already resulted in more than 100,000 beneficiaries getting into this 

program and qualifying for the low-income assistance in a very 

straightforward way. 

We are also talking with states about using the same kinds of 

auto enrollment tools for other populations. Under the statute, 

however, states are allowed to do auto enrollment when they have 

got so-called authorized representative status for beneficiaries. 

That means they can act on behalf of the beneficiary for decisions 

like choosing to enroll in this program. 

It turns out that most states do not have the legislative authority 

to do that now, so we are working with those states on finding 

other ways to overcome any barriers to information, barriers to enrollment. A number of states, for example, have sent out pre-filled 

out applications that just require a beneficiary’s signature and that 

has led to tens of thousands of more people signing up as well. 

But we are looking for every avenue that we can take under the 

statute to get people informed and enrolled in this program. I 

should add, too, that when it comes to the full drug benefit in 2006, 

there is an automatic enrollment authority that applies to all Medicaid beneficiaries, the full dual-eligibles as well as those in the QL 

and SLMB and QMB programs, too, that we are going to be asking 

for comment on how we can use that as effectively as possible when 

it comes to the full benefit in 2006. 

Senator BREAUX. So there is still apparently a large number of 

people who are eligible for the $600 person discount that are not 

taking advantage? 

Dr. MCCLELLAN. They are not yet enrolled. That is right. We are 

up to close to a million enrolled in that program, but we aim to get 

a lot higher than that, and that is why we are really focusing new 

efforts on working with states and working with these outside advocacy organizations that are very well connected to these beneficiary groups. 

33

Senator BREAUX. Do you have an idea of how many that are eligible for the discount, a full discount, that are not getting it simply 

because they have not enrolled? 

Dr. MCCLELLAN. Well, the projections were that about 7.3 million 

people would take advantage of the card program between now and 

when it ends at the end of 2005 and a little bit over 4 million people out of that 7 million would be eligible for the low-income assistance as well. So we are definitely still trying to get those numbers 

up and to do it faster than other previous new Federal benefit programs have achieved in the past. 

Senator BREAUX. About 25 percent ball park figure? 

Dr. MCCLELLAN. Right now in the first month, and I intend to 

keep doing all we can to really increase that number. 

Senator BREAUX. Well, I would really urge you to do it. I mean 

this is the easiest thing to take advantage of that you can possibly 

imagine. 

Dr. MCCLELLAN. Yes. 

Senator BREAUX. Here is $1,200 a year for prescription drugs for 

a couple that is lower-income that is there just for signing up, and 

they really need——

Dr. MCCLELLAN. Right. 

Senator BREAUX [continuing.] The maximum amount of encouragement to sign up for it because the program is three. 

Dr. MCCLELLAN. That is right. 

Senator BREAUX. It is available. Tell me a little bit about the 

interaction between the Medicare discount card? How is working 

when you have the various companies coming in with their own 

discount card? Back to my example in the beginning of the little 

couple that comes to their local pharmacy with 10, 12 different discount cards available to them. I mean tell me a little bit about how 

is it working with the interaction between the company discount 

cards and the Medicare card itself? 

Dr. MCCLELLAN. Well, there are two ways that that can work. 

There are now more than 100 manufacturer programs out there 

that have their own cards, that have their own enrollment process. 

Senator BREAUX. These are the manufacturers? 

Dr. MCCLELLAN. These are manufacturer programs of one kind 

or another, and one of the things that we do to try to make it easier for people to find out about enrolling in those programs is give 

them the information they need to connect with those programs 

when they call us up at 1–800–MEDICARE, so when you call us, 

you hear not only about the drug card and the transitional assistance that we offer but also about state programs and manufacturer 

programs that can help out as well. 

What I think is really important though is the fact that many of 

the major drug manufacturers, seven so far, are now offering wraparound discounts on any card that meets some basic terms, basically just passing on the full value of the manufacturer discounts, 

and those prices for drugs even after you use up your $600 are now 

$5 to $15 for a drug that can retail price for more than $100. This 

includes drugs from Lilly, like Lipitor, drugs from Merck like Zocor, 

many other commonly used drugs. As I said, 6 out of the top 10 

spending drugs for beneficiaries now and when you call us up or 

go to our web site, we will tell you about all of these specific drugs, 

34

the prices that you can get for them after you use your full $600 

credit and all the cards that are offering this wraparound help. So 

as you said, it is literally thousands of dollars in new help right 

now that people can qualify for and they should be finding out 

about it and we want to get that help to them as quickly as possible. 

Senator BREAUX. My last question, Mr. Chairman, is again when 

I made some opening comments, I talked about the fact that a person who is confused or not knowledgeable, if you will, about how 

this process works, if they call the 1–800–MEDICARE and can they 

give someone a list of the drugs that they happen to be taking, four 

or five, and their prescriptions and say here is what I am taking, 

can you tell me which card best would fit the needs that I have to 

meet each month? 

Dr. MCCLELLAN. That is exactly right. The easiest way to get 

connected to the help you need is to call us up and be ready with 

just a few pieces of information—your zip code, your income level 

if you think you may qualify for any of these kinds of assistance 

programs, and the drugs that you are on and the dosages that you 

can get usually from your pill bottles. We have recently made some 

improvements in the web site which are also being used by the customer service reps at our 1–800 number to make it even easier to 

enter all the drug information, and no matter how obscure the prescription is, whether it is an oral medicine, or otherwise, so that 

can be as straightforward as possible. 

Senator BREAUX. Give them that and what do you get back from 

Medicare? 

Dr. MCCLELLAN. You can get back several things. We can either 

tell you right then and there which cards look like they are going 

to be a great deal for you and what you would end up paying under 

those cards for your drugs so you can compare that to what you 

are paying now and make an informed decision about whether this 

is a good program for you. Or a lot of people like to see something 

in writing, so we will send them out a personalized brochure that 

is the Medicare drug card program for that specific beneficiary that 

gives them information on the top programs for their needs, and 

they can customize it to be just about one or two or three card programs. They can focus in on the pharmacies that they care most 

about or they can get a lot more information if they want. 

We have also listened to concerns that you and others have expressed about not having too many choices, not having too much 

information to sort through, so now when you go to our web site 

or call us up at 1–800–MEDICARE, we focus in first on the top five 

choices. So it is like a special five-card program just for you, but 

it is honed in on the five best choices for your needs. You do not 

have to look at any of the other programs at all. 

Senator BREAUX. Thank you, Dr. McClellan. 

The CHAIRMAN. John, thank you. We have been joined by our colleague on the committee, Senator Stabenow. If you wish to make 

any opening comments and questions of Dr. McClellan, please proceed. 

Senator STABENOW. Thank you, Mr. Chairman, and I apologize 

for not being here in time to hear your testimony, and I may, in 

35

fact, be a little redundant, but I appreciate your time, Mr. Chairman. 

The CHAIRMAN. That is OK. 

Senator STABENOW. This is an extremely important subject and 

so I appreciate the fact that you are holding this and with my colleague as well, Senator Breaux. 

First, I would say Mr. McClellan, would you agree that this is 

a pretty complicated process for seniors to wade through? 

Dr. MCCLELLAN. Senator Stabenow, it is good to see you again, 

and we are, as we have just been discussing, trying to take all the 

steps that we can to make it as straightforward as possible. It does 

not have to be complicated. Seniors who call us can now generally 

get the information they need in well under 20 minutes to find out 

not just about which cards can help them save a lot of money, but 

how much they can save and what it exactly takes to start getting 

those savings. So we do not want it to be complicated. We want to 

do everything we can. 

We have tried to learn from comments, suggestions and so forth 

to make it as straightforward as possible to start getting help right 

now. 

Senator STABENOW. Well, of course, the best way to make it the 

least complicated would be to have one card and for Medicare to 

be able to negotiate a group discount to get the maximum discount 

possible, as the VA does. That is not what this law does. Instead 

we have multiple cards, and on the cards for a moment, would you 

not agree that it is a concern, I am wondering how you are going 

to handle when people sign up for an individual card based on the 

medicine that they need and with the help of your agency work 

through which card gives them the best coverage maybe for five 

medicines that they are on, but then what happens when they find 

out that the discount list can change every 7 days or the price can 

go up every 7 days? 

Do you have a plan for how you are going to address or have you 

already had calls from people who are locked into a card for a year 

and find that the five medicines that were covered are now maybe 

only three medicines that are covered? 

Dr. MCCLELLAN. Senator, it is very important to us that the benefits that beneficiaries expect to get under this program actually do 

come through. That is why we have been monitoring closely what 

has been happening to prices, what has been happening to drugs 

covered and monitoring closely all calls and complaints that we get 

and handling them promptly. 

On prices, it has been the case in this program from the beginning that they can only go up when costs go up, not for any reason, 

which is the case outside of Medicare today, and we have seen 

prices for brand name drugs actually come down on average since 

this program was started and we are going to continue to monitor 

that closely. 

In terms of drugs that are covered, we have had virtually no 

complaints. I do not know of any complaints about a particular 

drug that was listed as being on a formulary, not being there for 

a discount, and, in fact, in monitoring what the card sponsors have 

been doing over time, we have seen no cases, no significant cases, 

of drugs that were listed coming off. 

36

In talking with the card sponsors, many of them are saying that, 

well, you know, the only times that we think we might even think 

about changing some of the drugs that we cover are if a generic 

version is approved, in which case seniors get a lot more savings 

for it, or if the FDA changes the reasons that it thinks the drug 

should be used, in which case there would be a good medical reason 

for a change, but we are monitoring that closely and so far we have 

not seen any substantial complaints about either prices, because 

they have been coming down or drugs covered because they have 

been staying stable under this program. 

Senator STABENOW. Well, I think that is good news if, in fact, the 

drugs do not change once a senior signs up. Would you not agree 

that that would not be a very fair situation if somebody signed up 

for a card based on certain medicines being discounted and then 

found that that changed down the road? Would you not agree that 

that would not be, at a minimum it would not be fair, even though 

right now it may be legal under this? 

Dr. MCCLELLAN. That is right. That is why we made clear to the 

companies that we will be monitoring them for any kind of bait and 

switch activities and tracking customer complaints, which we are 

doing now, and we are also making sure that customers know 

about it, the cards that are doing the job of keeping prices down 

and offering a broad range of prescriptions, so that those cards are 

the ones that attract beneficiaries. That is why it is so important 

I think to get good information out about actual prices that people 

are paying and actual drugs that are being covered, so that people 

do not just have a discount card or they do not know what it 

means. That is the way that too many of the existing discount 

cards have operated before this program came along. 

Senator STABENOW. You speak about the prices having gone 

down since the program was instituted. Have you monitored or 

looked at the studies—AARP has done a study, Families USA and 

others—about the dramatic increases in prices before the discount 

cards came into being? 

Dr. MCCLELLAN. They are looking at a slightly different thing. 

They have been tracking before and during the list prices for brand 

name medicines. Seniors should never be paying anything close to 

the list price for brand name medicines with the programs out 

there thanks to us and thanks to other options that are available 

to them as well. 

We have looked at prices for brand name, commonly used brand 

name drugs going back as far as early 2003 and comparing to the 

discounts that we are seeing now, and again, we are seeing savings 

of 10 to 30 percent for commonly used brand name drugs even compared to the list prices, the list retail prices from way back before 

this program started in early 2003. But that is why I think it is 

so important for seniors to get into a card program like this, that 

they never have to pay anything close to retail prices again. 

Senator STABENOW. Well, this reminds me a little bit—some of 

the price increases I have seen reminds me a little bit, Mr. Chairman, of a store who ups their prices 30 percent and then puts a 

sign out and says 15 percent off. There is a lot of concern about 

that kind of thing happening since between the time the law was 

passed and the discount cards. 

37

But a couple of other questions, if I might, Mr. Chairman? 

The CHAIRMAN. Surely. 

Senator STABENOW. Regarding the assets test, we, and again I 

apologize if you spoke to this, and I did not hear your comments 

earlier. 

Dr. MCCLELLAN. No, go right ahead. 

Senator STABENOW. But when we look at the fact that for $6,000 

for a low-income senior, they can be removed from what is really 

the maximum help. I mean we all agree that under this legislation, 

while I would certainly design the entire bill differently, do it differently, we I think all agree that for low-income seniors, there is 

the maximum amount of help, and we would want that to be for 

low-income seniors. 

I have to say as a caveat that it very much disturbs me in a state 

like Michigan where someone under Medicaid is going to go on to 

Medicare and actually pay a bigger copay than they did under 

Medicaid. But could you speak to the fact that right now we are 

looking at a calculation for a low-income senior and an assets test 

that basically says if you have $2,000, if you exceed $2,000 on 

household goods or personal effects, and that could be your wedding ring, that could be your furniture, if you exceed $1,500 on a 

life insurance policy, which my guess would be most people today 

if you have life insurance, it would be more than that, or funds set 

aside for burial expenses that would exceed $1,500, you disqualify 

as a low-income senior for the help, so that you have, maybe you 

have a small insurance policy, put aside a little bit so your children 

do not have to pay for your burial, you have a wedding ring, maybe 

you have a little bit of furniture, and this program does not help 

you? Does that make sense? 

Dr. MCCLELLAN. That would not make sense, and that is why I 

want to make sure we implement the asset test effectively. You 

know the point of this legislation, as you said, was among other 

things to target the best, the most comprehensive assistance, to the 

people that have the least ability to pay. While there are many seniors that have some ability to pay because they have got a lot of 

financial assets and other resources available, there are millions 

who do not, and that is why under our estimates, I think this is 

going to definitely be borne out in practice. A third of all Medicare 

beneficiaries are going to qualify for this comprehensive low-income 

help. 

Now we have got some work to do to make sure that we implement this asset test effectively, but I can tell you right now, even 

before we go through the full notice and comment and have discussions about what should count and what should not count, I am not 

going to be taking away benefits based on seniors keeping their 

wedding rings. That is not the way that this program I think was 

intended to operate and that is not the way it is going to operate. 

There may well be some other financial assets. You know if they 

have got tens of thousands of dollars in the bank, yeah, I think 

that that is—in an era when we are worried about not spending 

too much money in Federal Government programs—that might not 

be the best person to target all this comprehensive assistance to. 

But we are going to be very careful about doing this asset test 

in a way that is fair, in a way that focuses on seniors’ true ability 

38

to pay, not because they have got a family heirloom or a wedding 

ring or some other special prized asset that should not be counting 

for purposes of these important benefits. 

Senator STABENOW. Well, you may make light of that, but the 

law does not say that. That is not what the law says. 

Dr. MCCLELLAN. Well, that is why it is very important for us to 

implement the law effectively. We have some discretion within the 

law on how we interpret things like what counts for an asset and 

what I think and what we will ask for comment about is that Congress intended for us to do a reasonable application of an asset test 

for people that are not truly of limited means just because they 

happen to have low-income in a particular year. They might be expected to contribute to some of the costs, you know, 25 percent of 

the costs of the premium just like higher-income beneficiaries 

would. But for beneficiaries who are truly low income but for a 

small life insurance policy or a wedding ring or something like 

that, that is who we really want to help. 

Senator STABENOW. But the law refers to categories and calculations regarding funeral plots and life insurance policies, and by definition, let us say someone gets to keep their wedding ring—thank 

goodness. You are saying and the law says that if you have $6,000 

worth of assets, you do not qualify as a low-income senior. That is 

not very much; is it? 

Dr. MCCLELLAN. It is not very much, but it is much more, Senator, than millions of beneficiaries have today, millions of beneficiaries who are paying full cost for their drugs and who do not 

have any help right now from Medicare or anybody else with their 

drug costs, and that is what we are trying to change. 

Senator STABENOW. You are suggesting that when you are done, 

a third of those on Medicare will qualify under your definition of 

someone who has $6,000 or assets or less? 

Dr. MCCLELLAN. About a third of Medicare beneficiaries can get 

the additional assistance envisioned in this law, being able to get 

your drugs for as little as a few dollars for prescription or at most 

a few hundred dollars a year; that is right. 

Senator STABENOW. Well, we will be watching very closely on 

that, Mr. McClellan. 

Dr. MCCLELLAN. I will look forward to working with you on this. 

I know how important that assistance for people with limited 

means is to you. We are going to have a broad discussion of this 

when we put out our proposed regulations. We are working with 

the Social Security Administration, other experts, on thinking 

about what should and should not be counted in terms of coming 

up with a workable fair asset test and we are going to do that as 

effectively as we can under this law. 

Senator STABENOW. Well, just for the record, Mr. Chairman, I do 

not believe there is a way to come up with a $6,000 assets test that 

is really fair, no matter how good intentions are, how many good 

intentions there are. That amount is an extremely limited amount 

of money to say to seniors of this country in terms of giving them 

the help that they need. 

One other quick question. That is last week we read in the paper 

about another group of people I am very concerned about, and that 

is those who have private retiree coverage now. There are a lot of 

39

those folks in my state who worked their whole life, have retiree 

coverage, have given up pay raises and given up other kinds of bonuses to be able to get health care during their retirement years. 

Originally we saw numbers before this bill passed that about 2.7 

million people were likely to use retiree coverage because of the 

way this is structured, and now we are hearing at least internally 

that there are numbers that say that that is more like 3.8 million 

people who will lose retiree coverage. 

This is just one of a series of reasons why I did not support the 

original Medicare bill because I believe in addition to not really giving the help to low-income seniors because of all the bureaucracy 

and the assets test and so on, I have a very deep concern and belief 

that the first rule should be do no harm. 

That if anybody is losing their retiree coverage as a result of this, 

we are doing them harm. I am wondering if you would respond? 

I understand you had put out a statement saying——

Dr. MCCLELLAN. I did. 

Senator STABENOW [continuing.] Saying that those numbers were 

not accurate. 

Dr. MCCLELLAN. That is right. 

Senator STABENOW. It is difficult for us when we look at the 

budget numbers that were put out that were not accurate, and 

then different numbers come out after the bill passed, and we hear 

from the actuary that he was threatened with losing his job. So it 

is very difficult, and I certainly want to have confidence in the 

numbers that come out, but it is very difficult given the kinds of 

information and changing of numbers and so on that have gone on 

as it relates to this new law, but I wanted to give you an opportunity to speak to why this number evidently put together by someone within the department which is substantially higher, in fact 1.1 

million more retirees that would lose private coverage, why you are 

indicating that that is not accurate? 

Dr. MCCLELLAN. Yeah. Senator Stabenow, let me reiterate very 

clearly that that that is not our policy and that what we are doing 

as a lead up to implementing this new retiree assistance effectively 

is considering a range of options, and we are going to put out for 

public comment a range of options about how best to increase the 

strength and the security of retiree benefits. I have talked to a lot 

of those seniors as well—I probably do not get as much of a chance 

to in Michigan as you do—and I know how worried they are about 

their benefits. They have seen the trends over the last decade of 

declines in coverage and less employer contributions and higher 

costs that they have to pay, if they get to continue their benefits 

at all. We intend to stop that. 

We intend to stop that decline. We intend to end up with a policy 

that not only preserves but increases the support for retiree coverage, that adds existing employer contributions to the new help 

from Medicare, over $70 billion in new assistance, for employer 

programs like GM, Ford and others in your state, and we are going 

to have a very public process. 

We are getting comment on this from Members of Congress like 

you, we are getting comment from retiree organizations, we are 

getting comments from the employers themselves about how we 

can use all the tools in this bill to get them the maximum addiVerDate 0ct 09 2002 11:39 Dec 21, 2004 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 H:\DOCS\96738.TXT SAGING1 PsN: JOYCE
40

tional help in continuing to provide strong effective retiree coverage. It includes coverage that people get through the retiree drug 

subsidy which is what was the particular subject of that New York 

Times article. 

It also includes new assistance that retirees can get by employers 

wrapping around the Medicare Part D benefit or offering an enhanced Part D benefit themselves, one that is a comprehensive 

benefit and that they will now be able to do for a much lower cost, 

than if they are footing the whole bill on their own. 

So all of those approaches are important ways of augmenting employer coverage, and we are going to have a full discussion of all 

the options for doing this with a single goal in mind of how do we 

get the most additional help to retirees for the least additional cost 

to the Federal Government. 

Senator STABENOW. Well, I am certainly hopeful that your statement that no one losing their private coverage as a result of this 

will, in fact, happen. Finally, are you going to support our re-importation bill? 

Dr. MCCLELLAN. Well, that is outside of my current jurisdiction, 

Senator. I am sure that we are going to keep working together as 

close as we can on finding all the safe and proven and effective 

ways of lowering drug costs for our seniors and I look forward to 

continuing to work with you on all of these ideas. 

Senator STABENOW. Thank you. Thank you, Mr. Chairman, for 

your patience. 

The CHAIRMAN. Thank you, Senator. 

Senator Breaux. 

Senator BREAUX. I just have two follow-up points. I mean the 

fact about employer retirees losing their retiree coverage as a result of this bill, they were losing it way before anybody even 

thought about this. 

Dr. MCCLELLAN. They are losing coverage now. That is what we 

are trying to stop. 

Senator BREAUX. My own father had his own dramatically reduced, and his company told all of their future retirees they would 

have zero coverage long before we even started thinking about this 

idea. 

Dr. MCCLELLAN. Yeah. 

Senator BREAUX. Another point is the means test was not dreamt 

up in this Medicare bill. I mean we have means test for Social Security. We have means test for Medicaid. In fact, is it not true that 

the Medicaid means test is substantially more restrictive to be eligible for a full ticket for prescription drugs under Medicaid? The 

assets test is $2,000 for an individual, $3,000 for a couple, and it 

is not indexed? 

Dr. MCCLELLAN. That is right. 

Senator BREAUX. This is $6,000 of an individual for a full ride, 

$9,000 for a couple, and in addition to that, is it not indexed as 

well? 

Dr. MCCLELLAN. That is right. As you said, the Medicaid tests 

are stricter in very many states. The Medicare act means test is 

based on an SSI test so it’s very similar, same kind of indexing and 

so forth. 

41

Senator BREAUX. So I mean is it not clear that the means test 

that we used in this Medicare bill for prescription drugs, in fact, 

is substantially more generous than the existing Medicaid means 

test and the SSI means test? 

Dr. MCCLELLAN. As is the coverage that will be provided under 

this bill for millions of Medicaid beneficiaries who currently face restrictive formularies and other limits on the numbers of prescriptions they can fill. 

Senator BREAUX. I mean there was some argument for, I would 

say, Mr. Chairman, for no means test. But when you have a limited 

amount of money, which is $400 billion, we could have had no 

means test if we could have gotten, you know, $600 billion. I got 

people complaining now because somebody scored it at 800 billion. 

I mean we could have spent a trillion dollars and covered everybody who is over 65 with free drugs, but we do not have the money 

to do it. 

The CHAIRMAN. Thank you for those questions. Let me ask one 

that deals, and I am pleased that we have looked at that assets 

test. I will submit for the record the conference agreement and how 

it applies. It doubled the SSI test and it excluded specifically certain items like the house, like the car for transportation, up to 

$2,000 worth of household goods. It does exclude the wedding ring 

and life insurance up to $1,500, and so I think there is a substantial increase in the general generous character of the test. 

Mark, both with respect to the drug card going on right now and 

with respect to the 2006 benefit, lower income seniors are often the 

most challenging to reach and you have talked about a variety of 

scenarios and groups you are involving. Answer this for us if you 

would, please. What are the reasons for this difficulty and what 

outreach strategies are best for reaching the low-income seniors 

and is your outreach effort being tailored for both rural populations 

and for specific minority populations? 

Dr. MCCLELLAN. It absolutely is. Just picking up on your point, 

I think that looking back over the history of programs, well-intentioned programs intended to help people with limited means who 

are really struggling to get by. Outreach, I think, is one of the most 

critical barriers and problems that often does not get the attention 

it deserves. That is why there have been previous Federal programs that can take many years to get up to even 50 percent of 

eligible enrollment. We are going to do better than that this time, 

and we are also going to take steps to increase enrollment in those 

other Federal programs by taking many unprecedented outreach 

steps. 

This includes steps that we have tried already and that have 

been proven to be effective, steps like mailings from the Social Security Administration and Medicare that are targeted with some 

simple facts that people can use to figure out how to start taking 

advantage of the new benefits, advertising, especially advertising 

targeted in communities that have a high preponderance of these 

lower income beneficiaries can help as well. Broadcast advertising 

in particular and not just English language. We are doing Spanish 

language and other advertising now as well. 

Working with private groups. Around the country, many of these 

individuals have connections in one way or another in their comVerDate 0ct 09 2002 11:39 Dec 21, 2004 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 H:\DOCS\96738.TXT SAGING1 PsN: JOYCE
42

munity, connections to faith-based organizations, connections to 

seniors organizations, connections to other types of ethnic organizations. All of those sources can be great opportunities for outreach 

and connection. 

For example, we have been working with the National Alliance 

for Hispanic Health, and they have just come up with a new instruction manual in Spanish on how to use the Medicare approved 

drug discount card and how to get thousands of dollars’ worth of 

additional assistance beyond the discounts available for low-income 

beneficiaries. 

We cannot do this by ourselves, but because they have a tremendous amount of experience and connections with community groups 

that reach and deal with low-income beneficiaries on an on-going 

basis, we can talk to and connect with a lot more people. That is 

the philosophy behind the new grants that we are awarding. We 

just announced $4.6 million for community-based organizations recently. That is the philosophy behind doubling our support for the 

state health insurance assistance plans, and also doing new grant 

programs for the Administration on Aging, the Indian Health Service, and other Federal agencies that also have good connections and 

good experience in outreach. 

All together, I think these efforts will not only help us boost enrollment from the people who can get the most out of these new 

programs for the drug benefit but will also end up increasing enrollment in many of these other Federal programs that for too often 

have fallen short of the maximum benefits that they can provide. 

So this is a huge outreach effort. We are looking at all of the approaches that can be proven effective. We are even working some 

with the USDA and some of their local agricultural offices which 

is a good connection point for people in rural communities. 

We are going to keep that up and redouble our efforts over the 

coming year for both the drug card transitional assistance which 

people can get and use right now and for the full drug benefit in 

2006. 

The CHAIRMAN. Senator, yes. 

Senator STABENOW. Thank you, Mr. Chairman. I just have to 

comment more than a question and say I appreciate and fully believe that you are doing maximum outreach as it relates to all of 

this, but we would not need to spend all this money to do this and 

all this time if we had taken the approach of one Medicare card, 

allowing Medicare to negotiate maximum discounts for everyone, 

and then making that available to people so that this approach is 

the most complicated and the most costly way to go on this. 

I would also say if we allowed the pharmacist in my great state 

and around the country to negotiate and bring in prescription 

drugs, to do business with those in Canada, we could drop prices 

in half tomorrow, which is a bigger discount than any card we are 

going to come up with. 

Dr. MCCLELLAN. I know how strongly you feel about these issues, 

and I would just like to add on this point that by having multiple 

cards available, we can make sure that people get the formularies 

they want. It is true that there are some government programs out 

there that just have one set of benefits, but I am not sure that is 

going to deal effectively with all of our diverse beneficiaries. The 

43

VA formulary, for example, that gets mentioned a lot does not 

cover drugs like Vioxx and Lipitor and many of the other drugs 

that are commonly used by many millions of seniors. So what we 

are trying to do with our improvements in the card program is 

make it possible for you to hone right in on just the one or two or 

three programs that are best for your particular needs. 

So it is like having just one or a few choices, but they are choices 

that are actually going to match up with the kind of drug assistance that you get, and in terms of prices, this negotiation approach 

seems to be making a real difference. There was a Consumer’s 

Union study recently that found that the prices available through 

the Medicare endorsed drug cards are lower than the prices in 

California for Medi-Cal drugs and, you know, Medi-Cal is a very 

big state government run program that negotiates lower prices for 

their beneficiaries. The Medicare cards are doing better than that 

program. So there are certainly more steps that we should think 

about doing, but I think there is a lot of help available right now 

that we need to connect up with seniors, and we will keep trying 

to make the program work even better. 

The CHAIRMAN. Mark, thank you very much. As Senator 

Stabenow said, and as John and I certainly also agree, we are 

going to keep a very close eye on you. 

Dr. MCCLELLAN. Well, thank you very much. I think this kind 

of dialog is extremely helpful for us in focusing our efforts effectively, and we definitely appreciate your support for getting real relief right now to people who have already been waiting too long 

with high drug prices. Thank you very much. 

The CHAIRMAN. Well, we know that you have a very difficult task 

in front of you with a very complicated bill, and we will always expect you to be on time and on schedule. 

Dr. MCCLELLAN. I will do my best. 

The CHAIRMAN. Thank you very much. 

Dr. MCCLELLAN. Thank you. 

The CHAIRMAN. Now let us ask our second panel to come forward, please. Thank you all very much. Our second panel today we 

will hear from Gail Wilensky, a former administrator of the Health 

Care Finance Administration. That is the old HCFA versus the 

new CMS. Currently the John M. Olin Senior Fellow at Project 

Hope, where she is one of the country’s foremost authorities on 

Medicare, Medicaid and health care policy. 

Next, we will hear from Dr. Byron Thames. 

Dr. THAMES. Thames. 

The CHAIRMAN. Thames. A family physician from Orlando, Florida, joining us today as a trustee of AARP, an organization, of 

course, whose support and counsel was critical to the enactment of 

the Medicare legislation we are discussing today. 

Next will be Dr. Jane Delgado. 

Ms. DELGADO. Yes. 

The CHAIRMAN. Is president and CEO of the National Alliance 

for Hispanic Health and also a founding member of the new Access 

to Benefits Coalition that Dr. McClellan talked about, an organization dedicated to promoting outreach and enrollment of low-income 

seniors in the new Medicare drug program. 

44

Last, today Patricia Nemore, an attorney and Medicare expert, 

who is with the Washington Office for the Center of Medicare Advocacy, an organization focused on improving access to Medicare 

and quality health care. Well, we thank you all very much and, 

Gail, we will start with you. 

STATEMENT OF GAIL WILENSKY, PH.D., JOHN M. OLIN SENIOR 

FELLOW, PROJECT HOPE, FORMER ADMINISTRATOR, 

HEALTH CARE FINANCING ADMINISTRATION, BETHESDA, 

MD 

Ms. WILENSKY. Thank you. Mr. Chairman, Senator Breaux, 

thank you for inviting me to testify. I would like to re-enforce some 

of what has been said about how the new Medicare legislation will 

help the lowest income and the most vulnerable populations. I also 

want to stress the importance of allowing the full benefit to be implemented before introducing new legislative changes. 

As it is, it will take a Herculean effort to implement the major 

provisions of the legislation as it is now specified in law. I know. 

I have been there and I can now say it in a way that Mark McClellan cannot. The Medicare prescription drug card began enrolling 

beneficiaries in early May and started operations June 1, as you 

know. 

CMS estimates that about four million have enrolled, a really remarkable number given that it is only 2 months out. The card provides a way to get immediate assistance, especially for those who 

have no outpatient coverage which, of course, is not the majority 

of seniors, but even more important is the cash assistance that has 

been provided for those who are below 135 percent of the poverty 

line, the $600 that they will have as well as no enrollment fee. 

CMS has found that low-income beneficiaries are saving substantial amounts of money—you have been hearing that already from 

Dr. McClellan—when you think about both the discount and the 

cash assistance. There is some very important provisions of the 

cash assistance which I hope will be considered as precedent for future policy changes. 

The first is that the entire $600 is available even though the program started June 1, but more importantly is the provision to be 

able to roll over unused dollars into next year. I keep hoping that 

the Congress will consider that for the provisions and flexible 

spending accounts rather than the current use it or lose it provision which only encourages employees to spend their money however they may at the end of the year. 

Cards and assistance that can be used by these low-income seniors are people who will also have access to state pharma programs 

or some of the special discounts that the manufacturers make 

available so that their help may even be greater than it now appears. 

The real benefit, of course, though, starts in January 2006. A lot 

of attention has been given to the gap in coverage, the so-called 

‘‘donut hole.’’ Although, as you well know, the fact is that 14 million low-income seniors will not have to face that gap in coverage 

provided that they also have low assets. People who are below the 

poverty line pay only a small copay up to the catastrophic coverage. 

Those who are institutionalized dual-eligibles pay nothing at all. 

45

People who are above 135 percent of the poverty line but below 150 

pay slightly higher copayments, but relatively small amounts. 

Now, a lot of attention has been raised recently about what has 

been happening with the dual eligibles, those individuals who are 

eligible for Medicare and Medicaid. Of course they will not be impacted until January 2006, but there is something that is very 

ironic that is going on with some of the discussion. 

Before the legislation was passed, many individuals spoke as 

though they wanted to have Medicare supersede Medicaid because 

Medicare has not been typically regarded as a means tested or welfare-related program. Now, it is possible that there are some people 

with very severe disabilities who happen to live in very generous 

states that could find themselves somewhat worse off, but, in fact, 

the states will save money, not as much as they would have if 

there hadn’t been the maintenance of effort provisions, but they 

will nonetheless save money. So it is hopeful that in the generous 

states, they will continue providing some extra coverage, but the 

fact is under the old dual-eligible Medicaid coverage of prescription 

drugs, because prescription drugs is an optional benefit, there was 

no guarantee as to what individuals would be covered for. 

This was not an entitlement. Many states had preferred drug 

lists, do have preferred drug lists under Medicaid and a number of 

states have a lot of restrictions in terms of the amount of drug coverage provided. None of that will now happen with the dual eligible. So that while there may be some issues for some of the most 

disabled individuals, I think that we ought to understand that dual 

eligibles in general will be much better off than they had been before. 

There is some important information in a recently released study 

that I see was outside the door by PriceWaterhouseCoopers that 

shows the substantial amount of help that will be going to people 

below 150 percent of the poverty line and below 135 percent of the 

poverty line. They estimate that 98 percent of the spending by dual 

eligibles will be covered by this new bill. They furthermore estimate that 65 percent of the low-income beneficiaries are expected 

to pay less than $250. 

Just a couple of comments about some lessons that we are already learning. The fact of the matter is reaching low-income populations has always been very difficult. We know that from the 

qualified Medicare beneficiary outreach attempts at QMB, the socalled SLMB, the selected low-income beneficiaries, from the Children’s Health Insurance Program, and that this is not a new problem with regard to the prescription program attached to Medicare. 

The cash transition program will help. It will give CMS some 

time to figure out how to reach out to these low-income populations. As was discussed, automatic enrollment has been requested 

by some states and that this and other strategies will also be helpful in identifying low-income populations. Outreach is important. 

The state aging agencies can be helpful. The churches, the advocacy groups are all very important to be involved. 

The president’s budget assumes 10.9 million people out of 14.5 

eligible will actually enroll in 2006. That is an extraordinary number. I do not know whether they will be able to reach it, but the 

46

fact that that is their expectation really is a very important focus 

point. They will need lots of help. 

Let me again end with my plea, do not fix problems legislatively 

before 2006 when the main benefit has been rolled out unless you 

do not care if the program starts on time. 

There will, of course, be clean-up legislation. There always is. We 

saw the Balanced Budget Refinement Act and the so-called Beneficiary Improvement Act following the Balanced Budget Act. CMS 

now has an enormous burden put on it. A new benefit using a new 

delivery system, a modified private health care plan, lots of 

changes to Part B drug coverage, lots of provider payment changes, 

and other areas not even related to Medicare. 

Congress has really helped by providing a billion dollars to CMS and $500 million to the Social Security system, something that I 

believe is unprecedented. It has been helpful that Mark McClellan 

was confirmed as quickly as he was, but there has been a lot of 

staff turnover and an enormous amount of work. Some of it was 

predictable because of the aging of the staff, but even so, when it 

happens, it is still very difficult. 

This means that if there is an attempt to try to change the legislation before January 2006, it is very unlikely that this important 

benefit will actually exist. Let it go as it is. There will be problems. 

Fix them legislatively, but after the fact if you care about what 

happens to these low-income seniors. 

Thank you. 

[The prepared statement of Ms. Wilensky follows:]

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The CHAIRMAN. Gail, thank you very much. Now, Dr. Thames. 

Dr. THAMES. Thames, yes sir. 

The CHAIRMAN. Thames. Thank you very much. 

STATEMENT OF BYRON THAMES, M.D., TRUSTEE, AMERICAN 

ASSOCIATION OF RETIRED PERSONS, ORLANDO, FL 

Dr. THAMES. Thank you very much, Mr. Chairman, Senator 

Breaux. We thank you for inviting AARP to discuss the new Medicare drug law and how it helps beneficiaries with limited incomes. 

These provisions offer meaningful assistance to over 13 million people who need help the most in purchasing prescription drugs. They 

are among the most important features of this new law, and are 

the first critical steps toward providing comprehensive and affordable prescription drug coverage that all Medicare beneficiaries need 

and deserve. 

AARP is working to ensure that beneficiaries know about the 

new benefits and take advantage of the assistance. We are conducting extensive public outreach efforts that to date have reached 

roughly 300,000 of our members and their families. We have produced three booklets explaining the new law in plain language that 

the average reader can understand. 

AARP is also among the more than 80 groups participating in 

the Access to Benefits Coalition which is working to find and help 

those eligible for the extra assistance to understand and enroll in 

the programs. To meet this challenge, the Coalition is providing 

grants, education materials and technical assistance to coalitions of 

local groups that are forming across the country to help people take 

advantage of the assistance available to them. 

The rollout of the new limited income benefits is a massive undertaking and as with many new programs, lessons are learned 

along the way. Medicare officials are already taking advantage of 

these lessons to make improvements, such as establishing a standard application form that can be used to enroll individuals in any 

of the more than 70 different discount card options and allowing 

state pharmacy assistance programs to auto enroll their members 

in the drug card program. 

AARP believes we can and should make further improvements as 

we proceed. For example, people in Medicare savings programs also 

should be auto enrolled in the drug card program. These beneficiaries generally have incomes below 135 percent of the Federal 

poverty level and are among those who most need help with prescription drugs. Relying on outreach efforts alone virtually guarantees that many of these people will not get the $600 transitional 

assistance credit to which they are entitled. 

Auto enrollment is a proven method to ensure that they do gain 

access and we believe it can be done in a way that preserves choice 

and encourages market forces to help drive prices down. For the 

comprehensive drug program, the most important needed improvement to the low-income provision is elimination of the asset test. 

The asset test creates a welfare stigma and sends the wrong message because it penalizes individuals who have managed to modestly save for retirement. The asset test also involves complicated 

rules and massive amounts of documentation which may well dissuade people from applying for extra assistance. 

60

One of Medicare’s greatest strengths is that it does not carry 

such a stigma. Medicare is a social insurance program. An asset 

test for the drug benefits begins to erode that great strength. With 

these and other improvements that can be made, the extra assistance provided for people with limited incomes in the new Medicare 

drug law establishes a foundation and model for providing comprehensive drug coverage to all Medicare beneficiaries. 

That is a goal that we all share. We greatly appreciate the efforts 

of the administration and Congress to reach out to those who are 

eligible for this extra assistance and to make refinements as the 

program is implemented. 

We look forward to continuing these efforts through full implementation of the new law in 2006 and beyond. Thank you. 

[The prepared statement of Dr. Thames follows:]

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The CHAIRMAN. Doctor, thank you very much. Now, let us turn 

to Dr. Jane Delgado. 

Doctor. 

STATEMENT OF JANE DELGADO, PH.D., M.S., PRESIDENT AND 

CEO, THE NATIONAL ALLIANCE FOR HISPANIC HEALTH, 

FOUNDING MEMBER, THE ACCESS TO BENEFITS COALITION, 

WASHINGTON, DC 

Ms. DELGADO. Good afternoon, Mr. Chairman, Senator Breaux. I 

am president and CEO of the National Alliance for Hispanic 

Health, founded in 1973, and today serving over 12 million persons. 

I am also a founding organizational member and on the five-person 

steering committee of the ABC Coalition. My summary statement 

is going to focus on four things: the importance of MMA to Hispanics; the ABC Coalition; what we are doing at the Alliance; and 

also some early feedback from communities which is helpful as we 

move forward. 

First of all the importance of MMA to Hispanics. Most people do 

not know this, but Hispanics live longer than non-Hispanic whites. 

This is true for both Hispanic men and Hispanic women. So anything that has to do with older adults, we are keenly concerned 

with. 

We are very concerned about individualized care. Our recent report ‘‘Genes, Culture and Medicines’’ points out the differences 

among people in how they metabolize drugs. So individualized care, 

which is the wave of the future, with reference to pharmaceutical 

drugs is very important for us. 

The positive impact of MMA on healthy aging especially for lowincome seniors. This is important to us as Hispanics. 

Now, the ABC Coalition. Many people have mentioned it and I 

would like to say that our goal is very simple: to enroll 5.5 million 

beneficiaries by the end of 2005. Our members are very diverse. We 

are a group of senior organizations, disability organizations, faithbased, minority, provider, consumer and advocacy organizations, 

and we grow weekly. 

Now, our membership is over 82. ABC as an organization is 

about effective implementation of the new Medicare law to ensure 

that low-income beneficiaries make optimal use of available public 

and private benefits to pay for prescription drugs. 

I also want to say what ABC is not about. We are not about 

whether the MMA should or should not have been passed. We are 

not about how to reform it or whether we should. We are not about 

who should be elected president or to Congress. We are not about 

what we should do in other legislative positions. This is an organization people have agreed to be part of to enroll low-income seniors. 

Our steering committee is the National Council on Aging, Alzheimer’s, ourselves, AARP and Easter Seals, and we work through 

our working groups. 

What we have successfully done has been based on the collective 

experience of all our members. One is to give grants to local organizations so they can actually enroll people. But the second thing is 

to give web-based tools to people so once they are at the point of 

trying to enroll people, they have the best information. 

72

We have heard, that low-income people do not have access to the 

web. We understand that. But the people who are providing the 

intermediary service of helping enroll people do. So we have webbased tools that can help people get the best information on what 

is happening with MMA and the prescription drug benefit. 

When we look at what we are doing at the Alliance, we are doing 

what we know best. We have established networks and funded 25 

community-based organizations to actually enroll people, and in 

that we have to do some creative things—give people laptops, give 

them money so they could buy laptops so they could actually be 

part of the enrollment. We have produced videos. We have written 

and published a bilingual workbook. We have included the information on the Medicare transitional program on our help line. 

From the early feedback we get from communities is accurate 

and timely information is needed. People talk about confusion, but 

when there are more choices, and choice is a good thing, there is 

going to be some confusion. So we need to make sure that trusted 

providers of information are there to help people work through the 

process. 

This is an opportunity not just for the program, but also to talk 

to people about health. The outreach workers can go out, talk to 

people, do the kind of work which we want them to do, plus part 

of it is the MMA prescription benefit. 

We find that there is a continuing importance of being able to go 

to your local pharmacy. People have a relationship with that person. They need to continue that. 

The wraparound benefits are very important. If I were going to 

say what were the key things that are important about MMA, first 

of all, it is the single-most important opportunity to help lower income beneficiaries in the last 40 years. We think this is a key event 

for us. We want to make sure to support everything that we can 

to do it. 

Second, the low-income benefit will help even more people in 

2005 and further in 2006. We are glad about this, but we also know 

in order to do this that Medicare really needs to have the legislative language so they can have the full authority to work directly 

with community-based organizations. 

Finally, we understand how very often a national campaign with 

counting the number of impressions in television and listening to 

radio is very important but, as we know, from every program in 

health education, knowledge is not enough. You need knowledge, 

attitudes, and behaviors. These community-based partners who are 

out there at the front lines are key to making this program a success. 

That is what ABC is about. That is what the Alliance is doing. 

That is what makes this important, and we are here to work with 

you to make sure that the new prescription and preventative care 

benefits ensure a population that has healthy aging. 

Thank you. 

[The prepared statement of Ms. Delgado follows:]

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The CHAIRMAN. Jane, thank you very much. Now let me get to 

the last of our panelists on panel two, Patricia Nemore. 

Patricia, welcome. 

STATEMENT OF PATRICIA B. NEMORE, ATTORNEY, CENTER 

FOR MEDICARE ADVOCACY, INC., WASHINGTON, DC 

Ms. NEMORE. Thank you, Senator Craig and Senator Breaux. 

Since I understood that the interest of the committee is largely in 

the implementation of the Medicare drug plan, the testimony that 

I have submitted for the record as well as my oral comments today 

focus on those areas where we at the Center for Medicare Advocacy 

believe the Secretary and the Administrator can act to improve the 

drug benefit. We have not addressed the many areas of the law 

that we believe do need to be improved, amended or repealed. 

We know that low-income Medicare beneficiaries have disproportionately complex health care needs and that their enrollment in 

assistance programs is hindered by a lack of information and by 

complicated and burdensome application and enrollment processes. 

The prescription drug program and the low-income subsidy are, 

as each of you have said today, and everyone who has testified before you, extremely complex and are likely to create a great deal 

of confusion. I cannot stress enough that these facts argue for the 

Secretary to exercise all discretion that he has under the law to 

simplify this program in every way possible to ensure that lowincome beneficiaries can, in fact, get some prescription drug coverage. 

I would like to make five points. 

First, the Secretary must address the unique circumstances of 

dual eligibles. Dual eligibles will lose their Medicaid drug coverage 

in January 1, 2006. I differ with some comments I have heard 

about whether that is good or bad, but we do know that there will 

no longer be a Medicaid wraparound benefit for these individuals 

who have great health care needs. 

To assure that they have no gap in coverage, dual eligibles will 

have to choose a Part D plan between November 15 and December 

31. They will need to be identified and provided clear information 

and one-on-one assistance in order to do so. 

States and state health insurance counseling programs, what we 

call the SHIPs, and community-based organizations can be enlisted 

to help dual-eligibles choose plans. Since the law authorizes the 

Secretary to automatically enroll dual eligibles in plans, if they do 

not do so themselves, any automatic enrollment must be followed 

up by information and assistance to help individuals know how to 

use their plan or how to choose a different plan if they wish. 

Second, the Secretary must act to simplify, streamline and create 

equity in the eligibility and enrollment processes for the low-income subsidies. A few ways that he could do this are to deem all 

Medicare savings programs’ beneficiaries eligible for the low-income subsidy, eliminating the need for about a million people to 

apply and enroll to get the subsidy, to permit all the states that 

use more liberal methodologies in their Medicare savings program 

process to use those for the low income subsidy, and to require the 

Social Security Administration in those states that use more liberal 

methodologies to use those as well, so there would be equity among 

92

residents of a single state, and to require that the simple application form and process that the law requires the Secretary and the 

Commissioner of Social Security to create is available to all beneficiaries regardless of where they apply. We have heard a lot about 

the assets test. The assets test will create barriers for people, both 

because it will make people ineligible but also because it requires 

enormous documentation. The Secretary must minimize the documentation required. 

Third, the Secretary must require that clear detailed information 

is provided directly to beneficiaries of Part D plans, not merely that 

they be told about the availability of it, so that beneficiaries have 

information about a plan’s formulary, the formulary design and 

structure, the structure of any tiered cost sharing and which drugs 

are included in each tier. 

Beneficiaries will need to be directly provided notice when plans 

add or remove drugs from their formularies or change their tiered 

copayment system. Such notice must include clear information 

about how the beneficiary can seek coverage of a drug removed 

from the formulary or the review of a change in the drug’s copayment. 

Fourth, the Secretary must clarify the requirements for Part D 

plans’ processes for determinations, reconsiderations and appeals to 

assure that beneficiaries have access to an expedited review process for the coverage of drugs that are not on the formulary, for 

drugs that have been removed from the formulary, and for changes 

in copayment requirements. 

Such clarification could include, as under Medicare Advantage, 

that the physician can seek expedited review. 

Fifth, the Secretary must increase substantially resources for 

outreach, information, counseling and assistance that will assure 

the availability of the one-on-one assistance that is going to be desperately needed by beneficiaries trying to navigate this extremely 

complex system that has been created. 

This should be done by funding the State Health Insurance 

Counseling Programs at $41 million per year which is one dollar 

per beneficiary, and providing resources for groups such as Jane’s 

to do individualized community-based outreach and assistance. 

I thank you for the opportunity to testify here today and I am 

willing to answer any questions. Thank you, Senators. 

[The prepared statement of Ms. Nemore follows:]

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The CHAIRMAN. Patricia, thank you very much, and to all of you 

again, thank you. My questions will be somewhat general in nature, so as one responds, and the other feels they can add to or 

need to take from, please feel free to do so as we proceed to do all 

of this. 

During debate on this bill, the biggest focus I think for all of us, 

both in Congress and in organizations like yours, was on those seniors who did not otherwise have drug coverage and who just could 

not afford it themselves. 

This is a fairly generic question, but does this law substantially 

when implemented, in your opinion, alleviate that underlying problem and the primary premise behind this legislation. 

Gail. 

Ms. WILENSKY. It does a lot more than that because it is a much 

broader coverage bill, but it does focus an enormous amount of assistance on the low-income population which is where more of the 

individuals without drug coverage lay. So the answer is that it will 

cover some individuals who had drug coverage already with more 

extensive coverage, but it will do a very good job in covering those 

who are both without coverage and who were low income, particularly if it is as successful as the President’s budget assumes it will 

be in terms of reaching out to these individuals. 

Again, our experience in past administrations and in other attempts to reach these low income populations, including but not 

limited to my own efforts as HCFA administrator, is difficult. It is 

difficult for all income-related programs that I am aware of inside 

and away from health care, and we should not fool ourselves about 

the difficulty, but some of the assistance activities that have been 

mentioned will be helpful in making information clear and available. 

The CHAIRMAN. Doctor. 

Dr. THAMES. Senator, I would echo those statements. In the debate among the Board of Directors from AARP when this bill was 

being formed and the decision for us to support this, one of the 

early overriding factors in looking at what this bill was to do, was 

that it was going to help meet the needs of those who truly suffered 

the most particularly those with low income and those who had 

catastrophic drug bills, and those who have to make terrible decisions about what to spend their money on or whether to take the 

drugs in the appropriate doses or skip doses or skip days. We believe that this bill will help both those low income and those people 

with catastrophic drug costs. 

Ms. DELGADO. I think this is a very important bill in terms of 

low-income people, not just because of what we discussed, but in 

fact it moves CMS from being just a payer to being involved in people’s health and more of a public health agency because of some of 

the other parts of the bill such as, getting your ‘‘Welcome to Medicare’’ physical, getting your diabetes diagnosed early. This changes 

the whole flavor of what the agency is about, and for low-income 

seniors, it is a major step forward. 

The CHAIRMAN. Patricia. 

Ms. NEMORE. Senator, we have provided coverage for low-income 

people who did not have any coverage before and that will be tremendously important if the potential of the legislation is actually 

111

realized. The complexity of the eligibility process for the low-income 

subsidy is substantial; you have two different places that you might 

apply, there might be different rules that would be applied to you 

in those two different places, you would be subject to two different 

appeal systems. There is a lot of complexity in getting the subsidy, 

the low-income subsidy, and then on top of that we have the issue 

of choosing a plan and having the information you need to choose 

one plan over another and assure that that plan will be able, in 

fact, to meet your drug needs. 

So there is potential here to help low-income people who have no 

coverage. We have made it extremely difficult for them to do it, and 

for the dual eligibles, they will lose the wraparound. Whether or 

not the benefit is better or not better than what is in their state 

now, they will lose the wraparound benefit that is applicable to all 

other Medicare coverage for dual eligibles where Medicaid picks up, 

fills in the gaps of what Medicare does not pay, and that is not permitted under this law. So I think it is a mixed answer. 

The CHAIRMAN. OK. Patricia, you had mentioned and were suggesting some changes. At the same time, Gail has basically cautioned us in saying you better let CMS do its work before you start 

proposing changes and get it on the ground and get it running, and 

look at or you are going to be considerably further down the road 

before anybody receives benefits. 

Also, both of you have talked about dual wraparound, uniformity, 

benefits back to the states, I would like to have both of you discuss 

that a little bit, both the question of making changes now versus 

getting done what we have gotten done, if you will, get it on the 

ground and get it running, and also I watched this year, and the 

past several years, as states that became increasingly generous in 

their benefits in Medicaid having substantial withdrawal pains, if 

you will, because of a reduction in revenues based on the economy 

and shifts backwards. 

In other words, what was not an entitlement, it was simply 

added benefits pulled back, and the value of stabilizing that benefit, if you will, from a national standpoint, benefits to the states, 

and the understanding that I have, while some states may have 

been more generous, the value of a very small copay, if you will, 

or a very small payment on a prescription by a prescription basis 

to receive relatively uniformity in coverage. 

Discussion about both of those I think would be valuable to the 

committee in understanding it. Gail, let me start with you, we will 

go to you, Patricia, and see if we cannot gain from both of your 

knowledge in this area. 

Ms. WILENSKY. In the late 1990’s, states acted in ways that 

many of us would regard as positive but set themselves up for a 

lot of revenue obligations. They expanded the populations that they 

made Medicaid available to, they increased the benefits, and they 

increased the payments to providers, nothing that is bad in and of 

itself, but potentially much more costly than they had been exposed 

to. 

There was a sharp decline in revenue, as you know, for many 

states, and that has caused them to cut back, particularly in terms 

of payments to providers, sometimes to the benefits as well. It is 

unclear what will happen as the country is coming out of its recesVerDate 0ct 09 2002 11:39 Dec 21, 2004 Jkt 000000 PO 00000 Frm 00115 Fmt 6633 Sfmt 6633 H:\DOCS\96738.TXT SAGING1 PsN: JOYCE
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sion in terms of state revenues. We know what is happening at the 

national level, but whether that translates immediately to the 

states is less clear. 

I say that because it is important to understand that while the 

Federal Government is not going to share in whether states choose 

to offer additional benefits to their dual-eligible populations or 

other populations, states are permitted with their own money, of 

course, to augment benefits in any way that they see fit, and they 

will save money, although primarily not early on in the legislation 

over what they would have been spending without the passage of 

the Medicare Modernization Act, about 15 percent of what they 

would have spent. 

The other 85 percent comes back to the Federal Government 

through the maintenance of effort sometimes called the claw back 

provision. So precisely what will happen to individuals in some of 

the states will depend on how both the state responds and how the 

pharmacy assistance programs that exist in many of the states and 

how the manufacturers’ programs go on. 

But they will lose this wraparound largely, more than the majority, financed by the Federal Government in terms of adding on to 

what already has existed. So we will have to wait to see. 

Let me explain more carefully about why I feel so strongly about 

not modifying the legislation before the legislation has primarily 

rolled out which will mean the first or second quarter of 2006. People think that that means that CMS has until 2005, but they do 

not. If the information is going to be mailed out in October 2005, 

in order to get enrollment in November so that the benefit can 

start in January 2006, an enormous number of decisions have to 

be made by CMS and the Secretary. Rules have to be promulgated 

in time so that people can have comments come back and then respond to all of those. Many people in Congress do not understand 

the timeliness that that involves in order to have the decisions and 

then the rules put out and then the comments reacted to from 

those proposed rules. 

Both of you seem quite sympathetic with that problem, but let 

me give you some numbers to illustrate what happens if you come 

up with a very controversial regulation which could well happen at 

some point in implementing the Medicare Modernization Act. 

My two experiences with controversial regulations were the Clinical Lab Improvement Act, CLIA, which had 35 or 40,000 comments only to be outdone by the proposed rule for the relative 

value scale which produced 100,000 comments led largely by the 

nation’s physicians, but joined in by other groups as well. 

While the administrator does not have to respond to each comment specifically, all of the issues that are raised in comments 

need to be dealt with when the final decisions are made. That is 

why I feel so strongly that whatever errors are in this legislation 

and all of us would have written the legislation somewhat differently if we could have, I think it is important to allow the major 

parts of the legislation to roll out and then fix it. 

There will be clean-up legislation. There always is. I am sure it 

will be needed here, but the benefit is not going to happen if there 

is legislative change before the rollout. 

The CHAIRMAN. Patricia. 

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Ms. NEMORE. Senator, my organization did not support the Medicare Act of 2003 and I intentionally today, in preparing my comments, did not address the issue of changes in the law that we believe need to be made. 

The suggestions I made in my oral testimony, and there are more 

in the written testimony, are all suggestions that we believe can be 

done, that the Secretary and the Administrator have the authority 

to do under the law. 

The CHAIRMAN. Under the law. OK. 

Ms. NEMORE. We believe because this is such a needy population 

and such a hard to reach population and the law is so complex, 

that it is essential that those decisions always be exercised to the 

advantage of the beneficiary and to streamline and simplify the 

process wherever possible. 

The CHAIRMAN. OK. That is fair. 

Ms. NEMORE. So on the matter of the Medicaid issue, I would 

just like to make a couple of points. Medicaid does require that all 

medically necessary drugs be covered, be available in the state 

Medicaid program. That will not be true with any individual Part 

D plan. Part D plans can choose what to cover and what not to 

cover. It is true that states have limitations of one sort or another 

and many states do, but they need, they have to have an override 

process, so there is in virtually every state the opportunity to seek 

coverage of any medically necessary drug. 

But I think the real point is that there is no wraparound. It is 

not whether Medicaid was better than Medicare. In the dually eligible context—these are the neediest people we have in the entire 

population in terms of health care needs—there has always been 

the model that Medicare coverage is first and Medicaid fills in the 

gaps, and that has been a very important way for dual eligibles to 

get the complement of services they need because each program 

has its own gaps, and together they provide fairly substantial coverage. 

One other point on the Medicaid issue, Medicaid as Dr. Wilensky 

said, Medicaid is more generous or less generous depending on individual state budgets, but it is subject to the political process, and 

in the state of Connecticut where my program has its main office, 

Connecticut advocates and citizens were able to persuade the legislature to remove copayments this year, so they were able to exercise their advocacy in the political realm to shape the program to 

work best for beneficiaries. 

This will not be true with Part D. Each plan will create its own 

formulary, its own cost-sharing systems, and there will not be the 

opportunity for political advocacy toward any individual plan. 

But I think the issue of the wrap is really the most important 

thing for us to keep in mind, the wraparound benefit. 

Ms. WILENSKY. Senator Craig, may I add one more comment? 

The CHAIRMAN. Surely. 

Ms. WILENSKY. This is a very important issue and a number of 

points have been raised that I think are important particularly for 

this committee to understand. I do not disagree with some of the 

concerns raised outside of the prescription drug area in terms of 

the loss of a wraparound. But I think having Medicare and Medicaid as two separate programs was a bad way to have these extra 

114

benefits provided. The dual eligibles have long been regarded as 

not only being by far the most expensive population by virtue of 

their low-income and their medical needs, but not particularly well 

treated because these two programs did not integrate with themselves very well. 

To the extent that we think that the low-income assistance that 

is being provided to individuals on Medicare is not adequate for 

some of the Medicare low-income population because of their additional disabilities. It is important to augment the Medicare program and not have these two programs attempting to interact with 

each other. It has been an extremely expensive program that is not 

generally regarded as having functioned well. So while I appreciate 

that there may be some benefits that have fallen off, I think we 

will be far better off to try to augment them in a very selective 

basis for low income disabled Medicare beneficiaries than to think 

about the two programs lying on top of each other. That just is not 

a model we should try to replicate. 

The CHAIRMAN. I have taken way more than my time. Let me 

turn to my colleague, John Breaux. 

Senator BREAUX. Thank you very much. Ms. Nemore, I had supported the Medicare-Medicaid wraparound. But we did not have 

the votes to do that, and, of course, for my state of Louisiana, being 

in a Medicare program which was a guarantee and an entitlement 

is far superior to being in a Louisiana Medicaid program where you 

never know what you are going to get from year to year. 

It is already a program that is severely limited. I think they can 

only get six prescriptions filled and that is it. They never know 

whether it is going to be there the next year or not. So the concept 

of putting it all under the Medicare program was what we ultimately came up with, and I think Ms. Wilensky’s suggestion is we 

want to do more for seniors, we can increase it, which I am sure 

the pressure will be there to do. 

But there is nothing that prohibits states from using their own 

state money to continue to do a wraparound if the state is fortunate enough financially—maybe Connecticut would be one of those; 

Louisiana certainly is not—to be able to do it. If they think it is 

in their state’s interest and they can afford it and it is a proper 

use of funds, the state is not prohibited either under the discount 

card or under the Part D when it comes into effect to provide additional assistance. Does that not address some of your concerns? 

Ms. NEMORE. Senator, as you noted, your state of Louisiana 

would be hard-pressed to provide that kind of assistance because——

Senator BREAUX. No, no, they would not be hard-pressed. They 

would not do it, period. Hard-pressed is being generous. [Laughter.] 

Ms. NEMORE. It, as many states in the country that have substantial need, has a very high Federal match for Medicaid, so for 

those States to undertake this with their state dollars is very difficult. 

Senator BREAUX. I was on your side. I argued for it, but we just 

did not end up with it. Ms. Delgado, is your organization using all 

of these senior groups to help them and pointing seniors to senior 

centers and other type of organizations out there to help them educate the members? I mean this is a real tough problem. I think 

115

that if you are 65, and as I get closer to that number, I think I 

am going to be still smart and intelligent and can use my computer, but certainly my father’s generation does not even have a 

computer. I mean he would not know how to turn it on and would 

not want to learn, and it is very difficult for them to find where 

the information is on these new programs. 

I really think that these senior organizations can be particularly 

helpful in providing that type of information to seniors. I mean is 

that part of what you are attempting to do? 

Ms. DELGADO. Most definitely. But it is not just the senior 

groups. It is also the community health centers. 

Senator BREAUX. Sure. 

Ms. DELGADO. It is the Meals on Wheels people. 

Senator BREAUX. Good. 

Ms. DELGADO. It is everyone who may touch someone’s life or the 

life of a child who may have a parent that they can influence or 

help through the process. So really through ABC and through our 

own organization the Alliance, it is reaching out to people in whatever ways we can to get them the best information. 

I have to tell you that one of our earliest concerns was that people were concerned about the program because they kept being told 

it is confusing and complicated. 

Senator BREAUX. There were some who were intentionally arguing that point vociferously. 

Ms. DELGADO. Of course, but what we did is we took the people 

and told them, well, let us take a step back and see what you have 

to do, which is why we came out with a workbook for people to use, 

and once they worked through that workbook, they see, well, this 

is just listing all my medicines, this is knowing if my pharmacy accepts this card, this is calling this number, so it is making it simpler. 

You know government programs are not known for their simplicity. But at the same time, the access to the low-income senior 

that this provides for their medicine is stupendous. 

Senator BREAUX. I like what Dr. McClellan said when he talked 

about the 1–800–MEDICARE number that seniors or anyone could 

on behalf of a senior dial up and say, ‘‘Here is what I am taking, 

here are my five prescriptions or even more.’’ Then say which card 

best fits what my needs are. Have you all ever taken a look at 

that? I mean is that something that is working, has the potential 

to work better, can you give me some kind of a feeling from the 

user’s side? 

Ms. DELGADO. Actually when the program first started, we had 

regular contact with CMS asking them to make things simpler, 

some of the Spanish language. At ABC, we have our own web site 

that we started. It gives a lot of information, also works seniors 

through it. We also give them access to another web site that really 

gets seniors involved in any senior program that they are eligible 

for. So it’s really giving people tools. We have worked with CMS 

to get them to train local community-based groups on what they 

need to know and do. 

So, yes, it is working, but I have to say this is an—and I have 

been in Washington 25 years working with DHHS all this time—

and the CMS staff are working with the community-based organiVerDate 0ct 09 2002 11:39 Dec 21, 2004 Jkt 000000 PO 00000 Frm 00119 Fmt 6633 Sfmt 6633 H:\DOCS\96738.TXT SAGING1 PsN: JOYCE
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zations, and that is a new relationship. Sure, it has its bumps, but 

I think they are moving in the right direction. 

Senator BREAUX. Thank you. Dr. Thames, there is no means testing for the drug program. 

Dr. THAMES. Correct, sir. You mean the assets? 

Senator BREAUX. I mean means test, assets test. I mean you are 

eligible for the discount card. You are eligible after 2006 for the 

Medicare insurance program that will cover prescription drugs 

whether you are making $25,000 of income or whether you are clipping coupons fortunately for $3 million a year. So there is no 

means test there. 

There is a means test for the first time for Part B for medical 

services. I guess that is what AARP is objecting to? 

Dr. THAMES. Well, what we are concerned about is the Congressional Budget Office says that there will be 15.2 million people who 

are below 150 percent of the poverty level in 2006. Of that number, 

13.4 million of those people will be eligible for Part D. That 1.8 million of those people because they have assets will not be eligible 

under Part D. Is that incorrect? 

Ms. NEMORE. For the low-income subsidy. 

Senator BREAUX. I do not think that is correct. 

Ms. NEMORE. Would not be eligible for the low-income subsidy. 

Senator BREAUX. Oh, yeah, sure, for the low-income assistance, 

yeah. 

Dr. THAMES. For the low-income. 

Senator BREAUX. Are you objecting to——

Dr. THAMES. We feel that these people are low-income people and 

that it is wrong with their low incomes to deny them a needed subsidy because they have managed to put aside a small amount of 

savings for their retirement, which was what we were trying to encourage our people to do. 

Senator BREAUX. OK. So AARP’s objection is to the asset test? 

Dr. THAMES. Yes, sir, the asset test. I am sorry if I did not make 

that clear. 

Senator BREAUX. To become eligible for the subsidy? 

Dr. THAMES. Yes, sir, that is our problem because we feel that 

it is wrong to penalize these people with very low incomes who 

have worked hard and put aside money that we encouraged them 

to do for their own retirement and then those assets, particularly 

at such a low level of assets, for them not to be eligible then for 

the low-income provisions. 

Senator BREAUX. You would not argue against any asset test or 

would you? 

Dr. THAMES. Well, we have said we are against the asset testing, 

but we have also said if we are going to have asset testing, we 

think the present levels are too low, Senator. That is in our own 

discussions. 

Senator BREAUX. OK. Thank you, Doctor. Ms. Wilensky, I guess 

what you are saying, ‘‘If it ain’t broke, don’t fix it yet’’? 

Ms. WILENSKY. Well, even if you think it is not working as well 

as you would like it, hold off, let it start, we will discover problems 

for sure, fix it after it starts. 

Senator BREAUX. Yeah, I think that anything as monumental as 

this bill is to start trying to change it 2 months after it is impleVerDate 0ct 09 2002 11:39 Dec 21, 2004 Jkt 000000 PO 00000 Frm 00120 Fmt 6633 Sfmt 6633 H:\DOCS\96738.TXT SAGING1 PsN: JOYCE
117

mented is something we do not have the capacity to do nor should 

we. Let us see how it is going to work, give it some time. Obviously, it was written by humans. It is not perfect, and as always, 

there will be opportunities to improve upon it, but do not try and 

do it before the ink is dry on the program. Let us get it set up. It 

is not completely implemented yet; we have made great progress. 

If you get four million people, I guess, Mr. Chairman, enrolled in 

the drug discount card after only a couple of months, that really 

is very significant, and I think it is going to improve, and it is 

going to get better with people like yourselves helping people to understand it. 

So I think all of you have been helpful and provided some good 

information and thoughts and we thank you for it. Thank you. 

The CHAIRMAN. John, thank you very much. This will be my last 

question of the panel. I think it goes without saying that assistance 

in paying for drug benefits helps low-income seniors economically. 

We do not really argue that. But what effect do you expect greater 

access to drugs to have to the health status of seniors in low-income populations, especially considering that serious health problems are often more prevalent among low-income seniors. 

Dr. Delgado, I am especially interested in hearing from you in regard to your experience with the health status and the needs, let 

us say, of the Hispanic community. We are interested in helping 

people stay healthy or get healthier, and we now know, of course, 

that prescription drugs is the same argument but in a different 

context that we made 30-plus years ago as it related to access to 

hospitals. Would you respond to that and then any of you who wish 

to do follow-up on your own comments in relation to health versus 

economics? We think clearly we are helping them economically. Are 

we helping them from a health status? Yes. 

Ms. DELGADO. Let me just make three points. First, in terms of 

health, the fact that people will now be able to take their medicines, for example, for diabetes means they will not have to wait 

to go to the hospital to have an amputation, that they will be able 

to have better health. 

The second thing is that as part of the change in the mind-set 

of CMS, the ‘‘Welcome to Medicare’’ physical starts talking about 

health promotion, disease prevention, very important for people’s 

health because before people only went when they were sick to use 

their benefits. Now, there is an opportunity to say these are the 

things that you can do to prevent illness and to prevent the consequences of illness. 

The third thing is that people need to have access to the full 

range of medicines. We know, for example, that for Hispanics, for 

Mexicans in particular, there is data showing that the absorption 

rates of some medicines are three times the amount than it is for 

non-Hispanics, meaning people would take their medicines and become ill, and they would go to their doctor, I do not want my medicine, the doctor would say,‘‘Oh, my patient is non-compliant’’, but 

really it was not the right thing. By having a system that will 

cover both generics and brands, we let the physician and the patient decide which is the best medicine for that patient to live a 

better life. 

118

So it improves the economics, but the health of the person is critical. That means a person can stay home and live the kind of life 

that we want all our seniors to have. 

The CHAIRMAN. Patricia. 

Ms. NEMORE. To the extent that the drug plans are able to actually, are covering the drugs that any individual needs, the low-income assistance provided by this legislation will allow people to not 

have to choose between taking medicine or buying food. That is 

often a choice that is made by people living on very limited incomes 

and this benefit can provide some relief for that. We are very concerned about the formulary rules and what can or cannot be covered. The plans have enormous discretion in designing their 

formularies and may, in fact, not cover a number of drugs. Even 

if a person found a plan that covered some of their drugs, it might 

not cover all of their drugs. So there may well be gaps that would 

still require people to be paying large amounts of money for their 

drug coverage. 

But to the extent that people do not have to choose between food 

and medicine, that would be a good thing. 

The CHAIRMAN. So you can conclude from this also that in the 

general sense, fully implemented, while you dislike certain portions 

of it and would have done it differently, it should in the end 

produce a healthier senior population? 

Ms. NEMORE. If we have formularies that allow people to get access to the drugs they need, yes. 

The CHAIRMAN. OK. Dr. Thames. 

Dr. THAMES. As a family physician who practiced for over 40 

years, I am very much impressed with a number of things about 

the bill, and I will just mention again the physical examination you 

can get, the fact that we are going to have chronic disease management, we are going to be able to discover disease sooner and treatment is going to be more cost-effective. We are going to be able to 

keep more people out of the emergency rooms where costs go up, 

but we are also going to pay for comparable studies for efficacy of 

drugs, so we are going to decide in the same class of drugs which 

ones are the most cost-effective to do the same job, and that should 

make it a benefit, and poor people who have been unable to get the 

drugs that they need should be able to get not only the drug they 

need, but we are going to have scientific studies to determine what 

is the most cost-effective drug that they need for their diabetes or 

their cardiovascular disease. 

So I definitely feel that it would be very beneficial to those folks 

to identify their disease problems earlier and give them medications that keep them out of the emergency rooms and hospitals and 

begin to improve their life expectancy to come closer to what it is 

for more middle income Americans, where it is markedly below 

that now. 

Ms. WILENSKY. Dr. Thames mentioned a number of points that 

is important for the aging community in particular to be mindful 

of, that in this bill, it is primarily a prescription drug bill. But 

there are a number of very important other provisions like the 

studies for chronic care, which is dominating the ill health of Americans, like the disease management focus, the important preventive 

health care benefits that were included, and that when you think 

119

about how anachronistic Medicare has been, up until the passage 

of this bill, focusing on inpatient drug coverage and physician and 

hospital, home care and nursing care, but excluding outpatient 

drug coverage, something that is hard to imagine any other type 

of insurance plan doing for the last 15 years, this bill really moves 

forward in terms of allowing people to have better health because 

they have fuller health care coverage and because we are pushing 

forward on trying to organize how that care can be provided for 

chronic care and disease management purposes. 

The CHAIRMAN. Well, as each one of you have said, you would 

have done it a bit differently. I think that is probably true of 100 

senators and 435 House members. The reality is we did tackle a 

very large problem and try to resolve it. 

Now, of course, the detail of it being brought through regulation 

is critical and that is why we are here today, and that is why we 

will probably ask you or your colleagues to be back again and again 

as we watch in progress this effort taking shape. I do agree that 

I think we should be tremendously cautious as public policy people 

about suggesting changes before the fact. 

If it is clear within the context of the law, as Patricia has pointed 

out, maybe that is a nudging of CMS in the right direction or in 

a slightly different direction than they may be taking, but I think 

Congress will be cautious in that. We are very anxious to see it on 

the ground in a timely fashion so that seniors can begin to receive 

the benefits as was directed by this, as has been directed by this 

legislation. 

So we thank you for your presence today and your diligence. As 

I say, we will have you back again. I think it is important that we 

build a record, a record that CMS can look at knowing that we are 

watching them closely, as we move toward full implementation of 

what is in my opinion landmark legislation. We thank you all for 

your time here today. The committee will stand adjourned. 

[Whereupon, at 3:58 p.m., the committee was adjourned.] 

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