United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Health, 

Committee on Ways and Means, House of 

Representatives

MEDICARE PART D 

CMS’s Process and Policy 

for Enrolling New DualEligible Beneficiaries 

Statement of Kathleen M. King 

Director, Health Care 

For Release on Delivery

Expected at 2:00 p.m. EDT

Thursday, June 21, 2007

 

GAO-07-1022T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 21, 2007

MEDICARE PART D

CMS’s Process and Policy for Enrolling 

Highlights of GAO-07-1022T, a testimony New Dual-Eligible Beneficiaries 

before the Subcommittee on Health, 

Committee on Ways and Means, House of 

Representatives 

Under the Medicare Prescription

Drug, Improvement, and

Modernization Act of 2003 (MMA), 

dual-eligible beneficiaries—

individuals with both Medicare and

Medicaid coverage—have their 

drug costs covered under Medicare

Part D rather than under state 

Medicaid programs. The MMA 

requires the Centers for Medicare

& Medicaid Services (CMS) to

enroll these beneficiaries in a 

Medicare prescription drug plan

(PDP) if they do not select a plan 

on their own. CMS enrolled about 

5.5 million dual-eligible

beneficiaries in late 2005 and about 

634,000 who became dually eligible

during 2006. 

GAO was asked to testify on

(1) CMS’s process for enrolling

new dual-eligible beneficiaries into 

PDPs and its effect on access to 

drugs and (2) how CMS set the 

effective coverage date for certain 

dual-eligible beneficiaries and its 

implementation of this policy. 

This testimony is based on the 

GAO report, Medicare Part D: 

Challenges in Enrolling New 

Dual-Eligible Beneficiaries 

(GAO-07-272).

What GAO Recommends

GAO’s report contains several

recommendations, including that 

CMS require PDPs to modify 

beneficiary notices and that CMS

monitor the implementation of its 

payment policy. CMS did not agree 

with all of the recommendations,

but it has taken steps to implement 

some. 

CMS’s process for enrolling new dual-eligible beneficiaries who have not yet 

signed up for a PDP involves many parties, information systems, and 

administrative steps, and takes a minimum of 5 weeks to complete. For 

about two-thirds of these individuals—generally Medicare beneficiaries who 

subsequently qualify for Medicaid—pharmacies may not have up-to-date 

PDP enrollment information needed to bill PDPs appropriately until the 

beneficiaries’ data are completely processed. As a result, these beneficiaries

may have difficulty obtaining their Part D-covered prescription drugs during 

this interval. CMS has created contingency measures to help individuals 

obtain their new Medicare benefit, but these measures have not always 

worked effectively. For the other one-third of new dual-eligible 

beneficiaries—Medicaid enrollees who become Medicare-eligible because of 

age or disability—CMS eliminated the impact of processing time by enrolling 

them in PDPs just prior to their attaining Medicare eligibility. This 

prospective enrollment, implemented in late 2006, offers these dual-eligible 

beneficiaries a seamless transition to Medicare Part D coverage.

CMS set the effective Part D coverage date for Medicare eligible

beneficiaries who subsequently become eligible for Medicaid to coincide 

with the date their Medicaid coverage becomes effective. Under this policy, 

which was designed to provide drug coverage for dual-eligible beneficiaries 

as soon as they attain dual-eligible status, the start of the Part D coverage 

can extend retroactively for several months before the date beneficiaries are 

notified of their PDP enrollment. GAO found that CMS did not fully 

implement or monitor the impact of this policy. Although beneficiaries are 

entitled to reimbursement for covered drug costs incurred during this 

retroactive period, CMS did not begin informing them of this right until 

March 2007. Given their vulnerability, it is unlikely that these beneficiaries 

would have sought reimbursement or retained proof of their drug purchases

if they were not informed for their right to do so. Also, CMS made monthly 

payments to PDPs for providing drug coverage during retroactive periods, 

but did not monitor PDPs’ reimbursements to beneficiaries during that 

period. GAO estimated that in 2006, Medicare paid PDPs millions of dollars 

for coverage during periods for which dual-eligible beneficiaries may not 

have sought reimbursement for their drugs. 

www.gao.gov/cgi-bin/getrpt?GAO-07-1022T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Kathleen M. 

King at (202) 512-7114 or kingk@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today as you discuss the Medicare Part D 

prescription drug benefit. Implementation of this new drug benefit has 

raised particular concerns for individuals eligible for both Medicare and

full Medicaid benefits—known as dual-eligible beneficiaries.1

 These 

individuals account for about 15 percent of all Medicare beneficiaries and 

15 percent of all Medicaid enrollees. As a group, they are generally poorer 

and tend to have more extensive health care needs than other Medicare 

beneficiaries. Under the Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA),2

 dual-eligible beneficiaries—who 

previously received drug benefits under Medicaid—have had their 

prescription drug costs paid under Medicare Part D since January 1, 2006. 

In addition, the MMA requires the Centers for Medicare & Medicaid 

Services (CMS)3

 to assist dual-eligible beneficiaries by enrolling them in a 

private Medicare prescription drug plan (PDP) if they do not select a plan

on their own. CMS enrolled about 5.5 million dual-eligible beneficiaries in 

late 2005 for the initial implementation of Part D and about 634,000 

beneficiaries who became dual-eligible during 2006. 

My testimony today will summarize selected findings from the previously 

released GAO report, Medicare Part D: Challenges in Enrolling New 

Dual-Eligible Beneficiaries.

4

 Specifically, my remarks today will focus on 

(1) CMS’s process for enrolling new dual-eligible beneficiaries into PDPs 

and its effect on beneficiary access to drugs and (2) how CMS set the 

effective Part D coverage date for certain dual-eligible beneficiaries and its 

implementation of this policy. 

 1

We use the term dual-eligible beneficiaries to refer to individuals who qualify for a state’s 

full package of Medicaid benefits. 

2

MMA, Pub. L. No. 108-173, tit. I, § 101, et seq., 117 stat. 2066, 2071-2152 (2003) (to be

codified at 42 U.S.C. § 1395w-101, et seq. and 42 U.S.C. § 1396u-5). 

3

CMS is the agency that administers the Medicare program on behalf of the Secretary of 

Health and Human Services. 

4

GAO, Medicare Part D: Challenges in Enrolling New Dual-Eligible Beneficiaries, 

GAO-07-272 (Washington, D.C.: May 4, 2007). 

Page 1 GAO-07-1022T 
To address these issues, we conducted site visits in six states—California, 

Maine, Maryland, Michigan, New Jersey, and Texas—to learn about dualeligible beneficiaries’ enrollment in Part D from the perspective of state 

Medicaid agencies, pharmacies, and long-term care providers. We also 

interviewed officials from CMS and representatives of PDPs about issues 

that pertain to dual-eligible beneficiaries. We conducted the work for our 

report from March 2006 through April 2007 in accordance with generally

accepted government auditing standards. 

In summary, we found that CMS’s process for enrolling new dual-eligible

beneficiaries involves many parties, information systems, and 

administrative steps, and takes a minimum of 5 weeks to complete. For the 

majority of these individuals—generally Medicare beneficiaries not yet 

enrolled in Part D who subsequently qualify for Medicaid—this processing 

interval can create difficulties in obtaining Part D-covered drugs at their 

pharmacies. For other new dual-eligible beneficiaries—Medicaid enrollees 

who become Medicare eligible because of age or disability—CMS took 

steps to eliminate the impact of the processing interval by enrolling them 

in PDPs just prior to their attaining Medicare eligibility. In addition, for the 

Medicare first, Medicaid second group of new dual-eligible beneficiaries, 

CMS set the effective date of Part D coverage to coincide with the first 

date of their Medicaid eligibility. Under this policy, which was designed to

provide drug coverage for dual-eligible beneficiaries as soon as they attain 

dual-eligible status, the start of their Part D coverage can be retroactively 

set to several months before the date of their actual PDP enrollment. We 

found that CMS did not fully implement or monitor the impact of this 

coverage date policy. Although beneficiaries are entitled to reimbursement 

for covered drug costs incurred during this retroactive period, CMS and 

PDPs did not begin informing them of this right until March 2007. Also, 

CMS did not track Medicare payments made to PDPs to provide 

retroactive coverage or monitor PDPs’ reimbursements to beneficiaries for 

that period. We estimate that in 2006, Medicare paid PDPs about 

$100 million for coverage during periods for which dual-eligible 

beneficiaries may not have sought reimbursement for their drug costs. In 

the report, we recommend that CMS require PDPs to notify beneficiaries 

about their right to reimbursement, monitor implementation of its 

retroactive payment policy, and take other steps to improve the 

operational efficiency of the program. 

Page 2 GAO-07-1022T 
Dual-eligible beneficiaries are a particularly vulnerable population. These 

individuals are typically poorer, tend to have far more extensive health 

care needs, have higher rates of cognitive impairments, and are more 

likely to be disabled than other Medicare beneficiaries. About three out of

four dual-eligible beneficiaries live in the community and typically obtain

drugs through retail pharmacies. Other dual-eligible beneficiaries reside in 

long-term care facilities and obtain drugs through pharmacies that 

specifically serve these facilities. 

Background 

In general, individuals become dual-eligible beneficiaries in two ways. One 

way is when Medicare-eligible individuals subsequently become Medicaid 

eligible. This typically occurs when income and resources of beneficiaries 

fall below certain levels and they enroll in the Supplemental Security 

Income (SSI) program,5

 or they incur medical costs that reduce their 

income below Medicaid eligibility thresholds. If these Medicare 

beneficiaries did not sign up for a Part D plan on their own, they have no 

drug coverage until they are enrolled in a PDP by CMS. CMS data show 

that this group represented about two-thirds of new dual-eligible 

beneficiaries the agency enrolled in PDPs in 2006. According to CMS, it is 

not possible for it to predict which Medicare beneficiaries will become 

Medicaid eligible in any given month because Medicaid eligibility 

determinations are a state function.

Another way individuals become dually eligible is when Medicaid 

beneficiaries subsequently become eligible for Medicare by reaching 

65 years of age or by completing the 24-month disability waiting period.6

Once they become dual-eligible beneficiaries, they can no longer receive 

coverage from state Medicaid agencies for their Part D-covered 

prescription drugs. In 2006, this group represented approximately onethird of the new dual-eligible beneficiaries enrolled in PDPs by CMS. CMS 

can generally learn from states when these individuals will become dually 

eligible. 

 5

In most states, beneficiaries who qualify for cash assistance from SSI—a cash assistance 

program for aged, blind, and disabled individuals with limited income and resources—

automatically qualify for full Medicaid benefits. 

6

Under Social Security Disability Insurance (DI), which assists people who worked but 

became disabled before their retirement age, individuals are eligible for Medicare coverage

after they have received DI cash benefits for 24 months. 

Page 3 GAO-07-1022T 
For dual-eligible beneficiaries, Medicare provides a low-income subsidy 

that covers most of their out-of-pocket costs for Part D drug coverage. 

This subsidy covers the full amount of the monthly premium that nonsubsidy-eligible beneficiaries normally pay, up to the low-income 

benchmark premium.7

 The subsidy also covers most or all of a dual-eligible 

beneficiary’s prescription copayments. In 2007, these beneficiaries are 

responsible for copayments that range from $1 to $5.35 per prescription, 

depending on their income and asset levels, with the exception of those in

long-term care facilities, who pay no copayments. 

Given the number of entities, information systems, and administrative 

steps involved, it takes a minimum of 5 weeks for CMS to identify and 

enroll a new dual-eligible beneficiary in a PDP. As a result, two out of 

three new dual-eligible beneficiaries—generally those who are Medicare 

eligible and then become Medicaid eligible—may experience difficulties 

obtaining their prescription drugs under Part D during this interval. For 

other new dual-eligible beneficiaries—those switching from Medicaid to 

Medicare drug coverage—CMS instituted a prospective enrollment 

process in late 2006 that enrolls these individuals before their date of 

Medicare eligibility and offers a seamless transition to Part D coverage. 

CMS’s Enrollment 

Process Takes Time 

and Can Create 

Difficulties for Some 

Dual-Eligible 

Beneficiaries 

Multiple parties and information systems are involved in identifying and

enrolling dual-eligible beneficiaries in PDPs. As shown in figure 1, CMS, 

the Social Security Administration (SSA), state Medicaid agencies, and 

PDP sponsors play key roles in providing information needed to ensure 

that new dual-eligible beneficiaries are identified and enrolled properly. 

SSA maintains information on Medicare eligibility that is used by CMS and 

some states. State Medicaid agencies are responsible for forwarding to 

CMS lists of beneficiaries whom the state believes to be eligible for both 

Medicare and Medicaid. CMS is then responsible for making plan 

assignments and processing enrollments. PDP sponsors maintain 

information systems that are responsible for exchanging enrollment and 

billing information with CMS. 

 7

The low-income benchmark is the average monthly beneficiary premium for all PDPs in a 

region, weighted by each plan’s enrollment. 

Page 4 GAO-07-1022T 
Figure 1: Overview of the Major Systems and Steps Used to Enroll Dual-Eligible 

Beneficiaries in PDPs 

Source: GAO.

1

6

3

4

5

Medicare 

eligibility 

database

CMS

7

Drug plan

sponsor

systems

CMS’s enrollment 

transaction 

system

State

Medicaid

systems

SSA

Pharmacy

systems

CMS’s

eligibility

query

Drug plan sponsor mails out 

ID cards and PDP information 

to the enrolled beneficiary.

1

1 2

Notes: CMS adapted existing information systems used in the administration of other parts of the

Medicare program to perform specific functions required under Part D. The Medicare eligibility 

database serves as a repository for Medicare beneficiary entitlement, eligibility, and demographic 

data. The database is used by CMS to provide up-to-date information to verify the status of dualeligible beneficiaries, as well as determine subsidy status and make assignments to PDPs. The 

enrollment transaction system is used to enroll beneficiaries in PDPs. The eligibility query is used by 

pharmacies to obtain Part D enrollment information from the Medicare eligibility database. 

Page 5 GAO-07-1022T 
The process of enrolling dual-eligible beneficiaries requires several steps. 

It begins when state Medicaid agencies identify new dual-eligible 

beneficiaries and ends when PDPs make billing information available to 

pharmacies and send enrollment information to dual-eligible beneficiaries. 

We estimate that it takes at least 5 weeks to complete the process under 

current procedures. During this interval, pharmacies may not have 

up-to-date PDP enrollment information on new dual-eligible individuals. 

This may result in beneficiaries having difficulty obtaining Part D-covered 

drugs at their pharmacies. To illustrate why this occurs, we present the 

hypothetical example of Mr. Smith, who as a Medicare beneficiary did not 

sign up for the Part D drug benefit and, therefore, upon becoming 

Medicaid eligible, was enrolled in a PDP by CMS. (Fig. 2 shows the steps in 

Mr. Smith’s enrollment process.) 

Page 6 GAO-07-1022T 
Figure 2: Mr. Smith, a Hypothetical Example of the Enrollment Process for a Newly Identified Dual-Eligible Beneficiary Who 

Was Medicare Eligible but without Previous Part D Coverage 

Source: GAO.

Range of dates action could occur

Date that action occurred for Mr. Smith

August 11: Mr. Smith, who is on Medicare but not enrolled 

in a Part D plan, submits his Medicaid application to the state.

September 11: Mr. Smith is notified that he is eligible 

for Medicaid back to May 1, 2006.a

September 15: State submits Mr. Smith’s information 

on its dual-eligible file for September and includes

retroactive records for May, June, July, and August.b

September 16: CMS matches the state-submitted 

information on Mr. Smith against the data in the Medicare 

eligibility database and sends a response file to the state 

confirming Mr. Smith’s dual-eligibility status.

October 2: CMS determines that Mr. Smith is eligible for

the low-income subsidy and sets his copayment level.

October 8: CMS assigns all newly identified dual-eligible 

beneficiaries to a PDP if they are not already enrolled. 

Mr. Smith is randomly assigned to a PDP sponsored by 

ABC Corp.

October 9: The Medicare eligibility database sends a file 

with all of the new PDP assignments, including Mr. Smith’s, 

to the enrollment transaction system for processing.

October 14: The enrollment transaction system notifies

ABC Corp. of Mr. Smith’s assignment in their PDP via

the weekly enrollment update report. The report includes

information on Mr. Smith’s subsidy level and that his

coverage is effective back to May 1, 2006. Also, 

plan assignment information is available through the 

eligibility query.

October 15: ABC Corp. sends the billing information 

for Mr. Smith to the Medicare eligibility database.

October 15: ABC Corp. sends an enrollment letter 

to Mr. Smith.

October 16: The Medicare eligibility database updates its

enrollment information with Mr. Smith’s billing information 

and pharmacists can now access Mr. Smith’s billing 

information through an eligibility query. 

1

3

4

5

6

7

8

9

17

142128354249566370

Time between 

notification of 

Medicaid eligibility 

and when 

pharmacy can 

access billing 

information

2

August 11

August 18

August 25

September 1September 8

September 15September 22September 29

October 20

October 6

October 13

1

2

3

4

5

6

7

8

9

10

11

All grey bars indicate 

range of dates 

action could 

occur

11

Mr. SMITH #34012704

Effective: 5/1/06

10

elapsed day

Notes: The dates presented in this example of enrollment for Mr. Smith generally represent the bestcase scenario. The range of dates represent the minimum and maximum length of elapsed time 

allowed for processing and notification, based on information provided by CMS. GAO makes no 

assurances that the events described would occur on the dates provided for any specific dual-eligible 

beneficiary. 

Page 7 GAO-07-1022T 
a

The scenario presented reflects an application to Medicaid based on a reason other than disability.

State Medicaid agencies have 45 days to make eligibility determinations not based on disability and 

90 days for eligibility determinations based on disability, subject to extensions in certain 

circumstances. 

b

If the state Medicaid agency did not determine that Mr. Smith was eligible for Medicaid before it 

submitted its September dual-eligible file, his information could not be submitted until October. This 

scenario is not presented in this figure. 

From the time Mr. Smith applies for his state’s Medicaid program on 

August 11, it takes about 1 month for him to receive notification from the 

state that he is eligible for Medicaid, thus beginning the enrollment 

process. From there, Mr. Smith’s new status is submitted by his state to 

CMS in a monthly file transmittal. Once CMS receives the lists of dualeligible beneficiaries from all of the states, it verifies eligibility for 

Medicare and sets each beneficiary’s cost-sharing level. Then, around 

October 8, CMS assigns Mr. Smith to a PDP randomly, based on the 

premium level and the geographic area served by the PDP.8

 CMS next 

notifies the PDP sponsor, which then has to enroll him in its plan and

assign the necessary billing information. This billing information, such as a 

member identification number, is necessary for pharmacies to correctly 

bill the PDP for Mr. Smith’s prescriptions. The PDP also has to inform 

Mr. Smith of his enrollment information. By the time this process is 

completed, it is the middle of October. 

CMS has developed some contingency measures to help individuals like 

Mr. Smith during the processing interval. However, we found that these 

measures have not always worked effectively. For instance, CMS designed 

an enrollment contingency option to ensure that dual-eligible beneficiaries 

who were not yet enrolled in a PDP could get their medications covered 

under Part D, while also providing assurance that the pharmacy would be

reimbursed for those medications. However, representatives of pharmacy

associations we spoke with reported problems with reimbursements after 

using this option, which has led some pharmacies to stop using it. 

 8

Some states have assisted dual-eligible beneficiaries by using other methods to select a

PDP for enrollment, including methods that also consider drug utilization information. For 

example, the State of Maine used beneficiary-specific data to reassign nearly half of the

state’s dual-eligible beneficiaries to PDPs that covered more of their prescriptions. After 

reassignment, the number of beneficiaries whose PDP covered nearly all of their 

prescription drugs increased significantly. 

Page 8 GAO-07-1022T 
To avoid a gap in coverage for beneficiaries transitioning from Medicaid to 

Medicare prescription drug coverage, CMS has implemented a prospective 

enrollment process. Because states can predict and notify CMS which 

Medicaid beneficiaries will become new dual-eligible beneficiaries and 

when, CMS begins the enrollment process for these individuals 2 months 

before the their anticipated dual-eligible status is attained. By conducting

the processing steps early, the prospective enrollment used for this group 

of new dual-eligible beneficiaries should ensure a seamless transition from 

Medicaid drug coverage to Medicare Part D coverage. Fully implemented 

in November 2006, prospective enrollment applies to about one-third of 

the new dual-eligible beneficiaries enrolled in PDPs by CMS.

For the majority of new dual-eligible beneficiaries, CMS requires PDPs to 

provide drug coverage retroactively, typically by several months. During 

2006, Medicare paid PDPs millions of dollars to provide coverage to dualeligible beneficiaries for drug costs that may have been incurred during 

the retroactive coverage period. However, we found that CMS did not fully

implement or monitor the impact of this policy. 

CMS made the effective date of Part D drug coverage for Medicare 

beneficiaries who become Medicaid eligible coincide with the effective 

date of their Medicaid eligibility. Under this policy, Part D coverage for 

these beneficiaries is effective the first day of the month that Medicaid 

eligibility is effective, which generally occurs 3 months prior to the date an 

individual’s Medicaid application was submitted to the state, if the 

individual was eligible for Medicaid during this time. Thus, the Part D 

coverage period can extend retroactively back several months from when 

the actual PDP enrollment takes place. 

CMS Made Drug 

Coverage Retroactive, 

but Did Not Inform 

Beneficiaries of Their 

Right to 

Reimbursement 

Medicare makes payments to the PDPs for providing drug coverage

retroactively. Specifically, PDPs are paid approximately $90 per month for 

the retroactive coverage period.9

 PDPs, in turn, are responsible for 

reimbursing their members (or another payer) for Part D drug costs 

incurred during the retroactive months. For instance, in the case of 

Mr. Smith, while he applied for Medicaid in August and learned of his PDP 

assignment for Part D in October, his coverage was effective May 1. If 

 9

The $90 per month includes the direct subsidy Medicare pays PDPs for providing the

Medicare drug benefit to any Medicare beneficiary and the low-income premium subsidy 

CMS pays PDPs to cover the cost of premiums dual-eligible beneficiaries would pay if they

were not receiving the low-income subsidy. 

Page 9 GAO-07-1022T 
Mr. Smith incurred any costs for Part D-covered prescription drugs from 

May—when he became eligible for Medicaid—through October, he could 

submit his receipts to his assigned PDP and be reimbursed by the PDP, 

less the copayments he would pay as a dual-eligible beneficiary. 

We found that CMS’s implementation of this policy in 2006 was 

incomplete. While dual-eligible beneficiaries were entitled to

reimbursement by their PDPs in 2006, neither CMS nor PDPs notified dualeligible beneficiaries of this right. The model letters used until March 2007 

to inform dual-eligible beneficiaries of their PDP enrollment did not 

include any language concerning reimbursement of out-of-pocket costs 

incurred during retroactive coverage periods. In response to a 

recommendation in our report, CMS modified the model letters that the 

agency and PDPs use to notify dual-eligible beneficiaries about their PDP 

enrollment. The revised letters let beneficiaries know that they may be 

eligible for reimbursement of some prescription costs incurred during 

retroactive coverage periods. 

Given the vulnerability of this population, it seems unlikely that many 

dual-eligible beneficiaries would have contacted their PDPs for 

reimbursement if they were not clearly informed of their right to do so and 

given information about how to file for reimbursement, neither would they 

likely have retained proof of their drug expenditures. Mr. Smith, for 

example, would need receipts for drug purchases made during a 5-month 

period preceding the date he was notified of his PDP enrollment—at a 

time when he could not foresee the need for doing so. 

Further, CMS did not monitor how many months of retroactive coverage 

PDPs provided, nor did it monitor PDP reimbursements to beneficiaries 

for costs incurred during retroactive coverage periods. Based on data 

provided by CMS, we estimate that Medicare paid about $100 million to 

PDP sponsors in 2006 for retroactive coverage. CMS does not know what 

portion of this $100 million PDPs paid to dual-eligible beneficiaries to 

reimburse them for drug costs. If Mr. Smith’s PDP did not reimburse 

Mr. Smith for any prescription drugs purchased during the retroactive 

coverage period, the PDP retained Medicare’s payments for that period. 

Given the time it takes to complete the enrollment process, CMS has taken 

action to ensure ready access to Part D for some new dual-eligible 

beneficiaries, but difficulties remain for others. For the one-third of new 

dual-eligible beneficiaries whose eligibility can be predicted, CMS’s 

decision to implement prospective enrollment should eliminate the 

Conclusions 

Page 10 GAO-07-1022T 
coverage gap in transitioning from Medicaid to Medicare drug coverage. 

However, because of inherent processing lags, most new dual-eligible 

beneficiaries may continue to experience difficulties obtaining their drugs

for at least 5 weeks after being notified of their dual-eligible status. In 

addition, CMS’s incomplete implementation of its retroactive coverage

policy in 2006 means that CMS paid PDPs millions of dollars for coverage 

during periods for which dual-eligible beneficiaries may not have sought 

reimbursement for their drug costs. Without routine monitoring of this 

policy, the agency remains unaware of what portion of these funds was 

subsequently reimbursed to beneficiaries and, therefore, cannot ensure 

the efficient use of program funds. 

Our report contains several recommendations. We recommend that CMS 

require PDPs to notify beneficiaries of their right to reimbursement and 

monitor implementation of its retroactive payment policy. We also 

recommend that CMS take other steps to improve the operational 

efficiency of the program. Although the agency did not agree with all of 

them, it has already taken steps to implement some of our 

recommendations. As of March 2007, CMS has modified its letters to dualeligible beneficiaries to include language informing them of their right to 

reimbursement for drug costs incurred during retroactive coverage

periods and required PDP sponsors to do the same. In addition, CMS 

officials told us that they plan to analyze data to determine the magnitude 

of payments made to PDPs for retroactive coverage and the amounts PDPs

have paid to beneficiaries. We hope that CMS will use this information to 

evaluate the effectiveness of its retroactive coverage policy. If, after 

conducting the analysis, CMS determines that it is paying PDPs substantial 

amounts of money and dual-eligible beneficiaries are not requesting 

reimbursements, the agency may want to rethink its policy in light of 

pursuing the most efficient use of Medicare funds. 

Mr. Chairman, this concludes my prepared remarks. I would be pleased to 

respond to any questions that you or other members of the subcommittee 

may have at this time. 

For further information regarding this testimony, please contact 

Kathleen King at (202) 512-7114 or kingk@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this statement. Contributors to this testimony include 

Rosamond Katz, Assistant Director; Lori Achman; and Samantha Poppe.

Contacts and 

Acknowledgments 

(290647) Page 11 GAO-07-1022T 
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