GAO-06-139R Drug Card Education and Outreach 

United States Government Accountability Office

Washington, DC 20548 

November 18, 2005 

The Honorable Henry A. Waxman 

Ranking Minority Member 

Committee on Government Reform 

House of Representatives 

Subject: Medicare: CMS’s Beneficiary Education and Outreach Efforts for the 

Medicare Prescription Drug Discount Card and Transitional Assistance 

Program 

Dear Mr. Waxman: 

Established by the Medicare Prescription Drug, Improvement, and Modernization Act 

of 2003 (MMA), the Medicare Prescription Drug Discount Card and Transitional 

Assistance Program1

 is designed to help participants obtain prescription drugs at 

reduced prices.2

 All Medicare beneficiaries, except those with drug coverage through 

Medicaid, are eligible to enroll in the program to obtain drug discount cards, which 

are offered through private sector sponsors. In addition, enrollees in the program 

with low incomes who lack other drug coverage are also eligible for up to $600 each 

year in transitional assistance to help pay for their prescriptions. The drug card 

program, which began enrolling beneficiaries in May 2004, serves as an interim 

measure until January 1, 2006, when, in accordance with MMA, a prescription drug 

benefit becomes available to the nearly 42 million people enrolled in Medicare. 

MMA required the Centers for Medicare & Medicaid Services (CMS) in the 

Department of Health and Human Services (HHS) to broadly disseminate information 

on the program to the millions of Medicare beneficiaries—seniors and people under 

age 65 with permanent disabilities—who are eligible for a drug discount card. In 

response, CMS began education and outreach efforts designed to publicize the 

availability and features of the drug discount cards, provide information to facilitate 

beneficiary choice, and assist beneficiaries with the enrollment process. You asked 

us to provide information on CMS’s efforts because the agency’s experience in 

supporting the drug card program may yield important insights relevant to 

implementing the new prescription drug benefit that becomes effective in 2006. In 

this report, we (1) describe CMS’s education and outreach efforts in support of the 

 

1

Throughout this report we refer to the Medicare Prescription Drug Discount Card and Transitional 

Assistance program as the drug card program. 

2

Pub. L. No. 108-173, sec. 101(a), § 1860D-31, 117 Stat. 2066, 2131--48 (to be codified as 42 U.S.C. § 

1395w-141). 
2 GAO-06-139R Drug Card Education and Outreach

 

drug card program and review assessments of these efforts by public and private 

health care research organizations and (2) provide data on enrollment in the drug 

card program and identify factors that may have limited this enrollment.3

 

To do our work, we focused on several key education and outreach efforts that CMS 

used to provide Medicare beneficiaries with information on the drug card program. 

We interviewed CMS officials involved in planning and implementing the program’s 

education and outreach efforts and reviewed relevant agency documents. We also 

reviewed various assessments of CMS’s drug card campaign as well as relevant 

studies of some of CMS’s traditional means of disseminating information about 

Medicare. Specifically, we reviewed assessments by various research organizations, 

other government entities, and beneficiary advocacy groups as well as our own 

previous reports. These included assessments conducted by AARP, Abt Associates, 

the American Enterprise Institute (AEI), the Congressional Research Service (CRS), 

the Kaiser Family Foundation (KFF), the Medicare Payment Advisory Commission 

(MedPAC) and the Medicare Rights Center. We provided information on CMS’s 

expenditures on specific efforts in the drug card campaign to the extent such 

information was available. 

We obtained program enrollment data from CMS. To initiate a beneficiary’s 

enrollment for the drug discount card and for transitional assistance, CMS 

determines the applicant’s eligibility using Medicare and Medicaid enrollment data 

and federal sources of income data. Although we did not independently verify the 

accuracy of CMS’s program enrollment data, we believe they are sufficiently reliable 

for the purposes of this report. Our work was performed from May 2005 through 

November 2005 in accordance with generally accepted government auditing 

standards. 

Results in Brief 

CMS implemented a variety of education and outreach efforts that included the use of 

mass media and individualized counseling to inform beneficiaries about the drug card 

program and to assist in enrollment. Assessments we reviewed showed that CMS 

was effective in raising awareness of the drug card program, but was less effective in 

its efforts to inform and assist beneficiaries. In general, studies found that CMS’s 

efforts did not consistently provide information that was clear, accurate, and 

accessible, and they collectively fell short of conveying program features. At the 

same time, these assessments acknowledge the actions taken by CMS to address 

some of these problems. Studies we examined indicated that disseminating 

information via mass media and direct mail may not have been effective in reaching 

beneficiaries, particularly those with low incomes. Studies also found that CMS’s 

telephone help line and Web site did not always provide the information beneficiaries 

needed to choose a card that was best for them. Assessments also showed that CMS3

Other GAO products related to this topic include Medicare: CMS’s Implementation and Oversight of 

the Medicare Prescription Drug Discount Card and Transitional Assistance Program, GAO-06-78R

(Washington, D.C.: Oct. 28, 2005), and a review of sponsors’ processes related to the drug card 

program (forthcoming). 
3 GAO-06-139R Drug Card Education and Outreach

 

funded State Health Insurance Assistance Programs offering one-on-one counseling 

provided valuable assistance to beneficiaries but were limited in the number of 

people they could serve. An analysis of CMS partnerships with community-based 

organizations showed that these organizations could have been utilized more 

effectively in promoting the drug card program. 

As of September 1, 2005, about 6.4 million Medicare beneficiaries were enrolled in the 

drug card program, including 1.9 million who received transitional assistance. Many 

more beneficiaries were automatically enrolled than enrolled on their own. A variety 

of factors may have limited enrollment in the program. CMS attributed the extent of 

enrollment to confusion and misperceptions about the drug cards among Medicare 

beneficiaries. In addition, other assessments noted that the drug card program’s 

unfamiliar design, abundance of choices, and uncertain value may have discouraged 

some beneficiaries from enrolling. 

Background 

The drug card program is operated through private drug card sponsors, approved by 

CMS, and provides discounts off the retail price of prescription drugs.4

 On average, 

beneficiaries have a choice of 37 general drug discount cards—including both 

national (nationwide) and regional (state specific) cards—and pay an annual 

enrollment fee of $19.5

 To enroll, beneficiaries may submit standardized information 

to a drug card sponsor by mail, telephone, or via the Internet. An open enrollment 

period was established at the end of 2004 for beneficiaries who wished to change 

their card selection. 

Transitional assistance is available for Medicare beneficiaries who are at or below 

135 percent of the federal poverty level and not enrolled in any public or private 

insurance plans that provide drug coverage.6

 Beneficiaries who qualify do not have to 

pay an enrollment fee, pay 10 percent or less of each prescription’s retail price, and 

4

Drug card sponsors are required to offer a discount for at least one drug in each of the 209 therapeutic 

categories identified by CMS on a list of frequently used medications, and are precluded from offering 

discounts for nine classes of drugs. 42 C.F.R. § 403.806(d)(2) (2004). The formularies, or sets of 

preferred drugs, that are covered by the discounts, may not include all of a beneficiary’s drugs. 

Beneficiaries who use drugs not included in the formulary will not be able to obtain discounts for 

those drugs. However, if a beneficiary is approved for transitional assistance, payment may be made 

for a drug, even if it is not on the formulary. 

5

Among the qualifications to offer drug cards, sponsors—pharmacy benefit managers, heath insurers, 

and others—had to secure a large network of retail pharmacies. CMS established separate access 

requirements for urban, suburban, and rural areas. For example, in urban areas, at least 90 percent of 

a card’s enrollees must live within 2 miles of a network pharmacy. 

6

To qualify for transitional assistance, a beneficiary must (1) have an income at or below $12,569 per 

year for an individual, or $16,862 for a couple in 2004 and (2) not have other prescription drug 

coverage through Medicaid, employer-sponsored group health insurance programs, an individual 

health insurance policy, TRICARE (health care program for active duty and retired uniformed services 

members and their families), or the Federal Employee’s Health Benefits Program. MMA 117 Stat. 2133. 
4 GAO-06-139R Drug Card Education and Outreach

 

receive a $600 annual credit toward their drug purchases.7 Beneficiaries apply for 

transitional assistance through card sponsors. CMS then verifies the beneficiary’s 

income and drug coverage status, determines eligibility, and notifies the drug card 

sponsor, which informs the beneficiary of the decision.8

 Low-income beneficiaries 

currently enrolled in pharmaceutical manufacturers’ card programs—arrangements 

that offer discounts on particular manufacturers’ drugs—may also enroll in a 

discount card program to take advantage of the $600 transitional assistance. 

For various groups of beneficiaries, enrollment in the Medicare drug card program 

may be made automatically—with an option for the individual to decline—by virtue 

of beneficiaries’ participation in other Medicare or state programs. Beneficiaries in 

managed care plans—Medicare Advantage—may be group enrolled in exclusive drug 

cards sponsored by their health plans.9

 In some states, state pharmacy assistance 

programs, which provide prescription drugs at low or no cost to needy Medicare 

beneficiaries and others who do not qualify for Medicaid, may automatically enroll 

beneficiaries in a drug card program and choose to pay the enrollment fee and 

coinsurance.10 In addition, CMS decided to facilitate enrollment in the discount card 

program for certain low-income beneficiaries. 

CMS estimated that beneficiaries enrolling in drug card programs would experience 

significant savings on their prescription drugs. The discounts would vary depending 

on the drug card selected, the drugs purchased, and the pharmacy used. According to 

an October 2004 CMS study, prices for commonly used brand-name drugs under the 

discount card program ranged from 12 to 21 percent below national average retail 

pharmacy prices. It stated that savings for generic drugs were larger, with prices 

ranging from 28 to 75 percent lower than the typical price paid nationally. 

7

MMA 117 Stat. 2140-42. Qualified individuals were entitled to receive the full $600 credit amount in 

2004 regardless of when they enrolled. If they enrolled in 2005, the credit was prorated based on the 

quarter in which they enrolled. Any 2004 credit balance was rolled over into 2005; and any 2005 credit 

balance will be rolled over into 2006 until the individual enrolls in a Medicare prescription drug plan or 

the initial part D enrollment period closes on May 15, 2006, whichever comes first. 

8

Once an applicant is determined eligible to receive transitional assistance, CMS transfers funds from 

the Medicare part B Trust Fund directly to the approved discount card sponsor with which the eligible 

beneficiary has enrolled. The discount card sponsor is responsible for applying each eligible enrollee’s 

$600 subsidy to the beneficiary’s cost of prescription drugs covered under the program. 

9

Although many Medicare managed care plans already offer drug coverage, not all do so and most offer 

limited coverage. The discount card would be used in situations of no coverage or limited coverage 

under the plans. If the Medicare managed care plan offers a drug card, its members may only get that 

drug card. If a Medicare managed care plan does not offer a drug card, its members may sign up for 

any card available in their area. 

10Because people enrolled in state pharmacy assistance programs receive comprehensive help with 

their drug expenditures, their coverage may not change under a drug card program. However, with 

such enrollment, federal dollars substitute for state dollars, thus reducing the cost of those state 

pharmacy assistance programs. 
5 GAO-06-139R Drug Card Education and Outreach

 

In implementing its education and outreach efforts, CMS focused on enrolling those 

beneficiaries most likely to benefit from the drug discount card and transitional 

assistance program. Not all beneficiaries eligible to enroll in the drug card program 

were expected to do so because many have coverage through other sources. CMS 

assumed that those who could benefit from the card and subsidy were low-income 

beneficiaries eligible for transitional assistance and beneficiaries who were not low 

income but either had no or limited drug coverage.11 Therefore, in developing and 

disseminating messages and materials promoting the drug card program, the agency 

placed special emphasis on low-income beneficiaries. 

CMS had a limited amount of time to plan and launch the drug card program. 

Although agency officials started planning for the discount card shortly before 

enactment of MMA, they did not begin developing a strategy for communicating with 

beneficiaries until regulations detailing the requirements of the new program were 

issued on December 15, 2003. MMA required that the Medicare discount card 

program begin operating within 6 months of enactment. The education campaign 

began in January 2004; enrollment for the drug card began May 3, 2004; and the card 

was effective June 1, 2004. 

To evaluate its 2004 education and outreach efforts, CMS initiated a lessons learned 

process whereby information was collected from various entities involved in the drug 

card program. They included CMS central office staff, regional office staff, and 

contractors hired to provide marketing reviews and CMS customer service. In total, 

212 individuals participated in discussions to obtain information on the effectiveness 

of various elements of the agency’s communications strategy and how best to 

implement Medicare’s prescription drug benefit program. The results of this process 

were reported in February 2005.12

 

CMS Used Multiple Education and 

Outreach Efforts; Assessments of 

These Efforts Identified Weaknesses 

CMS relied on multiple education and outreach efforts—some that used mass 

communication and others that provided individualized attention—to support the 

drug card program. Specifically, these efforts included media advertising, direct mail, 

Medicare’s Web site and toll-free help line, one-on-one counseling, and partnerships 

with community organizations. Assessments we reviewed showed that CMS was 

effective in raising awareness of the drug card program, but its efforts were limited in 

their ability to inform and assist beneficiaries. Studies indicated that CMS’s 

11In 2002, 18 percent of noninstitutionalized Medicare beneficiaries lacked drug coverage for the full 

year. Others obtained drug coverage from a variety of sources, including employer-sponsored plans 

(34 percent), Medicaid (14 percent), Medicare managed care plans (12 percent), Medigap policies 

(12 percent), and other public programs (10 percent). 

12Centers for Medicare & Medicaid Services, Medicare-Approved Drug Discount Card and $600 

Credit Program: CMS and Drug Card Sponsor Lessons Learned, Final Results and Analysis

(Baltimore, Md.: February 2005). 
6 GAO-06-139R Drug Card Education and Outreach

 

education and outreach activities did not consistently provide information that was 

clear, accurate, and accessible. Reports also indicated that, in some cases, CMS 

made improvements when problems were identified. 

Media Advertising and Direct Mail 

As part of its education and outreach efforts, CMS initiated a multimedia advertising 

campaign—the National Publicity Campaign—in 2004 to generate awareness about 

changes to the Medicare program, including the 2006 prescription drug benefit and 

the interim drug card program, as well as sources of additional information. By 

February 2004, CMS began using television and print media to introduce beneficiaries 

to the changes in Medicare established by MMA. In spring 2004, CMS launched 

another series of advertisements specifically to educate Medicare beneficiaries on the 

availability of drug discount cards and their key features. A third set of 

advertisements in late summer and early fall 2004 sought to encourage enrollment by 

highlighting the savings offered through the drug discount cards. According to CMS, 

in fiscal year 2004, funding for the National Publicity Campaign was approximately 

$65 million. 

Another component of the National Publicity Campaign relied on several direct 

mailings to promote the drug card program. According to CMS officials, the agency’s 

discount card materials were consumer-tested to ensure they were understandable by 

various population groups, including beneficiaries with low literacy, poor English 

proficiency, or low income. In its first mailing, in February 2004, CMS sent a letter 

and a flyer to all Medicare beneficiaries alerting them to the drug discount cards as 

well as to the upcoming 2006 prescription drug benefit. In April 2004, CMS issued a 

second direct mailing, this time a three-page description of the drug card program. 

Another more targeted letter was sent that month to persons with Social Security 

payments below the income eligibility threshold established to qualify for transitional 

assistance. This communication focused on the benefits available to low-income 

persons and the process for obtaining a card and applying for the $600 credit. 

According to CMS officials, the agency spent at least $18 million of its publicity 

campaign funds on these mailings. 

Assessments of the National Publicity Campaign found that the impact of the 

campaign was mixed. On the one hand, it helped generate awareness that the drug 

card program existed. In a June/July 2004 survey developed by KFF and the Harvard 

School of Public Health, fewer than one-third of respondents 65 years of age or older 

said they were aware of the drug card program.13 A November/December 2004 

follow-up survey showed that 86 percent of respondents over the age of 65 were 

aware of the discount card program, and 67 percent said they were aware of the 

$600 subsidy.14

 

13Kaiser Family Foundation/Harvard School of Public Health, Views of the New Medicare Drug Law: A 

Survey of People on Medicare, publication no. 7144 (Washington D.C.: August 2004). 

14Kaiser Family Foundation, November/December 2004 Health Poll Report Survey, publication no.7247 

(Washington, D.C.: January 2005). 
7 GAO-06-139R Drug Card Education and Outreach

 

On the other hand, CMS was less successful in conveying essential features about the 

discount cards. Based on focus groups conducted in fall 2004 and winter 2005, Abt 

Associates reported that one-quarter to one-half of beneficiaries were unaware that 

there was more than one drug card to choose from.15 In addition, in its February 2005 

self-evaluation, CMS reported that the campaign was not effective in educating 

beneficiaries on the details and complexities of the program, especially on how to 

obtain transitional assistance. The agency noted that weaknesses in the 

communications strategy it developed prior to the launch of the drug card program 

may have led to these shortcomings. It cited, for example, the volume and content of 

CMS and drug card sponsor outreach material as contributing factors. In a legal 

analysis issued in March 2004, we found that CMS’s initial print advertisements 

contained a number of significant omissions. For example, while all of the materials 

we reviewed mentioned the new drug discount cards, none indicated that the cards 

may not be free and that savings may vary among drugs.16 

The assessments we reviewed also found limitations in the use of direct mail to help 

increase enrollment in health care initiatives. In particular, studies have shown that 

direct mailings may not be an effective outreach tool for Medicare beneficiaries with 

low incomes. In its report, MedPAC found that low literacy rates, poor English 

proficiency, and unfamiliarity with health care programs limit low-income 

beneficiaries’ ability to comprehend and act on direct mail instructions.17 Similarly, in 

2004 we reported that a 2002 direct mailing to low-income Medicare beneficiaries by 

the Social Security Administration (SSA) had a low response rate. SSA conducted a 

direct mailing campaign to encourage low-income beneficiaries to enroll in a program 

that provided assistance with premiums and other out-of-pocket costs associated 

with Medicare. Of the 16.4 million low-income beneficiaries that SSA targeted with 

the mailing, we found that 74,000 additional eligible beneficiaries—about 0.5 percent 

of all letter recipients—enrolled in Medicare savings programs than would have likely 

enrolled without the letter.18

 

Among low-income elderly, a lack of knowledge regarding the drug discount card and 

transitional assistance persisted into the summer. In a June/July 2004 survey, KFF 

and Harvard School of Public Health found that 70 percent of beneficiaries with 

incomes below $15,000 did not know enough to say if the drug discount cards were 

15Abt Associates, Evaluation of the Medicare-Approved Prescription Drug Discount Card and 

Transitional Assistance Program: Interim Evaluation Report, Final Report (Cambridge, Mass.: 

October 11, 2005). 

16GAO, Medicare Prescription Drug, Improvement, and Modernization Act of 2003--Use of 

Appropriated Funds for Flyer and Print and Television Advertisements, B-302504 (Washington, D.C.: 

March 10, 2004). 

17Medicare Payment Advisory Commission, Report to the Congress: Issues in a Modernized Medicare 

Program (Washington, D.C.: June 2005). 

18GAO, Medicare Savings Programs: Results of Social Security Administration’s 2002 Outreach to 

Low-Income Beneficiaries, GAO-04-363 (Washington, D.C.: March 26, 2004). 
8 GAO-06-139R Drug Card Education and Outreach

 

part of the new Medicare drug law, and only 13 percent of those surveyed were aware 

that low-income beneficiaries can receive a $600 credit.19

 

Medicare Web Site 

In addition to the National Publicity Campaign, CMS used its Medicare Web site—

www.medicare.gov—to educate beneficiaries about the drug card program and the 

choices they have when selecting a card. In particular, users of the Web site could 

access a tool called the Prescription Drug Assistance Program (PDAP), which was 

developed to help beneficiaries determine whether they were eligible to enroll in the 

drug card program, decide whether to enroll, and select the discount card that best 

suited their needs. Launched in April 2004, PDAP allowed users to compare drug 

cards by displaying information on the pharmacies that accept each card, the drugs 

each sponsor covers in its formulary, and the prices beneficiaries should expect to 

pay for these drugs.20 CMS also included a price comparison feature on PDAP so that 

users could compare drug prices offered through the various discount cards based on 

dosage and quantity. 

To use PDAP, beneficiaries entered their zip codes and responded to a series of 

questions that were used to determine eligibility for the drug card program. Next, 

beneficiaries selected the drugs they use regularly along with dosage and monthly 

quantity. PDAP then generated a list of available drug card sponsors and the prices 

available through their cards. Because a beneficiary may prefer a specific pharmacy, 

PDAP could search for a list of drug cards that a particular pharmacy accepts. 

Several assessments that reported on PDAP found that the Web-based tool was an 

important resource for Medicare beneficiaries and those who assist them in selecting 

drug discount cards. In general, these assessments indicated that PDAP could 

perform the complex calculations required to determine the comparative value of 

numerous discount cards available to eligible beneficiaries. For example, both CRS 

and MedPAC observed that the comparative information provided by PDAP was 

valuable for family members and others who help beneficiaries select a drug card.21 

Although PDAP was viewed as an important resource, several studies found that 

when the tool was first introduced, it did not always provide accurate information. 

Assessments indicated that the Web-based tool listed inaccurate drug prices and 

pharmacies that were not participating in the drug card program. According to CRS, 

19Kaiser Family Foundation/Harvard School of Public Health, Views of the New Medicare Drug Law: A 

Survey of People on Medicare, Additional Findings by Income Group, publication no. 7169 

(Washington, D.C.: September 2004). 

20According to the CMS Administrator, PDAP includes information on approximately 60,000 drug 

products and 75,000 pharmacies. The component of the Web site with information about drug prices 

was deactivated on September 30, 2005. 

21For example, see Congressional Research Services, Beneficiary Information and Decision Supports 

for the Medicare-Endorsed Prescription Drug Discount Card, RL32828 (Washington, D.C.: Mar. 24, 

2005). 
9 GAO-06-139R Drug Card Education and Outreach

 

because CMS posted the maximum price cited by drug card sponsors, some prices 

displayed on PDAP were too high. In addition, we found that some pharmacies 

reported being incorrectly listed as participating in the program, but most of the 

inaccurate listings were attributed to pharmacies being unaware that they had 

contracted to participate in a card sponsor’s network, according to CMS.22

 In 

response to these problems, CMS officials told us that they updated and verified drug 

pricing and corrected the pharmacy participation information. 

Another issue reported by CRS was that some users may have had difficulty 

navigating the Web site, and MedPAC reported that beneficiaries were overwhelmed 

by the number of drug cards from which they could choose.23 According to KFF,

most beneficiaries do not use the Internet, and even those who assist them often 

found the Web-based information more perplexing than helpful. An April 2004 KFF 

survey showed that use of the Internet by seniors is growing but overall remains low, 

with about 70 percent of those age 65 or over reporting that they never use the 

Internet. Of those who do go online, 2 percent reported having visited Medicare’s 

Web site. Furthermore, according to KFF, the use of the Internet among beneficiaries 

also varied significantly by income. For those with incomes below $20,000—nearly 

two-thirds of seniors in 2002—only 15 percent have ever used the Internet. For 

beneficiaries with incomes above $50,000—about 1 in 12 seniors in 2002—65 percent 

reported having ever used the Internet.24

 

By July 2004, CMS officials took steps to make PDAP more user friendly. For 

example, CMS created an option to sort and view the top five drug cards with the 

lowest cost for the beneficiary and provided information on the annual savings 

offered by various drug cards. While CMS addressed certain problems associated 

with PDAP, these changes did not eliminate the challenge for CMS in using the 

Internet as an information resource for Medicare beneficiaries.25

 

Medicare Telephone Help Line 

One of the goals of the National Publicity Campaign was to make the public aware of 

CMS’s telephone help line—1-800-MEDICARE—as a primary source of information 

on the Medicare program, including information on the drug card program. The tollfree telephone help line is a vehicle for Medicare beneficiaries, their families, and 

other members of the public to obtain answers to their questions about the drug card 

program features and enrollment. During the 6 months following the enactment of 

MMA, the help line handled over 9 million calls—many of which involved questions 

22GAO-06-78R. 

23Medicare Payment Advisory Commission, Public Meeting: State Lessons on the Drug Card

(Washington, D.C.: Sept. 10, 2004). 

24Kaiser Family Foundation, E--Health and the Elderly: How Seniors Use the Internet for Health 

Information (January 2005). 

25According to MedPAC, beneficiaries who are computer literate and have Internet connections in their 

homes are unlikely to have the high-speed connections necessary to use PDAP. 
10 GAO-06-139R Drug Card Education and Outreach

 

about prescription drug coverage—more than triple the number handled in the 

previous 6 months. 

As the volume of calls directed to the help line about the drug card program 

increased, there were concerns about the accuracy and completeness of the 

information provided by the help line’s customer service representatives (CSR). In 

December 2004, we reported that CSRs had substantial inaccuracy rates when 

answering questions about the drug discount card and transitional assistance.26 For 

example, one question we posed to CSRs about income eligibility for the $600 credit 

was answered inaccurately in 55 out of 70 calls, generally because the CSRs did not 

seek the needed information on the sources of beneficiaries’ incomes to correctly 

answer the question. On another question, CSRs responded with inaccurate answers 

in 10 out of 70 calls when asked to identify the lowest cost card available at a 

particular pharmacy, given an individual’s specific pharmaceutical needs. 

Other research organizations have also raised concerns about how information on the 

drug card program is communicated via 1-800-MEDICARE. MedPAC reported that 

CSRs provided too much information, rather than helping beneficiaries narrow their 

options, and that operators conveyed inaccurate information. In addition, KFF and 

CRS have commented on the long wait times associated with the help line,27 and the 

Medicare Rights Center reported frequent disconnections following the influx of calls 

due to the National Publicity Campaign.28 In response to the increased call volume, 

CMS had added over 800 CSRs by October 2004, more than doubling the number of 

staff previously available. 

One-on-one Counseling 

For Medicare beneficiaries and their families seeking individual assistance with the 

drug card program, CMS supports one-on-one counseling through State Health 

Insurance Assistance Programs (SHIP). Operated by states and funded through CMS 

grants, SHIPs use over 12,000 trained counselors—mostly volunteers—to provide 

information and assistance on a wide range of Medicare and Medicaid issues. In 

2003, CMS reported that SHIP programs nationwide served over 2 million Medicare 

beneficiaries, with about 1.2 million of those receiving assistance through one-on-one 

counseling sessions—in person and over the telephone—and approximately 800,000 

receiving assistance through presentations and public education outreach. For the 

drug card program, these counselors helped beneficiaries and their families make 

selection decisions using PDAP and assist those applying for transitional assistance. 

In 2004, SHIPs resources—$21 million—were primarily devoted to informing 

26GAO, Medicare: Accuracy of Responses from the 1-800-MEDICARE Help Line Should Be Improved, 

GAO-05-130 (Washington, D.C.: Dec. 8, 2004). 

27See, for example, Kaiser Family Foundation, Medicare Drug Discount Cards: A Work in Progress, 

prepared by Health Policy Alternatives, Inc. (Washington, D.C.: July 2004). 

28Medicare Rights Center, Medicare-Approved Drug Discount Cards: A Prescription for Improvement

(New York, N.Y.: May 2004). 
11 GAO-06-139R Drug Card Education and Outreach

beneficiaries and their families about the drug card program. In fiscal year 2005, CMS 

increased funding for SHIPs by about 50 percent, to roughly $31 million, to expand 

these efforts. 

CRS has noted that one-on-one counseling and assistance to beneficiaries provided 

by SHIPs have been essential complements to the information disseminated more 

generally through CMS’s other education efforts, such as 1-800-MEDICARE and the 

Medicare Web site. For its June 2005 report, MedPAC examined the challenges that 

state officials and beneficiary advocates face in educating beneficiaries about the 

discount card program. MedPAC suggested that CMS adequately fund SHIP outreach 

activities and direct beneficiaries to SHIPs for personalized assistance with the 

program. At the same time, MedPAC acknowledged that SHIPs alone are not able to 

counsel all Medicare beneficiaries who may need one-on-one counseling. 

Partnerships with Local Organizations 

As the SHIPs demonstrate, CMS relies on local outreach to help disseminate 

information and assist beneficiaries. Consistent with this strategy, the agency has 

developed an outreach effort known as the Regional Education About Choices in 

Health (REACH) program to increase awareness about changes in Medicare for 

beneficiaries not generally reached by national efforts due to barriers of language, 

literacy, location, income, or culture. REACH relies on local community-based 

organizations to use established networks for distributing health care information to 

serve beneficiaries in familiar, community settings. In 2004, CMS sponsored training 

sessions and distributed targeted materials to REACH partners to help them inform 

beneficiaries and facilitate enrollment for the drug card program and transitional 

assistance. 

In addition, CMS has partnered with the Access to Benefits Coalition (ABC), a group 

of national nonprofit organizations—including AARP, the Salvation Army, and the 

American Hospital Association—and 56 local coalitions that help low-income 

Medicare beneficiaries use private and public resources to save money on 

prescription drugs. To complement CMS’s efforts, ABC awarded $2 million to its 

network of grassroots groups to educate and enroll lower income beneficiaries in the 

drug card program. It set a short-term goal to ensure that at least 5.5 million lowincome beneficiaries would receive the $600 annual transitional assistance credit by 

the end of 2005. ABC also developed a Web-based tool for counselors and others to 

use to determine the individualized combination of programs—the drug card 

program, state pharmacy assistance programs, manufacturer’s discount card 

programs, and drug company patient assistance programs—that maximize 

beneficiary savings. 

Similarly, in 2004, CMS, in cooperation with HHS’s Administration on Aging, 

contracted with Ogilvy Public Relations Worldwide and spent $6.1 million to select, 

support, and evaluate community-based organizations to provide outreach related to 

the drug card. More than 100 organizations, including area agencies on aging, social 

service providers, health care agencies, and faith-based organizations, were selected 

to target low-income, hard-to-reach beneficiaries, including those in medically 
12 GAO-06-139R Drug Card Education and Outreach

underserved communities. Most were funded to complete their work from 

September 2004 through February 2005. Under the terms of their subcontracts with 

Ogilvy, the community-based organizations agreed to meet measurable performance 

standards regarding the specific number of beneficiaries they educated, assisted, and 

enrolled. Local organizations that fell short of achieving their agreed-upon 

performance standard for the number of beneficiaries whom they assisted with 

enrollment faced a reduction in their final payment. 

Assessments of CMS’s efforts to support the drug card program through partnerships 

with local organizations are limited. We identified an evaluation by Ogilvy that was 

submitted to CMS in May 2005. That report stated that community-based 

organizations funded by the partnership assisted nearly 900,000 beneficiaries in the 

enrollment process, but raised questions about whether these organizations were 

adequately prepared for the task.29 Among the shortcomings cited by communitybased groups, as reported in the Ogilvy report, were (1) organization leaders received 

training and orientation, but the training provided to staff and volunteers was 

insufficient to prepare them to answer the often complicated questions from 

beneficiaries; (2) the organizations experienced initial frustration and difficulties 

accessing and using CMS materials, including the Medicare Web site; and 

(3) outreach to nonelderly disabled beneficiaries was limited, largely because many 

community-based organizations did not feel qualified or equipped to serve this 

specific population. 

About 6 Million Beneficiaries Obtained 

a Drug Discount Card; Several Factors 

May Have Limited Enrollment 

Approximately 6 million beneficiaries are enrolled in the drug card program and 

nearly one-third of these participants received transitional assistance with their drug 

card. Many more beneficiaries were automatically enrolled than enrolled on their 

own. The number of beneficiaries in this latter group fell below an enrollment 

projection set by CMS but exceeded one set by the Congressional Budget Office 

(CBO). A variety of factors—beneficiary confusion as well as features in the 

program’s design—may have limited enrollment in the drug card program. 

Of the 6 Million Enrollees, Nearly Two-Thirds Were Automatically Enrolled

As of September 1, 2005, approximately 6.4 million Medicare beneficiaries had 

obtained discount cards through the drug card program. This number included 

4.5 million beneficiaries who had obtained only the discount cards and another 

1.9 million who obtained both discount cards and transitional assistance. Roughly 

two-thirds of participants enrolled early in the program—May through July 2004. 

(See fig. 1.) To enhance enrollment, CMS randomly assigned drug cards to 

beneficiaries in Medicare Saving Programs (MSP), which cover various Medicare-

 

29Ogilvy Public Relations, Development of Community-Based Coalitions to Support Drug Card 

Awareness, Final report on CMS Contract Number 500-01-0003, Task Order 0011 (May 31, 2005).
13 GAO-06-139R Drug Card Education and Outreach

related out-of-pocket costs for certain low-income beneficiaries.30 Drug card 

sponsors mailed drug cards to about 1.1 million of the beneficiaries in MSPs in 

October 2004 and to about 120,000 of these beneficiaries in February 2005.31

 

Approximately 12 percent of those who received these cards from the agency applied 

for and obtained transitional assistance. 

Figure 1: Enrollment in the Drug Card Program May 2004 through August 2005 

Note: In May 2004, the first month of the program, 66,910 beneficiaries enrolled in a drug discount card and 

received transitional assistance. Data are as of the last Thursday or Friday of the month. 

CMS data also demonstrated that slightly more than a third of the Medicare 

beneficiaries who enrolled in the drug card program did so on their own. As shown 

in table 1, of the 6.4 million total discount card program participants, we estimate that 

2.3 million enrolled on their own initiative, and 4.1 million were automatically 

enrolled by virtue of their participation in other Medicare or state assistance 

programs. 

 30There are four MSPs, each with differing income eligibility requirements and levels of benefits—the

Qualified Medicare Beneficiary, Specified Low-Income Medicare Beneficiary, Qualifying Individual, 

and Qualified Disabled and Working Individual programs. To enroll, eligible beneficiaries must have

incomes and assets within the specific program’s federal ceilings and enroll through their state 

Medicaid program. 

31Some of the original 1.1 million MSP beneficiaries that CMS autoenrolled in a general card in fall 2004

subsequently enrolled in a different drug discount card, canceled their assigned card, or died. As of 

September 1, 2005, this MSP group had declined to about 874,000 enrollees.
14 GAO-06-139R Drug Card Education and Outreach

Table 1: Estimated Autoenrollment and Self-Enrollment in the Drug Discount Card and Transitional 

Assistance Program, September 2005 

Discount card only 

Discount card with 

transitional assistance Total 

Autoenrolled 3,221,147 833,075 4,054,222 

• Beneficiaries in 

Medicare Advantage a 2,370,463 245,850 2,616,313 

• Beneficiaries in 

Medicare Savings 

Program b

850,684 144,225 994,909 

• Beneficiaries in state 

pharmacy assistance 

programs c 0 443,000 443,000 

Self-enrolled 1,274,725 1,065,292 2,340,017 

Total 4,495,872 1,898,367 6,394,239 

Source: GAO analysis of CMS data. 

Note: Enrollments effective as of September 1, 2005. 

a

Medicare Advantage refers to Medicare’s managed care plan options. 

b

Medicare Savings Programs assist low income beneficiaries by paying for some or all Medicare premiums and 

deductibles. 

c

State Pharmacy Assistance Programs provide low income and other beneficiaries with financial assistance for 

prescription drugs. 

Despite efforts to facilitate enrollment, the number of beneficiaries who obtained 

discount cards with transitional assistance—1.9 million—fell significantly below 

CMS’s projection. CMS anticipated that its drug card program, in general, would have 

the highest participation rate among those beneficiaries who would also qualify for 

transitional assistance. Specifically, the agency estimated that 4.7 million of the 

beneficiaries eligible for transitional assistance in 2004 would enroll in the drug card 

program and receive transitional assistance.32 CMS based this estimate on a variety of 

factors, including enrollment rates in similar programs and the nature and duration of 

the drug card program. In contrast, the 1.9 million beneficiaries who obtained 

discount cards with transitional assistance exceeded a CBO estimate. In a July 2004 

paper, CBO estimated that about 20 percent of those eligible for transitional 

assistance, or 1 million beneficiaries, would enroll in the drug card program and 

receive the $600 credit. CBO estimated that relatively few beneficiaries would 

participate in the interim program because of the program’s relatively short duration 

before the 2006 prescription drug benefit takes effect and the perception that the 

interim program is of limited value.33

 

 

32CMS, Medicare Program: Medicare Prescription Drug Discount Card; Interim Rule and Notice, 42 

C.F.R. Parts 403 and 408, Federal Register/Vol. 68, No. 240/Monday, December 15, 2003. 

33Congressional Budget Office, A Detailed Description of CBO’s Cost Estimate for the Medicare 

Prescription Drug Benefit (Washington D.C.: July 2004). 
15 GAO-06-139R Drug Card Education and Outreach

Beneficiary Confusion and Program Design

Issues May Have Limited Enrollment

Assessments indicate that the level of enrollment in the drug card program—

especially among those receiving transitional assistance—may be explained by a 

variety of factors. In particular, studies we reviewed found that beneficiary 

confusion about the drug card program as well as weaknesses in the program’s 

design may have deterred some beneficiaries from enrolling. 

Beneficiary Confusion 

One factor that may have limited enrollment is some beneficiaries’ reduced ability to 

access information and make effective choices about different health care options. 

The Medicare population has significant vulnerabilities in terms of health and 

cognitive status: 71 percent of beneficiaries have two or more chronic conditions, 

29 percent are in fair or poor health, and 23 percent have cognitive impairments.34

 

Efforts to inform beneficiaries are particularly challenging with older members of 

minority, low-income, limited English-speaking, and other underserved populations. 

Research has shown that beneficiaries lack a basic understanding of the Medicare 

program, and even those who know the fundamentals have significant information 

gaps. 

In the case of the drug card program, CMS has acknowledged that confusion or 

misperceptions about the drug cards among Medicare beneficiaries may have 

affected enrollment. In its February 2005 self-assessment, CMS found that despite 

the agency’s education and outreach efforts, beneficiaries confused the drug card 

with the 2006 prescription drug benefit, and some beneficiaries did not enroll because 

they were under the impression that Medicare would be sending them a card. 

Furthermore, the concept of a private drug card sponsor was difficult for many 

beneficiaries to understand. In addition, CMS found that some beneficiaries may not 

have enrolled because they believed they were ineligible for the discount cards. 

Specifically, many beneficiaries incorrectly thought that the drug card was only for 

low-income people, and those who likely qualified for the $600 in transitional 

assistance did not believe they qualified for it, even after having the income criteria 

explained to them. CMS also asserted that there was a misconception that 

acceptance of the $600 transitional assistance would negatively impact a beneficiary’s 

eligibility for other assistance programs, such as housing and food stamps. 

Design Features 

Several features of the drug card program’s design may also have limited enrollment. 

First, because it was designed as a voluntary opt-in program for most eligible 

beneficiaries, it represents a significant change in individual responsibility. KFF 

noted that requiring an active decision and effort may seem unfamiliar to, or be 

difficult for, some beneficiaries. Unlike more customary expansions in coverage 

 

34Kaiser Family Foundation, Medicare at a Glance, publication no. 1066-08 (Washington, D.C.: April 

2005). 
16 GAO-06-139R Drug Card Education and Outreach

 

under fee-for-service Medicare—where a new benefit is automatically available to 

beneficiaries—the drug card program asked beneficiaries to decide to enroll; choose 

a card; submit enrollment information; and in some instances, apply for transitional 

assistance. KFF also reported that some Medicare beneficiaries lack familiarity with 

the concept of drug discount cards and with the tools—for instance using Medicare’s 

PDAP to compare drug prices—that could be used to help make a decision to obtain 

a drug card. Because of the increased individual responsibility, automatic enrollment 

proved more effective than voluntary enrollment in increasing participation in the 

program. 

Another factor in the program’s design that may have limited enrollment was the 

number of card options beneficiaries could consider in making their choice. As noted 

by CRS, studies have shown that the responsibility of choosing from a broad array of 

options can lead to inaction. In the case of the drug card program, the availability of 

37 cards, on average, has made it difficult and time-consuming for beneficiaries to 

compare their drug card options. KFF and MedPAC reports noted that the amount of 

information on available cards and participating pharmacies, and the complexity of 

drug pricing, may have been overwhelming for many beneficiaries and others 

assisting them. CRS concluded that the large number of cards from which to choose 

may have deterred beneficiaries from choosing to enroll. 

Finally, studies we reviewed suggested that enrollment in the program depended, in 

part, on beneficiaries’ assessment of the value of the drug cards. The greater the 

perceived value of the discounts offered by the card, the more likely beneficiaries 

were to make the effort to obtain a card. However, MedPAC found that beneficiaries 

were uncertain about the value of drug cards, or perceived that they offered relatively 

small savings, and therefore saw no need to enroll in the program. AEI suggested 

that since most Medicare beneficiaries already have some type of prescription drug 

coverage, they may have assumed that a discount card program would be of little 

value to them.35 Abt focus group participants reported that they found other ways to 

reduce costs below what the cards offer, such as getting free samples from their 

provider(s), using discount cards from other groups, and getting drugs from Canada 

or Mexico. As noted earlier, according to CBO, the temporary nature of the drug card 

program—the program was designed to operate for no more than 18 months—may 

have contributed to low participation. 

Agency Comments 

We provided a draft of this report for comment to the Administrator of CMS, and we 

received written comments. (See enc.) 

35Beneficiaries without drug coverage may have discount cards offered by retailers or associations. 

For example, as reported by AEI, for a $20 annual enrollment fee, AARP’s MembeRx Choice provides 

average discounts of nearly 20 percent off retail prices. Beneficiaries in such programs may have 

assumed that they do not need a Medicare-endorsed drug card because they already have a private 

card under a similar corporate name. See: American Enterprise Institute, Private Discounts, Public 

Subsidies: How the Medicare Prescription Drug Discount Card Really Works (Washington, D.C.: 

June 2004). 
17 GAO-06-139R Drug Card Education and Outreach

 

CMS commented that the draft report did not provide a complete account of all its 

education and outreach activities in support of the drug card program. However, we 

examined several key education and outreach efforts that CMS used to provide 

Medicare beneficiaries with information on the drug card program. We focused on 

these key efforts because they were identified as elements in CMS’s own 

communication plan for the drug card program and were highlighted by CMS 

officials. Furthermore, these key efforts accounted for a substantial portion of CMS’s 

budget for beneficiary education. 

CMS provided examples of additional partnerships that we did not include in our 

report. It highlighted grants to the Department of Agriculture, Indian Health Service, 

Administration on Aging, and the National Governors’ Association. In our review of 

activities with partner organizations, we focused on those entities that received 

substantial resources—over $1 million—to provide education and assistance largely 

to low income beneficiaries. 

CMS commented that the draft report presents particularly negative assessments of 

CMS’s efforts, rather than the studies that CMS itself conducted as part of its overall 

oversight activities. In our draft, we did include discussions of several education and 

outreach efforts that assessments found to be useful to beneficiaries. Specifically, we 

noted studies that reported the price comparison information on the Medicare Web 

site was an important resource for beneficiaries as well as for those who assist them 

in selecting a drug card. We also reported that one-on-one counseling provided by 

SHIPs was an essential complement to CMS’s other education efforts. 

CMS expressed concern about a reference to our December 2004 report in which we 

found that CSRs had substantial inaccuracy rates when answering questions about 

the drug discount card and transitional assistance. Specifically, we reported that 

CSRs inaccurately answered 55 of 70 calls on eligibility for transitional assistance. 

While CMS questioned the accuracy rate we reported at the time, we continue to 

believe that this finding was correct, based on the income information we supplied to 

the CSRs. 

CMS commented that we omitted a factor that may have contributed to limited 

enrollment in the drug card program. Specifically, CMS observed that we did not 

mention that beneficiaries who take few or no prescription drugs have limited 

incentive to enroll. However, we did not find this factor identified in the assessments 

we reviewed. Furthermore, 2003 data show that 89 percent of seniors report taking 

prescription drugs, and of those nearly half report using 5 or more different drugs.36

 

CMS also provided clarifying information and technical comments, which we 

incorporated as appropriate. 

- - - - - 

36Health Affairs Web Exclusive, Prescription Drug Coverage and Seniors: Findings From A 2003 

National Survey (April 19, 2005). 
18 GAO-06-139R Drug Card Education and Outreach

As agreed with your office, we plan no further distribution of this report until 30 days 

after its date. At that time, we will send copies of this report to the Administrator of 

CMS, appropriate congressional committees, and other interested parties. We will 

also make copies available to others upon request. In addition, the report will be 

available at no charge on the GAO Web site at http://www.gao.gov. 

If you or your staff have any questions, please contact me at (312) 220-7600 or at 

aronovitzl@gao.gov. Contact points for our Offices of Congressional Relations and 

Public Affairs may be found on the last page of this report. Other contributors to this 

report include Rosamond Katz, Assistant Director; Krister P. Friday; and Shirin 

Hormozi. 

Sincerely yours, 

Leslie G. Aronovitz 

Director, Health Care 

Enclosure 
Enclosure 

19 GAO-06-139R Drug Card Education and Outreach 

Comments from the Centers for Medicare & Medicaid Services 
Enclosure 

20 GAO-06-139R Drug Card Education and Outreach
Enclosure 

21 GAO-06-139R Drug Card Education and Outreach
Enclosure 

22 GAO-06-139R Drug Card Education and Outreach
Enclosure 

23 GAO-06-139R Drug Card Education and Outreach
Enclosure 

24 GAO-06-139R Drug Card Education and Outreach
Enclosure 

25 GAO-06-139R Drug Card Education and Outreach
Enclosure 

26 GAO-06-139R Drug Card Education and Outreach

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