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MEDICARE PRESCRIPTION DRUG BENEFIT:

REVIEW AND OVERSIGHT

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MAY 8, 2007

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

DEBBIE STABENOW, Michigan

MARIA CANTWELL, Washington

KEN SALAZAR, Colorado

CHUCK GRASSLEY, Iowa

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

PAT ROBERTS, Kansas

RUSSELL SULLIVAN, Staff Director

KOLAN DAVIS, Republican Staff Director and Chief Counsel

(II)

C O N T E N T S

OPENING STATEMENTS

Page

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee

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

Grassley, Hon. Chuck, a U.S. Senator from Iowa ................................................. 3

WITNESSES

Block, Abby L., M.A., M.S.W., M.B.A, Director, Center for Beneficiary

Choices, Centers for Medicare and Medicaid Services, Department of Health

and Human Services, Washington, DC .............................................................. 5

Disman, Beatrice M., M.A., M.B.A., Regional Commissioner of Social Security,

New York Region; and Chair, Medicare Planning and Implementation Task

Force, Social Security Administration, New York, NY ..................................... 7

King, Kathleen M., M.A., Director, Health Care, Government Accountability

Office, Washington, DC ....................................................................................... 9

Bovbjerg, Barbara D., M.A., Director, Education, Workforce, and Income Security, Government Accountability Office, Washington, DC ................................ 10

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

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

Block, Abby L., M.A., M.S.W., M.B.A:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 35

Responses to questions from committee members ......................................... 44

Bovbjerg, Barbara D., M.A.:

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 62

Disman, Beatrice M., M.A., M.B.A.:

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 80

Response to a question from Senator Bingaman ........................................... 88

Grassley, Hon. Chuck:

Opening statement ........................................................................................... 3

King, Kathleen M., M.A.:

Testimony .......................................................................................................... 9

Prepared statement .......................................................................................... 89

Responses to questions from committee members ......................................... 102

COMMUNICATIONS

American Health Care Association (AHCA) and the National Center for Assisted Living (NCAL) ........................................................................................... 105

Long Term Care Pharmacy Alliance (LTCPA) ...................................................... 108

(III)

(1)

MEDICARE PRESCRIPTION DRUG BENEFIT:

REVIEW AND OVERSIGHT

TUESDAY, MAY 8, 2007

U.S. SENATE,

COMMITTEE ON FINANCE,

Washington, DC.

The hearing was convened, pursuant to notice, at 10:07 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus

(chairman of the committee) presiding.

Present: Senators Bingaman, Lincoln, Wyden, Schumer, Cantwell, Salazar, Grassley, Thomas, and Bunning.

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. The committee will come to order.

The book of Leviticus instructs, ‘‘Rise in the presence of the aged.

Show respect for the elderly and revere your God.’’

Today we continue our examination into whether Medicare’s prescription drug program is rising to the needs of its beneficiaries

and showing sufficient respect for America’s seniors.

Last week, we heard from beneficiary advocates and pharmacists. They confirmed that America’s seniors need Medicare’s

prescription drug program to get affordable drug coverage. We have

heard that the program has enrolled more than 22 million seniors.

Before the program, many of these seniors did not have coverage,

and now surveys show that 80 percent of seniors are satisfied with

the program. By these measures, the program has been a success.

But last week, we also heard some troubling reports. We heard

about a pattern we have been hearing about since the program

started: it is a pattern of poor administrative planning, it is a pattern of weak oversight of plans, and it is a pattern of failure to respond to seniors whom Congress intended the program to serve.

We heard again about the problems that agencies and private

plans have sharing data; the left hand is not talking to the right.

We heard of administrative mix-ups that have led the government

to withhold the wrong amount from millions of Social Security

checks, mix-ups that have led low-income seniors not to get the

benefits for which they are eligible. These seniors have, thus, not

been able to afford their prescriptions. These mix-ups have meant

uncertainty and hardship for many.

Last week, we heard about the confusion caused by rampant

marketing. We heard how seniors who only want prescription drug

coverage are ending up enrolled in Medicare Advantage plans that

2

they do not understand. We heard that private plans are being allowed to operate without sufficient control.

Tobey Schule, a pharmacist from my home State of Montana,

told us that seniors there have to choose among 50 plans. He told

us how confusing that is. He told how many of his patients have

ended up in a plan that is not the best for them based on the drugs

that they need.

Tobey also described how a senior may pick a plan because it

covers a certain drug, but then the plan can remove that drug from

its formulary. This causes seniors to change medications. Plans are

overruling the doctors’ medical decisions and the patient’s choice in

search of savings.

Last week, we heard how seniors who had a problem with the

program cannot get answers. One witness described how seniors

are ‘‘shunted’’ from one place to another. They get passed around

among agencies and private plans, and they never get their problems solved.

We are aided in our oversight efforts today by the Government

Accountability Office. Today, they will unveil their report on challenges in enrolling dual eligible beneficiaries, a particularly vulnerable population.

We are not here today to place blame, but this committee will

hold administrators responsible. We are here today to find out why

problems are occurring. We are here today to hear what plans are

doing to fix them, and we are here today to determine what the

committee needs to do to ensure that the benefit is serving all seniors.

I expect two things from those entrusted to run our programs: responsibility and honesty. As to responsibility, we all need to remember that Congress created this program to serve America’s

seniors. We are the hired hands; they are our bosses. And by ‘‘we’’

I mean the executive branch, HHS, CMS, as well as members of

the Congress. We are here to work for the people. We are just employees. The seniors are our employers. They are our bosses, and

we are here to serve them.

They deserve careful planning that considers their needs. They

deserve regulators who keep a watchful eye over their private

plans. They deserve administrators who respond to their concerns.

In short, they deserve respect.

Congress set up the program, and plans are a very important

part of that. But the bottom line is, many plans seem to operate

based on a profit motive more than they do to the public, more

than they do to seniors. We are here today, frankly, to help seniors,

help the public, because that is who we are here to serve. It is our

responsibility to make sure that we put the interests of seniors

first.

As for honesty, I have said it from the very beginning of this program, that I expect administrators to be forthcoming. If there is a

problem, tell us about it, and tell us how you plan to fix it. If an

immediate solution is not possible, then we can find another way,

even if it requires legislation.

So let us make this hearing the first step toward making honest

and responsible improvements to Medicare’s prescription drug program. Let us make sure that the program is showing sufficient reVerDate 11-MAY-2000 14:38 Nov 05, 2008 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 44329.000 SFIN1 PsN: SFIN1
3

spect for America’s seniors. Let us ensure that the benefit is doing

what it was designed to do: improve the health and well-being of

America’s seniors.

Senator Grassley?

OPENING STATEMENT OF HON. CHUCK GRASSLEY,

A U.S. SENATOR FROM IOWA

Senator GRASSLEY. Yes. Senator Baucus and I wrote this program, so you should not be surprised that we are having oversight

hearings because we want to make sure that it works according to

the way we intended. So, we have agencies responsible for the administration before us today.

I think we owe a debt of gratitude to the Centers for Medicare

and Medicaid Services and to Social Security for putting a very

complicated program into operation after we passed it for the benefit of millions of beneficiaries across the Nation. But there have

also been some unfortunate glitches.

Most of the early problems seem to have been resolved and they

were resolved quickly, and we commend the agencies for that. But

there are some persistent problems that should have been fixed by

now. I have been fairly vocal that, while much good work has been

done, there is room for improvement.

When this bill was written by the two of us, we took great pains

to make sure that plans wanting to serve Medicare beneficiaries

would have to meet strict requirements. Pharmacy availability and

formulary rules are just a couple examples of those requirements.

What I am particularly interested in learning more about today

is how the agencies are enforcing requirements spelled out in regulations and rules. We know, for example, that the agency requires

that if a plan wants to change its formulary it must allow enrollees

to continue to take the drug that they are already taking until the

end of the year.

We know that CMS has told plans that they are responsible for

claims for new dual eligibles back to their retroactive enrollment

dates. This is important because Medicaid provided retroactive

drug coverage.

Not long ago I heard from a pharmacy in Iowa about problems

affecting dual eligible beneficiaries. The director of billing for the

pharmacy informed me that it had not received any payments for

claims for Medicare beneficiaries who did not choose a Part D plan,

but who were later found Medicaid-eligible and retroactively enrolled. The plans are obligated to pay those claims, yet there had

not been any payments made to this pharmacist.

Senator Baucus, as well as Senators Hatch, Rockefeller, and myself requested that the Government Accountability Office study

these issues. I am pleased that it was completed in time for this

hearing.

Now I would like to comment on the Social Security Administration and its work on the low-income subsidy. We all know that it

is not easy to get people enrolled in assistance programs that they

are eligible for. We have seen that with Medicaid, SCHIP, and the

Medicare savings program.

The Social Security Administration seemingly pulled out all stops

to find beneficiaries and get them signed up for the extra financial

4

help. The results were impressive, but, despite their resourceintensive effort, millions of beneficiaries eligible for the extra help

still do not receive it.

I am looking forward to hearing from the Social Security Administration today about its work to re-tool the application and its outreach strategies, and from the Government Accountability Office,

which is looking into the low-income subsidy application process as

well.

Finally, I cannot help but bring up an issue that we—meaning

CMS, the Social Security Administration, and this committee—

have talked about at length, and that is the Social Security withhold option that some beneficiaries have chosen to pay their Part

D premium.

It has worked well for many beneficiaries, but, as one advocate

put it at the hearing just last week before this committee, it has

been a nightmare for other beneficiaries. Last fall, we held a member meeting on this topic. While I do not question that progress has

been made, it is clearly not enough, as we have heard in testimony

before this committee. We need to know when it will be fixed once

and for all.

At last week’s hearing, I said this committee is ultimately responsible for the drug benefit’s operation. On many fronts, the benefit has been a resounding success, but it’s not perfect. This hearing and last week’s hearing not only continue the committee’s commitment to strong oversight, they also will provide a solid foundation for the committee’s consideration of improvements to the drug

benefit.

One area that I am particularly interested in is the pharmacy

issue. Last week, we heard again that some plans’ practices have

made it difficult for pharmacists to fully gauge the terms and conditions of the contract. That, to me, just does not seem fair, particularly considering that there is not one of these plans that does

not have to be approved by the Secretary of HHS before it goes into

effect.

You would think that approval of those plans would take a look

at the contracts and make sure that the contracts are fair to the

one class of people that we were intending to make sure was preserved in our communities, and that is the community pharmacist.

I think this and other areas deserve more attention.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

Now I would like to welcome our panel. First, we will hear from

Abby Block, the Director of the Center for Beneficiary Choices at

the Centers for Medicare and Medicaid Services. Ms. Block was responsible for the implementation of the prescription drug benefit.

The second witness is Bea Disman from the Social Security Administration. Ms. Disman is the Regional Commissioner of Social

Security for the New York Region, and also serves as the chair of

the Medicare Planning and Implementation Task Force.

Third is Kathy King. She is the Director of Health Care at the

Government Accountability Office. Ms. King is the lead author of

a GAO report being released today on the dual eligible beneficiaries

in the Medicare drug benefit.

5

Finally, we will hear from Barbara Bovbjerg, also from the Government Accountability Office. Ms. Bovbjerg is Director of Education, Workforce, and Income Security.

A reminder to all of you: 5 minutes in your oral presentation.

Your statements will automatically be included in the record.

Ms. Block, why don’t you proceed?

STATEMENT OF ABBY L. BLOCK, M.A., M.S.W., M.B.A, DIRECTOR,

CENTER FOR BENEFICIARY CHOICES, CENTERS FOR MEDICARE AND MEDICAID SERVICES, DEPARTMENT OF HEALTH

AND HUMAN SERVICES, WASHINGTON, DC

Ms. BLOCK. Good morning, Chairman Baucus, Senator Grassley,

and distinguished members of the committee. I am pleased to be

here today to discuss the Medicare prescription drug benefit and,

in particular, plan oversight and review. First, it is important to

review where beneficiaries are today following enactment of Part D

just 3 years ago. Nearly 24 million beneficiaries are enrolled in

Part D. Not only do 90 percent of eligible beneficiaries have prescription drug coverage through Part D or other sources, but recent

surveys tell us that 80 percent of Medicare beneficiaries are satisfied with current coverage and drug plans.

In addition to beneficiary participation and satisfaction, the program also excelled in beneficiary savings and reduced costs to taxpayers. In fact, beneficiaries are saving an average of $1,200 a

year, with estimated premiums 42 percent lower than originally estimated.

One year ago, CMS was resolving a number of systems and processes issues that impacted some Part D enrollees’ ability to access

covered drugs. The high priority that CMS has placed on working

hard to find and fix the problems to avoid similar issues in 2007

has paid off. We work with plans, pharmacists, and States to improve data systems impacting beneficiary access. For example, we

facilitated better communication between plans and pharmacies

which resulted in upgrades to pharmacy software systems that will

improve messaging between pharmacies and plans for better customer service. Also, throughout the year CMS made a series of systems and processes changes and enhancements to improve our file

and data exchanges with plans, my fellow witness, the Social Security Administration, and the States to improve performance and accuracy in enrollment and processing. While these efforts have yielded positive results, we understand that we still have a long way to

go.

The oversight of Part D plans is a continuous effort. I want to

talk today about some of the ways that CMS is building upon lessons learned and information gathered during 2006. One important

example is an improved method of identifying companies for compliance audits, making more efficient use of resources available. In

addition, CMS has developed a contractor risk assessment methodology that identifies organizations and program areas representing

the greatest compliance risks to Medicare beneficiaries and the

government.

In that vein, we envision an approach to oversight that will include a mostly centralized data-driven program, fueled by data provided by contractors and beneficiaries. While receipt and analysis

6

of data is central to this oversight strategy, regularly scheduled

and focused targeted program compliance and program integrity

audits will be necessary to ensure program compliance. CMS anticipates the risk assessment tool to be ready for implementation

and use in January of 2008.

Further, CMS is now working with a contractor to augment the

internal agency resources available for Part D compliance audits.

Among other things, the contractor is conducting ‘‘secret shopping’’

of sales events across the country to enable CMS to learn firsthand

about what is happening in the sales marketplace and to identify

organizations in need of compliance intervention.

In addition, strengthened relationships with State regulators are

a key to help freely share compliance and enforcement information

we jointly regulate about marketing agent conduct.

Specifically, CMS worked cooperatively with the National Association of Insurance Commissioners and State departments of insurance to develop a model Compliance and Enforcement Memorandum of Understanding (MOU).

More fundamentally, before a plan sponsor is allowed to participate in the Part D program, it must submit an application and secure CMS approval. CMS performs a comprehensive review of the

application to determine if the plan meets CMS requirements.

CMS has established baseline measures for the performance data

and has been tracking results over time. Plans not meeting the

baseline measures are contacted by CMS and compliance actions

are initiated. Actions range from warning letters all the way

through civil monetary penalties and removal from the program,

depending on the extent to which plans have violated program requirements. All violations are taken very seriously by CMS, with

beneficiary protection the foremost concern.

In my written testimony I have outlined more specific information related to the recently released 2008 Call Letter to plans that

serves as central guidance to help plans implement new CMS policies and procedures. As an example of what is included in the Call

Letter, CMS expects that sponsors must assign preferred costsharing amounts in alignment with preferred formulary tiers.

Plans whose cost-sharing amounts fall above the mean will be rigorously examined under the discrimination review. The Call Letter

also highlights important reporting requirements, transparency in

data exchange between CMS and Part D plan sponsors, and puts

significant emphasis on marketing compliance.

CMS continues to make significant progress in overseeing and

promoting quality Part D prescription drug coverage. With ongoing

effort and vigilance, I am confident we will see continued high levels of plan compliance with program requirements, along with significant improvements where necessary on this critical front.

Thank you again for the opportunity to speak with you today. I

look forward to answering your questions.

The CHAIRMAN. Thank you, Ms. Block.

[The prepared statement of Ms. Block appears in the appendix.]

The CHAIRMAN. Ms. Disman, you are next.

7

STATEMENT OF BEATRICE M. DISMAN, M.A., M.B.A., REGIONAL

COMMISSIONER OF SOCIAL SECURITY, NEW YORK REGION;

AND CHAIR, MEDICARE PLANNING AND IMPLEMENTATION

TASK FORCE, SOCIAL SECURITY ADMINISTRATION, NEW

YORK, NY

Ms. DISMAN. Mr. Chairman, members of the committee, on behalf of Commissioner Astrue I thank you for inviting me to provide

an update on the Social Security Administration’s ongoing efforts

to sign up eligible Medicare beneficiaries for the low-income subsidy, or ‘‘extra help,’’ as it is commonly known.

In my role as Regional Commissioner and as chair of the Task

Force, I have seen the truly tireless and dedicated efforts of many

Social Security employees as they reach out to those individuals

who could benefit from ‘‘extra help.’’

Also, every day our Social Security employees in our field offices

and on our 800-number lines deal on a one-on-one basis with Medicare beneficiaries to assist them in filing for the ‘‘extra help.’’ I am

pleased to provide you with an update of our story.

Social Security has continued to use every means at our disposal

to reach those who could benefit from ‘‘extra help.’’ We have been

in the communities, in senior citizen centers, pharmacies, public

housing, churches, any place in which we feel senior citizens or the

disabled were likely to be found.

We have also continued to work with State pharmaceutical programs, State health insurance programs, area agencies on aging,

local housing authorities, community health clinics, prescription

drug plans, and others to identify people with limited income and

resources who might be eligible for ‘‘extra help.’’

Throughout these efforts, Social Security has attempted to reach

every potentially eligible Medicare beneficiary multiple times, in a

variety of ways. Whether there are 300 or 3 million people, Social

Security’s job is the same—find them. Find them where they live,

find them in the communities where they work, find them in any

way we can. Our message is simple: if you could possibly benefit

from this program, Social Security will help you apply.

For more detail on the many avenues Social Security has used

to reach and inform low-income Medicare beneficiaries about ‘‘extra

help,’’ for example, the multiple targeted mailings, telephone calls,

and targeted events, I refer you to our written testimony.

Today, however, I would like to focus on a new initiative. I am

pleased to talk about a new strategy in our continuing efforts to

inform the public about ‘‘extra help.’’

This outreach initiative, themed ‘‘Show Someone You Love How

Much You Care,’’ is designed to inform relatives and caregivers—

the sons, the daughters, the grandchildren, family friends—who

count a Medicare beneficiary among the important people in their

lives.

By specifically focusing on these caregivers, Social Security hopes

to reach even more individuals who could be assisted through the

‘‘extra help’’ program. At the end of April, the Commissioner met

with the advocacy organizations that SSA has been engaged with

as partners over the last 3 years to ask their assistance in this new

strategy. I have already seen this strategy on a number of their

websites.

8

We are launching the strategy this week, around Mother’s Day,

as we celebrate some of the special people in our lives. This year,

we are asking that people show someone they love how much they

care by learning about ‘‘extra help’’ that is available with Medicare

prescription drug costs. We are asking them to take a further step

to help those loved ones apply.

This week, Social Security employees around the country will be

visiting flower shops, restaurants, and places of worship to make

information about ‘‘extra help’’ available. I personally will be visiting one of the largest African American churches in Jamaica,

New York on Mother’s Day, and I have filmed TV spots publicizing

‘‘extra help’’ for NBC’s local consumer reporter.

I have seen the activities from around the Nation. My colleagues

and their staffs are actively engaged. Social Security also intends

to publish related articles in the media and be on local TV throughout the Nation.

Outreach efforts also include distribution of a special pamphlet

entitled ‘‘This Mother’s Day Show Someone You Love How Much

You Care,’’ and we made this phamphlet available to all the congressional staff as well.

The campaign will continue throughout the year with a second

series of targeted events scheduled for Father’s Day. Your offices

should be receiving these pamphlets. We are very excited about

this new initiative, its timing on Older Americans Month, and its

prospects for assisting low-income Medicare beneficiaries.

In addition, Social Security has made a special effort with CMS

to reach those beneficiaries who lost their deemed status in January, 2007, and to have them file for the ‘‘extra help.’’

Of the approximately 630,000 individuals affected, 247,000 have

applied for ‘‘extra help’’ and 168,000 are eligible. This is in addition

to those that the States have re-deemed.

Social Security is currently personally calling 188,000 of those

beneficiaries who have not yet filed for the ‘‘extra help.’’ Almost

850,000 beneficiaries have filed for ‘‘extra help’’ this fiscal year.

About 200,000 of those filings were unnecessary because the applicant was automatically eligible or they had filed more than once.

Based on these filings, about 350,000 individuals are eligible for

the ‘‘extra help.’’ We continue to receive about 30,000 applications

every week, or over 100,000 a month.

In conclusion, I want to express to this committee my personal

thanks for your continuing support for the Agency. I can assure

you that the dedicated employees of Social Security will continue

to do our very best, not only in administering the ‘‘extra help’’ program, but also in providing our very important traditional services

to the American public.

We realize that our job is not complete, and we continue to look

for ways in which we can reach those in need. We look forward to

our continuing dialogue with organizations, advocacy groups, and,

of course, this committee.

Thank you. I am glad to answer any questions that you may

have.

The CHAIRMAN. Thanks, Ms. Disman.

[The prepared statement of Ms. Disman appears in the appendix.]

9

The CHAIRMAN. Ms. King?

STATEMENT OF KATHLEEN M. KING, M.A., DIRECTOR, HEALTH

CARE, GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, DC

Ms. KING. Mr. Chairman, Ranking Member Grassley, and members of the committee, thank you for inviting us here to testify

today.

As you know, the Medicare Modernization Act moved the drug

benefits of dually eligible Medicare and Medicaid beneficiaries from

Medicaid to Medicare, effective January 1, 2006.

The CHAIRMAN. Ms. King, do you have a copy of that slide in

your materials here?

Ms. KING. I do. It is on page 5 of my testimony.

The CHAIRMAN. All right. Thank you.

Ms. KING. You asked us to do some work on this, and we focused

on the continuing challenges of enrolling new dual eligible beneficiaries into the Medicare Part D drug benefit.

My remarks here today are going to focus on a couple of the excerpts from my report. Specifically, I am going to focus on the process of enrolling new dual eligible beneficiaries and the effects of the

retroactive coverage policy.

As you know, dual eligible beneficiaries are a vulnerable group

because they are poorer, sicker, and have higher health care expenses than other Medicare beneficiaries. In recognition of this, the

Congress, in transferring drug benefits from Medicaid to Medicare,

required CMS to auto-enroll dual eligible beneficiaries into a Medicare Part D drug plan if they had not enrolled themselves.

Here is where it gets a little complicated, because I want to talk

about two different types of dual eligible beneficiaries. The first

group is people who are Medicare-eligible first and then they become eligible for Medicaid as a result of incurring high health care

expenses or spending down their income. They constitute about

two-thirds of the new dual eligible beneficiaries.

The one-third group is people who are eligible for Medicaid first

and then they become eligible for Medicare by virtue of turning 65,

or ending the waiting period for Medicare benefits through disability. I am going to come back to that.

This chart that I show you here, I am not going to spend a lot

of time on this, but I wanted to show it to you because it shows

you the complexity of what is involved in the enrollment process

for a dual eligible beneficiary.

It involves multiple partners. It involves SSA, all the State Medicaid agencies, CMS, and the prescription drug plans. So, it is quite

complicated, with steps going back and forth. It is explained in

more detail in our report.

The process involves many steps. I am going to show you another

chart now, equally complicated.

The CHAIRMAN. I hope this is not a trend. [Laughter.]

Ms. KING. No, this is it. This is on page 7 of my testimony. I

wanted to show you the effect of that on a hypothetical beneficiary.

We estimated that it takes about 5 weeks for the enrollment process to be completed because of all the drug interchanges. This procVerDate 11-MAY-2000 14:38 Nov 05, 2008 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 44329.000 SFIN1 PsN: SFIN1
10

ess has different effects depending on how you became a dual eligible.

For the two-thirds of people who were Medicare-eligible first and

then became eligible for Medicaid, they are likely to experience

some problems in accessing their drug coverage because not all the

parties are informed about their enrollment and what their drug

coverage is.

For the one-third who were Medicaid-eligible first and became eligible for Medicare, CMS instituted a process during 2006 to complete their enrollment process before they became Medicare-eligible. The key point about this is, these beneficiaries are Medicareeligible, as known in advance, because we know when they are

going to turn 65 or when they become Medicaid-eligible. So those

people’s enrollment process is smooth.

The other thing I want to talk about, and I do not have a chart

on it even though it is complicated, is the retroactive coverage policy. CMS decided, for new dual eligible beneficiaries, to set the retroactive coverage policy effective the first date of Medicaid eligibility.

So you have the approximate 5-week gap of the enrollment process and then, under State law, most beneficiaries are entitled to an

additional 3 months of retroactive coverage. So you have, give or

take, 5 months when people are eligible for coverage and they do

not know that they have it.

We have estimated that CMS paid approximately $100 million to

PDPs for people in this group, but we do not know how many people took advantage of this coverage because, in order to do so, you

would have to know after the fact that you were eligible and have

to have saved your receipts, or in some other way claim reimbursement for it. During 2006, CMS did not inform beneficiaries of their

right to this retroactive reimbursement.

In March of 2007, they sent out the notice telling people of it. So

they have taken steps to do that, but it still requires beneficiaries

to know about it and to take active steps to claim reimbursement

for those funds.

We have made recommendations to the agency on parts of this,

and they have adopted one of our recommendations, which was to

inform beneficiaries of their right to reimburse. We have also recommended that they track the number of people who are eligible

for retroactive coverage and track the reimbursements.

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

happy to answer any questions.

The CHAIRMAN. Thank you, Ms. King.

[The prepared statement of Ms. King appears in the appendix.]

The CHAIRMAN. Ms. Bovbjerg?

STATEMENT OF BARBARA D. BOVBJERG, M.A., DIRECTOR,

EDUCATION, WORKFORCE, AND INCOME SECURITY, GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, DC

Ms. BOVBJERG. Thank you, Mr. Chairman. Mr. Chairman, Senators, I appreciate being invited to speak today about SSA’s

progress in signing up individuals for the Medicare Part D lowincome subsidy.

11

SSA is charged with publicizing the subsidy, taking and evaluating applications, and determining participants’ continuing eligibility. Although my written statement includes information on

SSA’s processing of the subsidy applications, due to your interest

in outreach, I will focus orally on their progress in identifying eligible individuals and soliciting applications. My statement today represents work still in progress for this committee.

SSA began its outreach in May, 2005. It sent targeted mailings,

which included an application form, to almost 19 million individuals identified as potentially eligible. SSA contractors then made

phone calls to more than 9 million of those individuals who did not

respond to the initial mailing.

SSA also conducted other follow-up efforts, including sending notices to individuals they could not contact by phone, as well as contacting members of specific subgroups, such as non-English speaking individuals and those over 79 living in high poverty areas.

Also, in partnership with other government agencies and with

advocacy groups, SSA conducted more than 76,000 events at senior

centers, churches, and other community centers. As of March, 2007,

SSA’s efforts had resulted in approximately 6 million subsidy applications, of which more than 2 million were approved.

Whether this result represents success has been questioned;

there are no reliable data on the number of people who would qualify for this subsidy in the aggregate, so it is difficult to know

whether the number of approved applications represents most of

those who are eligible or a relatively smaller part of that group.

We collected estimates that ranged from 5.6 to 6.9 million individuals who might be eligible for the subsidy, suggesting that the

current number of approved applications covers between 30 and 40

percent of that eligible population and that roughly 3.4 to 4.7 million individuals remain eligible but did not apply.

If we assume that these estimates of the eligible population are

in the ballpark, this record compared somewhat favorably to the

first 2 years of the Food Stamp program, another means-tested program requiring outreach.

However, multiple barriers impede effective outreach. Even

though SSA’s original mailings to 19 million people were an overestimate of the eligibles and likely went to every individual who

could possibly be eligible, why did relatively few apply?

In the course of our work, we heard that many of these individuals may have been confused by the application and did not understand that the subsidy application and the Part D enrollment application were two different things. Also, some individuals may

have been reluctant to apply because they did not want to share

their personal financial information.

For the future, targeting the remaining eligible individuals for effective outreach will be difficult. Resources are not available to provide direct and personal contact to the 12 million people who received letters and did not apply, and millions of these individuals

are not, in fact, eligible anyway.

But SSA cannot target the subset of that population who are

likely to be eligible because data to identify them more specifically

are not available. SSA believes that tax data held by the IRS could

help. Even if many lower-income individuals do not, in fact, file tax

12

returns, SSA believes that it could at least use asset information

from the Form 1099 to eliminate some ineligibles from their list.

However, by law, IRS cannot provide such information without

specific authorization from Congress. Further, IRS staff expressed

doubts that tax information would provide meaningful targeting

help.

Those who suggest that SSA go door-to-door to reach potentially

eligible individuals are seeking activity that may be unrealistic for

them to carry out, with other important responsibilities and limited

resources, especially if they cannot target their outreach more precisely.

To conclude, SSA has made a creditable start in encouraging eligible Americans to apply for the Part D low-income subsidy. While

it is not clear how best to reach the remaining eligible individuals,

the momentum of the initial outreach campaign should not be lost.

Better information on who is or who is not eligible could help,

and we encourage SSA and IRS to work together to evaluate the

true utility of tax data for targeting outreach efforts. Knowing

whether, and to what extent, the tax data would be useful would

both settle the inter-agency argument and would inform a decision

on whether to provide SSA with access to tax records.

Until we know for sure that the use of such data will not help,

we will continue to wonder if we could have reached more individuals more quickly if such information were available. The subsidy

program, and those eligible to receive it, really deserve no less.

That concludes my statement. I am happy to answer questions

about any of that, and my written testimony.

[The prepared statement of Ms. Bovbjerg appears in the appendix.]

The CHAIRMAN. Sure. I deeply appreciate that, Ms. Bovbjerg, and

also the statements of all four of you.

I would like to begin with you, Ms. Block. The question really is

what CMS is or is not doing about marketing abuses by private

plans.

I am sure you saw today’s New York Times, the lead editorial,

a very stinging rebuke basically against your agency about not

doing a proper job in protecting against marketing abuses by some

of the plans, and, I would guess, especially, private fee-for-service.

Obviously, it is your agency’s responsibility to make sure that the

plans engage in proper practices. It is your job to make sure that

beneficiaries know their rights when they are the subject of all of

these marketing practices, know their rights in appealing, whether

a plan does or does not contain the right prescriptions, and so

forth. So, I would like you to tell me what you are doing about all

this.

But, first, I want to ask you a series of questions. How many

plans are there under your purview? The number of plans.

Ms. BLOCK. Well, it depends on how you count.

The CHAIRMAN. The number of plans that basically, in one way

or another, provide prescriptions under Part D.

Ms. BLOCK. There are, I would say, about 400 sponsors.

The CHAIRMAN. About 400.

Ms. BLOCK. Yes.

13

The CHAIRMAN. The next question is, how many of those did you

approve and how many have been disapproved?

Ms. BLOCK. Well, all of them were approved or they would not

be participating in the programs.

The CHAIRMAN. Did you disapprove any?

Ms. BLOCK. In the initial application.

The CHAIRMAN. During the year since the law has been in effect,

has CMS disapproved any plans?

Ms. BLOCK. We have, so far as I know, not disapproved any application.

The CHAIRMAN. And why would that be?

Ms. BLOCK. We have provided, in some cases, notices of intent

not to renew certain plans.

The CHAIRMAN. But have there been any instances where you

considered not to approve a plan?

Ms. BLOCK. Well, in any instance where there has been an issue,

we have been absolutely assured that the plan met all of our requirements before they were approved for participation.

The CHAIRMAN. But you have not disapproved any plans?

Ms. BLOCK. I need to go back and verify that.

The CHAIRMAN. But you are the Director.

Ms. BLOCK. I want to ensure that I give you an accurate answer.

The CHAIRMAN. And you, who oversee this program, have to go

back to check to see whether any were disapproved?

Ms. BLOCK. It is not typical that we would disapprove plans in

the application process. We go through a rigorous process. If a plan

does not appear to be meeting our requirements, we notify them of

all of their deficiencies and make very, very sure that, before they

receive final approval, they have cured any deficiencies that we

have identified. So we have gone through that process, certainly,

with some applications.

The CHAIRMAN. Right. I understand that. What about once the

plan has been approved? What oversight and regulatory actions do

you take with respect to plans that have been approved to see

whether or not they are conducting or not conducting abusive marketing practices?

Ms. BLOCK. There are numerous processes in place, including

audit processes. But in terms of marketing abuse, in addition to

the secret shopper program that I just mentioned——

The CHAIRMAN. Which you just have done recently. That is not

an ongoing practice, is it? You have just started that.

Ms. BLOCK. Well, we have been doing it for the last several

months——

The CHAIRMAN. How long has this program been in effect?

Ms. BLOCK [continuing]. And would hope to continue it as time

goes on, since it has proven to be very useful and the results have

been very helpful.

The CHAIRMAN. Have you taken any disciplinary action against

any plans?

Ms. BLOCK. We have taken action in terms of working with plans

to provide us with corrective action plans where we find that they

are not meeting requirements. There are numerous cases under investigation through the Program Integrity program where the

MEDICs that we contract with——

14

The CHAIRMAN. Just give me a rough sense of how many plans

have you taken disciplinary action against, and if you can be more

precise in describing to us what those disciplinary actions are.

Ms. BLOCK. Well, disciplinary actions range from warning letters,

to corrective action plans, to civil monetary penalties.

The CHAIRMAN. And then roughly how many would that be over

the course of the program?

Ms. BLOCK. Over the course of the program there have been hundreds and hundreds of actions taken. Most are resolved at the

warning letter stage. There are a number of plans under corrective

plans at the moment, and we are monitoring those very closely.

We are working very closely with the States in terms of alleged

marketing violations. We have worked with plans to ensure that

they have, in fact, terminated their contracts with brokers or

agents who are in violation of the contract.

The CHAIRMAN. You raise a very good point about States, because the law took regulation away from insurance commissioners

and put it in your lap. You have lots of insurance commissioners

who would chomp at the bit to clamp down on abusive marketing

practices.

So, that raises several questions. One, should the law be

changed? Why shouldn’t the States that would like to have the traditional role of overseeing insurance plans not go back and take a

little closer look at them? And short of that, what can you do in

the interim with States to assure that seniors are not being taken

advantage of?

Ms. BLOCK. Well, the States still have jurisdiction over the licensed agents, and we require all plans to use only State-licensed

agents. So the States do have jurisdiction.

What we have done is established this policy of signing memoranda of understanding and we have, I believe at this point, about

19 States that have already signed that memorandum, and we are

looking forward to more of them signing the memorandum so that

we can have a free interchange of information with the States

about allegations of non-compliance. And where those allegations

rise to the level of fraud or abuse, they are then referred to appropriate law enforcement.

The CHAIRMAN. All right. My time is expiring. But as you know,

under State law, the States can only look at the agents. They have

no jurisdiction over the plans themselves. That is a huge problem.

Frankly, I think plans, like private fee-for-service, are taking advantage of that.

My main point is, I just do not get the feeling that CMS is rigorously protecting seniors. I do not get that feeling at all. This hearing is an oversight hearing to see what is or is not working with

the program, and frankly there is a very deep sense that CMS is

not sufficiently scrutinizing private plans who get a pretty big

bump in income, in reimbursement, and especially private fee-forservice.

But the number of private fee-for-service plans has gone up 40

percent—40 percent—since the inception of the plans. As you

know, there is less control over them, fewer obligations for them,

that there is compared with, say, HMOs or other plans. They are

basically renegade plans. I am surprised CMS is not doing someVerDate 11-MAY-2000 14:38 Nov 05, 2008 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 44329.000 SFIN1 PsN: SFIN1
15

thing about that. I am very surprised, frankly, because it is your

job to oversee this.

Senator Grassley?

Ms. BLOCK. I would like to assure you we are doing everything

we possibly can.

The CHAIRMAN. Well, my personal view is——

Ms. BLOCK. And will continue to do more.

The CHAIRMAN. My personal view is, more needs to be done.

Senator GRASSLEY. Along the lines of what the Chairman just

said, I would just simply add that when we set up that the government is going to approve these plans before they can solicit membership from seniors, that the government, and specifically the Department of Health and Human Services, ought to be seen as kind

of a good-housekeeping seal of approval in every respect, that not

only does a plan meet the basic requirements of what the law does,

but that plans are going to operate in a business, ethical, good procedure way so that bad marketing practices do not happen, so that

when pharmacists are owed money by plans that they see that they

get their money. That is why we got the government involved in

that. Now, I am not going to go down that road any further, because I think the Chairman has done a good job.

Ms. Block, I want to ask about the $100 million that GAO referred to in 2006. Plans have been told that they must pay claims

back to those effective dates. From what I have heard, that has not

happened. A pharmacy in Iowa said that they have not received

any payments for some of their dual eligible beneficiaries, even

though the plan should pay them. That is bad for the program, and

bad for dual eligibles.

It is one of these things that we ought to be able to take for

granted, because a plan has had the government’s approval to operate, along the lines of what Chairman Baucus has been spending

his time on today.

Now, how are beneficiaries and pharmacies notified that Medicare covers these claims and how to submit them for payment?

How does CMS make sure that prescription drug plans pay these

claims?

Ms. BLOCK. Well, as GAO just reported, formal notification was

added to the letter that informs the beneficiary that they have now

become eligible in March. Prior to that, however, that information

was readily available through the various support groups and advocacy groups that work with beneficiaries, and the plans have

known, and know very clearly, that they have responsibility for

paying those claims.

So, if there are situations where pharmacists have not been paid,

I would like to hear the specifics, and we will absolutely look into

it and make sure that all payment that is due and owed will be

properly paid.

In terms of the inherent situation, there are really two choices.

The GAO report does not make a recommendation that we change

our procedures and policy in that regard because the choices are,

you either have this retroactive situation or you have a gap in coverage, and a gap in coverage is simply not acceptable. So, we have

chosen to have the retroactive coverage situation.

16

What we have committed to do, once all of the claims are in for

the year, is to go through those claims and see, in fact, whether

the retroactive claims are being paid when people had eligibility

retroactively.

But I do want to say that it is not unusual in the Medicaid program for coverage to be allotted retroactively, and so we really do

believe that Medicaid beneficiaries understand that they have this

eligibility, that they are entitled to coverage, and we will do everything in our power to make sure that the plans are, in fact, paying

properly.

Senator GRASSLEY. In the first instance, do the plans have the

responsibility to notify these beneficiaries about that?

Ms. BLOCK. Yes, they do.

Senator GRASSLEY. They have that responsibility?

Ms. BLOCK. They have that responsibility. They are required to

notify them, and we are now notifying them as well.

Senator GRASSLEY. All right.

Ms. King, along the lines of the discussion we have just had,

since it is your study that brought this out, can you discuss any

recommendations that the GAO may have to make sure that plans

pay claims that they are responsible for?

Ms. KING. Senator Grassley, we have recommendations in the report along the lines of notifying beneficiaries of their right to reimbursement. We would like to see a little bit more in terms of what

steps you have to go through in order to claim reimbursement, and

we recommend that CMS track the number of people, the number

of months, and the payments.

Senator GRASSLEY. All right.

The CHAIRMAN. I will give Senator Grassley more time here.

Does CMS have within its power the authority to say to a plan

that, first, we want evidence that you have actually paid this subsidy, the retroactive subsidy, to the beneficiary, and then we, CMS,

will reimburse you, the plan? Why can the burden not be more on

the plan rather than the burden on the bureaucracy of the Federal

Government?

Ms. BLOCK. Well, the plan can only pay when they know that

there is a claim due. Unless they know there is a claim due, there

is no way they can pay.

The CHAIRMAN. If they know there is a claim due, then CMS will

reimburse the plan once the plan knows the claim is due and the

plan then makes the payment to the beneficiary.

Ms. BLOCK. The plan should know before CMS knows, because

the only way that a claim can occur is for the beneficiary to go to

a pharmacy and fill a prescription. When they do that, a claim is

submitted to the plan, so the plan would know well before CMS

could possibly know that there is a claim.

The CHAIRMAN. We are talking about retroactively. They already

know about the drugs because we are talking about retroactive

payments. We are not talking about initial, we are talking about

retroactive. I am just curious.

Ms. BLOCK. The only way that either the pharmacist, CMS, or

the plan could know about a retroactive claim is if the beneficiary

submits that claim.

17

The CHAIRMAN. I am just suggesting you put the burden on

somebody else to get the job done.

Go ahead, Senator.

Senator GRASSLEY. This is going to be my last question. It is a

follow-up on the first series of questions that Senator Baucus

asked.

CMS said that it is considering a number of additional requirements for the marketing of private fee-for-service plans. What are

those requirements, and why did CMS not just adopt those requirements? In other words, why the waiting period?

Ms. BLOCK. Actually, Senator, there is no waiting period. We

have adopted those requirements and we will be issuing follow-up

guidance that makes very clear what the requirements are.

The reason it was worded that way in the Call Letter is that we

did not intend that list to be all-inclusive and we wanted to leave

open the possibility that, in addition to the requirements that we

spelled out in the Call Letter, we might, in fact, add requirements.

The requirements are very specific. They are that plans will have

to document clearly the education process that they have put their

brokers and agents through to ensure that they understand all of

the requirements of the Medicare program, in addition to the particular aspects of the product that they are selling.

The CHAIRMAN. All right. Thanks, Ms. Block. Thank you.

Senator Bunning, you are next.

Senator BUNNING. Thank you, Mr. Chairman.

Senator Grassley, in your opening statement—there were more

than two votes for this program when it went past the committee.

Senator GRASSLEY. As I made the statement, I sensed your

grumbling about saying that Senator Baucus and I wrote the bill.

What I should have said is, we were the chief negotiators of it.

Senator BUNNING. The chief negotiators.

Senator GRASSLEY. Sorry I offended you.

Senator BUNNING. No, no. That is all right, Senator Grassley.

But there were a lot of us advocating this bill when it went past

the committee, and I want the witnesses to realize that.

I have some questions for Social Security and CMS. The Medicare drug benefit has been a success, and we all know it has been

a success. Ninety percent of beneficiaries at least have coverage of

some kind, most—80 percent—are satisfied, and seniors are saving

money each month.

However, it is troubling to me the continuing problem some beneficiaries are having when they try to have their drug payments

withheld from Social Security checks. The caseworker who works

my cases in Kentucky said it took 8 to 9 months to finally get one

case solved, and she has cases open since last December that still

cannot get fixed.

Do you understand what I am saying now about the payments

that either Social Security is withholding and they are not paying

the benefit and someone is not getting paid in the process? That

is unacceptable, that time frame. Would you like to comment, Social Security or CMS, on this issue?

Ms. DISMAN. Well, let me start talking about it. We share your

concern. As a Regional Commissioner, I deal daily with beneficiaries who are experiencing some of the problems that you have

18

outlined. We take it very, very seriously, the adjustment of people’s

benefit checks. As a matter of fact, I have brought a staff person

with me into Baltimore who is doing the same type of casework

that you talk about.

But Social Security is really at the end of receiving all the data.

The data starts with the PDP, it goes to CMS, and then has to

come to Social Security. When we get data, we do give CMS the

response within 2 days. I think the issue that you are talking about

right now, I can talk about 2007 data.

When we are looking at the data that we are receiving for 2007,

the problems we had identified in 2006 really do not exist with the

data in 2007. But I would have to turn it to my colleague at CMS

who is in the midst of a reconciliation for 2006. They are currently

looking at that, and I would have to turn it to her to talk about

that.

Ms. BLOCK. Well, I would like to say, first, that we not only

share your concern, but we at CMS feel as strongly as SSA that

this is a problem that we have to solve and that we have to solve

quickly. So the concern is real, and I have dedicated staff who

spend all of their working hours, all of their waking hours, on this

problem.

Senator BUNNING. What I would really like for you to do is give

us an update on where the problem is and where we are in solving

it.

Ms. BLOCK. I would be happy to do that.

Senator BUNNING. All right.

Ms. BLOCK. We are, at this point, almost at the end of the first

step in solving the problem, which is to go through enrollment reconciliation so that we can be 100-percent certain that we have

every beneficiary in the correct plan. Because of some of the startup problems in 2006, we had situations where beneficiaries are not,

in the record, necessarily in the plan in which they should be enrolled.

Senator BUNNING. Thank you. I want to ask some more questions

because I am very limited in time.

For Social Security, it sounds like Social Security is making

every effort to find people who are eligible for low-income assistance and get them to apply. That is certainly a great goal.

However, according to your testimony, it looks like there are

quite a few who have applied but are not eligible. Is there a fear

that having to deny so many individuals might cause frustration

with the program?

Ms. DISMAN. Well, the question that we are looking at is, because

many States require people to file—the States that have State

Pharmaceutical Programs—to have a decision from Social Security

that they are not eligible before they get the State program. You

have a variety of reasons why people are filing. But as GAO has

indicated, we keep reaching people multiple times, multiple ways.

People are in the communities and in the streets to really reach

people.

Now, it is very interesting. We have done a number of surveys

talking to people, because we have actually made some personal

phone calls on a number of things that we have done. For example,

when we had people who were eligible for the $600 credit for the

19

discount card, we actually followed up with that population because

we thought that population would be a very, very important population that might really be eligible for the low-income subsidy.

It is very, very interesting. Thirty-one percent of the people we

spoke to said they had too much income or resources or they just

were not interested.

Senator BUNNING. They are not qualified?

Ms. DISMAN. They are not qualified. And we have done a number

of these, so that is why our focus is to try to identify those, again,

that could be potentially eligible and to keep reaching out in a variety of ways.

That is why we really have the campaign now, which we have

done before, but very specifically, to go to the caregivers and have

the sons, the daughters, the grandchildren, to try to reach out. And

one of the reasons we are doing it around Mother’s Day is because

places of worship are one of the biggest places where mothers go

on Mother’s Day. So, that is why many of us are doing this particular outreach at this time.

Senator BUNNING. Thank you.

The CHAIRMAN. Thank you, Senator.

Senator Bingaman?

Senator BINGAMAN. Thank you all for being here. I appreciate it

very much.

Let me ask a few questions also about this low-income subsidy

program. The two big problems, as I see it, are that, first, we need

to change the assets test. I think it is too low. I have been getting

opinions on that. But even without changing it, it seems to me

there ought to be ways that we can get more people who are eligible to qualify or to participate in the program.

First, let me ask on the first question that I raised there about

possibly needing to change the system, Ms. Disman, as I understand it, SSA has evaluated the asset levels of a sample of lowincome subsidy applicants who were ineligible because their assets

exceeded the statutory limit.

Could you give us any information about what percentage of

those applicants were over the statutory asset limit, and if so, how

much they were over it?

Ms. DISMAN. Yes. We had conducted a number of studies because

we, too, were interested in determining why individuals were not

eligible for the ‘‘extra help,’’ so we actually did some sampling at

various periods of time.

And if you looked at the samples that we conducted, we basically

found that when you looked at denials for what I call just assets

or resources, that alone was about 42 percent of the samples that

we conducted. There was an additional 6 percent that were ineligible for income and resources.

Now, it is very, very interesting, when you look at our application, and when we developed this application, because of the need

for mandatory filing for a lot of States and for other purposes, we

actually have a screen-out question.

So when you look at the resources themselves, there’s a question

that says: Do you have more than the amount for an individual and

for a couple that might not make you eligible, and we give the resource limits there as well.

20

And basically, 65 percent of the people who were denied for resources answered that question that they themselves had too much

in resources and they wanted a decision. When they do that, we do

not get data on the very specific amount of resources. So in looking

at that type of thing, we have checked, at that point, some of IRS’s

records to say, do you really know that these people know what

they are talking about?

And I have to tell you, when we did the sampling of the records,

it was evident that people really had the resources that they indicated, because we were able to impute interest income and other

kinds of assets to determine it. I do not have the exact amount

with me, and I can provide that for the record, but we did have the

exact amount that they exceeded the asset test.

Senator BINGAMAN. All right.

[The information appears in the appendix on p. 88.]

Senator BINGAMAN. Let me ask on this second point about, even

if we are not able to change the assets test, the assets test essentially says that, if you have anything significantly over $10,000 as

an individual in total assets, excepting your house and your car,

you are ineligible for the low-income subsidy. It is about $20,000,

a little over $20,000, for a couple, as I understand it.

Even if we are not able to change that, Ms. Bovbjerg, you have

talked about the problems that you have encountered in signing

some of these people up or getting people who are otherwise eligible.

The figures that I have are, there are between 3.2 and 4.2 million individuals who remain eligible, but unenrolled, in the lowincome subsidy. Or, stated differently, only between 35 and 42 percent of low-income subsidy-eligible individuals who had to affirmatively apply for the benefit are actually receiving the benefit.

Do you really think that getting this thing fixed with the IRS

would be a substantial step forward so that they would give you

the information they have about people’s incomes?

Ms. BOVBJERG. We do not know. The concern that we have at

GAO is that this is an unacceptable situation where SSA believes

that these data would help, and certainly SSA cannot go door-todoor finding 12 million people, they need to be able to narrow that

down. IRS thinks that it will not help.

We think: so take a look. Figure out to what extent the use of

these kinds of data might assist Social Security’s effort. Just to rule

out data sharing because informed staff at the IRS think it might

not help did not seem to us to be very conclusive.

Senator BINGAMAN. So you think we should lean on the IRS to

at least look at the issue and try to make a more informed determination as to whether this would help?

Ms. BOVBJERG. Yes. We have not completely finished our report,

but we are considering a recommendation that IRS work with SSA

on this to make sure that they are approaching it in a way that

would be helpful to SSA, to see whether it would assist. We

thought, at the very least, it might help with these estimates of the

total population as well.

Senator BINGAMAN. Thank you, Mr. Chairman.

The CHAIRMAN. Senator Salazar, you are next.

21

Senator SALAZAR. Thank you very much, Chairman Baucus and

Ranking Member Grassley, for holding this hearing.

I have a question for Ms. Block to begin with, and that has to

do with rural pharmacies and the timeliness and adequacy of reimbursement for rural pharmacies. At the beginning of the implementation of this program, Senators Baucus, Grassley, and a number

of us on this committee, as well as a whole host of other Senators,

wrote a letter to CMS about what was happening with rural pharmacies and the timeliness of the reimbursement rate.

Me, I come from what is one of the four poorest counties in the

United States of America, and I have seen what has happened at

some of these rural pharmacies as they have had to close up for

a number of different reasons.

But one of the reasons that I hear from some of these pharmacies

out in rural America is that there has been a lack of timeliness in

terms of the compensation that is required.

So my question to you is, why has CMS not moved to essentially

direct the providers here to provide the reimbursement in a

timeline that is less than 30 days, and to do it electronically so that

these pharmacies are getting the reimbursement that they are entitled to?

Ms. BLOCK. Well, I think, Senator, that we have, in fact, shared

the concern of rural pharmacists and have addressed every situation that has been brought to our attention.

Wherever a pharmacist believes that they have not been paid in

accordance with the provisions of their contract with the plan, we

have investigated the situation, and where we find that the complaint is justified, we have taken appropriate action with the plan

to ensure that they are, in fact, complying with all of their contractual obligations.

Senator SALAZAR. Let me ask you this question. The reality of it

is, if CMS had a directive in terms of a requirement that reimbursement be done electronically within, say, 15 days, whatever

the appropriate timeline would be, it probably would be much more

effective in terms of getting the result as opposed to just dealing

with the grievances that come up from a pharmacist who is not

getting paid on a particular basis. So does CMS have the authority

to do that now?

Ms. BLOCK. Well, in terms of our relationship contractually, we

contract with, as you know, the plans that participate in the program. The contracts with pharmacists are subcontracts of those

prime contractors. It is not typical in my experience, both in the

commercial world, in the FEHB world where I used to work, or in

the Medicare world, for a government agency to have that kind of

influence or direct involvement in subcontracts with a prime contractor.

What we do say, however, is we do have very specific requirements that the provisions of the contract, including the payment

provisions and the timely payment provisions, have to be clear,

that pharmacists have to know what they are, and that plans must

meet their contractual requirements. So wherever they do not——

Senator SALAZAR. But let me just say this, Ms. Block. I do not

think that the rural pharmacists who are complaining to me in the

little towns of La Jara, Oak Creek, and a whole host of other places

22

in my State feel that they are being dealt with adequately by the

government.

At the end of the day, these are government taxpayer dollars

that are going to reimbursing these pharmacies. So essentially escaping the way you are by saying, well, this is a matter between

the provider and the pharmacist, is not good enough for me.

One of the things I want to work on with this committee is to

make sure that this program is also working for these local pharmacists who are way out in the rural areas.

Let me ask both you, and if I can, Ms. King, a question. Frankly,

I think there is a lot of confusion still with Medicare Part D. It is

something that I think we are going to have to deal with over a

long period of time. But the morass that you showed us in the two

charts with respect to the dual eligibles, Ms. King, I think, is one

example of this.

So what would be, in a very summary form, your recommendation in terms of at least how we try to create a clear picture from

the morass that you described in the two charts that you testified

on?

Ms. KING. Senator, I wish I had an easy answer. But part of the

problem that comes with the process is, it is more complicated because it involves so many partners: SSA, State Medicaid agencies,

CMS. The plans all have to participate in it. And because of the

short length of time between enactment and implementation, CMS

had to use its existing systems to piece together this thing, and

they do not operate in real time. So, that is what is causing some

of the delays, the number of people and the complexity. In terms

of that, we did not identify a quick fix to that.

Senator SALAZAR. I appreciate that comment. Let me just make

one quick comment, if I may, Mr. Chairman. If I am a senior and

I look at Medicare Part D, we have information coming back that

says we are at a higher degree of satisfaction, obviously, than we

were a year ago. If I look at my State, I think we have 55 plans

that are out there under Medicare Part D.

If I sat down for a few days maybe I could try to figure that out,

but I wonder how it is that the half million or so seniors whom I

have in my State can honestly understand the complexity of what

we are providing them with, and how they sort through the plans

and figure out which one makes the most sense. So I think, whatever we end up doing in terms of trying to simplify this program

that this committee worked on so hard, is something that is very

important for all of us.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Senator. I appreciate

that.

Senator Lincoln?

Senator LINCOLN. Thank you, Mr. Chairman. I, too, appreciate

you and Senator Grassley bringing us together on this really critical issue. I would like to associate myself with Senator Salazar,

because, representing States that are rural, oftentimes our pharmacists are the only means of contact that some of our constituency

has with a health care provider, in many instances. So, he made

some very, very good points.

23

I know I joined Chairman Baucus last session in introducing a

bill on that, and we are working on another one, to make sure that

our pharmacists out there who really are doing yeoman’s work are

getting fair treatment out of these plans, because we have to keep

them going.

Just, several questions. Ms. Bovbjerg, I was interested in your

conversation in what Senator Bingaman was bringing up in terms

of the asset test, and other things. Are there not other Federal programs—I mean, I think about food stamps. Is there not a way to

streamline some of this in a greater way if the complication is really the sharing of information between the IRS and the Social Security Administration? Have we attempted to look at the other

streamlined processes for other Federal programs?

Ms. BOVBJERG. Well, of course, the problem here is that tax law

prevents IRS from sharing this information. For this purpose, it

would have to be in law. They would have to have the authorization of Congress.

Senator LINCOLN. That is to share the information. But we do

not use IRS records for food stamps.

Ms. BOVBJERG. But in this case, my understanding is that the

1099 forms, which provide information on other non-wage sources

of income, which would be income from assets in some cases, from

pension assets, from bank accounts, might provide a way to derive

which people in this large group are, in fact, not eligible, so SSA

could reduce outreach to people who would apply and then be

found ineligible for the program.

We really think that it is something worth looking at. Our concern was that it was being rejected out of hand because IRS staff

just do not believe that this would help SSA. We did not see evidence one way or the other. We would like to see some.

Senator LINCOLN. Yes. Well, it just seems like there are other

means out there that we might look at that would help us facilitate

that. I mean, obviously there are other Federal programs that we

might go to to at least bring about a hybrid of some type of ability

to get a better response.

I mean, we have had people in the field in Arkansas who have

gone back and actually interviewed the people who were determined before that they were eligible for the low-income subsidy,

and then asked, why did you not, and they said it was just too complicated, there was just too much there.

Ms. BOVBJERG. While it is a complicated application, I know that

SSA has made changes to the application to try to make it more

accessible to people. One of the reasons that SSA was tasked with

taking applications was that it was thought that their network—

their online application capability, the nationwide 800 number,

1,300 field offices—would really have the infrastructure in place to

reach out to people, and there would not be the stigma that might

be associated with getting ‘‘extra help’’ if you go into an SSA office,

a place people are very familiar with.

Senator LINCOLN. Well, I do applaud, and I know that when we

passed the bill I went and did a large number of meetings across

my State, and our regional Social Security administrator from the

Dallas office came and went through all those dog-and-pony shows

with me. They worked very hard in getting that information out

24

and looking at non-traditional ways of getting that information out.

I think your pamphlet is a great idea. I mean, I do think that there

is a lot that they are doing, and I do want to applaud them for

that. So, I guess we will just keep working at it and try to figure

out what works and what does not.

Ms. Block, it is my understanding that the MMA contained language that specifically said a beneficiary could obtain a 90-day supply of medication from their retail pharmacist if they wanted to,

even if the beneficiary had to pay more.

How is CMS interpreting this policy regarding the level playing

field, and can pharmacies dispense a 90-day supply if they want to?

Ms. BLOCK. Yes, they can. It is very, very clear that plans need

to have pharmacies, retail pharmacies, that will, and do, dispense

a 90-day——

Senator LINCOLN. You are just saying they do not all have to.

You are saying that they have to have some that will?

Ms. BLOCK. They must have some that will.

Senator LINCOLN. Well, what if they are not accessible to the patients?

Ms. BLOCK. Well, what we have done is made very clear that, if

we hear of any access problem, we will deal with that problem. I

have to tell you that we have not heard of any such situation to

date, but if you know of any or if anybody——

Senator LINCOLN. We have had some complaints. I have to be

honest with you, the chronic conditions like hypertension and diabetes, we have had some beneficiaries that have had some definite

troubles.

I agree with Senator Salazar. My pharmacies have told me they

are still having problems knowing exactly how much they are going

to get paid by these Part D plans, for generic drugs, particularly,

in their dispensing. What has CMS done to address that issue?

Ms. BLOCK. Well, I have heard the concern. I am not sure specifically why that would be an issue.

Senator LINCOLN. The plans do not tell them. They do not tell

them what they are going to get reimbursed.

Ms. BLOCK. I believe they do. I think the question may be, are

they telling them timely. That is something that I have heard

about and that we are certainly discussing.

Senator LINCOLN. Well, if you have a small pharmacist and they

have invested their own capital in that, not getting it in a timely

way or not understanding what they are going to get is a real problem.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator. Thank you very much.

Senator Schumer, you are next.

Senator SCHUMER. Thank you, Mr. Chairman, for having this

hearing. I will thank all of our witnesses.

Let me just say overall that, while we are getting fewer complaints at my office on Medicare, we are still getting plenty. The

number of plans is greater than ever. For those who had to switch

in 2006, if anything, it was more difficult than in 2005.

Second, long-term care residents face significant challenges in obtaining their medications. Third, the 1–800 number does not seem

25

to be working very well. I am not going to talk about those three,

but I guess I am getting ‘‘amens’’ from the chorus here about that.

I want to talk about pharmacists as well, because one of the

problems is that pharmacists have been asked to shoulder a tremendous load here. In a certain way, they are a little like the people in 9/11. They rushed forward early on when there was a big

mess, and often helped out not only with time and advice, but even

giving people medication without reimbursement.

Now what we hear is, there are all kinds of problems from our

pharmacies. In New York, we have had a large number of pharmacies go out of business, and many of them attribute it to the

problems they have had here. I put in a bill to deal with this, or

co-sponsored a bill, to relieve some of these, including having this

24-hour toll number, a special one, available to pharmacists to

work out problems, and I hope we will implement that.

But I have a couple of questions about it. These are to Ms. Block.

First, you conducted a survey that found that the vast majority of

Medicare drug plans surveyed paid pharmacies within 30 days.

The American Pharmacists Association testified that, in their

study of 59 pharmacists, the pharmacists indicated, on the average,

almost 20 percent of the plans took longer than 30 days to reimburse their pharmacies. So the first question is, how do you account for that discrepancy?

Second—I am going to ask them all at once, there are just three

of them, so you can answer them all—community pharmacists especially rely on prompt and fair payments from the Medicare drug

plans for their livelihood.

The National Community Pharmacists Association says 90 percent of independent pharmacists report their overall cash flow is

worse now than when Part D began, and 33 percent have said they

have considered closing their pharmacy as a result. In the last year

alone, as I mentioned, in my State, 221 independent pharmacies

closed their doors. Does CMS recognize this concern, and what

steps are you taking to alleviate that?

And then a general question: What more can be done to alleviate

our local pharmacies from bearing the brunt of Medicare Part D,

often doing the job that maybe somebody in the government should

be doing? Thank you.

Ms. BLOCK. Well, first, I would like to say that we very much appreciate and understand the work that pharmacists have done and

their contribution to the success of the Part D program. The program could not be where it is today without their contribution, and

we at CMS very much understand and recognize that, so I would

like that to be on the record, first.

In terms of the study you have referenced, sir, I have not seen

it, so I cannot account for it. If I can have a copy made available,

we will absolutely look at it.

Senator SCHUMER. I will get it to you. Do you still believe,

though, that most pharmacists, the vast majority, overwhelmingly

are getting reimbursed within 30 days?

Ms. BLOCK. I do. In every case where there is an assertion that

that is not happening, we investigate it. Any instances where we

have found, in fact, that it was not happening, we have dealt with

it promptly with the plan and will continue to do that.

26

Senator SCHUMER. All right.

Now, what about the general question? Do you recognize that

pharmacies are bearing the brunt here? Do you believe it is a problem that independent pharmacies are closing? What do you think

you can do to help alleviate the general burden on pharmacies with

Part D?

Ms. BLOCK. Well, I have to say that the Medicare prescription

drug program was established as a market-based competitive program, and that is the way it is operating. The arrangements that

pharmacists make with the plans, they make with a clear understanding of the payment provisions, that those provisions may be

different. Certainly I understand that many Medicare beneficiaries,

before Part D, paid cash at retail prices.

Senator SCHUMER. Sorry to interrupt. My time is limited. Do you

see this as a problem, yes or no?

Ms. BLOCK. Well, I mean, this is an economic issue which I do

not believe is specifically a Part D Medicare issue. I think we are

operating in a competitive market.

Senator SCHUMER. All right. I am disappointed to hear that you

do not regard it as the problem that many of us do.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

Senator Wyden?

Senator WYDEN. Thank you, Mr. Chairman.

A question for you, Ms. Block. A growing number of seniors are

getting their Part D benefits through Medicare Advantage plans,

and I have come to feel that not all Medicare Advantage plans are

created equal.

We have some very good ones in my part of the country that

have been out there for years and years—Kaiser would be an example—and then we have some that we have had reports of very

troubling practices, these private fee-for-service plans in particular.

My question to you is, when Medicare started providing private

choices—and it was done with demonstration projects back in the

early 1980s—even then there were a lot of reports that, with these

new approaches, there were going to be people who would try to

rip seniors off and try to take advantage and would perpetrate

fraud.

So it is now 2007. Medicare has had 20 years’ worth of experience in looking at private choices in Medicare. Why is the Center

not doing a better job of anticipating the kinds of problems that we

would see in these new products?

Ms. BLOCK. Well, I want to start by saying we have zero tolerance for ripping seniors off. We have anticipated everything we

possibly can. In our marketing guidelines we have very strict requirements that tell plans absolutely what is acceptable and what

is not acceptable. When plans violate those guidelines, we take action immediately to ensure that they come into compliance. That

is an ongoing process.

I am as concerned and disturbed as you are about some of the

allegations, and to the degree that we can enforce our regulations

and our guidance, we are doing that every day and will continue

to.

27

We are ever-vigilant that this does not occur, that seniors get appropriate information, that they are not in any way misled, that

they understand what they are enrolling in and what their benefits

are, and that they get all the benefits that they are entitled to.

Senator WYDEN. My understanding is, a lot of doctors are confused about these new plans as well. What has been done to help

doctors sort through these? Because in a lot of parts of the country

where doctors do not get particularly well reimbursed under Medicare now, the last thing you need is another headache for doctors

with respect to taking patients. So what has been done to try to

help doctors sort through these private fee-for-service plans and

help seniors?

Ms. BLOCK. I absolutely agree that that is a concern, and it is

something that we are dealing with. We have been working with

provider groups and with hospital associations. We have been putting material and information up on our website so that doctors understand exactly how these products work and what their reimbursement provisions are.

We have, in addition, required plans to make sure that they are

also providing accurate information to providers so that they understand the provisions of that type of product.

Senator WYDEN. I think what troubles me, Ms. Block—and you

have had a long and distinguished career in government service,

and I respect that work—is a lot of this seems to me to be after

the fact, and it could have been anticipated earlier, particularly

these problems with doctors.

After 20 years of understanding this—I mean, I go back to the

Medigap law. I was the principal author of that. We had shoeboxes

full of insurance policies because people were ripping them off. I

think, number one, the government has been slow to deal with

these rip-offs in private fee-for-service plans. I think it has done

harm to the cause of private choices, which I happen to be supportive of, and I want to see it corrected. I hope that there will be

faster movement now to deal with the problems.

I am curious how you are going to do this program of calling people who are going to be new enrollees. My understanding is that

now, with the reports of the abuses flowing in, you are going to

take some additional steps, and that is good. But how are you

going to run this calling program for new enrollees? Is this going

to be after they make their purchase, or is it going to be some other

arrangement? Tell me how that would work.

Ms. BLOCK. Well, it will be before the enrollment takes effect. If

a beneficiary decides to enroll in a private fee-for-service plan, before the plan will be permitted to submit that enrollment to CMS,

before that enrollment ever occurs, the plan is absolutely required

to contact that beneficiary and make 100-percent certain that they

really, first of all, signed the application form, because I have seen

some of the allegations that those forms are actually being forged,

and that of course is criminal and totally unacceptable.

So the beneficiary will have to assure the plan that they have,

in fact, signed the form; that they understand the provisions of the

product; and that this is, in fact, the kind of coverage that they

have chosen.

28

In terms of how that is working now, we have one plan under

a corrective action plan that is already doing this. The requirement

across the board will start in 2008.

But the plan that is already doing this is finding that 50 percent

of those applications are not being submitted because, when that

call is made, they find out that the beneficiary, in fact, either did

not intend to enroll in that plan or did not understand the provisions of the plan.

Senator WYDEN. My time is up. Just one last question on this

point. How long do you anticipate running this program for? I

mean, obviously it is designed to make sure that, in this new and

burgeoning field, that people are more aware. Do you anticipate

running this from 2008 to 2010, or indefinitely? How long do you

see it running?

Ms. BLOCK. At this point, indefinitely.

Senator WYDEN. All right. Thank you.

Thank you, Mr. Chairman, for the extra time.

The CHAIRMAN. Thank you. Thank you, Senator, very much.

Clearly, Ms. Block, we want to make this program work, and

there are a lot of questions about it not working as well as it

should.

Here is a question that has come up often. I know you have

heard about it, and I would like your response. That is, seniors

signed up for the plan. They have to stick with it for a year. The

plan, mid-term, changes its formulary. They can change, seniors

cannot, causing confusion, at the very least, for doctors, for seniors.

Off the top, that seems unfair to seniors.

Clearly, I can see why a plan may want to change. They, midyear, find a cheaper substitute, maybe generic. It saves money, but

it is confusing, again, to the beneficiary and to doctors, and perhaps hospitals and pharmacists. Is that fair that seniors cannot

change, but plans can change their formularies within the year?

Ms. BLOCK. Well, I would like to say, first of all, that we limit

the kinds of changes that plans can make mid-year, and those

changes are not all that frequent.

In the case that a plan does make a change, the beneficiary is

grandfathered in. So if they are already using that particular medication, that beneficiary can continue to use that medication for the

remainder of the year.

The CHAIRMAN. I hear what you are saying. I hear you saying

that. That may be what you honestly believe and think. But you

kind of sit here in, I guess, DC. I do not know where your office

is. At that table, in the spot where Ms. King is sitting, there was

a pharmacist named Tobey Schule who told over and over again

how much confusion that causes people who come to his pharmacy.

You may think it is working, but according to the people on the

front line, they do not think it is working. I encourage you to look

much more deeply and aggressively at this question and find out

the degree to which it is or is not working. People out in the field

do not think it is working. You, in DC, may think it is working,

but the people on the ground do not think that it is working.

The basic problem is, seniors do not know about the exceptions

process to the formulary. They do not know about it. They do not

know they can be ‘‘grandfathered,’’ if that is what is meant by the

29

exceptions process. People just do not know. This is a very, very

complicated program all the way along, as you well know, perhaps

better than most in the room here. But the problem is, it is extremely complicated, and the persons that it is supposed to help,

that is, seniors, we should not make it complicated for them.

This should be a little bit like the proverbial duck swimming in

the pond, gliding along effortlessly: seniors getting their benefits

right off the top, while underneath people are paddling furiously,

that is, you, the plans, the pharmacists, others, to make sure the

seniors get their benefits. The sense is that that is not happening.

Another question is, automatic enrollment for dual eligibles. It is

my understanding that non-dual eligibles get special treatment.

That is, you have a website. I am a non-dual eligible. I go to the

site, I can match my needs, my drug needs, with plans. Whereas,

with dual eligibles, there is no such matching, it is just automatic.

You are dual eligible, you are a senior, this is what you get,

whether or not it matches your drug needs, or whatnot. I understand there are some States who are a little more sensitive in this

program than is Uncle Sam, than is CMS. Some States—and I

think Maine is one example—have an intelligent system of some

kind. Some other States do, too.

Why is CMS not doing a better job matching dual eligibles’ drug

needs with their plans?

Ms. BLOCK. Well, I think there are several points. First of all, of

course, the statute, as I know you know, specifically says that we

will assign dual eligibles randomly. So, number one, there is a statutory provision. Number two, we do not know——

The CHAIRMAN. Does that prohibit you, though, from taking steps

like Maine is doing?

Ms. BLOCK. Well, it does not prohibit us in that sense, but, even

assuming we could selectively assign people, we do not know what

their medication regime is at the time that we assign them. Some

of the States do and can use that information.

But thirdly, and I think really an important point that needs to

be made, is the medication regime that an individual is on is not

necessarily the best or most effective regime for them. So it is not

a given that just having somebody——

The CHAIRMAN. You are saying a random selection is better?

Ms. BLOCK. No, I am not suggesting that a random selection is

better. I am suggesting that once a person is in a plan they have

various options. They can opt out of that plan, they can——

The CHAIRMAN. We are talking about dual eligibles here, Ms.

Block.

Ms. BLOCK. Dual eligibles can opt out.

The CHAIRMAN. People that are very vulnerable. People where it

is very hard to know what is going on here. This is a very complex

program that they are faced with.

Ms. BLOCK. I understand that. But there is the opportunity for

their providers to examine their medication regime in accordance

with the formulary of the plan they are in and see if, in fact, that

formulary can work for that beneficiary.

The CHAIRMAN. Can you address this question, Ms. King, about

automatic enrollment and lack of matching drugs?

30

Ms. KING. Yes. We did look, Senator, in the case of Maine. They

found that approximately one-third of their beneficiaries had about

a 100-percent match under the random assignment, but 20 percent

had less than a 20-percent match.

They decided, in consultation with CMS, to give beneficiaries

who had less than an 80-percent match an opportunity to see if

they could get a better match, and at the end of that process they

found a 99.8-percent match for those beneficiaries.

The CHAIRMAN. And could CMS do that with other States or encourage a similar kind of program with those States?

Ms. KING. One of our recommendations is that CMS work with

the States that wish to facilitate this kind of thing to have the

plans provide them the medication data they would need to provide

these kinds of intelligent assignments.

The CHAIRMAN. My time has expired.

Ms. BLOCK. And we do, indeed, work with the States to do that

where the States request that they be able to do that.

The CHAIRMAN. All States? You see, the problem here is the

sense that you are being pretty passive. The agency is passive.

Whatever the plan contracts say, that is what the contract says,

end of analysis. That is the sense here. We are trying to get you

to move beyond that.

Senator Lincoln?

Senator LINCOLN. Thanks, Mr. Chairman.

Just a few last, quick questions, a lot to what the Chairman was

talking about, particularly when we talk about grandfathering and

coverage determination, and quantity limits, and the prior authorization.

I just do not understand, Ms. Block, why it would not make more

sense for the plans to be barred from dropping the drugs at a midstream point. Instead of requiring the seniors to go back through

all of these processes when those things are dropped from the

formularies, why would you not just initiate from the beginning?

That question, as well as the 1–800 number on the outreach for

information for seniors. I am still getting a tremendous amount of

calls in my State. They are getting inaccurate information. The

person they speak to transfers the caller to someone else, and they

have to wait again after they have waited for hours already, with

that indication.

I just wanted to know if your records indicate a reduction in the

wait time or improvement in the resolution of problems, because

we are not seeing a tremendous amount of that in the State in

terms of those problems being resolved and the wait times being

eliminated.

One other thing. We have talked about marketing tactics. I know

for us in our State, Medicare Advantage, there was a lot of misinformation, or maybe lack of information being offered. A lot of seniors got into Medicare Advantage thinking that was a prescription

drug component. It ended up taking it out of traditional Medicare

fee-for-service.

I know there is a lot you are doing in trying to make sure that

information is greater, but could we not solve those that are unhappy and have been treated unfairly by minimizing the time it

takes us to put it back into the traditional Medicare fee-for-service

31

that they want to go back to? We have had a huge amount of problem in our office.

Our casework, in trying to work with our constituencies, have

discovered that they, for lack of information, signed up for a plan,

Medicare Advantage, that put them out of their traditional Medicare fee-for-service. It is taking us forever to help them get back

into it. It seems to me that CMS could do a better job at opening

up some kind of help lines or some kind of process that could minimize that time.

Those three questions, on top of one more. Senator Schumer did

not bring it up, but I certainly will. Given the high percentage of

nursing home residents who are cognitively impaired, after CMS

imposed a gag order on the nursing home staff and barred them

from assisting the residents in the Part D selection, is it realistic

to expect that some of these individuals are going to educate themselves and choose another Part D plan without some assistance?

Have you explored options for helping seniors find the plan that is

right for them?

I would just be interested to hear what you have to say on that,

as well as maybe, perhaps, our GAO witness, if you have any input

on the problems that we are seeing with the nursing home residents.

Ms. BLOCK. Well, Senator, I am truly sorry that you think that

we have imposed a barrier to nursing home staff assisting beneficiaries. They absolutely can, and should, assist beneficiaries. They

simply cannot steer them to a particular single plan in which the

advisor has a financial interest. That is the bar, and it is a very

legitimate one.

But we absolutely understand that seniors need help, and there

is no barrier to nursing home staff working with seniors or their

family members in giving them a range of choices that would be

particularly suitable for that particular beneficiary.

Senator LINCOLN. How about the other ones in terms of——

Ms. BLOCK. I am concerned to hear that there is a time lag, and

it is something that I will absolutely look into. It is our policy that

anybody who has enrolled in a plan based on misleading or erroneous information who wants to go back to original Medicare can

do that, and we give them a special enrollment period to enable

them to do that.

Senator LINCOLN. Maybe you could give me a person over at

CMS who could help us expedite that, because we are having some

trouble with that.

Ms. BLOCK. I would be very happy to talk with someone in your

office to do that.

Senator LINCOLN. All right. Great. Thank you.

And what about just barring them from dropping the formulary

drugs midstream?

Ms. BLOCK. There is a statutory provision that says that plans

can change their formularies mid-year, and we are abiding by the

statute. Nevertheless, we have very rigorous requirements in place

in terms of what changes plan can actually make. Staff at CMS reviews those requests and denies any of those requests that we feel

are inappropriate.

Senator LINCOLN. Thank you.

32

Ms. KING. Senator, if I might.

Senator LINCOLN. Yes?

Ms. KING. We do have some work under way that is not finished

yet, which should be ready later this year, that actually looks at

the coverage determination and appeals process and how well that

is working and how well CMS is overseeing that, so we should be

able to report on that later this year.

Senator LINCOLN. Great.

Ms. KING. And on the nursing home issue, that was not a specific

focus of our work, but our understanding is that a lot of nursing

homes worked with a single long-term care pharmacy, so when the

dual eligibles were randomly assigned to different plans, they were

assigned to a lot of different plans that served one nursing home.

So that, I think, was the genesis of the problem.

Senator LINCOLN. Thank you.

Thanks, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

Let me ask an open-ended question here. A lot of you have a lot

of experience one way or another with this Part D provision. Just

stepping back a little bit, forget your assigned roles, just stepping

back a little bit, where should this committee consider changing

the law? I am not saying we will or should, but at least consider?

Ms. Block, you said the law allows plans to change midstream,

and we cannot do a lot about that. There were other areas where

you said, well, that is the law. I am asking all four of you, life is

short. Say what you think. We do not want to be too short for you,

at least in your jobs. [Laughter.] But say what you think. Our job

here is to serve seniors. That is our job.

So, where might we at least look at and consider making some

changes? I am just going to go down the list here. First, I am going

to ask, anybody want to raise your hand? I am going to ask each

of you. Who wants to start?

Ms. KING. Senator, I will start.

The CHAIRMAN. All right. You are bold. Good for you.

Ms. KING. I think that one thing that the Congress ought to look

at at this point is how well their retroactive policy is being implemented, because it is likely that funds were paid for situations in

which beneficiaries did not know they were eligible. I think one

thing that you could do is keep a close eye on that in the next

years.

The CHAIRMAN. And how can we do so? We asked questions along

those lines here today. What else can we do in addition to the questions asked?

Ms. KING. I think that CMS could monitor that more carefully

and provide information to you on that.

The CHAIRMAN. All right. And what kind of monitoring comes to

mind?

Ms. KING. If they looked at the number of people who were in

that category, how many months of retroactive coverage, and more

specifically, data from the pharmacies about what kinds of reimbursements were paid during that period.

The CHAIRMAN. All right. Thank you.

Who else wants to step up here? Ms. Disman?

33

Ms. DISMAN. We have spent a lot of time talking about ‘‘extra

help’’ and our outreach efforts and our multiple ways, and certainly

I have spent a lot of time talking to the Government Accountability

Office and IRS. I think the recommendation initially that we do a

study with IRS to see if there is a way to identify individuals——

The CHAIRMAN. SSA.

Ms. DISMAN. SSA, with IRS, to take a look at it. As Regional

Commissioner of New York, I have had a lot of experience with the

SSI program.

The CHAIRMAN. Right.

Ms. DISMAN. So I know what 1099s have, I know other kinds of

data that we get for SSI as a verification. I think it is worth the

time to spend to look at it to see if we can narrow this population.

The approach would still be the same at SSA: we will conduct mailings, we will call people, we will see them in our field offices, and

speak to them on our 800 number.

But it is a lot different if you really have a smaller population

that you are dealing with than the one that is identified now. So,

we are very supportive of that. I have already spoken to IRS about

the potential for us to conduct a study.

The CHAIRMAN. Well, maybe we can play a role here and encourage or commission that study to take place, as well as the suggestions that Ms. King had.

Ms. Block?

Ms. BLOCK. Well, I would say that, given the admittedly bumpy

start of the program in the early months of 2006, we are seeing lots

of improvement as time goes on. I think it is early to be talking

about specific legislative changes. We are looking at the program.

We are looking at our experience.

We are learning from our experience every day. We are making

changes in our guidance, as you know. At this point in time I think

we probably would like a little more time to see how things work

and to determine what, in fact, is working well and what possibly

might need to be changed.

The CHAIRMAN. We are in our second year already. It has been

a long time.

Ms. BLOCK. Two years is relatively early in a program of this

magnitude.

The CHAIRMAN. And I was a little concerned at your response to

one of the Senators’ questions about payments to pharmacists. You

basically said, well, that is what the plans say, so that is it. If

plans say we pay within 30 days, no more questions asked.

You also heard one of the Senators say that is not pharmacists’

experience. Their experience is, it takes more than 30 days. I hear

you say, well, we will stop. Whatever the plans say, that is it. What

if the plan said 90 days? Would you do anything about it?

Ms. BLOCK. We have a specific requirement that 30 days is the

maximum.

The CHAIRMAN. Why not make it 15 days?

Ms. BLOCK. That, as I understand it, is not a typical industry

practice, sir.

The CHAIRMAN. Well, that is not the issue. That is not the question. There are a lot of practices that perhaps should be changed,

34

perhaps should be looked at, examined. We do not just automatically accept whatever anybody says, do we?

Ms. BLOCK. I think that the Medicare program needs to be run

as a market-based competitive program and, given those parameters, I do not think that it necessarily should step outside——

The CHAIRMAN. But the problem here is, you heard the pharmacists. The pharmacists are on the front lines. They are the ones

bearing the brunt of a lot of this. Clearly, it is to a plan’s interest

to keep it afloat and delay payment as long as they possibly can,

to earn interest on it, delay the payments. It is in their economic

interests to do so.

You said earlier, well, it is the pharmacists’ economic problem.

The trouble is, they are at the end of the line. They do not have

any leverage. The plans have leverage, pharmacists do not. So if

you are talking about competition, one of our goals is to make sure

competition is fair, not lopsided.

Ms. BLOCK. By the way, pharmacists do have leverage. We have

very strong GAO access standards, and a plan must meet those

standards. So if they cannot find pharmacists to contract with

them in sufficient numbers to meet our GAO access standards,

they cannot participate in the program. That is real leverage for

pharmacists.

The CHAIRMAN. Well, not really. Because, if I am a pharmacist

in a small town, I am the only pharmacist there is; I have no

choice. I have to sign up for the plan. The plans do the same

things, maybe, with respect to delaying payment, if they can, to

pharmacists. And low dispensing fees, in addition.

Pharmacists do not have a lot of leverage. Plans have a lot more

leverage than pharmacists do. So again, if we are talking about

competition, if it is fair, we have to look at a lot of different factors

here.

This has been helpful. Thank you very much. We will keep looking very closely at the Part D benefit, because our job is to make

it work.

To be honest with you, Ms. Block, I just urge you to be a little

more aggressive, get out in the field more. Go out and go see some

pharmacists and talk to them, and rural pharmacists. I spent a day

working in a pharmacy. A whole day working there. I have this

plan where, once a month, I work at some job back home. Eight

o’clock, sack lunch, all day long. I encourage you to go work at a

pharmacy, very rural. I will stop at this point.

But there is a difference between rural and rural. [Laughter.]

Rural in New York is not very rural, with all due respect to both

Senators from New York. If you go further out where I am from,

rural is really rural. I would encourage you to go to a really rural

pharmacy and spend a day there.

Thank you all very much. The hearing is adjourned.

[Whereupon, at 12 p.m., the hearing was concluded.]

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