Medicare Part D: Plan Sponsors' Processing and CMS Monitoring of Drug Coverage Requests Could Be Improved
Published: 2008-01-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Under the Medicare Part D program, prescription drug coverage is provided through plans sponsored by private companies. Beneficiaries, their appointed representatives, or physicians can ask sponsors to cover prescriptions restricted under their plan--a process known as a coverage determination--and can appeal denials to the sponsor and the independent review entity (IRE). GAO was asked to review (1) the processes for sponsors' coverage determination decisions and the approval rates, (2) the processes for appealing coverage denials and the approval rates at the sponsor and IRE levels, and (3) the Centers for Medicare & Medicaid Services' (CMS) efforts to inform the public about sponsors' performance and oversee sponsors' processes. GAO visited seven sponsors that account for over half of Part D enrollment. GAO also interviewed and obtained data from CMS and IRE officials.
section_title: What GAO Found
paragraphs: Sponsors in our study address coverage requests for drugs with restrictions using processes that allow for prompt decisions, apply a range of criteria, and have resulted in approvals of most cases. To minimize the amount of time needed to make a determination, study sponsors use automated systems to compare the patient information they receive from prescribing physicians against preset coverage criteria. The coverage criteria for specific drugs incorporate Medicare requirements--such as whether the drug use is excluded from coverage under Medicare Part D--and discretionary components--such as whether a less expensive alternative drug has been tried and failed. Some study sponsors indicated they feel pressure to make decisions within the CMS-required time frames even when all pertinent patient information from physicians is not at hand. In reviewing a sample of 421 case files, GAO found that overall, study sponsors approved about 67 percent of the coverage determination requests, ranging from 57 percent to 76 percent. The process for conducting appeals allows staff not involved in the previous case review to make better-informed decisions by considering additional supporting evidence. At the first level of appeal, sponsor staff evaluate any corrected or augmented evidence to see if coverage criteria have been met. At the second level of appeal, IRE staff consider the information the sponsor reviewed, along with any additional support that may be available. In many cases, appeals result in new interpretations of whether the requested drug should be covered. CMS appeals data show that, from July 2006 through December 2006, the median approval rate across all Part D sponsors was 40 percent; from July 2006 through June 2007, appeals to the IRE received full or partial approval in 28 percent of cases. For some standard appeals, missing appointment of representative (AOR) documentation contributed to delays in sponsor-level appeals decisions and dismissals of IRE appeals cases. Some study sponsors have developed "workarounds" to eliminate the need for the completed AOR form. CMS has improved its efforts to inform beneficiaries about sponsors' performance, but its oversight of sponsors is hindered by poorly defined reporting requirements. CMS developed two performance metrics on sponsors' timeliness and the outcomes of their coverage decisions. The agency improved the way it displays this information on the Medicare Web site in late 2007. In addition, CMS requires that sponsors report data on various measures of coverage requests and approvals. However, the agency has provided minimal guidance on the types of cases to be included in each coverage determination measure. As a result, our study sponsors reported data differently to CMS, hindering the agency's ability to adequately monitor sponsors' activities. Finally, CMS has conducted several audits and found that sponsors were noncompliant with a number of specific requirements. Areas of sponsor noncompliance ranged from incomplete written policies and procedures to delays in authorizing drug coverage after the IRE approved an urgent request.

section_title: Letter
paragraphs: The Medicare Prescription Drug, Improvement, and Modernization Act of  2003 (MMA) established a voluntary outpatient drug benefit, known as  Medicare Part D, that provides prescription drug coverage for nearly   25 million beneficiaries—seniors and individuals with disabilities— enrolled in the program. Beneficiaries may obtain the drug benefit, which  began on January 1, 2006, by enrolling in plans offered by Part D  sponsors—private companies, such as health insurance companies and  pharmacy benefit managers. The Centers for Medicare & Medicaid  Services (CMS)—the agency that administers the Medicare program—is  responsible for contracting with and overseeing the sponsors that provide  the drug benefit. Among its many functions, the agency is responsible for  monitoring sponsor compliance with program rules and publicly reporting  information on certain aspects of sponsor performance.
The MMA and CMS’s implementing regulations established specific  requirements for Part D sponsors. Sponsors’ formularies—lists of plan- covered drugs—must include “all or substantially all” drugs within six  designated drug categories: antidepressants, antipsychotics,  anticonvulsants, anticancer drugs, immunosuppressants, and HIV/AIDS  drugs. For each of the other therapeutic drug categories and classes,  sponsors’ formularies generally must include at least two Part D drugs.  However, formularies generally cannot include drugs or their uses that the  MMA excluded from Medicare Part D coverage. In addition, MMA  promotes the use of generic drugs, which are generally cheaper than most  brand-name drugs. The MMA states that a Part D sponsor must require a  pharmacy to inform a beneficiary of any differential between the price of a  drug and the price of its lowest-priced generic version.
Beyond the minimum formulary requirements, the MMA gives sponsors  discretion in designing their formularies to keep costs low. Because Part D  plan sponsors share financial risk with the Medicare program, they have  an incentive to control beneficiaries’ drug spending. To do so, sponsors  negotiate discounted prices with drug manufacturers and design their  formularies to encourage the use of cost-saving prescription drugs. As long  as they meet the minimum formulary requirements, sponsors may exclude  particular drugs from their formularies. For drugs included on the  formulary, sponsors may assign drugs to tiers that correspond to different  levels of cost sharing. In general, they encourage the use of generic  medications by putting them on a cost-sharing tier that requires the lowest  out-of-pocket costs for beneficiaries and discourage the use of expensive  drugs by putting them on tiers that require higher out-of-pocket spending  by beneficiaries. A national survey of noninstitutionalized seniors  conducted in the fall of 2006 found that 25.7 percent of beneficiaries  reported switching to a cheaper medication after they enrolled in a Part D  plan.
Sponsors can also lower drug spending by applying various utilization  management restrictions to drugs on their formularies. Utilization  management restrictions typically include (a) prior authorization, which  requires the beneficiary to obtain the sponsor’s approval before a drug is  covered for that individual; (b) quantity limits, which restrict the dosage or  number of units of a drug provided within a certain period of time; and   (c) step therapy, which requires that a beneficiary try lower-cost drugs  before a sponsor will cover a more costly drug.
Beneficiaries who attempt to fill a prescription for a nonformulary drug or  a restricted formulary drug will have coverage withheld unless the  beneficiary receives special permission from the plan sponsor. In a 2006  national survey of seniors, 11.3 percent of respondents reported needing  special permission to get a prescription filled. When coverage is withheld,  CMS regulations require that pharmacies inform beneficiaries of their right  to make a formal request to their plan for coverage—a process known as a  coverage determination. Beneficiaries, their appointed representatives, or  prescribing physicians can use the coverage determination process to  demonstrate that the sponsor’s coverage criteria have been met or that an  exception to the formulary, cost-sharing requirements, or utilization  restrictions should be granted based on the medical needs of the  beneficiary. Beneficiaries who receive an unfavorable coverage  determination may appeal the decision, first to the sponsor—a process  known as a redetermination—and then to an independent review entity  (IRE)—a process known as a reconsideration.
As a beneficiary protection, MMA and CMS regulations require that  sponsors have procedures in place to make coverage determination and  appeal decisions in a timely manner. CMS established priority levels for  coverage determinations and appeal requests as either standard or  expedited (for requests thought to be urgent, based on the beneficiary’s or  physician’s judgment). Prescribing physicians may initiate coverage  determinations and expedited redeterminations on behalf of a beneficiary  without permission from the beneficiary, but to initiate a standard appeal  on a beneficiary’s behalf, they must have a completed appointment of  representative (AOR) form. Sponsors must make standard coverage  determination decisions within 72 hours and expedited coverage  determination decisions within 24 hours. Decisions at the redetermination  level must be made within 7 days for a standard request and within   72 hours for an expedited request. If the sponsor fails to notify the  beneficiary of its decision within the established time frames, the decision  is deemed an automatic denial, at which point the sponsor must forward  the case to the IRE. At the reconsideration level—the second level of  appeal—the IRE has 7 days to decide a standard request and 72 hours for  an expedited request. (See app. I for an illustration of the coverage  determination and appeals levels and time frames.)
Questions have been raised about how coverage determination and  appeals processes work to safeguard beneficiaries’ access to the Part D- covered drugs they need. Little is known about how decisions are made,  the outcomes of coverage requests, and how CMS oversees sponsors’  coverage determination and appeals processes. You asked us to review  Part D coverage determination and appeals processes at the sponsor and  IRE levels. This report provides information on (1) the processes for  sponsors’ coverage determination decisions and the approval rates, (2) the  processes for appealing coverage denials and the coverage approval rates  at the sponsor and IRE levels, and (3) CMS’s efforts to inform beneficiaries  about sponsors’ performance and to oversee sponsors’ coverage  determination and appeals processes.
To review the processes for sponsors’ coverage determination decisions  and approval rates, we conducted site visits to seven sponsors offering  Part D plans in 2006, and interviewed officials about how coverage  determinations are made. The seven sponsors were chosen because they  varied on a number of measures, including size of enrollment and their  market presence across the country. As of September 1, 2006, the seven  sponsors we interviewed enrolled about 13 million beneficiaries, about   54 percent of all Part D enrollees. In addition, at each sponsor we  reviewed a randomly selected sample of coverage determination case files  from October 2006 to verify the information sponsor officials told us. In  total, we reviewed 421 coverage determination case files—at least 34 from  each sponsor. Information from these sponsors is illustrative and cannot  be generalized to the entire sponsor community. We also reviewed  relevant documents, including the MMA and Part D implementing  regulations, to understand sponsor requirements. Also, we obtained the  views of beneficiary advocates and physician association representatives  about the Part D coverage determination process. Physician association  representatives included both general and specialty practitioners.
To examine appeals processes, we interviewed management staff from the  seven selected sponsors and the IRE about their policies and procedures.
We reviewed randomly selected samples of October 2006 appeals case  files at each sponsor and the IRE to verify information obtained from our  interviews. In total, we reviewed 458 redetermination case files—at least  43 from each sponsor—and 100 reconsideration case files. To learn about  coverage approval decisions at the redetermination level, we analyzed  data reported by sponsors to CMS on the number of redeterminations  made from July 2006 through December 2006. To assess the reliability of  these sponsor-reported data, we interviewed CMS officials responsible for  the collection and analysis of the data, and we reviewed the CMS data  reporting requirements for redeterminations. We determined that the data  were sufficiently reliable for purposes of this report. To learn about  coverage approval decisions at the reconsideration level, we analyzed IRE  workload data reported to CMS, including data on the results of IRE  decision making. To assess the reliability of the IRE data, we conducted  interviews with IRE staff to learn about how the data are compiled. We  determined the data were sufficiently reliable for the purposes of this  report.
To determine how CMS informs beneficiaries about sponsors’  performance, we examined information posted on the Medicare  Prescription Drug Plan Finder tool and discussed planned changes to the  Web site with CMS officials. To determine how CMS oversees the coverage  determination and appeals processes, we interviewed agency officials  responsible for policy development and oversight of the Part D program.  We also examined data CMS collected to monitor sponsors’ activities and  compared the reporting practices of our study sponsors. Finally, we  reviewed CMS’s compliance audit reports.
In conducting our work, we did not examine how beneficiaries are  informed about their rights to request a coverage determination, or the  appropriateness of sponsors’ coverage criteria or coverage decisions. In  addition, we did not examine the extent to which beneficiaries use the  coverage determination process because the CMS data needed to do so  were inadequate. Although beneficiaries may pursue appeals beyond the  reconsideration level, reviewing these additional levels is beyond the  scope of this report. We performed our work from July 2006 through  January 2008 in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
subsections: section_title: The Medicare Part D Program
paragraphs: The Medicare Part D benefit is provided through private organizations that  offer one or more drug plans with different levels of premiums,  deductibles, and cost sharing. Plan sponsors must offer the standard   Part D benefit established under MMA or an actuarially equivalent benefit.  The standard benefit includes an annual deductible, coverage up to a level  of spending, a coverage gap—the period when beneficiaries pay all of the  costs of their drugs—and catastrophic coverage above a specified out-of- pocket limit. Sponsors may also offer enhanced benefit plans that provide  a lower deductible and coverage in the coverage gap in exchange for  higher premiums. Certain low-income beneficiaries are eligible for  subsidies to defray most of their out-of-pocket costs.
Part D sponsors offer drug coverage either through stand-alone PDPs for  those in traditional fee-for-service Medicare, or through Medicare  Advantage prescription drug (MA-PD) plans for beneficiaries enrolled in  Medicare’s managed care program. As of September 2007, CMS had  contracts with 101 PDPs and 461 MA-PDs. The majority of Part D  enrollees, about 71 percent, are in PDPs. PDP enrollment across contracts  varies widely, ranging from fewer than 20 enrollees to more than   3.3 million enrollees, and is highly concentrated—the four largest  contracts account for about 53 percent of total PDP enrollment in  September 2007.
section_title: Sponsors’ Use of Formularies and Utilization Management Restrictions
paragraphs: For the drugs included on their formularies, Part D sponsors decide which  drugs will have utilization management restrictions and which type of  restriction they will apply. Utilization management restrictions may  include prior authorization, quantity limits, and step therapy requirements.  Sponsors may apply utilization management restrictions to prevent the  overuse of expensive medications by requiring lower-tier drugs be tried  first. The restrictions may also serve to ensure that proper dosages are  dispensed, to protect against adverse drug interactions, and to control the  use of medications with potential for abuse. Each sponsor has discretion  to decide under which circumstances it will apply utilization restrictions.
Research conducted for The Kaiser Family Foundation has shown that  sponsors’ use of formularies and utilization management restrictions  varies significantly. The study reported that the 2007 formularies of the   10 largest PDPs differed in their coverage of a sample of commonly used  drugs and their use of utilization management restrictions on those drugs.  Four PDPs included on their formulary all of the 152 sampled drugs  commonly used by Medicare beneficiaries. Among the remaining 6 PDPs,   1 covered between 90 and 100 percent, and 5 covered between 70 and   80 percent of the sampled drugs. The authors also found that the 10 PDPs  placed prior authorization requirements on between 3 and 14 of the   152 sampled drugs. While 3 of the 10 PDPs did not have a step therapy  requirement on any of the 152 drugs, 2 PDPs had the requirement on 8 of  the drugs. The number of the 152 sampled drugs with quantity limits  ranged from 3 to 62.
section_title: Types of Coverage Determinations and Appeals
paragraphs: Beneficiaries can use the coverage determination and appeals processes to  challenge a utilization management restriction on a drug on the sponsor’s  formulary or to request coverage for a Part D drug that is not on the  sponsor’s formulary. Table 1 describes types of requests.
section_title: Coverage Determination Processes Allow for Prompt Decisions, Apply a Range of Criteria, and Have Resulted in Approvals for the Majority of Requests
paragraphs: Study sponsors have designed their coverage determination processes to  allow for prompt decision making within CMS-required time frames. They  obtain patient information needed to make their decisions using drug- specific coverage determination request forms and enter this information  into a computer for analysis of whether coverage criteria have been met.  When coverage requests cannot be approved by technical staff, they are  decided by clinical staff. Sponsors apply drug-specific coverage criteria  that incorporate the requirements established by MMA and CMS as well as  factors that they have discretion to apply, such as evidence of trial and  failure of lower- cost drugs. In the sample of coverage determination case  files we reviewed at the seven study sponsors, coverage of the requested  drug was approved in approximately two-thirds of the cases.
subsections: section_title: Streamlined Processes Make Expeditious Coverage Determination Decisions Possible
paragraphs: The sponsors we studied developed coverage determination processes  designed to produce decisions within the CMS-required time frames—72  hours for standard requests and 24 hours for expedited requests. To  collect the patient information needed to make coverage determination  decisions, study sponsors generally rely on drug-specific request forms.  These forms typically ask a series of questions based on the sponsor’s  established coverage criteria for a given drug. Prescribing physicians are  asked to use these forms to submit clinical information about a beneficiary  that generally includes the diagnosis associated with the requested drug,  and may include the beneficiary’s other medical conditions and drug  history. For instance, to process a coverage determination request for the  osteoporosis drug Forteo, a sponsor may ask whether the beneficiary has  a diagnosis of osteoporosis, has multiple risk factors for fractures, and has  tried and failed other specific osteoporosis therapies. Some study  sponsors had dozens of different forms for drugs in different classes, with  a varying number of questions. For example, one sponsor asked   5 questions for the sleep medications Ambien and Lunesta and 23  questions for the injectible drug Pegasys, used to treat hepatitis. If a  physician makes a coverage determination request over the phone,  sponsor staff have on-line access to the drug-specific questions they need  to ask.
With the information submitted by the prescribing physician, study  sponsors used computer algorithms—a series of questions with yes/no  answers—in order to make expeditious, consistent decisions. Technical  staff, such as pharmacy technicians or call center representatives, enter  the patient information into the computer system. The algorithms are used  to assess the information to determine whether the beneficiary meets the  sponsor’s coverage criteria for the specific drug in question. This process  generates rapid, consistent decisions if sponsors receive sufficient  information from prescribing physicians. When the technical staff cannot  approve the drug, coverage determination requests are forwarded for a  decision by clinical staff with more expertise, such as staff pharmacists.  One sponsor reported that, on average, a standard coverage determination  involving prior authorization takes about 40 minutes after the prescribing  physician provides the needed information.
However, the pressure to make a coverage determination within the CMS- mandated time frames increased the likelihood that sponsors may deny  requests when complete information is not at hand or can not be obtained  quickly. Two study sponsors told us that if they were not successful in  getting information they requested, they made decisions based on the  information they had at the time. For example, if physicians are asked to  provide a patient’s medical records as part of their request but do not  provide that information quickly, the sponsor may deny the request in  order to meet the required time frame. Among the coverage determination  case files we reviewed at the study sponsors, the sponsor requested  additional information from the physician in about 13 percent of the cases  and about 30 percent of the denials were for lack of requested medical  information. One sponsor noted that there would probably be fewer  denials at the coverage determination stage if sponsors had more time to  acquire needed information.
section_title: Sponsors Apply a Range of Coverage Criteria in Making Coverage Decisions
paragraphs: Sponsors apply a range of coverage criteria to evaluate requests for drugs  with restrictions. Their criteria are used, in part, to determine whether a  requested drug can be covered under Part D program rules set by MMA or  CMS. Sponsors consider a number of factors in reviewing a request,  including the following:    Should the drug be covered under another part of the Medicare  program? There are an estimated 6,000 unique drug products that  potentially could be covered under either Part B or Part D of the Medicare  program. Which part of the Medicare program is the appropriate payer  depends on factors such as the patient’s diagnosis, when the beneficiary is  taking the drug, or the setting in which the drug is being administered. For  instance, immunosuppressive drugs suppress the body’s immune response  and are used to treat autoimmune diseases—diseases in which the body  attacks its own tissues—and to prevent rejection of a transplanted organ.  Immunosuppressives are covered by Part B when the physician prescribes  them after a Medicare-covered organ transplant and by Part D for all other  outpatient uses.
Is the requested drug in a Part D-excluded drug class? Although  sponsors generally can not cover drugs in 1 of 10 statutorily excluded drug  categories, beneficiaries or prescribing physicians may request a coverage  determination for a drug that is in an excluded drug category. For such  coverage determinations, the physician must show that the drug is  prescribed for a purpose that is not excluded under the law or that it has  been mistakenly classified by the sponsor as excluded. For instance,  medications for coughs and colds are generally excluded from Part D.  However, CMS has issued guidance to plan sponsors that cough and cold  medications are eligible to meet the definition of a Part D drug in clinically  relevant situations. For example, if a physician prescribes a cough  suppressant to a beneficiary because the beneficiary has osteoporosis and  may break a bone if the cough is not controlled, then the cough  suppressant would be considered a Part D-covered drug.
Is the requested drug medically necessary? Part D sponsors must  approve coverage when the requested drug at the requested dosage is  medically necessary. In order to show medical necessity, the prescribing  physician must provide a statement that the requested drug is medically  necessary because (1) all of the covered Part D drugs on the sponsor’s  formulary for treatment of the same condition would not be as effective  for the beneficiary, would have adverse effects for the beneficiary, or both;  (2) the prescription drug alternatives on the formulary have been  ineffective in the past, are likely to be ineffective, or are likely to cause an  adverse reaction for the beneficiary; or (3) the number of doses available  under a quantity limit for a requested drug has been ineffective or is likely  to be ineffective. In addition, sponsors are required to approve a tiering  exception if they agree with the prescribing physician’s statement that  treatment of the beneficiary’s condition using the preferred alternative  drug would not be as effective for the beneficiary as the requested drug,  would have adverse effects for the beneficiary, or both.
Is the requested drug being prescribed for a medically accepted  indication? Under Medicare Part D, a drug is considered to be prescribed  for a medically accepted indication if the drug is FDA-approved for that  use. Any off-label use—one not approved by FDA—is considered  medically accepted only if it is supported by a citation in one of the three  designated drug reference guides. Beneficiary advocates have argued that  the coverage restrictions on those off-label drug uses not listed in the  designated drug reference guides cause beneficiaries to be denied  coverage for needed drugs, some of which beneficiaries had been  previously taking successfully. For instance, a beneficiary without cancer  may have a condition which causes severe pain. After trying several  medications, the beneficiary may have less pain with the use of Actiq, a  medication approved only for breakthrough pain in cancer patients. Under  Part D, the beneficiary would be denied coverage for the drug, even if the  beneficiary’s physician stated that the medication was medically  necessary, because the drug was not prescribed for a medically accepted  indication, and this use is not listed in one of the three drug reference  guides.
Beyond ensuring compliance with MMA and CMS coverage rules, sponsors  have discretion to develop their own drug-specific coverage criteria.  Sponsors in our study also considered the following factors.
Has the beneficiary tried and failed on a generic or preferred  alternative drug? To reduce costs, sponsors may require beneficiaries to  try and fail on generic or preferred alternative drugs before approving  coverage for higher-cost drugs. Sponsors told us, and CMS has affirmed,  that beneficiaries generally can switch to a therapeutically equivalent drug  without disruption to their care. Therefore, although a beneficiary has  been stable on a particular drug for a period of time, sponsors may require  the beneficiary to switch to a generic or preferred alternative drug.
Has the physician conducted specific tests to confirm the  beneficiary’s diagnosis or condition? Study sponsors sometimes also  ask for information from specified tests or studies that document a  patient’s diagnosis or condition. For instance, one sponsor told us that it  requires genotype tests for hepatitis drugs because the length of time a  patient should be on the drug is determined by the genotype.
Is the beneficiary already stable on the requested drug? Sponsors  may consider whether the beneficiary is stable on the requested drug  when deciding whether to approve or reapprove coverage.
Does the beneficiary have other medical conditions or take other  medications that may contraindicate the use of the requested  drug? For instance, one sponsor’s criteria for the drug Actiq—used to  treat breakthrough cancer pain—stipulated that the enrollee must not  have severe asthma or chronic obstructive pulmonary disease, which are  contraindications to Actiq. This same sponsor’s criteria for the  antidepressant Ensam noted that the medication should not be approved if  the enrollee is taking other types of antidepressants, such as monoamine  oxidose inhibitors or tricyclic antidepressants.
Duration of the approval period depends upon the drug requested and on  plan policies. In general, sponsors told us they approve coverage of a  requested drug for either the duration of the year or a 12-month period.  Some sponsors also approve requests for as long as the beneficiary  remains enrolled in the plan in cases where the drug treats an illness that  can last for the duration of a person’s life (such as multiple sclerosis). All  sponsors said that certain drugs, such as those with a specified length of  treatment for safety reasons, may be approved for shorter time periods.  For example, some injectible drugs are approved for 24 weeks. If coverage  criteria are not met, study sponsors’ denial letters generally included the  reason for the decision. For instance, denial notices may state that the  requested drug was not covered because the preferred alternative drug  must be tried first. Some, but not all, sponsors that we visited sent  notification letters to prescribing physicians that identified which  preferred drug should be tried. The IRE told us that some sponsor denials  are vague. For instance, sponsors may not do a good job of explaining  which specific requirements have not been met.
section_title: Study Sponsors Approved Two-Thirds of Coverage Determination Requests in Sample Month
paragraphs: Study sponsors approved about 67 percent of the coverage determination  requests among the October 2006 requests that we reviewed. Approval  rates varied among sponsors, ranging from 57 percent to 76 percent. We  also found that coverage determinations in MA-PD plans were more likely  to be approved than coverage determinations in PDPs; the approval rate  for MA-PD plans was 72 percent, compared to 63 percent for PDPs.  Sponsors in our study approved standard requests more often than  expedited requests. The approval rates for standard and expedited  requests were 67 percent and 53 percent, respectively.
We found that nearly all requests for coverage determinations were made  by physicians on behalf of their patients. Approximately 94 percent of the  coverage determinations in our case file review were requested by a  physician or a physician’s office staff. At the coverage determination stage,  we also found that only a small proportion of requests were expedited. Of  the coverage determination case files we reviewed, just 4 percent of the  requests were expedited.
We found that the most commonly requested drug class and category  combinations were, in order of decreasing frequency, (1) blood modifier  agent/hematopoietic, (2) endocrine-metabolic agent/antidiabetic,   (3) central nervous system agent/analgesic, (4) dermatological  agent/antifungal, (5) gastrointestinal agent/antiulcer, (6) anti-infective  agent/antifungal, and (7) musculoskeletal agent/antirheumatic. These  seven drug class and category combinations accounted for about half of  the requested drugs in the 421 cases we reviewed. At the individual drug  level, the five most requested drugs—collectively accounting for about  one-quarter of our sampled coverage determination requests—were  Procrit, Lamisil, Byetta, Celebrex, and Omeprazole.
section_title: Appeals Processes Allow for Better Informed Decisions, Have Often Resulted in Coverage Approvals, and Are Impeded by AOR Requirement
paragraphs: The appeals process allows for individuals not involved in the previous  case review to make better-informed decisions by considering additional  supporting evidence. In making redeterminations—the first level of  appeal—sponsor staff evaluate any corrected or augmented evidence to  see if coverage criteria have been met. In conducting reconsiderations— the second level of appeal—IRE officials consider the information the  sponsor reviewed, along with any additional support that may be available.  In many cases, appeals result in new interpretations of whether the  requested drug should be covered. CMS appeals data show that, from July  2006 through December 2006, the median approval rate across all Part D  sponsors was 40 percent; from July 2006 through June 2007, appeals to the  IRE received full or partial approval in 28 percent of cases. We found that,  for some standard appeals, missing AOR documentation contributed to  delays in study sponsor redetermination decisions and dismissals of IRE  reconsideration cases. Some study sponsors have developed  “workarounds” to eliminate the need for a completed AOR form.
subsections: section_title: Appeals Processes Involve Clinical Evidence and Patient Information Not Previously Available
paragraphs: Appeals processes at both the study sponsors’ level and the IRE typically  involve (1) reviewing more information than was available for the previous  decision level and (2) different decision makers.
subsections: section_title: First-Level Appeals to Sponsors
paragraphs: In conducting redeterminations—the first level of appeal—sponsors  typically receive corrected or augmented patient information that was not  submitted within the allotted time frame for the coverage determination.  For example, prescribing physicians may not have identified the  beneficiary’s conditions with sufficient specificity or included a complete  drug use history when making the coverage determination request; for  redeterminations, physicians often provide new information on the reason  for the requested drug and a list of drugs the beneficiary had previously  tried but were found to be ineffective or not well tolerated. Physicians may  forward laboratory test results or chart notes that sponsors had requested  previously. In addition, our reviews of sponsors’ redetermination case files  showed that physicians revise the statements they had provided originally  to address issues raised in the sponsors’ coverage denial letters.
To determine whether the sponsor’s drug-specific coverage criteria have  been met, study sponsor staff reassess the submitted information, along  with any additional support not previously considered. For  redeterminations that involve requests for off-label uses of drugs, study  sponsors said they make an effort to look for citations in one of the three  Part D-designated drug reference guides to see if one of them supports use  of the drug for the indication for which it was prescribed. In reviewing  requests for dosage limit exceptions, in addition to considering a  beneficiary’s medical record, study sponsors may also examine medical  research literature for evidence not included in the reference guides. In  addition, sponsors may discuss a case directly with the prescribing  physician. We found that study sponsors contacted prescribing physicians  to obtain additional information in 31 percent of the redetermination case  files we reviewed.
CMS requires that redetermination decisions be made by individuals not  previously involved in reviewing the drug request. Study sponsors’  redetermination decision staff making clinical decisions consist largely of  pharmacists or staff medical directors. If the staff pharmacist does not  approve a decision, a medical director makes the final decision. CMS  additionally requires that decisions concerning the medical necessity of  the requested drug be made by a physician with expertise in the field of  medicine appropriate to the condition being treated. Some of the study  sponsors contract with external physicians or utilization review  companies for this function.
section_title: Second-Level Appeals to the IRE
paragraphs: Along with the information in the sponsor case file, IRE staff review any  new supporting information they receive or solicit from the prescribing  physician as well as relevant medical literature. In making a  reconsideration decision—the second level of appeal—the IRE is likely to  have more information than did the sponsor at the first level of appeal. It  not only has information from the sponsor’s case file, but also information  in the physician’s letter or beneficiary correspondence that may be  submitted with the reconsideration request. In addition, IRE staff told us  that they contact the physician or beneficiary to obtain specific details  about the beneficiary’s health or to clarify the information submitted, such  as adverse effects the beneficiary has experienced or contraindications to  the preferred formulary drugs. During its review, the IRE may also  perform additional research in the drug reference guides on the reason the  physician is prescribing a particular drug or dosage. For instance, IRE staff  may be successful in researching the Part D-designated drug reference  guides for a specific off-label drug use that a sponsor had not identified.
As Medicare’s independent external appeals contractor, the IRE employs  medical professionals subject to conflict-of-interest prohibitions, which  bar them from having certain relationships with any health insurance  utilization review company, provider network, or drug supply company.  The IRE staff conducting most reconsiderations are predominantly  physicians credentialed in various medical specialties. For example,  according to IRE officials, appeals cases involving opioids are handled by  pain management specialists because these cases need a specialty review.  IRE officials also said that, when necessary, the IRE contracts with  external specialists to review cases.
section_title: First-Level and Second- Level Appeals Approved Drug Coverage in 40 Percent and 28 Percent of Cases, Respectively
paragraphs: Consideration of new evidence during the appeals process often leads to  decisions that reverse the sponsors’ decisions. At the first level of appeal,  CMS appeals data show that, from July 2006 through December 2006, the  median approval rate across all Part D sponsors was 40 percent. Across  Part D sponsors, approval rates ranged from 0 percent to 100 percent for  all appeals during that period. PDP sponsors were somewhat more likely  to approve coverage; the median rate of approvals for PDPs was about   45 percent, compared to about 38 percent for MA-PDs.
At the second level of appeal, IRE appeals data show full or partial  coverage approvals of the requested drug in about a quarter of the 11,679  reconsideration cases decided from July 2006 through June 2007. IRE data  for this period show that the IRE either fully or partially approved  coverage in 28 percent of appeals and denied coverage in 36 percent of  appeals. A significant proportion of IRE cases, 34 percent, were dismissed  for various reasons, such as the lack of AOR documentation. (See fig. 1.)
The 11,679 cases reviewed by the IRE addressed a variety of issues. From  July 2006 through June 2007, about one-third of IRE cases concerned a  drug utilization restriction, such as a prior authorization requirement or  quantity limit. Another 33 percent of IRE cases were requests for a drug  not covered under Part D, such as a drug in one of the 10 Part D-excluded  categories. Twenty-eight percent of cases were requests for Part D drugs  not on the sponsor’s formulary. The remaining 5 percent of IRE cases  involved issues such as requests to pay a lower cost-sharing level and  reimbursement for drugs provided outside of the sponsor’s pharmacy  network.
IRE approval rates for Part D appeals were highest for disputes involving  drug utilization restrictions and lowest for cases involving Part D-excluded  drugs. The IRE fully or partially approved coverage in 39 percent of the  appeals concerning a drug utilization restriction, 30 percent of appeals  involving nonformulary drugs, and 18 percent of appeals for coverage of a  drug that sponsors denied as an excluded drug under Part D. (See fig. 2.)
As part of the decision process, the IRE determines whether the sponsor  has met its obligation for coverage under the Part D rules. IRE staff told  us that during the first year of the program, some sponsors denied  requests because they did not fully consider the beneficiary’s overriding  medical need for the requested drug, as CMS requires. In contrast, at the  IRE, the beneficiary’s medical condition is the determining factor when  the sponsor’s coverage criteria cannot be met. For example, in one case, a  sponsor denied a physician’s request for the drug Celebrex—a drug used  to treat arthritis and other conditions—because the physician did not  provide documentation of the beneficiary’s trial and failure of the  sponsor’s formulary medications—Naproxen, Ibuprofen, or Ketoprofen. In  this case, the sponsor did not cover the requested drug because its step  therapy requirement had not been met. However, in reviewing the case,  the IRE applied medical necessity criteria because the prescribing  physician stated that use of the sponsor’s preferred formulary alternatives  were contraindicated for treatment of his patient’s condition. As a result,  the IRE overturned the sponsor’s decision, stating that an exception to the  sponsor’s step therapy requirement was warranted and that the sponsor  should provide coverage of the drug until the end of the plan year.
section_title: Missing AOR Forms at Study Sponsors and the IRE Cause Appeals to Be Delayed or Dismissed
paragraphs: At our study sponsors and at the IRE, we found evidence that decisions on  standard appeals submitted by prescribing physicians—redeterminations  and reconsiderations—had been delayed and sometimes dismissed due to  missing AOR forms. Without written authorization from the beneficiary,  sponsors and the IRE may begin collecting relevant documentation to  support a physician-submitted standard request, but they cannot complete  their review. Also, the time frame for making the decision does not begin  until the completed AOR form is received. According to most study  sponsors and the IRE, if they do not receive the signed AOR form within a  reasonable amount of time—which ranges from about a week to about a  month after receiving the request—they deny or dismiss the request. Of  the cases we reviewed at the study sponsors, missing AOR forms  generated processing delays in 7 percent of cases. These delays were  typically about 14 days, but could stretch to 67 days. At the IRE, missing  AOR forms caused dismissals of about 9 percent of appeals, which is  about one in every five reconsideration cases that were dismissed.
Data on the prevalence of delays in processing redetermination requests  attributable to missing AOR forms mask the fact that some sponsors in our  study have developed “workarounds” to eliminate the need for a  completed AOR form. For example, one sponsor told us it treats all  physician appeals as expedited, regardless of the priority level indicated  by the physician. Our review of a sample of sponsors’ case files showed  that 26 percent of redetermination requests were classified as expedited  compared to 4 percent of the coverage determination case files we  reviewed. Although expediting requests precludes the need for an AOR  form, one sponsor stated that because these requests may not be truly  urgent, it may not be in the beneficiary’s best interest for the appeal to be  rushed. Expedited appeals allow less time—72 hours versus 7 days—for  reviewers to consider the evidence at hand or to request additional  information, which might affect the outcome of the appeal. For the case  files we reviewed, the denial rate for expedited redeterminations was   73 percent compared with a denial rate of 67 percent for standard  redeterminations.
In another workaround, sponsors obviate the need to obtain two  signatures—the beneficiary’s to appoint the physician to act as a  representative and the physician’s to accept the appointment—by  arranging for the redetermination request to be made by the beneficiary.  For example, one sponsor reported contacting beneficiaries to ask  whether they want to initiate the redetermination instead of their  physicians, who had contacted the sponsor first. Our case file reviews  showed that beneficiaries made requests in about 36 percent of  redetermination cases compared to 2 percent of coverage determination  cases. This approach was designed to identify those beneficiaries who  wish to initiate an appeal rather than having their physician appeal on  their behalf, thus reducing the need for the AOR paperwork.
Most sponsors in our study and IRE officials reported that the requirement  that prescribing physicians be formally appointed beneficiary  representatives with a signed AOR form in order to initiate standard  appeals is an administrative impediment. The only actions prescribing  physicians without explicit authorization cannot take are initiating the  appeal, opening discussions with a sponsor or the IRE about an ongoing  appeal requested by the beneficiary, or receiving notices of adverse  standard redeterminations or reconsiderations. In practical terms,  prescribing physicians’ involvement in a standard appeal does not differ  significantly whether they are appointed representatives or not.
section_title: CMS Efforts to Inform Beneficiaries about Sponsors’ Performance Have Improved; Oversight Hindered by Poorly Defined Reporting Requirements
paragraphs: CMS has improved its efforts to inform beneficiaries about sponsors’  performance, but its oversight of sponsors is hindered by poorly defined  reporting requirements. CMS publicly reports information on two  performance metrics: the rate at which sponsors met required time frames  for decision making and the rate at which the IRE concurs with sponsors’  redetermination decisions. In November 2007, for one of these metrics,  CMS modified the way it informs beneficiaries by grading sponsors’  performance against absolute benchmarks, rather than relative rankings as  it had done previously. To oversee sponsors’ processes, CMS requires that  sponsors report data on several coverage determinations and appeals  measures; however, the agency provided minimal guidance on the  information to be included in each coverage determination measure. As a  result, our study sponsors have reported data differently to CMS,  hindering the agency’s ability to monitor sponsors’ activities adequately. In  its audits of PDP sponsors, CMS found that most of the sponsors it audited  were noncompliant with many of the coverage determination and appeals  requirements.
subsections: section_title: CMS Improved Its Use of Performance Metrics to Inform Beneficiaries
paragraphs: Using quarterly IRE data, CMS has developed two performance metrics to  gauge how well sponsors’ coverage determination and appeals processes  are operating. CMS calculates metrics on (1) the rate at which sponsors  met required time frames for coverage determinations and  redeterminations, as measured by the number of cases, per 10,000  beneficiaries, automatically forwarded to the IRE because of delays in  sponsors’ decision making; and (2) the rate at which the IRE concurs with  sponsors’ redetermination decisions, as measured by the percentage of  cases in which the IRE upheld, or agreed with, sponsors’ coverage  denials. CMS officials told us that the agency selected these two  performance metrics, in part, because beneficiaries could interpret their  meaning easily. CMS includes the two metrics in information made  available to the public on the Medicare Prescription Drug Plan Finder—a  Web site designed to help beneficiaries compare drug plans.
CMS account managers—staff responsible for overseeing sponsors’  performance—review sponsors’ scores on these performance metrics to  monitor how well their coverage determination and appeals processes are  operating. Sponsors with the highest rates of cases forwarded  automatically to the IRE and the lowest percentages of cases in which the  IRE agreed with their decisions are viewed as problematic. When a  sponsor is identified as an outlier, the assigned account manager contacts  the sponsor to discuss its coverage determination and appeal procedures  and works with the sponsor to identify ways to improve its performance,  such as conducting additional training sessions.
Both the IRE and the sponsors in our study noted certain limitations in the  data underlying each of these metrics. The number of automatically  forwarded cases used for the timeliness metric may understate sponsors’  timeliness. According to IRE officials, some sponsors have forwarded  cases to the IRE believing they had exceeded the required decision time  frames when they had not. According to the officials, these sponsors  automatically forwarded cases when they had not yet received a signed  AOR form or a physician statement to support a coverage request. In such  cases, the required time frames have not yet expired and the IRE returns  the case to the sponsor for processing. Because these sponsors  automatically fowarded cases to the IRE inappropriately, their rates of  missed time frames are higher than they should be.
Another limitation is that the performance metric on the IRE’s  concurrence with sponsors’ decisions can be misleading. In discussing this  measure with the sponsors in our study, one sponsor commented that a  low rate of IRE agreement with their decisions implies, unfairly, that the  sponsor’s decisions were flawed. They contend that the IRE often receives  additional supporting evidence that results in an overturn, as we found by  interviewing IRE officials. They state that had they received the same  information within their time frame for processing the case, they may have  approved the request. In their view, a low percentage of cases in which the  IRE agrees with the sponsor’s decisions does not necessarily mean that  the sponsor was not performing well. However, a CMS official asserted  that sponsors are responsible for collecting all the information needed to  adjudicate a request in the time allotted and are accountable if they do not  obtain the same information available to the IRE.
CMS uses these performance metrics to inform beneficiaries of sponsors’  performance and to encourage poor performing sponsors to do better. In  an effort to improve the information shared with beneficiaries for the 2008  open enrollment period, the agency changed the manner in which it  calculates and displays these metrics—using a star designation system.  For the 2007 open enrollment period, CMS used 2006 data from the IRE to  rank order sponsors’ rates, classify sponsors into groups based on  sponsors’ relative performance, and assign a star designation to each  group. For example, CMS chose to assign three stars, indicating very  good performance, to 90 percent of sponsors for each metric. The next   5 percent of sponsors were assigned two stars, indicating acceptable  performance, while the remaining sponsors were given one star, indicating  poor performance.
By setting the star designations using relative comparisons rather than  defined benchmarks for different levels of performance, CMS implied that  those sponsors receiving the most stars had superior performance while  those with fewer stars were not meeting a CMS-set standard. The  clustering of 90 percent of sponsors in the three-star designation could  have been misinterpreted by beneficiaries as identifying those sponsors  with superior performance when, in fact, by definition, 90 percent of  sponsors received three stars. Moreover, the performance of sponsors in  the top category varied significantly. For example, among the 26 PDP  sponsors receiving three stars, the percentage of cases where the IRE  concurred with sponsors’ redetermination decisions ranged from 39 to   75 percent. At the same time, the remaining categories were quite  compressed. A relatively small difference in rates could have placed a  sponsor in the lowest category rather than the highest category. CMS  designated an IRE concurrence rate of 39 percent to be very good  performance, but a 36 percent rate as acceptable performance, and   34 percent as poor performance.
Recognizing the value of comparing sponsor performance against absolute  standards (benchmarks), CMS changed its star designation system in time  for the 2008 open enrollment period. For the performance metric on IRE  concurrence, the agency now assigns sponsors to one of five star  categories using fixed benchmarks rather than a percentile ranking.   Table 2 shows how sponsors are assigned to different performance  categories for the metric on IRE concurrence. For example, under the new  designation system, only those sponsors with IRE concurrence rates better  than 95 percent receive five stars, indicating excellent performance. Also,  stars are only displayed for sponsors that have at least five appeals cases  reviewed by the IRE.
For the 2008 open enrollment period, CMS expanded its star designation  system for the timeliness metric from three stars to five stars. Although it  retained the relative ranking approach, CMS more evenly distributed the  sponsors across the star categories. For example, whereas previously CMS  assigned the top 90 percent of sponsors—those with the lowest rates of  cases forwarded to the IRE because of missed time frames—the highest  rating, the agency now assigns the highest rating to the top 15 percent of  sponsors. Previously, CMS assigned 5 percent of sponsors the lowest  rating, but now it assigns the lowest rating to 15 percent of the sponsors.  The remaining sponsors are distributed more evenly across the two-,  three-, and four-star designations. CMS continues to include among the top  performing sponsors those with no cases forwarded to the IRE due to  missed time frames. In our examination of 2006 publicly reported  performance data, we found that, among the 60 PDP sponsors receiving  three stars for making timely decisions, 21 did not forward any cases to  the IRE because of missed time frames.
section_title: CMS Monitoring Hampered by Lack of Specificity in Reporting Requirements; Audits Identified Sponsors Needing Improvement
paragraphs: CMS’s oversight of sponsors’ coverage determination and appeals  processes include both monitoring and auditing.
subsections: section_title: CMS’s Monitoring Efforts
paragraphs: In monitoring the coverage determination processes, CMS reviews  quarterly data reported by sponsors. The coverage determination  measures selected for reporting capture information about the extent to  which beneficiaries use the coverage determination process and the  outcomes of that process. An agency official involved in selecting the  measures to be reported noted that CMS sought to minimize the  administrative burden on sponsors by selecting measures for which data  were likely to be readily available. For 2006, the first year of the Part D  program, CMS required sponsors to submit data on the following types of  coverage determination cases:  the number of requests and the number of approvals for formulary drugs  requiring prior authorizations;  the number of requests and the number of approvals for formulary  exceptions, such as for nonformulary drugs; and  the number of requests and the number of approvals for tiering  exceptions.
CMS used the submitted coverage determination data to calculate an  overall request rate and an overall approval rate. In its analysis of the 2006  sponsor-reported data, CMS identified sponsors with relatively high  overall rates of coverage requests and low overall rates of approvals. The  agency wrote to these sponsors requesting that they confirm whether their  submitted data were accurate and not the result of clerical errors.
We found that our study sponsors submitted information differently to  CMS because the agency provided limited guidance on the information to  be included in each coverage determination measure. CMS defined the  coverage determination measures sponsors are required to report too  broadly, thus allowing each sponsor to use its existing data categorizations  for each of the measures. After examining data reported for the third and  fourth quarters of 2006, and following up with our study sponsors, we  found substantial discrepancies in how sponsors reported these overall  data for requests and approvals, as the following illustrate.
While four of our seven sponsors said their measure of formulary drug  requests requiring prior authorizations included requests for quantity limit  exceptions, three sponsors included only a portion or none of these types  of cases. For example, one sponsor told us that it omitted 6,032 requests  for quantity limit exceptions in reporting the formulary drug request  measure in the fourth quarter of 2006. These cases accounted for about   22 percent of the sponsor’s total coverage determination requests during  that period. Another sponsor did not include 4,608 requests involving  quantity limit exceptions in reporting the formulary drug request measure.  These cases accounted for about 25 percent of all its coverage  determination requests in the fourth quarter of 2006.
Some, but not all, study sponsors included other types of cases in the  requests and approvals for formulary drug measures. For example, three  of our seven study sponsors included cases disputing coverage under   Part B or Part D in their formulary drug measures, and four study sponsors  included requests for drugs excluded from coverage under Part D.
One of our seven study sponsors stated that, while it included all prior  authorization requests in the formulary drug request measure, it included  all requests for step therapy and quantity limits in the nonformulary drug  request measure, based on a definition for nonformulary drugs in the  Medicare Part D manual. In contrast, another sponsor in our study  reported in the nonformulary drug category requests for drugs that it  inadvertently did not include when designing its open formulary.
We identified two sponsors that double counted the number of requested  and approved tiering exceptions by reporting them in two different  measures. For example, one of our study sponsors included 13,986  requests for tiering exceptions in its count of prior authorization requests  for formulary drugs reported to CMS. The inclusion of these tiering  exceptions in the number of requests for formulary drugs increased the  requests for formulary drugs reported by about 43 percent.
For the 2007 contract year, CMS made a number of modifications to its  reporting requirements. CMS instructed sponsors to begin reporting data  on the number of requests and approvals for quantity limit exceptions  measures and renamed the other measures to better convey the types of  coverage determinations to include in their reporting. CMS also  instructed sponsors to exclude cases related to Part B versus Part D  coverage from their data submissions. However, because CMS has yet to  address categorization issues, such as whether the measures should be  mutually exclusive, sponsors’ data reporting may remain inconsistent.  Until data reliability issues are addressed, CMS may not be in a position to  use these measures to oversee sponsors’ coverage determination process  effectively.
section_title: CMS’s Auditing Efforts
paragraphs: In it 2007 compliance audits of five PDP sponsors, CMS found numerous  violations of Part D standards. The agency used an audit protocol that  examined 13 elements related to the coverage determination process and  13 elements of the appeals processes. CMS auditors reported that the  number of violations across sponsors ranged from 15 to 26 specific  coverage determination and appeals process requirements. CMS has  required sponsors to fix the violations by adopting corrective action plans.
Areas of sponsor noncompliance ranged from incomplete written policies  and procedures to delays in authorizing drug coverage after the IRE  approved an expedited request. Auditors found that some sponsors did not  notify beneficiaries of coverage decisions within the required time frames.  Several sponsors were cited for not using CMS-approved decision notices;  such notices must explain the reasons for denying requests or inform  beneficiaries of their appeal rights. Other sponsors did not have policies to  use physicians to review appeals of coverage requests denied for a lack of  medical necessity. Table 3 shows those audit elements for which CMS  found at least four of the five sponsors noncompliant. As of October 2,  2007, each of the five sponsors had submitted to CMS corrective action  plans to remediate the identified deficiencies, which CMS was in the  process of reviewing.
A number of the audit findings indicate that the publicly reported  performance metric on sponsor timeliness may not accurately reflect  sponsors’ adherence to the requirement to automatically forward cases to  the IRE. In reviewing case files, for example, CMS found that sponsors  inconsistently forwarded standard coverage determination cases to the  IRE when they did not meet the required CMS time frame, with one of the  sponsors providing CMS with a written statement acknowledging that it  had not forwarded any cases to the IRE for review during the audit period.  Another two sponsors inappropriately allowed themselves more time to  process certain coverage determination requests by starting their coverage  determination review only after they received a supporting statement from  the physician.
In a separate initiative, CMS has worked with a selected group of sponsors  to improve their performance on coverage determinations and appeals.  Using a collaborative approach to performance improvement, CMS has  conducted evaluations of two sponsors with comparatively high reversal  rates at the IRE level of appeal to identify reasons why the IRE often did  not agree with these sponsors’ prior coverage decisions. After examining  a random sample of IRE case files for each sponsor in 2006, CMS identified  several process-related issues that each sponsor could improve and  provided feedback in the form of recommendations to each sponsor. For  example, at one sponsor, CMS found that in about two-thirds of the  reviewed cases, the sponsor should have done a better job of obtaining  and assessing documentation of the evidence to support the request. The  agency recommended that the sponsor revise certain forms in order to  obtain all the information needed to make appropriate coverage  determination decisions. CMS officials told us that both sponsors  improved their performance by increasing the number of cases in which  the IRE agreed with their decisions. As of September 2007, CMS was  completing its evaluation of a third sponsor that did not receive a three- star designation for the performance metric based on the 2006 data.
section_title: Conclusions
paragraphs: In the Part D program, beneficiaries’ access to prescription drugs is a  function not only of whether a particular drug is on a plan’s formulary and  whether it is subject to utilization management tools, but also how plan  sponsors make individualized coverage decisions when requested. The  Medicare drug benefit allows sponsors to operate in a regulated but  flexible environment. Thus, sponsors in our study follow similar  procedural steps but apply discretion in making coverage determinations  and appeal decisions.
Administrative barriers in the appeals process can have implications for  beneficiaries’ drug coverage. Efforts to implement the requirement that  prescribing physicians be formally appointed beneficiary representatives  with a signed AOR form in order to initiate standard appeals have been  cited as an impediment to the appeals process. We found evidence that  missing AOR forms have caused delays and some dismissals in cases being  considered. A more streamlined approach that reduces AOR paperwork by  quickly identifying those beneficiaries who wish to initiate an appeal could  improve the process while maintaining physician involvement.
While CMS has improved its efforts to inform beneficiaries about  sponsors’ performance, its oversight efforts remain mixed. The agency has  begun to hold sponsors accountable for maintaining compliance with  coverage determination and appeals requirements. Agency auditors cited  sponsors for widespread deficiencies and have required them to revise  procedures to better serve beneficiaries. However, CMS lacks the data it  needs to routinely monitor coverage determination and appeals requests  and approvals across all sponsors. The agency has not taken steps  necessary to ensure that sponsors report data consistently.
section_title: Recommendations for Executive Action
paragraphs: To improve the Medicare Part D coverage determination and appeals  processes, we recommend that the Administrator of CMS:  reduce the need for completed AOR forms by requiring sponsors and the  IRE, upon receipt of standard appeal requests submitted by prescribing  physicians without completed AOR forms, to telephone beneficiaries to  determine whether they wish to initiate the appeal, and   ensure that sponsor-reported data used for monitoring coverage  determination and appeals activities are accurate and consistent by  providing specific data definitions for each measure.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, CMS remarked that our  review presents a balanced evaluation of Part D coverage determination  and appeals procedures and the associated data reporting procedures, and  does an excellent job of highlighting various challenges in the Part D  appeals process. (See app. II.) The agency reported that it is exploring the  adoption of one of the report’s recommendations and is in the process of  implementing the other. In addition to comments on each of our  recommendations, CMS provided detailed, technical comments that we  incorporated where appropriate.
CMS stated that it intends to consider our recommendation that the need  for a signed AOR form be reduced through a process where sponsors call  beneficiaries when physicians request appeals on their patients’ behalf.  However, it noted that it was not certain whether any change to the  current policy could be implemented without modifying the statutory and  regulatory provisions associated with the AOR requirement. The agency  pointed out that physician representation of beneficiaries is limited by law  because only a Medicare Part D eligible individual can bring an appeal at  the IRE level. Therefore, CMS said that it is reviewing the current legal  requirements about making appeal requests to determine whether changes  are appropriate and necessary. CMS added that it intends to work with  physician groups to ensure that physicians promptly submit any needed  AOR forms.
We are pleased that CMS is considering how it can implement our  recommendation to address the difficulties regarding the AOR  requirement. In making this recommendation, we considered relevant  statutory and regulatory provisions and found no limitations that would  preclude its adoption by CMS. Our recommendation would reduce the  need for AOR forms by requiring that sponsors and the IRE determine at  the outset whether beneficiaries want to initiate their appeals or have  physicians do so on their behalf. If it is determined that the beneficiary is  requesting the appeal, an AOR form would not be needed and the sponsor  or IRE could immediately process the request. However, if sponsors or  IRE find that beneficiaries want their physicians to initiate the appeal for  them, then completed AOR forms would still be required. We have slightly  reworded our recommendation, to clarify our intent and eliminate any  ambiguity, and included the revised language in the final report.
CMS agreed with our recommendation to ensure that sponsor-reported  data are accurate and consistent by providing specific data definitions for  the coverage determination and appeals measures. The agency noted that  it has taken steps to modify the Part D Plan Reporting Requirements  guidance on data element definitions. It plans to reinforce this guidance  during upcoming calls with Part D sponsors, as well as in memoranda to  sponsors, Frequently Asked Questions documents, and conference  presentations. In addition, to minimize data entry errors, CMS has  implemented data edit rules that will, among other things, reject a value  that exceeds an expected range. It also developed procedures for sponsors  to correct previously submitted information.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution of it until 30 days from  the date of this report. We will then send copies to the Administrator of  CMS, appropriate congressional committees, and other interested parties.  We will also make copies available to others upon request. This report is  also available at no charge on GAO’s Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  Kathleen King at (202) 512-7114 or kingk@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made contributions to this report  are listed in appendix III.
section_title: Appendix I: Steps and Time Frames for Part D Coverage Determination and Appeals
section_title: Appendix II: Comments from the Centers for Medicare & Medicaid Services
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the contact named above, Rosamond Katz, Assistant  Director; Lori Achman; Todd Anderson; Hazel Bailey; Krister Friday; Lisa  Rogers; and Jennifer Whitworth made major contributions to this report.