Medicare Part D: CMS's Process and Policy for Enrolling New Dual-Eligible Beneficiaries
Published: 2007-06-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), dual-eligible beneficiaries--individuals with both Medicare and Medicaid coverage--have their drug costs covered under Medicare Part D rather than under state Medicaid programs. The MMA requires the Centers for Medicare & Medicaid Services (CMS) to enroll these beneficiaries in a Medicare prescription drug plan (PDP) if they do not select a plan on their own. CMS enrolled about 5.5 million dual-eligible beneficiaries in late 2005 and about 634,000 who became dually eligible during 2006. GAO was asked to testify on (1) CMS's process for enrolling new dual-eligible beneficiaries into PDPs and its effect on access to drugs and (2) how CMS set the effective coverage date for certain dual-eligible beneficiaries and its implementation of this policy. This testimony is based on the GAO report, Medicare Part D: Challenges in Enrolling New Dual-Eligible Beneficiaries (GAO-07-272).
section_title: What GAO Found
paragraphs: CMS's process for enrolling new dual-eligible beneficiaries who have not yet signed up for a PDP involves many parties, information systems, and administrative steps, and takes a minimum of 5 weeks to complete. For about two-thirds of these individuals--generally Medicare beneficiaries who subsequently qualify for Medicaid--pharmacies may not have up-to-date PDP enrollment information needed to bill PDPs appropriately until the beneficiaries' data are completely processed. As a result, these beneficiaries may have difficulty obtaining their Part D-covered prescription drugs during this interval. CMS has created contingency measures to help individuals obtain their new Medicare benefit, but these measures have not always worked effectively. For the other one-third of new dual-eligible beneficiaries--Medicaid enrollees who become Medicare-eligible because of age or disability--CMS eliminated the impact of processing time by enrolling them in PDPs just prior to their attaining Medicare eligibility. This prospective enrollment, implemented in late 2006, offers these dual-eligible beneficiaries a seamless transition to Medicare Part D coverage. CMS set the effective Part D coverage date for Medicare eligible beneficiaries who subsequently become eligible for Medicaid to coincide with the date their Medicaid coverage becomes effective. Under this policy, which was designed to provide drug coverage for dual-eligible beneficiaries as soon as they attain dual-eligible status, the start of the Part D coverage can extend retroactively for several months before the date beneficiaries are notified of their PDP enrollment. GAO found that CMS did not fully implement or monitor the impact of this policy. Although beneficiaries are entitled to reimbursement for covered drug costs incurred during this retroactive period, CMS did not begin informing them of this right until March 2007. Given their vulnerability, it is unlikely that these beneficiaries would have sought reimbursement or retained proof of their drug purchases if they were not informed for their right to do so. Also, CMS made monthly payments to PDPs for providing drug coverage during retroactive periods, but did not monitor PDPs' reimbursements to beneficiaries during that period. GAO estimated that in 2006, Medicare paid PDPs millions of dollars for coverage during periods for which dual-eligible beneficiaries may not have sought reimbursement for their drugs.

section_title: Letter
paragraphs: I am pleased to be here today as you discuss the Medicare Part D  prescription drug benefit. Implementation of this new drug benefit has  raised particular concerns for individuals eligible for both Medicare and  full Medicaid benefits—known as dual-eligible beneficiaries. These  individuals account for about 15 percent of all Medicare beneficiaries and  15 percent of all Medicaid enrollees. As a group, they are generally poorer  and tend to have more extensive health care needs than other Medicare  beneficiaries. Under the Medicare Prescription Drug, Improvement, and  Modernization Act of 2003 (MMA), dual-eligible beneficiaries—who  previously received drug benefits under Medicaid—have had their  prescription drug costs paid under Medicare Part D since January 1, 2006.  In addition, the MMA requires the Centers for Medicare & Medicaid  Services (CMS) to assist dual-eligible beneficiaries by enrolling them in a  private Medicare prescription drug plan (PDP) if they do not select a plan  on their own. CMS enrolled about 5.5 million dual-eligible beneficiaries in  late 2005 for the initial implementation of Part D and about 634,000  beneficiaries who became dual-eligible during 2006.
My testimony today will summarize selected findings from the previously  released GAO report, Medicare Part D: Challenges in Enrolling New  Dual-Eligible Beneficiaries. Specifically, my remarks today will focus on   (1) CMS’s process for enrolling new dual-eligible beneficiaries into PDPs  and its effect on beneficiary access to drugs and (2) how CMS set the  effective Part D coverage date for certain dual-eligible beneficiaries and its  implementation of this policy.
To address these issues, we conducted site visits in six states—California,  Maine, Maryland, Michigan, New Jersey, and Texas—to learn about dual- eligible beneficiaries’ enrollment in Part D from the perspective of state  Medicaid agencies, pharmacies, and long-term care providers. We also  interviewed officials from CMS and representatives of PDPs about issues  that pertain to dual-eligible beneficiaries. We conducted the work for our  report from March 2006 through April 2007 in accordance with generally  accepted government auditing standards.
In summary, we found that CMS’s process for enrolling new dual-eligible  beneficiaries involves many parties, information systems, and  administrative steps, and takes a minimum of 5 weeks to complete. For the  majority of these individuals—generally Medicare beneficiaries not yet  enrolled in Part D who subsequently qualify for Medicaid—this processing  interval can create difficulties in obtaining Part D-covered drugs at their  pharmacies. For other new dual-eligible beneficiaries—Medicaid enrollees  who become Medicare eligible because of age or disability—CMS took  steps to eliminate the impact of the processing interval by enrolling them  in PDPs just prior to their attaining Medicare eligibility. In addition, for the  Medicare first, Medicaid second group of new dual-eligible beneficiaries,  CMS set the effective date of Part D coverage to coincide with the first  date of their Medicaid eligibility. Under this policy, which was designed to  provide drug coverage for dual-eligible beneficiaries as soon as they attain  dual-eligible status, the start of their Part D coverage can be retroactively  set to several months before the date of their actual PDP enrollment. We  found that CMS did not fully implement or monitor the impact of this  coverage date policy. Although beneficiaries are entitled to reimbursement  for covered drug costs incurred during this retroactive period, CMS and  PDPs did not begin informing them of this right until March 2007. Also,  CMS did not track Medicare payments made to PDPs to provide  retroactive coverage or monitor PDPs’ reimbursements to beneficiaries for  that period. We estimate that in 2006, Medicare paid PDPs about   $100 million for coverage during periods for which dual-eligible  beneficiaries may not have sought reimbursement for their drug costs. In  the report, we recommend that CMS require PDPs to notify beneficiaries  about their right to reimbursement, monitor implementation of its  retroactive payment policy, and take other steps to improve the  operational efficiency of the program.
subsections: section_title: Background
paragraphs: Dual-eligible beneficiaries are a particularly vulnerable population. These  individuals are typically poorer, tend to have far more extensive health  care needs, have higher rates of cognitive impairments, and are more  likely to be disabled than other Medicare beneficiaries. About three out of  four dual-eligible beneficiaries live in the community and typically obtain  drugs through retail pharmacies. Other dual-eligible beneficiaries reside in  long-term care facilities and obtain drugs through pharmacies that  specifically serve these facilities.
In general, individuals become dual-eligible beneficiaries in two ways. One  way is when Medicare-eligible individuals subsequently become Medicaid  eligible. This typically occurs when income and resources of beneficiaries  fall below certain levels and they enroll in the Supplemental Security  Income (SSI) program, or they incur medical costs that reduce their  income below Medicaid eligibility thresholds. If these Medicare  beneficiaries did not sign up for a Part D plan on their own, they have no  drug coverage until they are enrolled in a PDP by CMS. CMS data show  that this group represented about two-thirds of new dual-eligible  beneficiaries the agency enrolled in PDPs in 2006. According to CMS, it is  not possible for it to predict which Medicare beneficiaries will become  Medicaid eligible in any given month because Medicaid eligibility  determinations are a state function.
Another way individuals become dually eligible is when Medicaid  beneficiaries subsequently become eligible for Medicare by reaching   65 years of age or by completing the 24-month disability waiting period.  Once they become dual-eligible beneficiaries, they can no longer receive  coverage from state Medicaid agencies for their Part D-covered  prescription drugs. In 2006, this group represented approximately one- third of the new dual-eligible beneficiaries enrolled in PDPs by CMS. CMS  can generally learn from states when these individuals will become dually  eligible.
For dual-eligible beneficiaries, Medicare provides a low-income subsidy  that covers most of their out-of-pocket costs for Part D drug coverage.  This subsidy covers the full amount of the monthly premium that non- subsidy-eligible beneficiaries normally pay, up to the low-income  benchmark premium. The subsidy also covers most or all of a dual-eligible  beneficiary’s prescription copayments. In 2007, these beneficiaries are  responsible for copayments that range from $1 to $5.35 per prescription,  depending on their income and asset levels, with the exception of those in  long-term care facilities, who pay no copayments.
section_title: CMS’s Enrollment Process Takes Time and Can Create Difficulties for Some Dual-Eligible Beneficiaries
paragraphs: Given the number of entities, information systems, and administrative  steps involved, it takes a minimum of 5 weeks for CMS to identify and  enroll a new dual-eligible beneficiary in a PDP. As a result, two out of  three new dual-eligible beneficiaries—generally those who are Medicare  eligible and then become Medicaid eligible—may experience difficulties  obtaining their prescription drugs under Part D during this interval. For  other new dual-eligible beneficiaries—those switching from Medicaid to  Medicare drug coverage—CMS instituted a prospective enrollment  process in late 2006 that enrolls these individuals before their date of  Medicare eligibility and offers a seamless transition to Part D coverage.
Multiple parties and information systems are involved in identifying and  enrolling dual-eligible beneficiaries in PDPs. As shown in figure 1, CMS,  the Social Security Administration (SSA), state Medicaid agencies, and  PDP sponsors play key roles in providing information needed to ensure  that new dual-eligible beneficiaries are identified and enrolled properly.  SSA maintains information on Medicare eligibility that is used by CMS and  some states. State Medicaid agencies are responsible for forwarding to  CMS lists of beneficiaries whom the state believes to be eligible for both  Medicare and Medicaid. CMS is then responsible for making plan  assignments and processing enrollments. PDP sponsors maintain  information systems that are responsible for exchanging enrollment and  billing information with CMS.
The process of enrolling dual-eligible beneficiaries requires several steps.  It begins when state Medicaid agencies identify new dual-eligible  beneficiaries and ends when PDPs make billing information available to  pharmacies and send enrollment information to dual-eligible beneficiaries.  We estimate that it takes at least 5 weeks to complete the process under  current procedures. During this interval, pharmacies may not have   up-to-date PDP enrollment information on new dual-eligible individuals.  This may result in beneficiaries having difficulty obtaining Part D-covered  drugs at their pharmacies. To illustrate why this occurs, we present the  hypothetical example of Mr. Smith, who as a Medicare beneficiary did not  sign up for the Part D drug benefit and, therefore, upon becoming  Medicaid eligible, was enrolled in a PDP by CMS. (Fig. 2 shows the steps in  Mr. Smith’s enrollment process.)
From the time Mr. Smith applies for his state’s Medicaid program on  August 11, it takes about 1 month for him to receive notification from the  state that he is eligible for Medicaid, thus beginning the enrollment  process. From there, Mr. Smith’s new status is submitted by his state to  CMS in a monthly file transmittal. Once CMS receives the lists of dual- eligible beneficiaries from all of the states, it verifies eligibility for  Medicare and sets each beneficiary’s cost-sharing level. Then, around  October 8, CMS assigns Mr. Smith to a PDP randomly, based on the  premium level and the geographic area served by the PDP. CMS next  notifies the PDP sponsor, which then has to enroll him in its plan and  assign the necessary billing information. This billing information, such as a  member identification number, is necessary for pharmacies to correctly  bill the PDP for Mr. Smith’s prescriptions. The PDP also has to inform   Mr. Smith of his enrollment information. By the time this process is  completed, it is the middle of October.
CMS has developed some contingency measures to help individuals like  Mr. Smith during the processing interval. However, we found that these  measures have not always worked effectively. For instance, CMS designed  an enrollment contingency option to ensure that dual-eligible beneficiaries  who were not yet enrolled in a PDP could get their medications covered  under Part D, while also providing assurance that the pharmacy would be  reimbursed for those medications. However, representatives of pharmacy  associations we spoke with reported problems with reimbursements after  using this option, which has led some pharmacies to stop using it.
To avoid a gap in coverage for beneficiaries transitioning from Medicaid to  Medicare prescription drug coverage, CMS has implemented a prospective  enrollment process. Because states can predict and notify CMS which  Medicaid beneficiaries will become new dual-eligible beneficiaries and  when, CMS begins the enrollment process for these individuals 2 months  before the their anticipated dual-eligible status is attained. By conducting  the processing steps early, the prospective enrollment used for this group  of new dual-eligible beneficiaries should ensure a seamless transition from  Medicaid drug coverage to Medicare Part D coverage. Fully implemented  in November 2006, prospective enrollment applies to about one-third of  the new dual-eligible beneficiaries enrolled in PDPs by CMS.
section_title: CMS Made Drug Coverage Retroactive, but Did Not Inform Beneficiaries of Their Right to Reimbursement
paragraphs: For the majority of new dual-eligible beneficiaries, CMS requires PDPs to  provide drug coverage retroactively, typically by several months. During  2006, Medicare paid PDPs millions of dollars to provide coverage to dual- eligible beneficiaries for drug costs that may have been incurred during  the retroactive coverage period. However, we found that CMS did not fully  implement or monitor the impact of this policy.
CMS made the effective date of Part D drug coverage for Medicare  beneficiaries who become Medicaid eligible coincide with the effective  date of their Medicaid eligibility. Under this policy, Part D coverage for  these beneficiaries is effective the first day of the month that Medicaid  eligibility is effective, which generally occurs 3 months prior to the date an  individual’s Medicaid application was submitted to the state, if the  individual was eligible for Medicaid during this time. Thus, the Part D  coverage period can extend retroactively back several months from when  the actual PDP enrollment takes place.
Medicare makes payments to the PDPs for providing drug coverage  retroactively. Specifically, PDPs are paid approximately $90 per month for  the retroactive coverage period. PDPs, in turn, are responsible for  reimbursing their members (or another payer) for Part D drug costs  incurred during the retroactive months. For instance, in the case of   Mr. Smith, while he applied for Medicaid in August and learned of his PDP  assignment for Part D in October, his coverage was effective May 1. If   Mr. Smith incurred any costs for Part D-covered prescription drugs from  May—when he became eligible for Medicaid—through October, he could  submit his receipts to his assigned PDP and be reimbursed by the PDP,  less the copayments he would pay as a dual-eligible beneficiary.
We found that CMS’s implementation of this policy in 2006 was  incomplete. While dual-eligible beneficiaries were entitled to  reimbursement by their PDPs in 2006, neither CMS nor PDPs notified dual- eligible beneficiaries of this right. The model letters used until March 2007  to inform dual-eligible beneficiaries of their PDP enrollment did not  include any language concerning reimbursement of out-of-pocket costs  incurred during retroactive coverage periods. In response to a  recommendation in our report, CMS modified the model letters that the  agency and PDPs use to notify dual-eligible beneficiaries about their PDP  enrollment. The revised letters let beneficiaries know that they may be  eligible for reimbursement of some prescription costs incurred during  retroactive coverage periods.
Given the vulnerability of this population, it seems unlikely that many  dual-eligible beneficiaries would have contacted their PDPs for  reimbursement if they were not clearly informed of their right to do so and  given information about how to file for reimbursement, neither would they  likely have retained proof of their drug expenditures. Mr. Smith, for  example, would need receipts for drug purchases made during a 5-month  period preceding the date he was notified of his PDP enrollment—at a  time when he could not foresee the need for doing so.
Further, CMS did not monitor how many months of retroactive coverage  PDPs provided, nor did it monitor PDP reimbursements to beneficiaries  for costs incurred during retroactive coverage periods. Based on data  provided by CMS, we estimate that Medicare paid about $100 million to  PDP sponsors in 2006 for retroactive coverage. CMS does not know what  portion of this $100 million PDPs paid to dual-eligible beneficiaries to  reimburse them for drug costs. If Mr. Smith’s PDP did not reimburse   Mr. Smith for any prescription drugs purchased during the retroactive  coverage period, the PDP retained Medicare’s payments for that period.
section_title: Conclusions
paragraphs: Given the time it takes to complete the enrollment process, CMS has taken  action to ensure ready access to Part D for some new dual-eligible  beneficiaries, but difficulties remain for others. For the one-third of new  dual-eligible beneficiaries whose eligibility can be predicted, CMS’s  decision to implement prospective enrollment should eliminate the  coverage gap in transitioning from Medicaid to Medicare drug coverage.  However, because of inherent processing lags, most new dual-eligible  beneficiaries may continue to experience difficulties obtaining their drugs  for at least 5 weeks after being notified of their dual-eligible status. In  addition, CMS’s incomplete implementation of its retroactive coverage  policy in 2006 means that CMS paid PDPs millions of dollars for coverage  during periods for which dual-eligible beneficiaries may not have sought  reimbursement for their drug costs. Without routine monitoring of this  policy, the agency remains unaware of what portion of these funds was  subsequently reimbursed to beneficiaries and, therefore, cannot ensure  the efficient use of program funds.
Our report contains several recommendations. We recommend that CMS  require PDPs to notify beneficiaries of their right to reimbursement and  monitor implementation of its retroactive payment policy. We also  recommend that CMS take other steps to improve the operational  efficiency of the program. Although the agency did not agree with all of  them, it has already taken steps to implement some of our  recommendations. As of March 2007, CMS has modified its letters to dual- eligible beneficiaries to include language informing them of their right to  reimbursement for drug costs incurred during retroactive coverage  periods and required PDP sponsors to do the same. In addition, CMS  officials told us that they plan to analyze data to determine the magnitude  of payments made to PDPs for retroactive coverage and the amounts PDPs  have paid to beneficiaries. We hope that CMS will use this information to  evaluate the effectiveness of its retroactive coverage policy. If, after  conducting the analysis, CMS determines that it is paying PDPs substantial  amounts of money and dual-eligible beneficiaries are not requesting  reimbursements, the agency may want to rethink its policy in light of  pursuing the most efficient use of Medicare funds.
Mr. Chairman, this concludes my prepared remarks. I would be pleased to  respond to any questions that you or other members of the subcommittee  may have at this time.
section_title: Contacts and Acknowledgments
paragraphs: For further information regarding this testimony, please contact   Kathleen King at (202) 512-7114 or kingk@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this statement. Contributors to this testimony include  Rosamond Katz, Assistant Director; Lori Achman; and Samantha Poppe.
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