Medicare Part D: Opportunities Exist for Improving Information Sent to Enrollees and Scheduling the Annual Election Period
Published: 2008-12-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In Medicare Part D, enrollees in stand-alone prescription drug plans (PDPs) are allowed to switch plans during an annual coordinated election period (AEP) set under law from November 15 to December 31, with new coverage effective January 1. The Centers for Medicare & Medicaid Services (CMS) required that plan sponsors send an Annual Notice of Change (ANOC)--using either its model or a nonmodel format--before the 2008 AEP. Among other things, GAO examined: (1) stakeholders' views of the model ANOC and CMS's efforts to assure its effectiveness, and (2) how the scheduling of the AEP affects the enrollment process for beneficiaries switching PDPs. Among the largest PDP sponsors, we selected eight to interview along with other stakeholders involved in the AEP. We also obtained and analyzed data from CMS.
section_title: What GAO Found
paragraphs: Sponsors, pharmacists, beneficiary advocates, and counselors GAO interviewed expressed concern that CMS's model ANOC for the 2008 AEP did not effectively communicate drug plan changes to enrollees. They noted that it contained language at a reading level too high for some beneficiaries as well as too much, often irrelevant, information. To help ensure their enrollees understood how plan changes would affect them personally, two study sponsors mailed additional information detailing specific changes in coverage and costs for drugs the beneficiary took in the past year. Despite GAO's previous recommendation that CMS ensure that its Part D materials meet communications guidelines, CMS's process for developing its model ANOC did not include a systematic evaluation of its effectiveness. However, CMS officials reported that they recently initiated an evaluation of their annual Medicare beneficiary materials for the 2010 AEP that will examine reading levels, effectiveness, and length, among other factors. Such an evaluation is important in light of changes CMS has made for the 2009 AEP, which have raised further concerns among stakeholders. It is unclear whether alternative formats for communicating plan changes to beneficiaries will be considered. Although CMS and plan sponsors made improvements to the enrollment process, CMS data showed that about 15 percent of beneficiaries who chose to switch plans in the 2008 AEP were not fully enrolled in their new plan by January 1. Modifications to the enrollment process for the 2008 AEP reduced the time needed to enroll beneficiaries in a new plan to a median of 5 days. However, the volume of applications submitted late in the AEP contributed to beneficiaries being at risk of not having access to their new coverage by January 1. In fact, among the beneficiaries who submitted applications after December 15, 40 percent were not completely processed until after the effective date of their new coverage. As a result, stakeholders reported that beneficiaries, pharmacies, and sponsors faced various operational challenges, including the risk of inaccurate charges and additional administrative burden. Some stakeholders we interviewed for our study said that creating an interval for enrollment processing between the end of the AEP and the effective date of coverage would help ensure that beneficiaries switching plans would have their coverage in place on January 1.

section_title: Letter
paragraphs: The Medicare Prescription Drug, Improvement and Modernization Act of  2003 (MMA) established an outpatient drug benefit, known as Medicare  Part D, that provides prescription drug coverage for beneficiaries who opt  to enroll in the program. Congress designed Medicare Part D to be a  market-driven program which promotes competition among private health  plans. Of the roughly 25 million beneficiaries enrolled in Part D as of  January 2008, about 17 million beneficiaries—those in traditional  Medicare—received coverage through stand-alone prescription drug plans  (PDPs). PDPs are offered by private entities, known as drug plan  sponsors, that contract with the Centers for Medicare & Medicaid Services  (CMS), the agency that administers the Medicare program within the  Department of Health and Human Services (HHS). In its administration of  Part D, CMS is responsible for implementing program requirements and  overseeing plan sponsors’ compliance with these requirements.
Generally, beneficiaries enrolled in PDPs are only allowed to change their  drug plan during the Part D annual coordinated election period (AEP). As  required under federal law, the AEP runs from November 15 to   December 31, with drug coverage under the elected new plan effective on  January 1 of the next year. In considering their options, beneficiaries may  have a choice of more than 50 PDPs in the state where they live. Plans  differ, for example, in the particular drugs covered, monthly premiums, or  copayments beneficiaries are responsible for paying.
Beneficiaries may consider changing their PDP plan for a variety of  reasons, including changes in their health and prescription drug needs or  modifications by their plan. Generally, sponsors make changes to benefits  offered by their plans effective at the beginning of each benefit year. After  the opportunity to change plans during the AEP, most beneficiaries  enrolled in PDPs are locked into their plan for the benefit year. Thus,  beneficiaries should determine whether drugs they previously used will  continue to be covered, have increased copayments, or have any new  access requirements in the next benefit year. In light of these types of  changes, and without the opportunity to switch plans until the next AEP, it  is important that enrollees evaluate whether their drug plans will continue  to meet their needs. To this end, it is essential that CMS ensure that  information sent to enrollees by plan sponsors prior to the AEP clearly  and effectively communicates plan changes.
To inform enrollees about their benefits for the coming year, CMS requires  that sponsors mail enrollees an Annual Notice of Change (ANOC) for  receipt by October 31. This document describes modifications to the plan’s  premium, drug coverage, cost sharing, and other features for the next  benefit year. For the 2008 AEP that began November 15, 2007, sponsors  could either adopt the model ANOC provided by CMS or create a  nonmodel ANOC that included elements required by CMS that describe  plan modifications. Nonmodel ANOCs were subject to a longer review  period by CMS. The agency also required that sponsors mail enrollees an  Evidence of Coverage (EOC) document, which details enrollees’ benefits,  rights, and responsibilities under a plan, for receipt by January 31, 2008.  For the 2009 AEP starting November 15, 2008, sponsors must use CMS’s  standardized ANOC and EOC, mailed together, so that enrollees receive  them by October 31, 2008. Sponsors no longer have the option to use non- model materials.
CMS’s schedule provides beneficiaries with at least 2 weeks to review the  ANOC prior to November 15—the first day plans can accept AEP  enrollments. In addition, for the 2008 AEP CMS advised beneficiaries  opting to change plans to do so by December 7—3 weeks prior to the  official December 31 end date for the AEP. CMS recommended that  beneficiaries apply to switch plans by early December to avoid potential  problems in January, such as late or missing membership cards or  inaccurate copayment charges that may result if their applications were  not fully processed prior to January 1, 2008, the effective date of coverage.
Despite the potential for cost increases or changes in drug coverage from  year to year, the vast majority of enrollees do not switch their drug plans.  In the 2008 AEP, about 1 million beneficiaries initiated a change from one  PDP to another. You expressed concern about how beneficiaries are  notified of plan benefit changes for the AEP. In this report, we reviewed  the notices sent to enrollees as well as the enrollment process for those  opting to switch between drug plans. Specifically, we examined:   (1) sponsors’ timeliness in mailing the ANOC for the 2008 AEP and the use  of CMS’s model, (2) stakeholders’ views of CMS’s model ANOCs and the  extent to which the agency assures that they effectively communicate plan  changes to beneficiaries, and (3) how the scheduling of the AEP affects  the enrollment process for beneficiaries choosing to switch plans.
To address these issues, we obtained information on the practices and  experiences of sponsors, pharmacies, beneficiary advocates, and Medicare  counselors during the 2008 AEP. We interviewed representatives from  eight sponsors, each with 100,000 or more non-dual-eligible PDP enrollees  as of November 2007, which together accounted for about 70 percent of all  non-dual-eligible PDP beneficiaries. Additionally, we spoke to  associations representing pharmacists, pharmacy benefit management  companies, and health plans. We also interviewed counselors who assist  Medicare beneficiaries through the State Health Insurance Assistance  Programs (SHIPs) in California, Texas, Florida, and New York, which were  among the states with the largest number of PDP enrollees. Because we  used selective samples of sponsors and SHIPs, our conclusions cannot be  generalized to all PDP sponsors or SHIPs.
We reviewed CMS’s 2008 AEP “Readiness Checklist”, which contains  sponsor-reported information on compliance with ANOC mailing  requirements, to determine PDP sponsors’ timeliness. We also obtained  sample ANOCs from our study sponsors along with templates of any  supplementary documents addressing plan benefit changes that our study  sponsors disseminated between September and December 2007. In  addition, we asked sponsors and other stakeholders about their  perspectives on CMS’s 2008 and proposed 2009 AEP requirements, and  reviewed their formal comments submitted to CMS. To learn about CMS’s  process for developing and evaluating ANOCs, we interviewed CMS  officials responsible for beneficiary materials related to the AEP. We also  reviewed previous GAO work on CMS’s Part D communications and  relevant literature on principles of effective communication with Medicare  beneficiaries. To examine the effect of the AEP schedule on the  enrollment process, we obtained CMS data on PDP beneficiaries who  initiated a switch to another PDP during the 2008 AEP, including  beneficiary application dates, as reported by PDP sponsors, and the CMS  processing dates for enrollees changing plans. To assess the reliability of  these data, we interviewed CMS officials responsible for the collection and  analysis of the data, and we determined that the data were sufficiently  reliable for purposes of this report.
We conducted this performance audit from October 2007 through October  2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: The Medicare Part D Program
paragraphs: In the Medicare Part D program, drug plan sponsors compete to deliver  prescription drug benefits and attract enrollees. Sponsors offer, through  their PDPs, one or more benefit packages that differ in their levels of  premiums, deductibles, cost sharing, and coverage in “the gap”—the  period when beneficiaries would otherwise pay all of the costs of their  drugs. Sponsors must offer plans with standard prescription drug coverage  established under the MMA or actuarially equivalent prescription drug  coverage as approved by CMS, or may opt to offer plans with  supplemental prescription drug coverage. In 2008, only about 10 percent  of PDPs—5 of 47—offered the defined standard coverage.
Each plan must cover a set of drugs—generally known as a formulary— that meets certain criteria. Beyond the minimum formulary requirements,  sponsors have discretion in designing their formularies and may exclude  particular drugs from coverage, thus contributing to variation in  formularies across PDPs. For drugs included on a plan formulary,  sponsors may assign drugs to tiers that correspond to different levels of  cost sharing. In general, sponsors encourage the use of generic  medications by putting them on a cost-sharing tier that imposes the lowest  out-of-pocket costs on beneficiaries.
PDP sponsors are required to implement drug utilization management  programs to reduce cost when medically appropriate. As part of these  programs, sponsors may apply various utilization management restrictions  to specific drugs on their formularies. Utilization management restrictions  may include (1) prior authorization, which requires the beneficiary to  obtain the sponsor’s approval before a drug is covered for that individual;  (2) quantity limits, which restrict the dosage or number of units of a drug  provided within a certain period of time; and (3) step therapy, which  requires that a beneficiary try lower-cost drugs before a sponsor will cover  a more costly drug.
section_title: 2008 Plan Benefit Changes
paragraphs: From year to year, sponsors can make changes in their plans’ benefit  structure including premiums, cost-sharing levels, formularies, and  utilization management restrictions. Prior to the AEP, plan sponsors must  submit to CMS bids for approval in order to implement significant changes  to benefit structures that will go into effect the next benefit year. As part  of this bid negotiation process, CMS reviews formularies and the design of  the plan and benefits offered, including removals of drugs from  formularies, use of utilization management restrictions, and the  application of copayments for drugs. Sponsors have limited opportunities  to change benefit structures that may adversely impact enrollees,  including removing particular drugs from formularies or moving drugs to  higher cost-sharing tiers.
Changes to plan benefit structures can have significant effects on a  beneficiary’s out-of-pocket costs and access to particular drugs. For  example, a 2008 analysis conducted by Avalere Health—a health care  research and consulting firm—showed that average monthly premiums in  the 10 most popular Medicare PDPs increased by 16 percent from 2007 to  2008. The analysis also noted that some of the most popular plans raised  their premiums by more than 50 percent.
In addition to changes in premiums, PDPs made significant changes from  2007 to 2008 in cost sharing and utilization management of formulary  drugs, according to a study sponsored by the Kaiser Family Foundation.  For example, the study found that the average copayment for a 30-day  supply of nonpreferred name-brand drugs increased 13 percent from  $63.31 in 2007 to $71.31 in 2008. Additionally, it reported that PDPs  increased their use of utilization management restrictions, such as step  therapy and quantity limits, from 25 percent of a sample of the most  commonly prescribed drugs in 2007 to 30 percent in 2008.
section_title: Written Communications for Medicare Beneficiaries
paragraphs: The design of written materials for Medicare beneficiaries is particularly  important in light of evidence that some older individuals have challenges  reading and retaining written information. For example, studies have  found that individuals ages 65 and older were less proficient than younger  adults in locating information in documents and making health decisions  based on what they read. Further, a 2003 national survey of adult literacy  showed that 27 percent of Medicare beneficiaries were unable to  understand information in short, simple texts.
Previous GAO work highlights the importance of assuring that Part D  materials, in particular, communicate clearly to this population. Our 2006  study noted that the reading levels of a sample of Part D materials  exceeded the capacity of 40 percent of the seniors surveyed. Additionally,  the Part D materials reviewed in this study did not include about half of 60  common elements of effective communication, such as language that is  free of jargon and consists of familiar words in short sentences, sometimes  referred to as “plain language.” As a result of these findings, we  recommended that CMS ensure that its written materials describe the Part  D benefit in a manner that is consistent with commonly recognized  communications guidelines and is responsive to the reader’s needs.
Since the mid-1990s, a group of federal employees from different agencies  and specialties has promoted the use of plain language in government  communications, particularly those that describe federal benefits and  services for the public. Documents that conform to principles of plain  language are organized with the reader in mind and:  include only the information the reader needs;   omit unnecessary words and use short sentences of 15 to 20 words;    avoid technical terms and use simple words and active voice;  facilitate comprehension using headings, tables, lists, and white space; and incorporate customer feedback using surveys, focus groups, or protocol  testing.
Currently, no formal plain language initiative is in place for federal  executive agencies; however, some agencies have chosen to incorporate  plain language principles in their documents. For example, officials from  CMS’s Office of External Affairs indicated that they will conduct a plain  language review of CMS documents if requested by agency staff.
Other consumer research supported the use of information customized to  individuals’ preferences and circumstances to reduce the risk that  consumers dismiss the information as irrelevant. Under this approach,  consumers are provided with only data that are most relevant to them,  thus making it less likely they will be overwhelmed by the information  communicated. One study noted the importance of providing streamlined  information that helps individuals understand the consequences of their  choices.
section_title: AEP Materials for Beneficiaries
paragraphs: CMS requires sponsors to mail all enrollees an ANOC that shows how  various features of their drug plan—such as the premium, coverage, cost  sharing, and formulary—will change for the next benefit year. In addition  to the ANOC, sponsors are required to send beneficiaries other  enrollment-related documents, such as the EOC, a Summary of Benefits  (SB), and a comprehensive or abridged formulary. Table 1 describes  selected information included in each of these documents, as prepared by  sponsors in our study.
For the 2008 AEP, sponsors could opt to mail the EOC along with the  ANOC to beneficiaries for receipt by October 31, 2007, or separately mail  the EOC to enrollees for receipt by January 31, 2008. If sponsors chose to  mail EOCs separately, sponsors were required to mail a SB along with the  ANOC. For the 2009 AEP, CMS required plan sponsors to mail the ANOC, a  formulary, and the EOC together for receipt by enrollees by October 31,  2008.
In developing these materials for the 2008 AEP, sponsors could choose to  adopt CMS’s model documents or create nonmodel documents that  contained CMS’s required elements. Sponsors are required to submit all  AEP materials to CMS for review prior to mailing to enrollees. As a result,  use of model versus nonmodel documents had implications for the amount  of time for CMS review and the time frame for plan sponsors to mail  materials. When sponsors used CMS model documents without  modification, CMS reviewed the materials within 10 days; for documents  considered nonmodel, CMS required a 45-day review period. For the 2009  AEP, CMS required plan sponsors to use a standardized ANOC-EOC with  no modifications to the text permitted.
section_title: Sponsors Were Timely in Mailing 2008 ANOCS to Nearly All Beneficiaries and Most Sponsors Used CMS’s Model ANOC
paragraphs: PDP sponsors reported to CMS that nearly all enrollees received their  ANOCs on time for the 2008 AEP and most of our study sponsors used  CMS’s model ANOC. Our analysis of CMS’s Readiness Checklist and  information reported from certain sponsors indicated that 99.8 percent of  the approximately 17.2 million PDP beneficiaries enrolled as of   November 1, 2007, received ANOCs from their plan sponsors by the  required October 31 deadline. Of the 35,630 beneficiaries who received  ANOCs late, the majority (21,902) received them by November 15, 2007—  the start of the AEP—and the remainder received them by December 10,  2007. Given the limited delays in distributing ANOCs, CMS did not take  enforcement action against any of the sponsors reporting late mailings for  the 2008 AEP.
Six sponsors in our study adopted CMS’s model ANOC to inform  beneficiaries of upcoming plan changes rather than develop their own  ANOCs. Five of these six sponsors using the model reported doing so to  qualify for a shorter CMS review period—10 days versus 45 days—and in  some instances to help ensure that they could produce and send their  ANOCs by the October 31 deadline. The remaining two study sponsors  chose to develop nonmodel ANOCs for the 2008 AEP. Although their  ANOCs contained all of CMS’s required information elements, we found  that they were substantially different in format from the CMS template and  from each other. For example, these ANOCs contained sponsor-developed  text rather than CMS’s model language. Also, information was presented in  a different order and with different section headings than CMS’s model  ANOC. These two sponsors told us that in electing to create nonmodel  materials, such as the ANOC, they were able to highlight unique aspects of  their plans. For example, one of the sponsors included information that  one of its plans would begin covering the cost of administering Part D  vaccines for the 2008 benefit year.
section_title: Stakeholders Raised Concerns about the ANOC’s Readability; CMS Did Not Assess the Effectiveness of Its Model ANOCs
paragraphs: Stakeholders have expressed various concerns regarding the readability of  the ANOC and we found that prior to the 2008 and 2009 AEPs CMS did not  systematically evaluate its effectiveness in conveying plan changes to  beneficiaries. Stakeholders in our study noted that, because CMS’s model  ANOC was not beneficiary friendly, it was difficult for individuals to  determine how changes would affect them personally. To help ensure that  their enrollees understood the significance of plan changes, two sponsors  in our study mailed supplemental information that showed changes in  coverage and costs for the specific drugs the enrollee took in the past year.  Although CMS used in-house experts when developing its model ANOC,  the agency did not formally assess whether its 2008 model materials  incorporated commonly recognized communication guidelines to  effectively inform beneficiaries about plan changes. CMS officials recently  reported that on October 1, 2008, they initiated an evaluation of their  annual Medicare beneficiary materials—particularly the combined ANOC- EOC for the 2010 AEP—to assess their reading level, effectiveness, and  length, among other factors. Such an evaluation is particularly important  in light of changes that CMS made for the 2009 AEP, which raised further  concerns among stakeholders. However, it is unclear whether the  evaluation will consider potential benefits of alternative formats for  communicating plan changes to beneficiaries.
subsections: section_title: Stakeholders Expressed Concern about the Readability of CMS Model ANOC
paragraphs: Five sponsors and other stakeholders in our study noted that CMS’s model  materials for the 2008 AEP were not sufficiently concise or beneficiary  friendly and felt that the language in the model ANOC was at a reading  level too high for some beneficiaries. One sponsor—concerned about the  reading level of the documents and the complexity of the language used— noted that the model ANOC contained some sentences with more than 40  words. According to another sponsor, the inclusion of excess information  that did not contribute to understanding the benefit made it more likely  that beneficiaries would become overwhelmed and less likely to find the  information they need. Another sponsor stated that beneficiaries generally  do not read the ANOC because it is a confusing document that lacks more  basic information on plan changes and simpler language. Additionally, one  study sponsor pointed out that the CMS model materials were not reader  friendly or concise; it preferred to create its own simplified materials that  use plain language and easy-to-read graphics and layouts. Similarly,  stakeholders that assisted individuals during the AEP told us that some  beneficiaries found the ANOC overwhelming and had difficulty processing  the large amounts of information provided. Health care researchers,  advocates, and SHIP counselors we spoke with concluded that much of  the information contained in the model ANOC was too general in nature or  irrelevant to the reader, making it hard for beneficiaries to determine how  changes would affect them personally.
To help ensure that enrollees understood their plan changes, two sponsors  in our study provided additional information to beneficiaries that showed  how coverage of their specific drugs would change in the next benefit  year. For the 2008 AEP, these sponsors reported supplementing their use  of the CMS model ANOC with additional personalized mailings distributed  prior to and during the AEP. Using their pharmacy claims database, these  sponsors reported producing documents that indicated whether the  particular medications each beneficiary used in 2007 would continue to be  covered in 2008. The documents also showed any changes in cost sharing  and utilization management restrictions to be applied to these drugs in the  new benefit year. These personalized mailings went to approximately   3.6 million of the 7.3 million PDP enrollees served by our study sponsors.  Figure 1 shows a hypothetical example that we created of a sponsor’s  mailing containing personalized information on changes for the next  benefit year.
One of the two sponsors reported including personalized drug information  as a separate communication to beneficiaries shortly after the ANOC was  sent. This sponsor sent these personalized mailings only to those  beneficiaries whose drugs would undergo coverage changes for the  upcoming year. Sponsor staff told us they created personalized mailings  because they made substantial modifications to their formularies for 2008  and they wanted to make certain that beneficiaries were aware of these  changes.
Similarly, the other sponsor reported that it wanted to ensure that  beneficiaries would not be surprised by drug benefit changes effective in  January and thus felt that it was important to provide more information  than required by CMS. This sponsor inserted personalized information on  upcoming plan changes in its monthly Explanation of Benefits (EOB) sent  to beneficiaries in October, November, and December 2007. The sponsor  reported that it sought to communicate information in a succinct format to  enable beneficiaries to focus only on the plan changes relevant to them,  individually, without having to examine the longer plan formulary  document. Additionally, this sponsor had conducted focus groups to  identify the specific information elements, such as individual drug  coverage and cost changes, beneficiaries look for when reviewing their  plan notices. Sponsor staff noted that they chose to supplement the EOB  with this information because industry research indicated that readership  of the EOB is high—90 to 95 percent.
section_title: CMS Has Not Assessed Effectiveness of ANOCs, Which May Be More Critical in Light of Changes to 2009 AEP Materials
paragraphs: Agency officials told us that they had not systematically evaluated the  effectiveness of the agency’s ANOCs or incorporated beneficiary feedback  or the principles of plain language. Instead, in developing the 2008 model,  CMS officials said the agency relied on in-house expertise gained through  the development of other Medicare materials. They reported making slight  wording modifications to the draft 2008 ANOC based on comments from  the agency’s Office of External Affairs, but said that plain language review  was not part of the document clearance process. CMS officials said they  recognize the need to incorporate feedback from beneficiaries and  increase the use of commonly recognized elements of plain language in  their documents. However, they cited a lack of adequate in-house  resources to conduct consumer testing. Additionally, a CMS official cited  an insufficient number of staff to meet additional requests for plain  language review.
After the release of standardized materials for the 2009 AEP, a CMS  official reported that the agency had awarded a contract for an evaluation  of its annual Medicare beneficiary materials—particularly the combined  ANOC-EOC—which CMS required sponsors to send to beneficiaries in a  single mailing for the 2009 AEP. The official also noted that this  assessment began on October 1, 2008, and is to be completed by February  2009. According to the contract and CMS officials, this evaluation will  redesign and standardize beneficiary materials including the ANOC-EOC  to provide more understandable information to beneficiaries. CMS  officials indicated that the redesigned ANOC-EOC should be completed for  the 2010 AEP.
This effort by CMS is particularly important in light of changes that CMS  has made for the 2009 AEP, which raised further concerns among  stakeholders. One such change requires that sponsors use only a  standardized ANOC, rather than giving sponsors the option of creating  their own. In adopting this standardized document, sponsors may insert  plan-specific information where appropriate, but cannot otherwise modify  the language. According to CMS, this standardization is consistent with the  materials for the Federal Employees Health Benefits Program (FEHBP).  Additionally, the agency expects the required use of a standardized ANOC  to reduce misinformation on plan changes because this document was  more likely to contain errors than other documents submitted to CMS for  review. CMS also expects this change to speed its review of materials by  eliminating the 45-day review of nonmodel materials. When sponsors use  CMS standardized documents without modification they are available for  use 5 days after submission to CMS.
While one sponsor and two beneficiary advocates supported greater  standardization, six of the eight sponsors expressed concerns that the  2009 ANOC requirements will render notices to beneficiaries less effective  in communicating plan changes. In formal written comments to CMS and  in interviews on the proposed changes for the 2009 AEP, some study  sponsors noted that the mandatory use of CMS’s standardized documents  requires the use of language already considered to be at a reading level  that is too high for some beneficiaries. Additionally, two sponsors told us  that, in the past, they have conducted focus groups with their enrollees on  the clarity of their materials. They pointed out that the requirement to use  only standardized materials prevents them from developing an ANOC that  incorporates enrollees’ feedback and provides information in a way that  they believe would enhance beneficiaries’ comprehension of plan changes.
Some of these concerns may be addressed in CMS’s forthcoming  evaluation of the combined ANOC-EOC. The contract includes the  development of beneficiary materials at an appropriate reading level and  that incorporates plain language principles. Additionally, a CMS official  said that the evaluation will involve in depth interviews with consumers in  an effort to develop more effective beneficiary materials for PDP  enrollees. The interviews will include special populations such as dual  eligibles.
Another change CMS implemented for the 2009 AEP was a requirement  that the EOC be sent to beneficiaries with the ANOC in a single mailing.  For the 2008 AEP, sponsors had the option to mail a short Summary of  Benefits (SB) with the ANOC in October and follow this with the more  detailed EOC in January. For the 2009 AEP, CMS requires all sponsors to  mail to beneficiaries the ANOC and EOC together for receipt by   October 31; the SB will be available to beneficiaries only upon request.  According to CMS, this change gives beneficiaries comprehensive  information on their current plan in advance of the AEP. Furthermore,  CMS considers the EOC a resource document that beneficiaries will keep  and refer to as appropriate.
Sponsors, advocates, and SHIPs expressed concern that sending the  ANOC and EOC as one mailing results in a lengthy document that could  confuse some beneficiaries and deter others from reading the materials.  Because CMS’s new set of required materials replaces the abbreviated SB  (approximately 4 pages in length) with the more detailed EOC (that could  be more than 100 pages in length), the size of sponsors’ mailings for the  AEP could grow from about 51 pages in 2008 to about 86 pages in the 2009  AEP. One sponsor noted that beneficiaries want information about  changes that affect them significantly, such as changes to their formulary  or cost-sharing responsibility. Another sponsor cited the importance of  highlighting changes to step therapy and prior authorization for  beneficiaries. These sponsors expressed concern that the long combined  ANOC-EOC may not be useful for beneficiaries in understanding such  changes.
According to the contract and CMS officials, the evaluation of beneficiary  materials including the ANOC-EOC requires the development of shorter  documents. However, it is unclear whether the evaluation will include an  examination of alternatives such as the use of specific information tailored  to the individual—an approach favored by communications researchers. It  is also unclear whether the evaluation will include an assessment of the  decision to combine the ANOC and EOC mailings despite concerns  expressed in comments to CMS on the draft 2009 call letter.
section_title: Despite Improved Procedures, the AEP Schedule Does Not Allow Sufficient Time to Process All Enrollments
paragraphs: Despite improved AEP enrollment procedures, one in seven of the  approximately 1 million beneficiaries choosing to switch PDPs were not  fully enrolled in their new plan by January 1. CMS and sponsors made  modifications to the enrollment process that resulted in a median  processing time of 5 days for applications submitted throughout the 2008  AEP. However, the statutorily mandated AEP schedule—November 15 to  December 31 with coverage effective January 1—lacks sufficient time in  which to fully process enrollment applications. As a result, stakeholders  reported inaccurate charges, additional administrative burden, and  inconveniences for the beneficiary following the 2008 AEP. CMS officials  and sponsors in our study agreed that creating an interval for enrollment  processing between the end of the AEP and the effective date of new  coverage would reduce the risk of these challenges.
subsections: section_title: CMS and Sponsors Improved Procedures to Reduce Enrollment Processing Time
paragraphs: For the 2008 AEP, CMS and sponsors implemented changes to expedite  enrollment processing in order to avoid difficulties encountered the  previous year. To be fully enrolled in a new plan a beneficiary must  submit a complete application, eligibility must be verified by sponsors and  CMS, billing codes must be assigned and disseminated, adjustments must  be made to premium amounts and any relevant subsidies, and the  beneficiary must receive documentation of new coverage, in the form of  either a confirmation letter or a new membership card. The complete  processing of an enrollment application requires data exchanges among  not only CMS, sponsors, and pharmacies, but also the Social Security  Administration (SSA), state Medicaid programs for certain beneficiaries,  and various CMS contractors. The multiple data exchanges among  partners that are necessary for processing a beneficiary’s change in plans  occur sequentially over a period of time.
A previous study by GAO on Part D complaints and grievances found that  63 percent of the complaints received by CMS over an 18-month period  cited problems related to processing beneficiary enrollments and  disenrollments. We noted that CMS received numerous complaints about  late or missing membership cards, incorrect enrollments and  disenrollments, inaccurate premiums, involuntary switching, and problems  regarding cost-sharing amounts. To address concerns, CMS continually  works with its partners through work groups, task forces, and coalitions to  improve program quality and improve Part D processes.
The changes CMS implemented for the 2008 AEP reduced the time needed  for processing enrollments by at least 14 days, compared to the previous  year. CMS achieved this reduction by requiring sponsors to:  transmit new enrollment information to CMS “as early as possible” or, at  most, within 7 days instead of the 14 days permitted during the 2007 AEP;   contact beneficiaries regarding missing information within 10 days of  receipt versus 21 days as previously required; and   provide beneficiaries with information on their enrollment in a new plan  from CMS’s earliest notification, which is likely to be the weekly report,  rather than waiting for CMS’s monthly report as previously permitted.
In addition, CMS improved the process by requiring sponsors to assign  billing codes to new enrollments earlier in the process. Pharmacies need  these codes in order to identify and charge the appropriate plan and  collect the correct copayment amounts from beneficiaries. Previously,  sponsors assigned this information at various times and in separate  transactions that sometimes followed CMS’s confirmation of a  beneficiary’s Part D eligibility by as much as 14 days, delaying availability  of billing codes at the pharmacy. In contrast, for the 2008 AEP, the agency  required sponsors to submit the billing codes for each beneficiary  simultaneously with the initial enrollment transaction. Since 2006, CMS  has required sponsors to include this information on the  acknowledgement and confirmation letters sent to beneficiaries informing  them of the effective date of their new coverage. These letters could be  used by pharmacists to verify coverage prior to the beneficiaries’ receipt  of their new plan membership cards. Streamlining the assignment of the  billing codes significantly decreased the time to complete enrollment  processing and increased overall program efficiency.
Four sponsors in our study also took steps to complete AEP enrollments  and transmit the billing codes to their claims systems prior to receiving the  weekly report from CMS confirming eligibility. Two sponsors went  further to expedite enrollments by establishing processes to independently  obtain information needed to complete an application or verify enrollees’  eligibility for Part D. Because these sponsors did not wait for CMS to  confirm eligibility via their weekly or monthly reports, they were able to  provide pharmacies with information regarding a beneficiary’s new  coverage more quickly.
Additional time-saving modifications to the enrollment process identified  by CMS officials and sponsors in our study included:    use of customer service representatives to complete telephone  enrollments, conduct the preliminary eligibility check required by CMS,  and ask the caller pertinent questions;   more detailed beneficiary information provided by CMS to sponsors in the    more detailed information provided to pharmacies by CMS and sponsors  during the query used to obtain billing information for beneficiaries  without membership cards or other documentation of coverage; increased staffing during December to manage the volume of late-month  enrollments; and   automation of certain tasks to reduce processing time.
section_title: Not All Beneficiaries Switching Plans Were Fully Enrolled Before Their New Coverage Began
paragraphs: Despite these improvements, we found that 15 percent of the  approximately 1 million beneficiaries choosing to switch plans during the  2008 AEP were at risk of not having access to their new coverage on  January 1, 2008. Reasons for these delayed enrollments included the  volume of late-December applications combined with the processing time  required to fully enroll a beneficiary in a new plan, and the AEP schedule  that accepts enrollments through December 31 with coverage effective the  next day. To prevent problems in January resulting from these delays, in  2007 CMS sponsored a media campaign and distributed guidance to its  partners to encourage beneficiaries to submit their 2008 AEP applications  by December 7, 2007. Despite this effort, CMS weekly report data revealed  that 50 percent of the applications to change PDPs were received after  December 10. Furthermore, sponsors received 5 percent of enrollment  applications for beneficiaries during the last 2 days of the AEP. Figure 2  shows the distribution of enrollment applications received during the 2008  AEP.
CMS data also show that the time needed to fully process an enrollment  application varied over the course of the AEP. Overall, the median  processing time was 5 days. However, in week 1 of the AEP the median  processing time was 20 days and in week 5 the median was 3 days.
Of the applications received after December 15—which accounted for  nearly one third of all 2008 AEP applications—40 percent were not  processed until after January 1. On average, applications received in late  December took 3 days longer to process than applications received earlier  in the month. Not until January 11—2 weeks into the new coverage year,  did CMS and its partners complete the processing of 97 percent of the  applications of beneficiaries choosing to switch PDPs during the 2008  AEP. Figure 3 shows when enrollment processing for the 2008 AEP was  completed.
The capacity to process late December enrollments also varied across  sponsors. We found that larger sponsors were quicker in processing  enrollments received after December 15. Thus, sponsors with more than   3 million PDP beneficiaries were able to process 81 percent of late  December applications prior to the effective date of new coverage. In  contrast, sponsors with less than 100,000 PDP enrollees were able to  process 48 percent of applications before the new year. Regardless of  sponsor size, the AEP schedule provided insufficient time in which to fully  process all enrollment applications.
The inability of CMS and sponsors to complete all the steps in the  enrollment process prior to the effective date of new coverage for  beneficiaries choosing to switch plans created a number of challenges.  One consequence is the heightened risk of inaccurate charges or payment  amounts for beneficiaries, pharmacies, and sponsors. Following the 2008  AEP, beneficiary advocates, SHIPS, and pharmacists reported that some  individuals were charged the wrong copayment or deductible, especially  those who had applied for a low-income subsidy—which must be  authorized by SSA—to reduce their cost-sharing levels. Two pharmacy  associations reported that if new coverage could not be verified, their  members risked filling a prescription for which they would not get  reimbursed or the beneficiary would need to pay for a temporary supply of  the medication while coverage issues were resolved. Pharmacy  association representatives also reported delayed receipt of payment from  sponsors related to prescriptions filled when a beneficiary’s enrollment  status changed. In addition, stakeholders told us about significant payment  inaccuracies that took time to resolve.
Additional administrative burden was another consequence of the  incomplete processing of all AEP enrollments prior to January 1,  according to several stakeholders we interviewed. Until beneficiaries  switching plans received documentation of their new coverage from the  sponsor on a membership card or letter, pharmacies had to use alternative  means to locate the updated enrollment and billing information in order to  fill a prescription and submit a claim correctly. CMS guidance requires  pharmacists to complete electronic inquiries and, if necessary, phone calls  to try to identify the beneficiary’s correct enrollment status and billing  codes if that information is not in the claims system. Pharmacy  associations reported that this procedure was overly complex and  required extensive staff time. Sponsors and pharmacy associations said  that claims filed under a beneficiary’s old plan had to be reversed  retroactively and charged to the correct plan, requiring additional time and  resources. Stakeholders we interviewed noted that beneficiaries lack a  single point of contact to resolve enrollment issues promptly and might  need to follow up with multiple sources including their plan, CMS, SSA,  and the prescribing physician.
section_title: Stakeholders Favor Changes to the AEP Schedule to Better Manage Plan Switching
paragraphs: CMS, sponsors, pharmacy associations, SHIPS, and beneficiary advocates  recognize that the current AEP schedule—November 15 through  December 31—is problematic. Some stakeholders we interviewed in our  study said that creating an interval for enrollment processing between the  end of the AEP and the effective date of coverage would help ensure that  coverage for a beneficiary switching plans would be in place on January 1.  Additional time for enrollment processing would also help beneficiaries  receive their new membership information prior to the effective date of  coverage. In addition, we recently reported that such an interval may  address some challenges that result from premium withholdings from  Medicare beneficiaries’ Social Security checks. Requiring a “quiet period”  is standard practice in private health insurance and other federal health  programs, allowing sponsors time to process applications and provide  enrollees appropriate information about their new coverage prior to its  effective date. For example, in Medicare Part B, open enrollment is  followed by a 3-month processing interval that extends from March 31 to  July 1. Similarly, in the FEHBP, enrollment is followed by approximately a  3-week processing interval that extends from the second Monday in  December to January 1.
More than half the sponsors interviewed supported the creation of an  enrollment processing interval. CMS officials and two sponsors  recommended ending enrollment in mid December, while two other  sponsors suggested ending the AEP on November 30. Stakeholders also  noted that some of the difficulties associated with an AEP schedule that  includes the end-of-the-year holidays could be avoided with an earlier end  date.
Several sponsors recommended an earlier start date to address concerns  they have regarding CMS’s guidance prohibiting sponsors from processing  applications submitted between the receipt of the ANOC (October 31) and  the beginning of the AEP (November 15). Although CMS officials told us  they expected beneficiaries to use this time to become informed about  their choices, sponsors reported that this waiting period was inconvenient  for those beneficiaries who were prepared to make an enrollment change.  Similarly, SHIP counselors pointed out that they too must wait until  November 15 to forward beneficiaries’ completed applications. SHIP  counselors in one state reported that the need to double check enrollment  applications completed prior to November 15 limited the number of Part D  beneficiaries they were able to assist during the AEP. However,  stakeholders noted that starting the AEP earlier would have implications  for the preceding AEP deadlines.
section_title: Conclusions
paragraphs: Effective written communication about plan changes helps beneficiaries  determine whether their current PDP will continue to meet their needs  and may reduce the risk of surprises at the pharmacy when beneficiaries  fill their prescriptions in the new benefit year. From a program  perspective, beneficiaries must be sufficiently aware of plan changes in  order to fully use their ability to switch plans to foster the competition that  Congress intended in designing the Part D program. To this end, CMS  designed a model ANOC to provide a consistent format for the information  sent to beneficiaries about upcoming plan changes. Sponsors as well as  advocates have voiced concerns that the model lacked the attributes— particularly simplicity and personalization—that researchers say are  needed for beneficiaries to understand and act on the information  provided. Although CMS told us that they recently initiated an evaluation  of its annual notification materials, it is unclear whether alternative  formats for the ANOC-EOC will be considered. Based on our findings as  well as research on the need to make information relevant to the reader,  CMS’s evaluation should consider alternative models that incorporate a  beneficiary’s personal drug information. Such an alternative may be more  effective in highlighting key changes in drug costs and coverage for plan  enrollees. Two sponsors in our study supplemented the 2008 ANOC by  mailing additional information on specific drug coverage and cost changes  to nearly 3.6 million enrollees, thus demonstrating the feasibility of  providing such personalized information to their members.
Although CMS and sponsors implemented improvements to better manage  the 2008 AEP enrollment process, their efforts are hampered by a schedule  that lacks a sufficient interval in which to complete processing beneficiary  enrollment changes prior to the effective date of new coverage. Under the  current mandated schedule, it is not possible to guarantee that  beneficiaries choosing to switch plans late in December are fully enrolled  in their new plans with pharmacists having sufficient evidence of the new  coverage by January 1. In addition, sponsors and pharmacies reported  excessive administrative complexity and diminished program efficiency as  a result of the nearly 15 percent of enrollments still in process in January.  Stakeholders agree that modifying the schedule and creating an interval  between the end of the AEP and the effective date of coverage would  minimize these challenges as well as mitigate issues related to low-income  subsidies and premium withholding from beneficiaries’ Social Security  checks. Establishing a processing interval would be consistent with the  open enrollment periods in Medicare Part B, the FEHBP, and commercial  insurance and create a more streamlined program to better serve  beneficiaries.
section_title: Matter for Congressional Consideration
paragraphs: To improve the Part D enrollment process, Congress should consider  authorizing the Secretary of HHS to amend the current AEP schedule to  include a sufficient processing interval to fully enroll beneficiaries prior to  the effective date of their new coverage.
section_title: Recommendation for Executive Action
paragraphs: To ensure that beneficiaries are informed effectively of plan changes, we  recommend that the Acting Administrator of CMS strengthen the agency’s  evaluation of the ANOC-EOC by reviewing alternative formats that include  personalized drug coverage and cost information.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided CMS with a draft of this report for their review and comment.  The agency provided written comments, which have been reprinted in  appendix I. It also provided technical comments that we incorporated as  appropriate.
CMS concurred with our recommendation and agreed that beneficiaries  need plan benefit information that is easy to read and understand. The  agency noted that its process for developing the model ANOC and the  EOC included a review of other programs’ model materials such as those  used in the FEHBP, as well as restructuring the model to eliminate  duplication and increase readability. CMS pointed out that, in preparation  for the 2010 AEP, it has engaged a contractor to evaluate and improve the  required notification materials sent to beneficiaries. CMS expects this  evaluation to further address issues of length and readability. The  contractor will obtain input from beneficiaries as part of its effort to  redesign the ANOC for the 2010 AEP.
Citing the near perfect timeliness rate for plans’ 2008 AEP ANOC mailing,  CMS asserted that beneficiaries had the information they needed to make  informed decisions about their plan options. However, we remain  concerned that despite this timeliness, the volume and complexity of  documents exceeding 100 pages continue to pose challenges for some  beneficiaries. While CMS’s effort to evaluate the ANOC-EOC is an  important, worthwhile step, such a review would benefit by a focus on  streamlining as opposed to maximizing the amount of information that  beneficiaries receive. Beyond the current evaluation, CMS should continue  its efforts to improve the understandability of its AEP materials by testing  more concise formats with beneficiaries. As we note in this report, a  single-page, customized model that shows each beneficiary’s drug use and  any upcoming changes in coverage and costs may more clearly  communicate the essential information Part D beneficiaries need to be  adequately informed.
CMS acknowledged the challenges inherent in the current AEP schedule.  The agency reiterated its strategies for ensuring that beneficiaries are able  to access their new plan benefits while their enrollment is still being  processed. For example, CMS highlighted its consistent efforts to  encourage beneficiaries to submit their enrollment applications by early  December. However, as we discuss in this report, one consequence of this  approach is a reduction in the amount of time beneficiaries have to  consider and enroll in an alternative plan that could better meet their  needs.
We are sending copies of this report to the Administrator of CMS,  committees, and others. The report also is available at no charge on the  GAO Web site at http://www.gao.gov/.
If you or your staff have any questions about this report, please contact me  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 major contributions to this report are  listed in appendix II.
section_title: Appendix I: Comments from the Centers for Medicare & Medicaid Services
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the contact named above, Rosamond Katz, Assistant  Director; Jennie Apter; Ramsey Asaly; Anne Hopewell; JoAnn Martinez- Shriver; Jessica Smith; and Hemi Tewarson made major contributions to  this report.
section_title: Related GAO Products
paragraphs: Medicare Part D: Complaint Rates Are Declining, but Operational and  Oversight Challenges Remain. GAO-08-719. Washington, D.C.: June 27,  2008.
Medicare Part D Low-Income Subsidy: SSA Continues to Approve  Applicants, but Millions of Individuals Have Not Yet Applied.   GAO-08-812T. Washington, D.C.: May 22, 2008.
Medicare Part D: Plan Sponsors’ Processing and CMS Monitoring of  Drug Coverage Requests Could Be Improved. GAO-08-47. Washington,  D.C.: January 22, 2008.
Medicare Part D Low-Income Subsidy: Additional Efforts Would Help  Social Security Improve Outreach and Measure Program Effects.   GAO-07-555. Washington, D.C.: May 31, 2007.
Retiree Health Benefits: Majority of Sponsors Continued to Offer  Prescription Drug Coverage and Chose the Retiree Drug Subsidy.   GAO-07-572. Washington, D.C.: May 31, 2007.
Medicare Part D: Challenges in Enrolling New Dual-Eligible  Beneficiaries. GAO-07-272. Washington, D.C.: May 4, 2007.
Medicare Part D: Prescription Drug Plan Sponsor Call Center Responses  Were Prompt, but Not Consistently Accurate and Complete. GAO-06-710.  Washington, D.C.: June 30, 2006.