Medicare Part D: Challenges in Enrolling New Dual-Eligible Beneficiaries
Published: 2007-05-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since January 1, 2006, all dual-eligible beneficiaries--individuals with both Medicare and Medicaid coverage--must receive their drug benefit through Medicare's new Part D prescription drug plans (PDP) rather than from state Medicaid programs. GAO analyzed (1) current challenges in identifying and enrolling new dual-eligible beneficiaries in PDPs, (2) the Centers for Medicare & Medicaid Services' (CMS) efforts to address challenges, and (3) federal and state approaches to assigning dual-eligible beneficiaries to PDPs. GAO reviewed federal law, CMS regulations and guidance and interviewed CMS and PDP officials, among others. GAO also made site visits to six states to learn about the enrollment of dual-eligible beneficiaries from the state perspective.
section_title: What GAO Found
paragraphs: CMS's enrollment procedures and implementation of its Part D coverage policy generate challenges for some dual-eligible beneficiaries, pharmacies, and the Medicare program. A majority of new dual-eligible beneficiaries--generally those on Medicare who have not yet signed up for a PDP and who become eligible for Medicaid--may be unable to smoothly access their drug benefit for at least 5 weeks given the time it takes to enroll them in PDPs and communicate information to beneficiaries and pharmacies. Pharmacies also may be affected adversely when key information about a beneficiary's dual eligibility is not yet processed and available. When dispensing drugs during this interval, pharmacies may have difficulty submitting claims to PDPs and accurately charging copayments. In addition, Medicare pays PDPs to provide these beneficiaries with several months of retroactive coverage but, until March 2007, CMS did not inform beneficiaries of their right to be reimbursed for drug costs incurred during these periods. CMS does not monitor its payments to PDPs for retroactive coverage or the amounts PDPs have reimbursed dual-eligible beneficiaries. Medicare paid PDPs millions of dollars in 2006 for coverage during periods for which dual-eligible beneficiaries may not have sought reimbursement for their drug costs. CMS has taken steps to address challenges associated with enrolling dual-eligible beneficiaries in PDPs. CMS has implemented a policy to prevent a gap in prescription drug coverage for those new dual-eligible beneficiaries whose Part D eligibility is predictable--Medicaid beneficiaries who subsequently qualify for Medicare. We estimate this group represents about one-third of new dual-eligible beneficiaries. In August 2006, CMS began operating a prospective enrollment process that should allow the agency and its Part D partners time to complete the enrollment processes and notify these beneficiaries before their effective enrollment date. Also, CMS is making changes to improve the efficiency of key information systems involved in the enrollment process. While the agency is performing some information systems testing, it is not planning to perform testing of the interactions of key information systems collectively, which is crucial to mitigating the inherent risks of system changes. Under federal law, CMS is required to assign dual-eligible beneficiaries to PDPs based on PDP premiums and geographic area. State Medicaid agency officials and others assert that this assignment method often places dual-eligible beneficiaries in PDPs that do not meet their drug needs. With CMS approval, Maine officials considered beneficiary-specific data to reassign nearly half of their dual-eligible beneficiaries to PDPs that better met their drug needs in late 2005. After the reassignment, the number of these dual-eligible beneficiaries whose PDP covered nearly all of their prescription drugs increased significantly. States choosing to make such reassignments in the future would need ready access to key information from PDPs. CMS contends that reassignments are not needed because beneficiaries may switch to drugs of equivalent therapeutic value or change plans at any time.

section_title: Letter
paragraphs: The Medicare Prescription Drug, Improvement and Modernization Act of  2003 (MMA) established a voluntary outpatient prescription drug benefit  for Medicare—the federal health insurance program for elderly and certain  disabled individuals—known as Medicare Part D. This benefit is provided  through prescription drug plans (PDP) sponsored by contracted private  companies. These private companies, termed sponsors, offer one or more  benefit packages, through individual PDPs that charge monthly premiums  that cover different drugs and have different beneficiary cost-sharing  arrangements (such as copayments and deductibles). Medicaid is a jointly  funded federal-state health care program that covers certain low-income  families and low-income individuals who are aged or disabled. Medicaid  beneficiaries receive their prescription drugs at no or low cost as part of  their Medicaid benefits. About 6 million people were eligible for both full  Medicare and Medicaid benefits in December 2005 and more become  eligible each month. For those who are dually eligible for both Medicare  and Medicaid, known as full-benefit dual-eligible beneficiaries, the MMA  required that drug coverage transition from Medicaid drug coverage to  Medicare Part D drug coverage on January 1, 2006. Dual-eligible  beneficiaries are generally poorer, are more likely to have extensive health  care needs, and use more medications than other Medicare beneficiaries.  To help dual-eligible beneficiaries and other low-income Medicare  beneficiaries with the costs of prescription drug coverage, the MMA  provided these individuals with a low-income subsidy that covers most of  their out-of-pocket costs for Part D prescription drugs.
The Centers for Medicare & Medicaid Services (CMS)—the agency that  administers the Medicare program—has responsibility for assisting in the  transition of dual-eligible beneficiaries’ drug coverage from Medicaid to  Medicare. In October and December 2005, CMS assigned each dual-eligible  beneficiary who had not already signed up for a Part D plan to a PDP and  notified these beneficiaries of their assignment. Part D prescription drug  coverage for these beneficiaries was effective January 1, 2006. CMS also  provided state pharmaceutical assistance programs (SPAP) with the ability  to enroll or reassign their members to PDPs using additional criteria, with  prior approval from CMS.
The agency also developed contingency measures to help with  administrative difficulties that could arise with the change in coverage. It  established an enrollment contingency option to ensure that dual-eligible  beneficiaries not yet enrolled in a PDP could get their prescriptions and  that pharmacies would be reimbursed for those prescriptions. Also, CMS  required PDPs to provide beneficiaries with a short-term supply of needed  drugs, known as a transition supply, if they were prescribed a drug that  was not on their PDP’s list of covered drugs, or formulary.
Shortly after the start of the program, the media reported that some dual- eligible beneficiaries encountered difficulties that limited their access to  needed drugs. These included reports of dual-eligible beneficiaries not  enrolled in a PDP, enrolled in more than one PDP, not correctly identified  as a low-income beneficiary, charged incorrect copayments at the  pharmacy, and unable to obtain drugs because of inadequate transition  coverage. In February 2006, the Secretary of Health and Human Services  reported that these problems potentially affected several hundred  thousand dual-eligible beneficiaries. Some of these problems were the  result of data transmission difficulties among the states, CMS, and PDP  sponsors. Responding to a February 2006 survey by The Kaiser Family  Foundation, 31 state Medicaid directors reported widespread problems  affecting a significant number of dual-eligible beneficiaries. In response to  the problems, 29 state Medicaid agencies and the District of Columbia’s  Medicaid agency interceded and provided temporary coverage to ensure  dual-eligible beneficiaries had access to prescription drugs.
Each month CMS randomly assigns and enrolls new dual-eligible  beneficiaries who are not already in a Part D plan. Of the 633,614 new  dual-eligible beneficiaries that CMS automatically enrolled in 2006, most  were Medicare beneficiaries who subsequently qualified for Medicaid,  generally due to a loss of income and resources. Others were Medicaid  beneficiaries who subsequently qualified for Medicare, typically due to age  or disability. In addition to new dual-eligible beneficiaries, some  previously assigned dual-eligible beneficiaries may be reassigned each  benefit year. In fall 2006, CMS reassigned about 193,000 dual-eligible  beneficiaries to new PDPs for the 2007 benefit year. Consequently, the  challenges of ensuring prompt and accurate Part D enrollment are  ongoing.
Given the reported problems that occurred during the early months of the  Part D program, you raised questions about whether difficulty obtaining  prescription drugs could continue to be a problem for many newly  identified dual-eligible beneficiaries. In this report, we examine (1) current  challenges in identifying and enrolling new dual-eligible beneficiaries in  PDPs, (2) CMS’s efforts to address challenges in enrolling dual-eligible  beneficiaries, (3) federal and state approaches to assigning dual-eligible  beneficiaries to PDPs, and (4) CMS’s actions to ensure that PDPs  implement effective transitional drug coverage following enrollment.
To address these issues, we reviewed relevant federal laws and regulations  and guidance provided by CMS to state Medicaid agencies, PDPs, and  pharmacies on their respective roles in the Medicare Part D benefit, CMS  documents on the interaction of key information systems, and the model  contract between CMS and PDP sponsors. We also interviewed CMS  officials, including those responsible for information systems, CMS  contractors responsible for maintaining key information systems, Social  Security Administration (SSA) officials, state Medicaid officials, and  representatives of pharmacy associations and long-term care provider  associations. We also interviewed representatives from five PDP  sponsors that represented about 54 percent of dual-eligible PDP  enrollment as of June 3, 2006. Each of these sponsors offered a PDP that  was eligible to receive assignments of dual-eligible beneficiaries in 2006.  To learn about alternative methods of assigning Medicare beneficiaries to  PDPs, we also interviewed representatives of SPAPs.
We also conducted site visits in six states—California, Maine, Maryland,  Michigan, New Jersey, and Texas—to learn about the transition of dual- eligible beneficiaries from the perspective of state Medicaid agencies,  pharmacies, and long-term care providers. Together, these states  accounted for 28 percent of all dual-eligible beneficiaries enrolled in a PDP  in May 2006. In selecting the states, we chose states that represented a  range in the number of dual-eligible beneficiaries, the number of PDPs to  which CMS assigned dual-eligible beneficiaries, state involvement with  PDP assignment, and state size. Information from the six states cannot be  generalized to every state’s experience with the Part D program because  each state Medicaid program is different. To assess the reliability of  Maine’s data on the reassignment of dual-eligible beneficiaries—the only  state in our sample to have such information—we talked with Maine  Medicaid agency officials and state contractors about how the analyses  were conducted and reviewed documentation of the methodology. We  determined that the data were sufficiently reliable for the purposes of this  report. We conducted our work from March 2006 through April 2007 in  accordance with generally accepted government auditing standards.
subsections: section_title: Background
subsections: section_title: The Medicare Part D Program
paragraphs: Medicare Part D coverage is provided through private plans sponsored by  dozens of health care organizations that may charge premiums,  deductibles, and copayments for the drug benefit. All Part D plans must  meet federal requirements with respect to the categories of drugs they   must cover and the extent of their pharmacy networks. They must offer  the standard Medicare Part D benefit, or an actuarially equivalent benefit.  Beyond these requirements however, the specific formulary and pharmacy  network of each PDP can vary.
Under the MMA, drug coverage for all dual-eligible beneficiaries  transitioned from Medicaid to Medicare Part D, on January 1, 2006. The  MMA requires CMS to assign dual-eligible beneficiaries to a PDP if they  have not enrolled in a Part D plan on their own. CMS may only assign  dual-eligible beneficiaries to PDPs serving their area with premiums at or  below the low-income benchmark amount and must randomly assign  individuals if there is more than one eligible PDP. During October and  December 2005, CMS randomly assigned to PDPs dual-eligible  beneficiaries who had not already enrolled in a Part D plan. The agency  mailed notices to these beneficiaries informing them of their assignment  and also that they could select a different PDP if they wished. If they did  not switch from their assigned PDP by December 31, 2005, their  assignment took effect, with coverage beginning January 1, 2006. CMS  enrolled 5,498,604 dual-eligible beneficiaries during this first round of  assignments and continues to assign new dual-eligible beneficiaries into  PDPs on a monthly basis, when these beneficiaries do not independently  enroll in a Part D plan.
For some dual-eligible beneficiaries, some drugs that were previously  covered under Medicaid might not be covered by their Medicare PDP’s  formulary. Subject to certain parameters, PDPs have the flexibility to set  their own formularies and, as a result, PDPs vary in their inclusion of the  drugs most commonly used by dual-eligible beneficiaries. According to a  2006 report by the Department of Health and Human Services, Office of  Inspector General (OIG), one-fifth of dual-eligible beneficiaries were  assigned to PDPs that provide coverage of all of the most commonly used  drugs and one-third were assigned to PDPs that provide coverage of less  than 85 percent of these drugs. However, dual-eligible beneficiaries are  allowed to switch to a different PDP at any time with coverage under a  new PDP effective the following month.
In addition, to help ensure a smooth transition to Part D, CMS requires  PDP sponsors to provide for a transition process for new enrollees whose  current medications may not be included in their PDP’s formulary. For  2006, CMS recommended that PDP sponsors should fill a one-time  transition supply of nonformulary drugs in order to accommodate the  immediate need of the beneficiary. In particular, CMS suggested that PDPs  provide at least a 30-day transition supply to all beneficiaries and a 90- to  180-day transition supply for residents in long-term care facilities.
Dual-Eligible Beneficiaries  Dual-eligible beneficiaries are a particularly vulnerable population.
Totaling roughly 6.2 million in January 2006, they account for about   15 percent of all Medicaid beneficiaries and 15 percent of all Medicare  beneficiaries. In general, these individuals are 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. A majority of dual-eligible beneficiaries live in the  community and typically obtain drugs through retail pharmacies. Nearly  one in four dual-eligible beneficiaries reside in a long-term care facility and  obtain their drugs through pharmacies that specifically serve long-term  care facilities.
While most Medicare beneficiaries enrolled in a PDP pay monthly  premiums, deductibles, and other cost-sharing as part of their benefit  package, the Medicare Part D program pays a substantial proportion of  dual-eligible beneficiaries’ cost-sharing obligations through its low-income  subsidy program. For dual-eligible beneficiaries, Medicare pays the full  amount of the monthly premium that nonsubsidy eligible beneficiaries  normally pay, up to the level of the low-income benchmark premium.  Medicare Part D also covers most or all of the prescription copayments:  dual-eligible beneficiaries pay from $1 to $5.35 copayments per  prescription filled in 2007, with the exception of those in long-term care  facilities who have no copayments. In addition, dual-eligible beneficiaries  are not subject to a deductible or the so-called “donut hole.”
In addition to dual-eligible beneficiaries, the Part D low-income subsidy is  available to other low-income Medicare beneficiaries. Some of these other  Medicare beneficiaries must apply for the subsidy through the SSA or a  state Medicaid agency. The subsidy is available on a sliding scale,  according to income and resources. Dual-eligible beneficiaries are  automatically entitled to the full subsidy amount and do not need to apply  independently for the subsidy.
An individual can become a dual-eligible beneficiary in two main ways.  First, Medicare beneficiaries can subsequently qualify for Medicaid. This  occurs when their income and resources decline below certain thresholds,  and they enroll in the Supplemental Security Income (SSI) program, or  they incur medical costs that reduce their income below certain  thresholds. CMS data indicate that roughly two-thirds of the 633,614 dual- eligible beneficiaries the agency enrolled in 2006 were Medicare  beneficiaries who subsequently qualified for Medicaid, and had not already  signed up for a PDP on their own. According to CMS officials, it is not  possible to predict the timing of dual-eligibility for these individuals  because determining Medicaid eligibility is a state function.
Second, Medicaid beneficiaries can subsequently become eligible for  Medicare by either turning 65-years-old or by completing their 24-month  disability waiting period. This group represents approximately one-third  of the new dual-eligible beneficiaries enrolled by CMS in PDPs. State  Medicaid agencies can generally predict when this group of individuals  will become dually eligible.
section_title: Systems and Steps Involved in the Identification and Enrollment of Dual- Eligible Beneficiaries
paragraphs: Multiple parties and multiple information systems are involved in the  process of identifying and enrolling dual-eligible beneficiaries in PDPs. In  addition to CMS, the SSA, state Medicaid agencies, and PDP sponsors play  key roles in providing information needed to ensure that beneficiaries are  identified accurately and enrolled. 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 who the state  believes to be eligible for both Medicare and Medicaid. PDP sponsors  maintain information systems that are responsible for exchanging  enrollment and billing information with CMS.
For the most part, CMS adapted existing information systems used in the  administration of other parts of the Medicare program to perform specific  functions required under Part D. In addition, CMS worked with the  pharmacy industry to develop a tool specifically to aid pharmacies in  obtaining billing information needed to process claims for dual-eligible  beneficiaries without enrollment information. The principal systems  supporting the Part D program are as follows:    The Medicare eligibility database. This system serves as a repository for  Medicare beneficiary entitlement, eligibility, and demographic data. In the  enrollment process for dual-eligible beneficiaries, the database is used by  CMS to provide up-to-date information to verify the status of dual-eligible  beneficiaries, as well as to determine subsidy status and make  assignments to PDPs. It also provides data to other CMS systems, SSA,  state Medicaid agencies, PDPs, and pharmacies.
The enrollment transaction system. This system is used to enroll  beneficiaries in PDPs. In addition, it informs PDPs about a beneficiary’s  subsidy status and copayment information, calculates Medicare payments  to PDPs for each covered enrollee, and processes changes in PDP  enrollment, including those elected by the beneficiary.
The eligibility query. This tool is used by pharmacies to obtain Part D  billing information from the Medicare eligibility database. When filling a  prescription for a beneficiary who does not have proof of Part D  enrollment or eligibility, a pharmacy submits a request for billing  information using the eligibility query. In response, the pharmacy receives  information on the beneficiary’s PDP enrollment, including the data  necessary to bill the beneficiary’s PDP for the drugs dispensed.
The process of enrolling dual-eligible beneficiaries requires several steps;  it begins when the state Medicaid agency identifies new dual-eligible  beneficiaries and ends when PDPs make billing information available to  pharmacies. (For more detailed information on the steps involved in  identifying and enrolling dual-eligible beneficiaries, see app. I.) The key  information systems (see fig. 1) and steps in identifying and enrolling dual- eligible beneficiaries are the following.  1.  State Medicaid agencies obtain Medicare eligibility information from  SSA or request data from CMS’s Medicare eligibility database and  match that information against their own Medicaid eligibility files. The  state Medicaid agencies compile comprehensive files identifying all  dual-eligible beneficiaries, known as the dual-eligible files. CMS  receives Medicare eligibility information from SSA daily.  2.  State Medicaid agencies send CMS the dual-eligible files and CMS  matches the files against data in its Medicare eligibility database to  verify each individual’s dual eligibility. The agency sends a response  file back to each state that includes the results of the matching process  for each submitted individual.  3.  Those dual-eligible beneficiaries who were matched are considered  eligible for the full low-income subsidy and the Medicare eligibility  database sets the copayment information accordingly. This process is  referred to as deeming. The Medicare eligibility database also assigns  beneficiaries not already enrolled in a Part D plan to PDPs that operate  in regions that match the beneficiary’s official SSA address of record.  Both the deeming and assignment information are sent to the  enrollment transaction system to be processed.  4.  The enrollment transaction system processes the deeming and  assignment information in order to complete the enrollment and  notifies the PDPs of those dual-eligible beneficiaries who have been  enrolled in their PDP and their copayment amounts.  5.  PDPs process the resulting enrollment, assign the standard billing  information, and send this information to the Medicare eligibility  database. In addition, the PDPs mail out ID cards and PDP information  to the enrolled beneficiary.  6.  The Medicare eligibility database transmits the PDP’s billing  information to the eligibility query system.  7.  Using the eligibility query, pharmacies can access the billing  information needed to fill prescriptions and bill them to the assigned  PDP if beneficiaries lack their enrollment information.
section_title: Implementation of Part D Information Systems
paragraphs: Under tight time frames, CMS and its partners integrated information  systems to support the Part D program. To support the Part D program,  CMS pieced together existing information systems that had related  Medicare functions. In addition, information systems belonging to state  Medicaid agencies and PDPs had to integrate with CMS information  systems and CMS did not establish formal agreements with these partners  until the time of implementation. Final regulations for the program were  not issued until January 28, 2005, and business requirements for the  program were not finalized until March 2005. Thus, there was little time for  testing given that requirements and agreements were so late in being  solidified.
A number of information systems problems surfaced in the early months  of the program. These problems included logic errors in the enrollment  process which generated cancellations to PDPs instead of enrollments, the  eligibility query being overwhelmed by the number of pharmacy inquiries,  and CMS difficulties matching data submitted by the state Medicaid  agencies to information in the Medicare eligibility database. These  problems can be attributed, in part, to poor systems testing. Because of  tight time frames associated with implementing Part D, robust system- level and end-to-end testing did not occur.
In January 2006, CMS contracted with EDS, an information technology  consulting company, to identify opportunities for improvement in the  information systems and services for Medicare Part D. EDS’s report  findings and observations addressed many overarching challenges in the  information systems infrastructure supporting the program, including the  observation that the aggressive time frame for implementation did not  allow sufficient time for end-to-end testing. CMS is redesigning key  information systems involved in the enrollment process in order to  improve the efficiency of these systems.
section_title: Enrollment Processes and Coverage Policy Generate Challenges for Dual-Eligible Beneficiaries, Pharmacies, and the Medicare Program
paragraphs: CMS’s enrollment processes and implementation of its Part D coverage  policy generate challenges for some dual-eligible beneficiaries,  pharmacies, and the Medicare program. Because the interval between  notification of Medicaid eligibility and completion of the Part D enrollment  process can extend at least 5 weeks, some dual-eligible beneficiaries— those previously on Medicare who subsequently become eligible for  Medicaid—may be unable to smoothly access their Part D benefits during  this interval. At the same time, pharmacies that are unable to obtain up-to- date information about a dual-eligible beneficiary’s enrollment are likely to  experience difficulties billing PDPs. In addition, CMS has tied dual-eligible  beneficiaries’ effective date of Part D eligibility to the date of Medicaid  eligibility, providing for several months of retroactive Medicare benefits.  Although the Medicare program pays PDP sponsors for the period of  retroactive coverage, beneficiaries were not informed of their right to  reimbursement for drug costs incurred during this period. GAO found that  Medicare paid PDPs an estimated $100 million in 2006 for coverage during  periods for which dual-eligible beneficiaries may not have sought  reimbursement for their drug costs.
subsections: section_title: CMS’s Enrollment Processes Can Create Difficulties for Some Dual- Eligible Beneficiaries
paragraphs: The timing of steps to enroll dual-eligible beneficiaries in Part D and to  make billing information available to pharmacies generates a gap between  the date beneficiaries are notified of their dual eligibility status and the  date they receive their enrollment information. As a result, some new dual- eligible beneficiaries may have difficulty obtaining their drugs at the  pharmacy counter or may pay higher than required out-of-pocket costs.  Among Medicare beneficiaries who subsequently become eligible for  Medicaid, Medicare-only beneficiaries not previously enrolled in a PDP are  likely to experience more difficulties compared with those who had  enrolled in a PDP prior to becoming eligible for Medicaid. Because the  information systems used are not real-time processing systems, the  enrollment process takes place over a period of about 2 months.
Given the time involved in processing beneficiary data under current  procedures, pharmacies may not have up-to-date PDP enrollment  information on new dual-eligible individuals. This may result in  beneficiaries having difficulty obtaining medications at the pharmacy. 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, must be enrolled  in a PDP. (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. It takes until October 15 before the  PDP notifies Mr. Smith of his enrollment and until October 16 before all  the necessary information is available to his pharmacy. If Mr. Smith had  sought to obtain prescription drugs prior to October 16, the pharmacy  would have had difficulty getting the PDP billing information needed to  process claims on his behalf.
The reason this gap occurs is that some of the enrollment and PDP  assignment processing steps are done at scheduled intervals, such as once  a month or once a week. According to CMS, because of the challenges  some state Medicaid agencies have in compiling the dual-eligible file, CMS  requires the file be submitted just once a month. CMS waits until it  receives the monthly dual-eligible files from all state Medicaid agencies  before determining each individual beneficiary’s subsidy level and making  the PDP assignment for these beneficiaries. State Medicaid agencies that  submit their dual-eligible file to CMS early in the monthly cycle do not  have their beneficiaries’ subsidy levels determined or the assignments to a  PDP made any sooner than the last state to submit its file. Deeming and  PDP assignment can take up to 10 days. Similarly, CMS’s system of  notifying the PDP of a beneficiary assignment is on a weekly cycle,  beginning on Saturday. Thus, regardless of what day in the week CMS’s  enrollment transaction system receives a beneficiary’s PDP assignment  and processes that enrollment, the information is not communicated to the  PDP until the following Saturday. It takes up to another week before the  beneficiary receives a membership card or other membership  documentation from the PDP or the pharmacy has computerized access to  the Part D information needed to properly process a claim if an eligibility  query is used to obtain billing information. Thus, the time elapsed from the  date the state notified Mr. Smith of his eligibility for Medicaid to the date  Mr. Smith was notified by his assigned PDP of his Part D enrollment was  at least 35 days.
Other new dual-eligible beneficiaries may incur out-of-pocket costs at the  pharmacy that are too high for their dually eligible status because of the  time it takes information on the beneficiary’s new status to reach their  PDP. To illustrate this case, we present the hypothetical example of   Mrs. Jones, a Medicare beneficiary who becomes eligible for Medicaid but  had already enrolled in a PDP. (See fig. 3.) When Mrs. Jones, who also  applied for Medicaid on August 11, goes to the pharmacy on September 12,  the pharmacy charges Mrs. Jones the same copayments that she was  charged as a Medicare-only Part D beneficiary instead of the reduced  amount for dual-eligible beneficiaries. This occurs because the PDP, and  consequently the pharmacy, does not have up-to-date information on Mrs.  Jones’s status as a dual-eligible beneficiary; this information must go  through processing steps similar to those for Mr. Smith. That is, the state  Medicaid agency must first submit Mrs. Jones’s name to CMS on its dual- eligible file, which is done monthly. Subsequently, CMS must determine  Mrs. Jones’s level of subsidy according to the agency’s schedule for the  deeming process. Mrs. Jones’s PDP will change her copayment  information only after it receives CMS’s weekly notification of enrollment  transactions on October 7.
Any dual-eligible beneficiary who has a change in subsidy status, such as  dual-eligible beneficiaries who enter a nursing home, may temporarily face  higher than required out-of-pocket costs for drugs due to processing  delays. Residents of nursing homes who are dual-eligible beneficiaries are  not required to pay any copayments, but they could be charged until the  PDP updates its own data based on information provided by CMS.  Recognizing the time lags that pharmacies encounter in receiving  complete Part D information on dual-eligible beneficiaries, CMS issued a  memorandum in May 2006 requiring PDP sponsors to use the best  available data to adjust a beneficiary’s copayment, meaning that PDPs  need not wait for CMS to notify them of a status change but can make  adjustments based on notification received from a nursing facility or state  agency. However, according to some we spoke with, PDPs vary in terms of  their willingness to act on information provided by a party other than  CMS.
The time intervals associated with the Part D enrollment process for new  dual-eligible beneficiaries can lengthen when data entry errors occur or  when a dual-eligible beneficiary is identified by the state after the state has  submitted its monthly dual-eligible file. For example, if CMS cannot match  information from its Medicare eligibility database with a beneficiary’s  information listed in the state’s dual-eligible file, the state must find the  source of the problem and resubmit the beneficiary’s information in the  following month’s dual-eligible file. State Medicaid agency officials told us  that generally mismatches occurred in 2006 because of errors in a birth  date or Social Security number. CMS reported that for the month of June  2006, about 17,000 to 18,000 names in state Medicaid agencies’ dual- eligible files could not be matched against information in the Medicare  eligibility database. This number of mismatches is down from 26,000  mismatches earlier in the program.
section_title: Tools Designed to Help Pharmacies Have Not Worked Well
paragraphs: CMS has provided pharmacies with certain tools to help process a claim  when a beneficiary does not present adequate billing information or has  not been enrolled in a PDP. The eligibility query was designed to provide  billing information to pharmacies when dual-eligible beneficiaries do not  have their PDP information, but pharmacies report problems using the  tool. The enrollment contingency option was designed to ensure that dual- eligible beneficiaries who were not yet enrolled in a PDP could get their  medications, while also providing assurance that the pharmacy would be  reimbursed for those medications. Problems with reimbursements have  led some pharmacies to stop using the enrollment contingency option.
The eligibility query was developed by CMS to help pharmacies determine  which plan to bill when a dual-eligible beneficiary lacks proof of  enrollment, but about half of the time the query system returns a response  indicating a match was not found (see fig. 4). To obtain billing information  on individuals without a PDP membership card or other proof of Part D  enrollment, pharmacies have modified their existing computer systems to  allow them to query CMS’s Medicare eligibility database. Using the Part D  eligibility query, pharmacies can enter certain data elements—such as an  individual’s Social Security number, Medicare ID number, name, and date  of birth—to verify whether the individual is a dual-eligible beneficiary and  whether the individual has been assigned to a PDP. Ideally, when a match  occurs, the pharmacy receives an automated response within seconds  showing codes that contain the standard billing information necessary to  file a claim—such as the identity of the PDP sponsor and the member ID  number. According to CMS, of all the eligibility queries pharmacies  initiated in September 2006, about 55 percent enabled them to match data  identification elements with an individual in the Medicare eligibility  database. In comments on a draft of this report, the agency explained that  pharmacies had used the eligibility query for nonenrolled individuals  whose data would not otherwise be in the system.
In cases where the PDP has not yet submitted standard billing information  to CMS, the pharmacy must spend additional time contacting the PDP. In  cases where the dual-eligible beneficiary has been assigned to a PDP, but  the PDP has yet to submit the standard billing information, the eligibility  query response contains only a 1-800 phone number for the assigned PDP.  In these cases, pharmacies must spend additional time contacting the   1-800 number to obtain needed billing information. In April 2006, about   13 percent of the eligibility query responses that matched a beneficiary did  not contain the standard billing information.
Pharmacy association representatives and individual pharmacists we met  with told us that improvements to the eligibility query were needed. They  said the eligibility query would be more useful if the responses pharmacies  receive contained such information as the name of the PDP in which the  beneficiary is enrolled, the effective date of the beneficiary’s enrollment in  the PDP, and the beneficiary’s low-income subsidy status, rather than just  a 1-800 number or the standard billing information that is now provided.  They also noted that the frequency with which the eligibility query  responds without the standard billing information is also problematic;  without adequate billing information the pharmacy has to make a  telephone call to obtain the appropriate billing information.
In cases where the eligibility query does not produce a match but the  pharmacy has other evidence that the individual is dually eligible for  Medicare and Medicaid, such as ID cards or a letter from the state, CMS  has provided pharmacies with an enrollment contingency option. That is,  the pharmacies can submit their claims to a nationwide PDP sponsor— WellPoint—which CMS has contracted with to provide pharmacies with a  source of payment for prescriptions filled for dual-eligible beneficiaries  who have yet to be enrolled in a PDP. The WellPoint enrollment  contingency option was intended for use in cases where the pharmacy can  confirm that an individual is dually eligible for Medicare and Medicaid but  cannot determine the beneficiary’s assigned PDP through the eligibility  query. In such cases, claims are screened for eligibility, and if the  beneficiary is indeed dually eligible, but has not yet been enrolled in a  PDP, the beneficiary gets enrolled in a PDP offered by WellPoint.
The WellPoint enrollment contingency option has often not functioned as  intended. For example, WellPoint was billed for a number of claims where  the beneficiary was enrolled in another PDP. As of November 26, 2006,  46.0 percent of the 351,538 Medicare ID numbers with claims that were  billed to WellPoint had already been assigned to a PDP. CMS and  WellPoint officials told us WellPoint reconciles payment for these claims  directly with the beneficiary’s assigned PDP. However, pharmacy  association representatives told us that, in some cases, WellPoint required  the pharmacies to refund payments for these claims to WellPoint and then  submit the claim to the appropriate PDP. In other cases, pharmacies bill  WellPoint without supplying the necessary beneficiary data elements. For  instance, rather than entering the individual’s actual Medicare ID number,  the pharmacy may enter dummy information into the Medicare ID field. As  of November 26, 2006, CMS reported that, roughly 35 percent of the  Medicare ID numbers submitted to WellPoint were invalid, requiring  pharmacies to refund their outlays on claims using these numbers. In  addition, about 4 percent of the Medicare ID numbers were valid but the  individual was either not eligible for Medicaid or was not eligible for Part  D enrollment (for instance due to incarceration). WellPoint required  pharmacies to refund money for these claims as well. According to one  state pharmacy association representative, some pharmacies in the state  have discontinued using the WellPoint contingency option because of the  reimbursement difficulties. Only about 15 percent of Medicare ID numbers  with claims filed through the WellPoint option were associated with  individuals eligible for enrollment in the WellPoint PDP.
Pharmacy association representatives noted that some pharmacies  dispense medications to individuals without proof of Part D enrollment,  hoping to get needed billing information at a later date that will allow them  to properly submit a claim. One state pharmacy association representative  noted that pharmacies serving only long-term care facilities dispense  medication without assurance of reimbursement because they are required  to do so under the contractual arrangements they have with the long-term  care facilities.
Pharmacy association representatives told us that after-the-fact  reimbursement of drug claims is problematic. According to the pharmacy  association representatives, it can be burdensome for staff to determine  where to appropriately resubmit the claim. They also noted that PDPs will  sometimes reject retroactive claims that are submitted after a certain  period of time has elapsed.
section_title: Medicare Pays PDPs to Provide Retroactive Coverage but Beneficiaries Have Not Been Informed of Their Right to Reimbursement
paragraphs: With the current combination of policies and requirements under which  CMS operates, Medicare pays PDPs to provide retroactive coverage to  Medicare beneficiaries newly eligible for Medicaid. However, until March  2007, CMS did not inform these beneficiaries of their right to seek  reimbursement for costs incurred during the retroactive period that can  last several months. Given the vulnerability of the dual-eligible beneficiary  population, it seems unlikely that the majority of these beneficiaries would  have contacted their PDP for reimbursement if they were not notified of  their right to do so. GAO found that Medicare paid PDPs millions of  dollars in 2006 for coverage during periods for which dual-eligible  beneficiaries may not have sought reimbursement for their drug costs.
Retroactive coverage for dual-eligible beneficiaries stems from both CMS’s  Part D policy and from Medicaid requirements. Under the MMA, once an  individual who is not enrolled in a plan qualifies as a dual-eligible  beneficiary, CMS is required to enroll the individual in a PDP. However,  the MMA does not precisely define when Part D coverage for these  beneficiaries must become effective. As initially written, when enrolling a  Medicare beneficiary without Part D coverage who became eligible for  Medicaid, CMS’s policy set the effective coverage date prospectively as the  first day of the second month after CMS identified the individual as both  Medicare and Medicaid eligible. In March 2006, CMS changed this policy,  making coverage retroactive to the first day of the month of Medicaid  eligibility. In making this change, CMS cited concerns about enrollees  experiencing a gap in coverage under its prior enrollment policy. Federal  Medicaid law requires that a Medicaid beneficiary’s eligibility be set  retroactively up to 3 months prior to the date of the individual’s  application if the individual met the program requirements during that  time. Therefore, for this group of dual-eligible beneficiaries, Part D  coverage may extend retroactively for several months prior to the actual  date of PDP enrollment by CMS.
The mechanics and time frames for Part D retroactive coverage can be  illustrated by the hypothetical case of Mr. Smith, a Medicare beneficiary  who was not enrolled in a PDP when he applied for Medicaid. On  September 11, Mr. Smith’s state Medicaid agency made him eligible for  Medicaid benefits as of May 11, 3 months prior to his August 11 program  application, as he met Medicaid eligibility requirements during that  retroactive period. In October, CMS notified Mr. Smith of his enrollment in  a PDP and indicated that his Part D coverage was effective retroactively as  of May 1, the first day of the month in which he became eligible for  Medicaid.
Medicare’s payment to Mr. Smith’s PDP, beginning with his retroactive  coverage period, consists of three major components, two of which are  fixed and a third that varies with Mr. Smith’s cost-sharing obligations.
The first component is a monthly direct subsidy payment CMS makes to  Mr. Smith’s PDP toward the cost of providing the drug benefit.
The second component is the monthly payment CMS makes to Mr. Smith’s  PDP to cover his low-income benchmark premium.
The third component covers nearly all of Mr. Smith’s cost-sharing  responsibilities, such as any deductibles or copayments that he would pay  if he were not a dual-eligible beneficiary. CMS makes these cost-sharing  payments to his PDP based on the PDP’s estimate of the typical monthly  cost-sharing paid by beneficiaries. CMS later reconciles Mr. Smith’s cost- sharing payments with the PDP based on his actual drug utilization as  reported by the PDP to CMS.
Under CMS’s retroactive coverage policy, Mr. Smith’s PDP receives all  three components of payments for the months of May, June, July, August,  and September, although Mr. Smith was not enrolled in the PDP until  October. Medicare pays Mr. Smith’s PDP sponsor about $60 a month for  the direct subsidy and another monthly payment for the low-income  premium up to the low-income benchmark, which ranges from $23 to $36  depending on Mr. Smith’s location. We estimate that for all dual-eligible  beneficiaries enrolled by CMS with retroactive coverage, Medicare paid  PDPs about $100 million in 2006 for these two monthly payment  components for the retroactive period. Unlike the cost-sharing  component of Medicare’s payments, the two monthly payment  components are not subject to a reconciliation process tied to utilization  of the benefit. This means that if Mr. Smith’s PDP did not reimburse   Mr. Smith for any prescription drugs purchased during the retroactive  coverage period, the PDP would have to refund Medicare the cost-sharing  payment, but would keep the direct subsidy payments and the low-income  premium payments.
Medicare makes the direct subsidy and low-income premium payments for  the retroactive coverage period because CMS requires PDP sponsors to  reimburse beneficiaries for covered drug costs incurred during this period.  However, we found that CMS did not inform dual-eligible beneficiaries  about their right to seek reimbursement or instruct PDP sponsors on what  procedures to use for reimbursing beneficiaries or others that paid on the  beneficiary’s behalf for drugs purchased during retroactive periods. The  model letters that CMS and PDPs used until March 2007 to notify dual- eligible beneficiaries of their PDP enrollment did not include any language  concerning reimbursement of out-of-pocket costs incurred during  retroactive coverage periods. After reviewing a draft of this report and  our recommendations, 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 the dual-eligible beneficiary population, it seems  unlikely that the majority of these beneficiaries would have contacted  their PDP for reimbursement if they were not notified of their right to do  so nor would they likely have retained proof of their drug expenditures.  In the case of Mr. Smith, for example, he would need receipts for any drug  purchases made during the retroactive period—about 5 months preceding  the date he was notified of his PDP enrollment—at a time when he could  not foresee the need for doing so. Finally, Mr. Smith or someone helping  him would have to find out how and where to claim reimbursement from  his PDP. Under CMS’s 2006 policy, even if Mr. Smith had submitted proof  of his drug purchases, he would not be eligible for reimbursement if CMS  had enrolled him in a PDP that did not cover his prescriptions or did not  have Mr. Smith’s pharmacy in its network. Nevertheless, Mr. Smith’s PDP  would have received monthly direct subsidy and low-income premium  payments for Mr. Smith for the retroactive coverage period.
For 2006, CMS did not calculate aggregate payments made to PDP  sponsors for retroactive coverage. Further, the agency did not monitor  reimbursements to dual-eligible beneficiaries for drug purchases made  during the retroactive period. Agency officials told us that they have data  to determine the PDP payments and beneficiary reimbursements. As a  result of not tracking this information, CMS does not know how much of  the roughly $100 million in direct subsidy and low-income premium  payments for retroactive coverage in 2006 was used by PDPs to pay for  drug expenses claimed by dual-eligible beneficiaries for drugs purchased  during retroactive coverage periods.
section_title: CMS Has Taken Actions to Address Challenges Faced by New Dual-Eligible Beneficiaries and Pharmacies
paragraphs: Given the experience of early 2006, CMS has taken several actions to  improve the transition of dual-eligible beneficiaries to Part D. First, the  agency has taken steps to facilitate the change in drug coverage for  Medicaid beneficiaries whose date of Medicare eligibility can be  predicted—about one-third of new dual-eligible beneficiaries enrolled by  CMS. In August 2006, CMS implemented a new prospective enrollment  process that state Medicaid agencies may use to eliminate breaks in  prescription drug coverage for these beneficiaries. Second, CMS is taking  steps to improve tools pharmacies use when dual-eligible beneficiaries  seek to fill a prescription, but do not have their PDP enrollment  information. Third, CMS has plans to integrate the agency’s information  systems to increase the efficiency of the systems involved in the  enrollment process.
subsections: section_title: CMS Instituted Prospective Enrollment to Help Ease Challenges of Certain New Dual-Eligible Beneficiaries
paragraphs: CMS implemented a new prospective enrollment process in August 2006 to  help Medicaid beneficiaries who become Medicare eligible transition to  Part D without a break in coverage. Under the prospective enrollment  process, state Medicaid agencies voluntarily can include on the monthly  state dual-eligible file those Medicaid beneficiaries predicted to become  Medicare eligible, for instance Medicaid beneficiaries who are nearing  their 65th birthday. Two months prior to the date the beneficiary will  become Medicare eligible, CMS assigns the beneficiary to a PDP. By  completing the assignment process prior to when these beneficiaries  become Medicare eligible, CMS officials told us that these beneficiaries  should have all their PDP enrollment information when their Medicare  Part D coverage begins.
Prior to the prospective enrollment process, Medicaid beneficiaries who  became Medicare eligible experienced a gap of up to 2 months during  which they were no longer eligible for Medicaid prescription drug  coverage but had yet to receive information on their Medicare Part D drug  coverage. This is because state Medicaid agencies were allowed to include  in the monthly state dual-eligible file only those dual-eligible beneficiaries  who were known to be eligible for Medicaid and Medicare at the time the  file was sent. State Medicaid agencies were required to end Medicaid  coverage for prescription drugs when the beneficiary became Part D  eligible.
Because prospective enrollment was in its very early stages during our  audit work, we cannot evaluate how effectively the new process is  working to mitigate the gaps in coverage some new dual-eligible  beneficiaries faced. In the first month of implementation, 38 state  Medicaid agencies submitted records identifying at least some prospective  dual-eligible beneficiaries. CMS officials attributed the lack of submission  of the names of prospective dual-eligible beneficiaries by some state  Medicaid agencies in August 2006 to the short time frame state Medicaid  agencies were given to change how they compiled the dual-eligible file. As  of November 2006, the state Medicaid agencies for all 50 states and the  District of Columbia have included prospective dual-eligible beneficiaries  in their monthly file. While it is too early to gauge the impact of the  process on beneficiaries, we believe that prospective enrollment has the  potential to provide continuous coverage for those beneficiaries who can  be predicted to become dually eligible. State Medicaid officials also told us  that prospective enrollment is a beneficial change to the process of  identifying and enrolling new dual-eligible beneficiaries.
section_title: CMS Working to Improve Utility of Eligibility Query and Billing Contingency Option
paragraphs: CMS is taking steps to improve the eligibility query and the billing  contingency option. CMS worked with the pharmacy industry to change  the format of the eligibility query to include more complete information.  Also, CMS officials said they planned to make changes to the enrollment  contingency contract to institute a preliminary screen of Medicare  eligibility and Part D plan enrollment before a claim goes through the  system.
In response to requests from pharmacies that more information be  provided through the eligibility query, CMS officials told us that agency  staff worked with the National Council for Prescription Drug Programs,  Inc.—a nonprofit organization that develops standard formats for data  transfers to and from pharmacies—to change the format of the eligibility  query and increase the amount of information pharmacies could get from  the responses. As part of the planned improvements, eligibility query  responses for beneficiaries identified in the database will include—in  addition to the data elements previously included—the beneficiary’s name  and birth date, the PDP’s identification number, and the beneficiary’s low- income subsidy status. The new specifications for the eligibility query  were released December 1, 2006. Pharmacies have to work with their own  software vendors to implement the changes to their own systems.
CMS is also taking steps to improve the availability of the information  pharmacies access through the eligibility query. CMS officials told us that,  after being notified of a confirmed enrollment by CMS via a weekly  enrollment update, PDPs should submit standard billing information to  CMS within 72 hours. However, sometimes PDPs hold the information for  longer than 72 hours. According to CMS, the time it takes PDPs to submit  billing information to the agency has improved since the beginning of the  Part D program. While CMS does not monitor the amount of time it takes  for PDPs to submit billing information, the agency has begun monitoring  Medicare’s eligibility database to identify PDPs that have a large number  of enrollees for whom billing information is missing. As part of this effort,  CMS sends a file monthly to each PDP that lists enrollees without billing  information. CMS guidance to PDPs states that each PDP should  successfully submit standard billing information for 95 percent of the  PDP’s enrollees each month. According to CMS data, as of October 1, 2006,  about 27 percent of PDPs with CMS-assigned, dual-eligible beneficiaries  had billing information for less than 95 percent of their CMS-assigned,  dual-eligible beneficiaries. Of those that did not meet the 95 percent  threshold, most had fewer than 20 CMS-assigned, dual-eligible  beneficiaries.
CMS has implemented certain changes for 2007 to address the large  number of problematic claims going through the WellPoint enrollment  contingency option. It has directed WellPoint to check an individual’s  Medicare eligibility and Part D enrollment before the claim is approved,  using a new daily update report from Medicare’s eligibility database. This  is expected to allow WellPoint to deny claims at the point-of-sale that  should not be paid through this option, thereby reducing the number of  claims that must be reconciled at a later date.
section_title: CMS Is Attempting to Address Information Systems Issues, but without Adequate Testing, Problems May Continue
paragraphs: CMS is now making changes to improve the efficiency of key information  systems involved in the enrollment process. It is redesigning and  integrating these information systems to reduce redundancies and to  synchronize data currently stored in different systems, which should lead  to a more efficient enrollment process. While CMS is performing unit,  system, and integration testing on these changes, it has no definitive plans  to perform end-to-end testing on the changes to the overall information  systems infrastructure. CMS is pursuing contractual help to determine  the extent of testing that it can perform in the future.
CMS is currently integrating information from the Medicare eligibility  database with information from the enrollment transaction system  because duplicative demographic and other data are stored in both  systems. According to CMS information technology (IT) officials, because  these data are not stored in one place and a huge amount of enrollment  traffic is moving back and forth between these two systems, it has been a  very large burden for the agency to synchronize and maintain a single set  of data. CMS IT officials told us that they spent the first 6 months of Part D  implementation stabilizing the supporting information systems and have  only now begun to look at efficiencies that can be achieved through  integration and mergers that can reduce maintenance and processing  times. In the long term, the agency hopes to integrate all beneficiary,  entitlement, and enrollment information into one database.
CMS IT officials contend that true end-to-end testing of these current  changes may not be feasible given the agency’s limited time and resources  and the number of scenarios that would have to be tested in the more than  600 different PDPs. In addition, true end-to-end testing would involve  thorough interface testing with SSA, and state Medicaid agency and PDP  systems, which are not standardized and vary widely. While we agree that  end-to-end testing will be difficult given the multiple partners involved and  the complexity of the program’s systems infrastructure, it is crucial to  mitigate the risks inherent in CMS’s planned changes. End-to-end testing is  a highly recognized systems development best practice and is considered  essential to ensure that a defined set of interrelated systems, which  collectively support an organizational core business area or function,  interoperate as intended in an operational environment. These interrelated  systems include not only those owned and managed by the organization,  but also the external systems with which they interface. Because end-to- end testing can involve multiple systems and numerous partner interfaces,  it is typically approached in a prioritized fashion taking into consideration  resources, test environments, and the willingness of external parties to  participate. CMS IT officials acknowledge that there are risks associated  with implementing these changes but still do not plan to conduct end-to- end testing even on a limited basis.
section_title: CMS Randomly Assigns Dual-Eligible Beneficiaries to PDPs; Some States Assigned Individuals Using a More Tailored Approach
paragraphs: As required under the MMA and implementing regulations, for dual-eligible  beneficiaries who have not enrolled in a Part D plan, CMS makes random  assignments to PDPs based only on the premium amount and the  geographic location of the PDP. This method ensures that PDP sponsors  enroll an approximately equal number of beneficiaries. However, state  Medicaid officials and others assert that dual-eligible beneficiaries  assigned to PDPs by CMS are often enrolled in PDPs that do not meet their  drug needs. For the initial PDP assignments for January 2006, some SPAPs  used additional criteria—including drugs used by beneficiaries—to enroll  or reassign beneficiaries to PDPs that were more appropriate to their  individual circumstances. SPAP officials reported that these alternative  methods produced beneficial results. However, CMS and PDP sponsors  pointed out that random assignment works to enroll beneficiaries into  PDPs, and that there is no need to use additional criteria.
subsections: section_title: When Enrolling Dual- Eligible Beneficiaries, CMS Considers PDP Premiums and Geographic Location
paragraphs: CMS assists in the enrollment of dual-eligible beneficiaries who have not  enrolled in a Part D plan on their own by randomly assigning them in  approximately equal numbers among eligible PDP sponsors in each region.  Under the MMA, the agency may only consider the premiums of the PDPs  in the region when making these assignments. CMS first distributes  beneficiaries randomly among those PDP sponsors that offer one or more  PDPs at or below the low-income benchmark—the average premium in a  region—if there is more than one eligible PDP serving the beneficiary’s  geographic location. It then assigns the beneficiaries randomly among all  eligible PDPs offered by each PDP sponsor. Following the first round of  enrollments, CMS has assigned new dual-eligible beneficiaries to PDPs  monthly.
Dual-eligible beneficiaries may change PDPs at any time during the  enrollment year. When dual-eligible beneficiaries change PDPs, coverage  under the new PDP becomes effective the following month. As of  November 2006, 29.8 percent—1,703,018—of dual-eligible beneficiaries  initially enrolled by CMS subsequently made a PDP election of their own  choosing.
During the original assignments for 2006, CMS assigned some dual-eligible  beneficiaries to PDPs that did not serve the area where they lived. This  occurred for about 107,000 dual-eligible beneficiaries, 1.9 percent of the  population randomly assigned to PDPs at that time. In these cases, CMS  made inappropriate assignments because it used address information from  SSA that was out-of-date or that corresponded to the individual’s  representative payee—the individual or organization who manages the  beneficiary’s money on the beneficiary’s behalf—rather than to the  beneficiary. For example, if a beneficiary resides in Arizona and their  representative payee resides in Virginia, CMS would have assigned that  beneficiary to a PDP serving Virginia. CMS officials pointed out that this  problem was relatively minor because most of these dual-eligible  beneficiaries (about 98.1 percent of those affected) were either enrolled in  a PDP offered by a PDP sponsor that offered coverage in the beneficiary’s  actual region or that had a national pharmacy network. CMS officials told  us that PDP sponsors serving the remainder of these beneficiaries were  instructed to provide benefits to this group in accordance with their out- of-network benefits. CMS officials also told us that the fact that dual- eligible beneficiaries can switch PDPs at any time addresses the issue.  PDP sponsors were still required to notify all affected beneficiaries of the  out-of-area assignment. CMS instructed PDPs to notify those dual-eligible  beneficiaries living in an area not served by the PDP sponsor that they  would be disenrolled at some future point and must contact Medicare to  enroll in an appropriate PDP.
section_title: Some States Have Assigned Individuals to PDPs Using a More Tailored Approach
paragraphs: Under the MMA, SPAPs may enroll Part D beneficiaries into PDPs as their  authorized representatives. Although CMS encouraged SPAPs to follow  the same enrollment process CMS uses for dual-eligible beneficiaries, CMS  has allowed certain SPAPs to use additional assignment criteria. Qualified  SPAPs may use alternative assignment methods—often referred to as  intelligent random assignment (IRA)—to identify PDP choices for their  members that meet their individual drug needs. IRA methods consider  beneficiary-specific information, such as drug utilization, customary  pharmacy, and other objective criteria to narrow the number of PDP  options to which a member could be assigned. With CMS approval, SPAPs  may enroll members randomly among PDPs that meet these given criteria.  However, SPAPs may not discriminate among PDPs by enrolling members  into a specific or preferred PDP—a practice referred to as steering.
subsections: section_title: Using Additional Criteria, Maine Switched PDP Assignments to Accommodate Drugs Used by Dual-Eligible Beneficiaries
paragraphs: The SPAP in Maine is one example of an organization that took steps to  reassign noninstitutionalized, dual-eligible beneficiaries, with CMS  approval, by aligning their drug needs with PDP formularies, ultimately  reassigning nearly half of its dual-eligible population to PDPs other than  those assigned by CMS. In June 2005, state legislation was enacted that  authorized the inclusion of all dual-eligible beneficiaries in Maine’s  existing SPAP membership. Maine officials sought to pass this legislation  in response to concerns that this population could experience coverage  disruptions during the transition to Medicare Part D as implemented by  CMS. They reported that, although these individuals may switch PDPs at  any time, it could take months for beneficiaries to transfer to a more  appropriate PDP. Thus, after CMS had randomly assigned dual-eligible  beneficiaries to PDPs, Maine reassigned certain noninstitutionalized, dual- eligible beneficiaries to different PDPs prior to January 1, 2006.
The state found support for its decision to reassign dual-eligible  beneficiaries in a state analysis, which indicated that CMS assignments  resulted in a poor fit for many dual-eligible beneficiaries in Maine. (See  table 1.) According to the analysis, CMS had assigned roughly one-third of  dual-eligible beneficiaries to PDPs that covered all of their recently used  drugs. However, nearly half of dual-eligible beneficiaries in the state had a  match rate—the percentage of a beneficiary’s medications that appeared  on the CMS-assigned PDP formulary—lower than 80 percent. The analysis  also showed that about one in five dual-eligible beneficiaries had match  rates below 20 percent.
As an alternative to random assignment based on PDP premiums and  location, Maine officials developed an IRA method that considered a  beneficiary’s drug utilization and customary pharmacy to make new PDP  assignments. Officials developed a computer program that generated  scores used to rank PDPs in order of best fit for each beneficiary. The  program included the 10 PDPs in the state with premiums at or below the  low-income benchmark that provided their formularies to the state. It  compared the drugs on these PDPs’ formularies to the beneficiary’s drug  utilization history compiled from Medicaid claims for the 3 months prior to  the date of assignment (September, October, and November 2005) and  assigned an aggregate score to each PDP. The scoring system  differentiated between instances where a drug was on the formulary with  and without prior authorization requirements. For PDPs with identical  scores, the program assessed pharmacy location. If more than one PDP  had the beneficiary’s customary pharmacy in their network, the program  randomly assigned the beneficiary among those PDPs with the highest  scores. Although Maine officials conducted this analysis for all of its 2005  dual-eligible beneficiaries, after they conferred with CMS officials they  reassigned only those dual-eligible beneficiaries who had lower than an 80  percent formulary match, accounting for 14,558 individuals, about   46 percent of the state’s dual-eligible population.
Maine officials reported that IRA resulted in a marked improvement in  match rates for beneficiaries compared to CMS’s PDP assignments. For  each PDP, officials calculated the match rate before and after IRA for  reassigned beneficiaries. (See table 2.) This analysis showed that before  the use of IRA, the weighted average match rate for all participating PDPs  was 34.14 percent, and ranged from 20.59 percent to 38.64 percent across  PDPs. Following the application of IRA, the weighted average match rate  rose to 99.86 percent, with little variation across PDPs.
Maine officials noted that their continued use of IRA for dual-eligible  beneficiaries is contingent on their access to key data. To make the initial  assignments for dual-eligible beneficiaries effective January 1, 2006, the  state had drug utilization information from its own Medicaid claims  system. However, if the state chooses to reassign individuals again, it must  obtain up-to-date utilization information. To help ensure that it would have  the data needed to perform another round of IRA in the future, Maine’s  SPAP included in its contract with PDP sponsors a requirement to  exchange with the SPAP information on pharmacy networks, formularies,  and drug utilization on an ongoing basis. For 2007, Maine reassigned  10,200, about 22 percent of dual-eligible beneficiaries, to a new PDP.
section_title: New Jersey’s SPAP Used Drug Utilization Data to Identify Optimal PDP Assignments Prior to CMS Enrollment
paragraphs: The state of New Jersey’s SPAP—known as the Pharmaceutical Assistance  to the Aged and Disabled (PAAD) Program—developed and implemented  an IRA method, with CMS approval, that allowed it to enroll its members  in PDPs that best served their drug needs. PAAD officials designed their  IRA to simulate the decision process that would occur if beneficiaries had  received assistance from a State Health Insurance Assistance Program  counselor or had used CMS’s Web-based formulary finder on their own.
PAAD officials engaged a contractor to develop a computer program that  would identify PDPs that cover each individual’s prescription drug needs.  The program matched information on members’ maintenance drugs with  formulary and pharmacy network information for all PDPs offered in New  Jersey at or below the low-income benchmark. The program treated  married couples as one member in the assignment process to ensure that  they would be enrolled in the same PDP. In all, PAAD matched 210,000  beneficiaries among six PDPs.
Following the application of IRA and prior to enrolling individuals, PAAD  sent one of two letters to beneficiaries that explained the results of the  IRA method. PAAD sent a letter to some beneficiaries indicating that one  PDP best met their needs in terms of its formulary match and inclusion of  their customary pharmacy. Other beneficiaries were sent letters informing  them that their needs would be equally met by multiple PDPs and  identified those PDPs. To satisfy CMS’s requirement that the state not  steer beneficiaries to a particular PDP, New Jersey included a full list of all  eligible PDPs in the state on the back of the letter.
PAAD staff sent these letters in October 2005 and offered to enroll these  beneficiaries if they did not receive a response by November 2005.  Individuals were asked to notify PAAD of the PDP that they wanted to join  and PAAD moved to enroll them in that PDP. For beneficiaries who did  not respond to their letters, PAAD enrolled them into the PDP identified as  the best fit by the IRA, or randomly among PDPs that equally met their  needs. Of the roughly 210,000 letters sent to SPAP members, PAAD  received about 130,000 letters requesting enrollment in the suggested PDP  within the first month or two after PAAD sent the letters. In total, PAAD  enrolled 165,207 beneficiaries, about 78.7 percent of those sent letters, into  PDPs identified as the best fit by the IRA.
section_title: Stakeholders’ Reactions to States’ Use of Intelligent Random Assignment Protocols Are Mixed
paragraphs: While CMS has allowed certain SPAPs to use IRA methods to assign or  reassign their members, CMS does not support the use of IRA methods to  assist dual-eligible beneficiaries with Part D enrollment. CMS officials told  us that any proposal to add drug utilization as a criterion for PDP  assignments assumes that a beneficiary should remain on the same drugs.  They contend that beneficiaries can change prescriptions to a similar drug  that is on their CMS-assigned PDP’s formulary and receive equivalent  therapeutic value. Moreover, the officials pointed out the ability of dual- eligible beneficiaries to switch PDPs. Overall, CMS officials maintained the  position that its PDP assignment method for dual-eligible beneficiaries  used in fall 2005 worked well.
In contrast, state Medicaid officials we met with generally support the use  of IRA methods to assist beneficiaries in choosing a PDP that meets their  individual circumstances. State Medicaid officials we met with maintained  that overall, dual-eligible beneficiaries would have been in a better  position during the initial transition to Medicare Part D if drug utilization  information were considered in the PDP assignment process. A  representative of the National Association of State Medicaid Directors  (NASMD) asserted that while CMS’s assignment process was fair to PDP  sponsors, it did not ensure that beneficiaries were enrolled in appropriate  PDPs. The representative reported that CMS referred individuals who  wanted to take their drug usage into account in selecting a PDP to the  Medicare.gov Web site, which most dual-eligible beneficiaries are not able  to use.
Some state Medicaid agencies indicated their support for IRA in the  months prior to Part D implementation. At that time, 15 state Medicaid  agencies made commitments to a software vendor to use a free software  package designed to match beneficiaries’ drug utilization history with PDP  formularies as an educational tool to help them choose the PDP best  aligned to their individual drug needs. However, litigation over use of the  IRA software led to delays, at the end of which CMS had already assigned  dual-eligible beneficiaries to PDPs. State Medicaid agencies reported that  they then did not have the time to match beneficiaries, send out  scorecards, and allow beneficiaries to switch PDPs before the January 1,  2006, implementation date.
Executives of PDP sponsors we spoke with stated that CMS’s assignment  method generally worked well; however, some executives raised concerns  about IRA methodology. Two PDP sponsors raised concerns that IRA  methods misinterpret formulary information. Executives from one PDP  sponsor contended that there is not a need to look at drug utilization  information because of the requirements for broad formularies. These  executives also told us that using this method could increase the  program’s costs by making PDPs cover more drugs.
section_title: PDP Transition Process Compliance Improved but Beneficiary Confusion Remains; 2007 Contracts More Specific
paragraphs: CMS actions to address problems associated with PDP implementation of  pharmacy transition processes led to a more uniform application of  transition processes. Pharmacy transition processes allow new PDP  enrollees to obtain drugs not normally covered by their new PDP while  they contact their physician about switching to a covered drug. In  response to Part D sponsors’ inconsistent implementation of transition  drug coverage processes in early 2006, CMS issued a series of memoranda  that clarified its expectations. PDP sponsors, pharmacy groups, and  beneficiary advocates told us that since then, beneficiaries’ ability to  obtain transition drug coverage has substantially improved. However, they  also report that dual-eligible beneficiaries remain unaware or confused  about the significance of receiving a transition drug supply at the  pharmacy and are not using the transition period to address formulary  issues. CMS made the transition process requirements in its 2007 contracts  with PDP sponsors more specific.
subsections: section_title: CMS Guidance on Transition Drug Coverage Improved PDP Performance
paragraphs: After receiving complaints that Part D enrollees experienced difficulties  obtaining their medications, CMS took steps to address issues related to  the availability of transition drug supplies. Federal regulations require PDP  sponsors to provide for a transitional process for new enrollees who have  been prescribed Part D-covered drugs not on the PDP’s formulary. CMS  instructed PDP sponsors to submit a transition process, which would be  subject to the agency’s review, as part of the application to participate in  Part D.
Although CMS specified its expectations for a transition process in March  2005 guidelines for Part D sponsors, the sponsors had discretion in  devising their processes. The March 2005 guidelines specified that Part D  sponsors should consider filling a one-time transition supply of  nonformulary drugs to accommodate the immediate need of the  beneficiary. The agency suggested that a temporary 30-day supply would  be reasonable to enable the relevant parties to work out an appropriate  therapeutic substitution or obtain a formulary exception, but it allowed  Part D sponsors to decide the appropriate length of this one-time  transitional supply. For residents in long-term care facilities, CMS  guidance indicated that a transition period of 90 to 180 days would be  appropriate for individuals who require some changes to their medication  in order to accommodate PDP formularies.
During the early weeks of the program, CMS received reports that the way  in which some PDP sponsors implemented their transition processes  adversely affected beneficiaries’ ability to obtain transition supplies.  Sponsors differed in the time period set for providing transition coverage;  some PDPs provided the suggested 30-day supply, while other PDPs  provided beneficiaries with as few as a 15-day initial supply. Some PDP  sponsors did not apply their transition coverage processes to instances  where a formulary drug was subject to utilization restrictions. For  example, CMS received complaints that individuals were not given a  transition supply when their medications had prior authorization, step  therapy, or quantity limit restrictions. Additionally, PDP sponsors’  customer service representatives and pharmacies were generally unaware  of the transition processes and how to implement them. Pharmacy  association representatives also told us of problems overriding the usual  pharmacy billing system in order to process a claim when dispensing a  transition supply.
CMS responded to the reported problems concerning the uneven  application of transition processes by issuing a series of memoranda to  PDP sponsors to clarify its expectations.
On January 6, 2006, CMS issued a memorandum to PDP sponsors  highlighting the need for beneficiaries to receive transition supplies at the  pharmacy. The memorandum emphasized that PDP sponsors should   (1) train customer service representatives to respond to questions about  the PDP’s transition process, (2) provide pharmacies with appropriate  instructions for billing a transition supply, and (3) ensure that enrollees  have access to a temporary supply of drugs with prior authorization and  step therapy requirements until such requirements can be met.
On January 13, 2006, CMS issued guidance stating that PDP sponsors  should establish an expedited process for pharmacists to obtain  authorization or override instructions, and authorize PDP customer  service representatives to make or obtain quick decisions on the  application of transition processes.
In a January 18, 2006, memorandum, CMS reiterated its policy that PDP  sponsors should provide at least an initial 30-day supply of drugs and that  PDPs should extend that coverage even further in situations where a  longer transition period may be required for medical reasons. In addition,  CMS asked PDP sponsors to consider contacting beneficiaries receiving  transition supplies of drugs to inform them that (1) the supply is  temporary, (2) they should contact the PDP or physician to identify a drug  substitution, and (3) they have a right to request an exception to the  formulary and the procedures for requesting such an exception.
When many beneficiaries continued to return to the pharmacy for refills  without having successfully resolved their formulary issues, CMS issued a  memorandum on February 2, 2006, calling for an extension of the Part D  transition period to March 31, 2006. The agency asserted that the  extension was needed to give beneficiaries sufficient time to work with  their provider to either change prescriptions or request an exception.
In another memorandum to PDP sponsors on March 17, 2006, CMS  reemphasized the objectives of the transition process and highlighted the  need to inform beneficiaries of what actions to take to resolve formulary  issues following the receipt of a transition supply.
Since CMS clarified its transition process guidance to PDP sponsors, many  of the issues surrounding transition processes have been resolved. Some  of the pharmacy and long-term care associations, and Medicaid officials  we spoke with, told us that problems with providing transition drug  coverage have largely been addressed. They noted that the issues  surrounding the implementation of the transition processes have  significantly improved.
To oversee PDP compliance with transition coverage processes, CMS  tracks complaints and monitors the time it takes Part D sponsors to  resolve complaints. CMS officials said that they rely on beneficiary and  pharmacy complaints for information about problems with transition  coverage. The agency also assigns case workers to ensure that PDPs  resolve these issues. Although CMS can issue monetary penalties, limit  marketing, and limit enrollment for PDPs, officials reported that no such  punitive actions have been taken against any PDP regarding transition  process compliance.
section_title: Dual-Eligible Beneficiaries Often Confused about Implications of Receiving Transition Fills
paragraphs: Despite PDP sponsors’ efforts to communicate with beneficiaries receiving  transition supplies, beneficiaries do not always take needed action during  the transition period. Consequently, some dual-eligible beneficiaries return  to the pharmacy without having worked with their physician to apply to  get their drugs covered or find a substitute drug.
While three PDP sponsors told us how they conveyed information about  the transition period, two of these PDP sponsors acknowledged that dual- eligible beneficiaries often do not use the transition period as intended.  For example, one PDP executive told us that beneficiaries often do not  realize that a transition supply has been provided and that they have to  apply to the PDP to continue receiving coverage for that particular drug.
Representatives from some pharmacy associations and long-term care  groups that we spoke to also agreed that, even when notified, dual-eligible  beneficiaries are unaware of the implications of the policy. Some  pharmacy representatives we spoke with noted that when dual-eligible  beneficiaries receive a transition supply, they are often unaware that this  supply is temporary and therefore return to the pharmacy the following  month in an effort to refill the same prescription without having tried to  switch to a formulary medication or obtain permission to continue to have  the drug covered. Two other pharmacy association representatives noted  that beneficiary understanding of transition supplies is a particular  problem for dual-eligible beneficiaries in the long-term care setting who  often do not open or read the notification letter sent from the PDP. Staff in  long-term care facilities often find unopened mail for the beneficiary sent  from their PDP.
section_title: For 2007, CMS Added Specific Transition Process Requirements to Its Contracts with PDP Sponsors
paragraphs: Unlike the discretion allowed PDP sponsors under the guidance for 2006,  CMS’s 2007 contract incorporates specific requirements. For example,  the guidance for 2006 stated that, “we expect that PDP sponsors would  consider processes such as the filling of a temporary one-time transition  supply in order to accommodate the immediate need of the beneficiary.”  As part of the 2007 contract, PDP sponsors must attest that the PDP will  follow certain required components of a transition process. These  components require that, among other things, PDPs    provide an emergency supply of nonformulary Part D drugs for long-term    apply transition policies to drugs subject to prior authorization or step    add a computer code to their data systems to inform a pharmacy that the  prescription being filled is a transition supply,   ensure that network pharmacies have the computer codes necessary to bill    notify each beneficiary by mail within 72 hours of a transition supply of  medications being filled.
To educate beneficiaries about the purpose of transition supplies, CMS  also added a requirement for PDP sponsors in its 2007 contracts to instruct  beneficiaries about the implications of a transition supply and alert  pharmacies that they are supplying a transition supply. Beginning in 2007,  PDP sponsors are required to notify each beneficiary of the steps they  should take during the transition period when they receive a transition  supply of a drug. In addition, PDP sponsors are required to add a computer  code to their systems so that after a pharmacist fills a transition supply, a  message back to the pharmacist will alert them that the prescription was  filled on a temporary basis only. The pharmacist will then be in a better  position to inform the beneficiary of the need to take appropriate steps  before the transition period ends.
section_title: Conclusions
paragraphs: Some challenges regarding the enrollment of new dual-eligible  beneficiaries have been resolved, while others remain. In particular, CMS’s  decision to implement prospective enrollment for new dual-eligible  beneficiaries who are Medicaid eligible and subsequently become  Medicare eligible should alleviate coverage gaps this group of beneficiaries  previously faced. However, because of inherent processing lags, most  dual-eligible beneficiaries—Medicare beneficiaries new to Medicaid—may  continue to face difficulties at the pharmacy counter. In addition, because  of CMS’s limited oversight of its retroactive coverage policy, the agency  has not been able to ensure efficient use of program funds. Until March  2007, the letters used to notify dual-eligible beneficiaries of their PDP  enrollment and their retroactive coverage did not inform them of the right  to be reimbursed and how to obtain such reimbursement. CMS monitoring  of retroactive payments to PDPs and subsequent PDP reimbursements to  beneficiaries is also lacking. We found that Medicare paid PDPs millions of  dollars —we estimate about $100 million in 2006—for coverage during  periods for which dual-eligible beneficiaries may not have sought  reimbursement for their drug costs.
After spending many months stabilizing the information systems  supporting the Part D program, CMS is now making changes to improve  the efficiency of its key information systems involved in the enrollment  process. While CMS officials are aware of the risks involved in these  changes, they are not planning to perform end-to-end testing because of  the complexity of the systems infrastructure, the multiple partners  involved, and time and resource constraints. While we agree that end-to- end testing will be difficult, it is important to perform this testing to  mitigate risks and avoid problems like those that occurred during initial  program implementation.
CMS’s assignment of dual-eligible beneficiaries to PDPs serving their  geographic area with premiums at or below the low-income benchmark  generally succeeded in enrolling dual-eligible beneficiaries into PDPs. The  experience of SPAPs in Maine and New Jersey, while limited,  demonstrates the feasibility of using IRA methods to better align  beneficiaries’ PDP assignments with their drug utilization needs. However,  continued use of these methods is contingent on access to beneficiary  drug utilization and formulary information from PDPs. In addition, some  dual-eligible beneficiaries—those with representative payees—were  assigned to PDPs that did not serve the area where they lived. Since CMS  receives a file from SSA that includes an indicator showing that an  individual has a representative payee, the agency could use this  information to assign these beneficiaries to PDPs that serve the area  where they live.
To resolve problems associated with the uneven application of transition  policies, CMS clarified its previous guidance to plans and added  requirements to its 2007 contracts with PDP sponsors. The 2006  experience with plans’ uneven implementation of CMS’s transition policy  guidance demonstrated how inconsistent interpretations can lead to  problems for beneficiaries and pharmacies. CMS officials recognized that  the agency needed to be more directive by including specific procedures in  its 2007 PDP contracts. Even with consistent implementation of transition  policies and notification requirements, however, without assistance, dual- eligible beneficiaries—a highly vulnerable population—are likely to have  difficulty resolving problems that they encounter with the transition.
section_title: Recommendations for Executive Action
paragraphs: We make the following six recommendations.
To help ensure that dual-eligible beneficiaries are receiving Part D  benefits, the Administrator of CMS should require PDP sponsors to notify  new dual-eligible beneficiaries of their right to reimbursement for costs  incurred during retroactive coverage periods.
To determine the magnitude of Medicare payments made to PDPs under  its retroactive coverage policy, the Administrator of CMS should track  how many of the new dual-eligible beneficiaries it enrolls each month  receive retroactive drug benefits and how many months of retroactive  coverage the agency is providing them.
To determine the impact of its retroactive coverage policy, the  Administrator of CMS should monitor PDP reimbursements to dual- eligible beneficiaries, and those that paid on their behalf, for costs  incurred during retroactive periods through an examination of the  prescription utilization data reported by PDP sponsors.
To mitigate the risks associated with implementing Part D information  systems changes, especially in light of initial systems issues caused by the  lack of adequate testing, the Administrator of CMS should work with key  partners to plan, prioritize, and execute end-to-end testing.
To help ensure new dual-eligible beneficiaries are enrolled in PDPs that  serve the geographic area where they live, the Administrator of CMS  should assign dual-eligible beneficiaries with representative payees to a  PDP serving the state that submits the individual’s information on their  dual-eligible file.
To support states with the relevant authority that want to use alternative  enrollment methods to reassign dual-eligible beneficiaries to PDPs, the  Administrator of CMS should facilitate the sharing of data between PDPs  and states.
section_title: Agency Comments and Our Evaluation
paragraphs: CMS reviewed a draft of this report and provided written comments,  which appear in appendix II. In addition to comments on each of our  recommendations, CMS provided us with technical comments that we  incorporated where appropriate.
CMS remarked that we did an excellent job of outlining the complex  systems and steps involved in identifying, assigning, and enrolling new  dual-eligible beneficiaries into PDPs. However, the agency objected to  what it perceived as an overwhelmingly negative tone in our findings and  stated that our discussion of retroactive coverage was overly simplified.  CMS did note that the agency was in the process of implementing three of  our six recommendations to improve existing procedures.
CMS’s main concern regarding the draft report for comment centered on  our characterization of the interval between the effective date of Part D  eligibility and the completed enrollment process as a “disconnect.” Also,  CMS officials noted that “it is not new or unusual for individuals to pay out  of pocket for their prescription drug or other healthcare services, and then  subsequently be reimbursed.” The agency explained that its policy of tying  the effective Medicare Part D enrollment date to the first day of Medicaid  eligibility is intended to ensure that dual-eligible individuals receive Part D  benefits for the period that they were determined by their state to be  eligible for this coverage. CMS asserted that it is the retroactive eligibility  requirement under Medicaid, not CMS policy, which causes the “space and  time conundrum” over which it has no control.
Regarding this broad concern from CMS, we note that our discussion of  the time to complete the enrollment process and the period of retroactive  coverage experienced by a majority of newly enrolled dual-eligible  beneficiaries was intended to describe CMS’s implementation of the  enrollment process for new dual-eligible beneficiaries; we did not evaluate  CMS’s policy. Recognizing the desirability of providing drug coverage as  soon as beneficiaries attain dual-eligible status, we do not object to CMS’s  policy of linking the Part D effective coverage date to Medicaid’s  retroactive eligibility date. However, our review found that CMS had not  fully implemented this policy and, as a consequence, neither beneficiaries  nor the Medicare program are well served. Therefore, we have  recommended actions that CMS should take to better protect beneficiaries  and ensure efficient use of Medicare program funds. To clarify our  message and to reflect information obtained through agency comments,  we modified portions of this discussion and provided the revised sections  to CMS for supplemental comments.
In its supplemental comments, CMS again objected to what it believed is  our implication that retroactive coverage for dual-eligible beneficiaries is  inappropriate or that CMS has put the Medicare program at unwarranted  risk. As stated above, we do not disagree with the policy of retroactive  coverage for dual-eligible beneficiaries; rather we are concerned with how  CMS implemented this policy in 2006. Only by monitoring the amounts  paid to PDP sponsors for retroactive coverage periods and the amounts  PDP sponsors reimbursed dual-eligible beneficiaries will CMS be in a  position to evaluate the effectiveness of its retroactive coverage policy.
Also, CMS asserted that we incorrectly imply that CMS had the  information needed to monitor reimbursements to dual-eligible  beneficiaries when such information is not expected to be available until  after May 31, 2007. During the course of our audit work in 2006, CMS  indicated no current or planned efforts to monitor or enforce PDP sponsor  reimbursements to dual-eligible beneficiaries. Only after receiving our  draft report did CMS state its intention to analyze the data necessary to  monitor plan compliance and evaluate agency policy. In fact, we were told  that CMS decided to conduct this analysis as a direct result of our draft  report’s findings and recommendations.
CMS agreed with our recommendation to require PDP sponsors to notify  new dual-eligible beneficiaries of their eligibility for reimbursement for  costs incurred during retroactive coverage periods. To be consistent with  its retroactive coverage policy, CMS is in the process of adding language to  this effect in the notices that the agency and PDP sponsors send to dual- eligible beneficiaries enrolled in a PDP. The revised letters advise  beneficiaries to tell their PDP if they have filled prescriptions since the  effective coverage date because they “may be eligible for reimbursement  for some of these costs.” However, contrary to comments CMS made on  our draft report—that dual-eligible beneficiaries will be told they should  submit receipts for previous purchases of Part D drugs—the revised letters  do not explicitly tell beneficiaries of the steps they would need to take to  access their retroactive coverage. The agency also reported that it plans to  inform its partners about the changes to the enrollment notification  letters.
In response to our recommendation that CMS determine the number of  beneficiaries and the magnitude of payments made to PDP sponsors for  dual-eligible beneficiaries subject to retroactive coverage, CMS indicated  that it intends to continue to track the number of new dual-eligible  beneficiaries provided retroactive coverage. Although this monitoring is  important to managing the enrollment process for new dual-eligible  beneficiaries, it would be even more useful if CMS tracked the number of  months of retroactive coverage provided to beneficiaries it enrolls in  PDPs.
CMS disagreed with our recommendation that it monitor PDP  reimbursement of beneficiary expenses incurred during retroactive  coverage periods. We maintain that the agency should actively monitor its  retroactive coverage policy by examining data that plan sponsors routinely  submit to the agency. In their drug utilization records, sponsors must  indicate the amounts paid by the plan and by the beneficiary for each  claim. If it became evident that dual-eligible beneficiaries were not filing  claims for retroactive reimbursements while PDPs received Medicare  payments for their coverage, CMS would be in a position to evaluate its  effective coverage date policy.
Regarding our recommendation that the agency work with key partners to  plan, prioritize, and execute end-to-end testing, CMS disagreed and  questioned whether the benefits of doing so justify the associated costs.  We find this position on end-to-end testing to be inconsistent with systems  development best practices. Establishing end-to-end test environments  and conducting such tests is widely recognized as essential to ensure that  systems perform as intended in an operational environment. CMS was  alerted to this issue in a March 2006 CMS contractor report that identified  the lack of comprehensive end-to-end testing as a weakness of the Part D  program. We acknowledge that, given the complexity of the program’s  infrastructure and the multiple partners involved, end-to-end testing will  be difficult. However, other forms of testing, including integration and  stress testing, should be conducted in addition to, not as a replacement  for, end-to-end testing.
CMS concurred with our recommendation that it ensure all new dual- eligible beneficiaries are enrolled in PDPs that serve the geographic area  where they live. CMS reported that it has completed the underlying  changes necessary to implement this recommendation. Beginning in April  2007, the CMS auto-assignment process enrolls dual-eligible beneficiaries  into PDPs that operate in the state that submits that individual in its dual- eligible file.
CMS disagreed with our recommendation that the agency facilitate  information sharing between PDPs and states that wish to use additional  information to reassign beneficiaries yearly. The agency asserted that, for  a number of reasons, efforts to match beneficiaries’ customary drugs to  PDP formularies are not necessary or desirable. Furthermore, CMS noted  that it lacks the statutory authority and the drug utilization data needed to  assign beneficiaries to PDPs on anything other than a random basis. We  did not propose that CMS change its assignment method and we did not  take a position on the desirability of states’ use of intelligent random  assignment methods. However, we maintain that states wishing to reassign  beneficiaries should have access to PDP data once beneficiaries have been  enrolled.
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) 512-7119 or kingk@gao.gov. Questions concerning  information systems issues and testing should be directed to David  Powner at (202) 512-9286 or pownerd@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 Involved in the Identification and Enrollment of Dual- Eligible Beneficiaries into Medicare Part D
paragraphs: The process of enrolling dual-eligible beneficiaries requires several steps:  It begins when the state Medicaid agency identifies new dual-eligible  beneficiaries and ends when PDPs make billing information available to  pharmacies.  1.  States are responsible for identifying their Medicaid enrollees who  become dual-eligible beneficiaries. They combine data obtained from  SSA or requested from CMS on individuals eligible to receive Medicare  benefits with their own information on Medicaid enrollees to compile  the dual-eligible files. CMS receives Medicare entitlement information  daily from SSA.  2.  After the 15th of the month and before midnight of the last night of the  month, states transmit their dual-eligible files to CMS. These files  contain information on all individuals identified by the states as dual- eligible beneficiaries, including those newly identified and those  previously identified. Generally within 48 hours of receipt, CMS  processes state submissions. Within the Medicare eligibility database,  edits of the state files are performed. Based on the results of the edits,  the Medicare eligibility database transmits an e-mail to each state  telling the state its file was received and the results of the edits. Files  that fail the edits must be resubmitted. Once a file passes the edits, the  Medicare eligibility database matches the file against the Medicare  eligibility database to determine if it is a valid (matched) beneficiary,  eligible for Medicare, and passes business rules for inclusion as a dual  eligible. The results of this processing for each transaction on the  states’ file are added to the response files, which are sent back to the  states.  3.  After CMS has performed the matching process, the Medicare  eligibility database processes these files through two additional steps:  (a) Deeming. Deeming takes the input from the matching process and   a monthly input file from SSA on beneficiaries receiving Social  Security Supplemental Income (SSI) to determine the copayment  level for the dual-eligible beneficiaries. Deeming is performed  against these data according to the business rules.  (b) Auto-assignment. Auto-assignment takes the results of deeming   and assigns each beneficiary to a PDP within the region that  includes the beneficiary’s official address. Auto-assignment takes  the total dual-eligible population and eliminates records using 18  exclusions rules resulting in the final set of beneficiaries to be  auto-assigned. Exclusions include beneficiaries who are already  enrolled in a Part D plan, currently incarcerated, and not a U.S.  resident (residing outside the States and territories). Auto- assignment uniformly assigns qualified dual-eligible beneficiaries  to designated PDPs across each region.
The resulting deeming and assignment information is sent to CMS’s  enrollment transaction system for processing. In addition, a mail tape  is prepared by CMS containing beneficiary names and addresses so  that mail can be generated that informs beneficiaries of the pending  enrollment and identifies the PDP to which they were assigned. A file  also is sent to each of the plans identifying the beneficiaries assigned  to their PDP.  4.  Upon the receipt of the deeming and assignment information from the  Medicare eligibility database, CMS’s enrollment transaction system  facilitates the changes in the copayments and the enrollment of the  beneficiaries into their assigned PDP. The enrollment transaction  system informs the PDP of the enrollment and copayment transactions  via a weekly Transaction Reply Report (TRR) that summarizes all  transactions that the enrollment transaction system has performed for  the respective PDP during the prior week, beginning on Saturday.  5.  PDPs then process the resulting assignment and copayment changes,  assign standard billing information, and send the information to CMS’s  Medicare eligibility database. The Medicare eligibility database  performs edits, such as matching each submitted beneficiary’s  information with Part D enrollment information. For each match, the  standard billing information is added to the Medicare eligibility  database and a response is generated for the PDP, confirming that the  information was accepted. The PDPs mail out ID cards and plan  information to the enrolled beneficiary.  6.  Nightly, the eligibility query receives billing information from the  Medicare eligibility database, making the updated standard billing  information available for use in the eligibility query system.  7.  Pharmacies can use their computer systems to access billing  information needed to bill the assigned PDP for the beneficiary’s  prescriptions if a beneficiary does not have their enrollment  information.
section_title: Appendix II: Comments from the Centers for Medicare & Medicaid Services
section_title: Appendix III: GAO Contacts And Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to the contacts named above, Rosamond Katz, Assistant  Director; Lori Achman; Diana Blumenfeld; Marisol Cruz; Hannah Fein;  Samantha Poppe; Karl Seifert; Jessica Smith; Hemi Tewarson; and Marcia  Washington made major contributions to this report.