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

Letter

Background

The Medicare Part D Program

In the Medicare Part D program, drug plan sponsors compete to deliver prescription drug benefits and attract enrollees. Sponsors offer, through their PDPs, one or more benefit packages that differ in their levels of premiums, deductibles, cost sharing, and coverage in “the gap”—the period when beneficiaries would otherwise pay all of the costs of their drugs. Sponsors must offer plans with standard prescription drug coverage established under the MMA or actuarially equivalent prescription drug coverage as approved by CMS, or may opt to offer plans with supplemental prescription drug coverage. In 2008, only about 10 percent of PDPs—5 of 47—offered the defined standard coverage.

Each plan must cover a set of drugs—generally known as a formulary— that meets certain criteria. Beyond the minimum formulary requirements, sponsors have discretion in designing their formularies and may exclude particular drugs from coverage, thus contributing to variation in formularies across PDPs. For drugs included on a plan formulary, sponsors may assign drugs to tiers that correspond to different levels of cost sharing. In general, sponsors encourage the use of generic medications by putting them on a cost-sharing tier that imposes the lowest out-of-pocket costs on beneficiaries.

PDP sponsors are required to implement drug utilization management programs to reduce cost when medically appropriate. As part of these programs, sponsors may apply various utilization management restrictions to specific drugs on their formularies. Utilization management restrictions may include (1) prior authorization, which requires the beneficiary to obtain the sponsor’s approval before a drug is covered for that individual; (2) quantity limits, which restrict the dosage or number of units of a drug provided within a certain period of time; and (3) step therapy, which requires that a beneficiary try lower-cost drugs before a sponsor will cover a more costly drug.

2008 Plan Benefit Changes

From year to year, sponsors can make changes in their plans’ benefit structure including premiums, cost-sharing levels, formularies, and utilization management restrictions. Prior to the AEP, plan sponsors must submit to CMS bids for approval in order to implement significant changes to benefit structures that will go into effect the next benefit year. As part of this bid negotiation process, CMS reviews formularies and the design of the plan and benefits offered, including removals of drugs from formularies, use of utilization management restrictions, and the application of copayments for drugs. Sponsors have limited opportunities to change benefit structures that may adversely impact enrollees, including removing particular drugs from formularies or moving drugs to higher cost-sharing tiers.

Changes to plan benefit structures can have significant effects on a beneficiary’s out-of-pocket costs and access to particular drugs. For example, a 2008 analysis conducted by Avalere Health—a health care research and consulting firm—showed that average monthly premiums in the 10 most popular Medicare PDPs increased by 16 percent from 2007 to 2008. The analysis also noted that some of the most popular plans raised their premiums by more than 50 percent.

In addition to changes in premiums, PDPs made significant changes from 2007 to 2008 in cost sharing and utilization management of formulary drugs, according to a study sponsored by the Kaiser Family Foundation. For example, the study found that the average copayment for a 30-day supply of nonpreferred name-brand drugs increased 13 percent from $63.31 in 2007 to $71.31 in 2008. Additionally, it reported that PDPs increased their use of utilization management restrictions, such as step therapy and quantity limits, from 25 percent of a sample of the most commonly prescribed drugs in 2007 to 30 percent in 2008.

Written Communications for Medicare Beneficiaries

The design of written materials for Medicare beneficiaries is particularly important in light of evidence that some older individuals have challenges reading and retaining written information. For example, studies have found that individuals ages 65 and older were less proficient than younger adults in locating information in documents and making health decisions based on what they read. Further, a 2003 national survey of adult literacy showed that 27 percent of Medicare beneficiaries were unable to understand information in short, simple texts.

Previous GAO work highlights the importance of assuring that Part D materials, in particular, communicate clearly to this population. Our 2006 study noted that the reading levels of a sample of Part D materials exceeded the capacity of 40 percent of the seniors surveyed. Additionally, the Part D materials reviewed in this study did not include about half of 60 common elements of effective communication, such as language that is free of jargon and consists of familiar words in short sentences, sometimes referred to as “plain language.” As a result of these findings, we recommended that CMS ensure that its written materials describe the Part D benefit in a manner that is consistent with commonly recognized communications guidelines and is responsive to the reader’s needs.

Since the mid-1990s, a group of federal employees from different agencies and specialties has promoted the use of plain language in government communications, particularly those that describe federal benefits and services for the public. Documents that conform to principles of plain language are organized with the reader in mind and: include only the information the reader needs; omit unnecessary words and use short sentences of 15 to 20 words; avoid technical terms and use simple words and active voice; facilitate comprehension using headings, tables, lists, and white space; and incorporate customer feedback using surveys, focus groups, or protocol testing.

Currently, no formal plain language initiative is in place for federal executive agencies; however, some agencies have chosen to incorporate plain language principles in their documents. For example, officials from CMS’s Office of External Affairs indicated that they will conduct a plain language review of CMS documents if requested by agency staff.

Other consumer research supported the use of information customized to individuals’ preferences and circumstances to reduce the risk that consumers dismiss the information as irrelevant. Under this approach, consumers are provided with only data that are most relevant to them, thus making it less likely they will be overwhelmed by the information communicated. One study noted the importance of providing streamlined information that helps individuals understand the consequences of their choices.

AEP Materials for Beneficiaries

CMS requires sponsors to mail all enrollees an ANOC that shows how various features of their drug plan—such as the premium, coverage, cost sharing, and formulary—will change for the next benefit year. In addition to the ANOC, sponsors are required to send beneficiaries other enrollment-related documents, such as the EOC, a Summary of Benefits (SB), and a comprehensive or abridged formulary. Table 1 describes selected information included in each of these documents, as prepared by sponsors in our study.

For the 2008 AEP, sponsors could opt to mail the EOC along with the ANOC to beneficiaries for receipt by October 31, 2007, or separately mail the EOC to enrollees for receipt by January 31, 2008. If sponsors chose to mail EOCs separately, sponsors were required to mail a SB along with the ANOC. For the 2009 AEP, CMS required plan sponsors to mail the ANOC, a formulary, and the EOC together for receipt by enrollees by October 31, 2008.

In developing these materials for the 2008 AEP, sponsors could choose to adopt CMS’s model documents or create nonmodel documents that contained CMS’s required elements. Sponsors are required to submit all AEP materials to CMS for review prior to mailing to enrollees. As a result, use of model versus nonmodel documents had implications for the amount of time for CMS review and the time frame for plan sponsors to mail materials. When sponsors used CMS model documents without modification, CMS reviewed the materials within 10 days; for documents considered nonmodel, CMS required a 45-day review period. For the 2009 AEP, CMS required plan sponsors to use a standardized ANOC-EOC with no modifications to the text permitted.

Sponsors Were Timely in Mailing 2008 ANOCS to Nearly All Beneficiaries and Most Sponsors Used CMS’s Model ANOC

PDP sponsors reported to CMS that nearly all enrollees received their ANOCs on time for the 2008 AEP and most of our study sponsors used CMS’s model ANOC. Our analysis of CMS’s Readiness Checklist and information reported from certain sponsors indicated that 99.8 percent of the approximately 17.2 million PDP beneficiaries enrolled as of November 1, 2007, received ANOCs from their plan sponsors by the required October 31 deadline. Of the 35,630 beneficiaries who received ANOCs late, the majority (21,902) received them by November 15, 2007— the start of the AEP—and the remainder received them by December 10, 2007. Given the limited delays in distributing ANOCs, CMS did not take enforcement action against any of the sponsors reporting late mailings for the 2008 AEP.

Six sponsors in our study adopted CMS’s model ANOC to inform beneficiaries of upcoming plan changes rather than develop their own ANOCs. Five of these six sponsors using the model reported doing so to qualify for a shorter CMS review period—10 days versus 45 days—and in some instances to help ensure that they could produce and send their ANOCs by the October 31 deadline. The remaining two study sponsors chose to develop nonmodel ANOCs for the 2008 AEP. Although their ANOCs contained all of CMS’s required information elements, we found that they were substantially different in format from the CMS template and from each other. For example, these ANOCs contained sponsor-developed text rather than CMS’s model language. Also, information was presented in a different order and with different section headings than CMS’s model ANOC. These two sponsors told us that in electing to create nonmodel materials, such as the ANOC, they were able to highlight unique aspects of their plans. For example, one of the sponsors included information that one of its plans would begin covering the cost of administering Part D vaccines for the 2008 benefit year.

Stakeholders Raised Concerns about the ANOC’s Readability; CMS Did Not Assess the Effectiveness of Its Model ANOCs

Stakeholders have expressed various concerns regarding the readability of the ANOC and we found that prior to the 2008 and 2009 AEPs CMS did not systematically evaluate its effectiveness in conveying plan changes to beneficiaries. Stakeholders in our study noted that, because CMS’s model ANOC was not beneficiary friendly, it was difficult for individuals to determine how changes would affect them personally. To help ensure that their enrollees understood the significance of plan changes, two sponsors in our study mailed supplemental information that showed changes in coverage and costs for the specific drugs the enrollee took in the past year. Although CMS used in-house experts when developing its model ANOC, the agency did not formally assess whether its 2008 model materials incorporated commonly recognized communication guidelines to effectively inform beneficiaries about plan changes. CMS officials recently reported that on October 1, 2008, they initiated an evaluation of their annual Medicare beneficiary materials—particularly the combined ANOC- EOC for the 2010 AEP—to assess their reading level, effectiveness, and length, among other factors. Such an evaluation is particularly important in light of changes that CMS made for the 2009 AEP, which raised further concerns among stakeholders. However, it is unclear whether the evaluation will consider potential benefits of alternative formats for communicating plan changes to beneficiaries.

Stakeholders Expressed Concern about the Readability of CMS Model ANOC

Five sponsors and other stakeholders in our study noted that CMS’s model materials for the 2008 AEP were not sufficiently concise or beneficiary friendly and felt that the language in the model ANOC was at a reading level too high for some beneficiaries. One sponsor—concerned about the reading level of the documents and the complexity of the language used— noted that the model ANOC contained some sentences with more than 40 words. According to another sponsor, the inclusion of excess information that did not contribute to understanding the benefit made it more likely that beneficiaries would become overwhelmed and less likely to find the information they need. Another sponsor stated that beneficiaries generally do not read the ANOC because it is a confusing document that lacks more basic information on plan changes and simpler language. Additionally, one study sponsor pointed out that the CMS model materials were not reader friendly or concise; it preferred to create its own simplified materials that use plain language and easy-to-read graphics and layouts. Similarly, stakeholders that assisted individuals during the AEP told us that some beneficiaries found the ANOC overwhelming and had difficulty processing the large amounts of information provided. Health care researchers, advocates, and SHIP counselors we spoke with concluded that much of the information contained in the model ANOC was too general in nature or irrelevant to the reader, making it hard for beneficiaries to determine how changes would affect them personally.

To help ensure that enrollees understood their plan changes, two sponsors in our study provided additional information to beneficiaries that showed how coverage of their specific drugs would change in the next benefit year. For the 2008 AEP, these sponsors reported supplementing their use of the CMS model ANOC with additional personalized mailings distributed prior to and during the AEP. Using their pharmacy claims database, these sponsors reported producing documents that indicated whether the particular medications each beneficiary used in 2007 would continue to be covered in 2008. The documents also showed any changes in cost sharing and utilization management restrictions to be applied to these drugs in the new benefit year. These personalized mailings went to approximately 3.6 million of the 7.3 million PDP enrollees served by our study sponsors. Figure 1 shows a hypothetical example that we created of a sponsor’s mailing containing personalized information on changes for the next benefit year.

One of the two sponsors reported including personalized drug information as a separate communication to beneficiaries shortly after the ANOC was sent. This sponsor sent these personalized mailings only to those beneficiaries whose drugs would undergo coverage changes for the upcoming year. Sponsor staff told us they created personalized mailings because they made substantial modifications to their formularies for 2008 and they wanted to make certain that beneficiaries were aware of these changes.

Similarly, the other sponsor reported that it wanted to ensure that beneficiaries would not be surprised by drug benefit changes effective in January and thus felt that it was important to provide more information than required by CMS. This sponsor inserted personalized information on upcoming plan changes in its monthly Explanation of Benefits (EOB) sent to beneficiaries in October, November, and December 2007. The sponsor reported that it sought to communicate information in a succinct format to enable beneficiaries to focus only on the plan changes relevant to them, individually, without having to examine the longer plan formulary document. Additionally, this sponsor had conducted focus groups to identify the specific information elements, such as individual drug coverage and cost changes, beneficiaries look for when reviewing their plan notices. Sponsor staff noted that they chose to supplement the EOB with this information because industry research indicated that readership of the EOB is high—90 to 95 percent.

CMS Has Not Assessed Effectiveness of ANOCs, Which May Be More Critical in Light of Changes to 2009 AEP Materials

Agency officials told us that they had not systematically evaluated the effectiveness of the agency’s ANOCs or incorporated beneficiary feedback or the principles of plain language. Instead, in developing the 2008 model, CMS officials said the agency relied on in-house expertise gained through the development of other Medicare materials. They reported making slight wording modifications to the draft 2008 ANOC based on comments from the agency’s Office of External Affairs, but said that plain language review was not part of the document clearance process. CMS officials said they recognize the need to incorporate feedback from beneficiaries and increase the use of commonly recognized elements of plain language in their documents. However, they cited a lack of adequate in-house resources to conduct consumer testing. Additionally, a CMS official cited an insufficient number of staff to meet additional requests for plain language review.

After the release of standardized materials for the 2009 AEP, a CMS official reported that the agency had awarded a contract for an evaluation of its annual Medicare beneficiary materials—particularly the combined ANOC-EOC—which CMS required sponsors to send to beneficiaries in a single mailing for the 2009 AEP. The official also noted that this assessment began on October 1, 2008, and is to be completed by February 2009. According to the contract and CMS officials, this evaluation will redesign and standardize beneficiary materials including the ANOC-EOC to provide more understandable information to beneficiaries. CMS officials indicated that the redesigned ANOC-EOC should be completed for the 2010 AEP.

This effort by CMS is particularly important in light of changes that CMS has made for the 2009 AEP, which raised further concerns among stakeholders. One such change requires that sponsors use only a standardized ANOC, rather than giving sponsors the option of creating their own. In adopting this standardized document, sponsors may insert plan-specific information where appropriate, but cannot otherwise modify the language. According to CMS, this standardization is consistent with the materials for the Federal Employees Health Benefits Program (FEHBP). Additionally, the agency expects the required use of a standardized ANOC to reduce misinformation on plan changes because this document was more likely to contain errors than other documents submitted to CMS for review. CMS also expects this change to speed its review of materials by eliminating the 45-day review of nonmodel materials. When sponsors use CMS standardized documents without modification they are available for use 5 days after submission to CMS.

While one sponsor and two beneficiary advocates supported greater standardization, six of the eight sponsors expressed concerns that the 2009 ANOC requirements will render notices to beneficiaries less effective in communicating plan changes. In formal written comments to CMS and in interviews on the proposed changes for the 2009 AEP, some study sponsors noted that the mandatory use of CMS’s standardized documents requires the use of language already considered to be at a reading level that is too high for some beneficiaries. Additionally, two sponsors told us that, in the past, they have conducted focus groups with their enrollees on the clarity of their materials. They pointed out that the requirement to use only standardized materials prevents them from developing an ANOC that incorporates enrollees’ feedback and provides information in a way that they believe would enhance beneficiaries’ comprehension of plan changes.

Some of these concerns may be addressed in CMS’s forthcoming evaluation of the combined ANOC-EOC. The contract includes the development of beneficiary materials at an appropriate reading level and that incorporates plain language principles. Additionally, a CMS official said that the evaluation will involve in depth interviews with consumers in an effort to develop more effective beneficiary materials for PDP enrollees. The interviews will include special populations such as dual eligibles.

Another change CMS implemented for the 2009 AEP was a requirement that the EOC be sent to beneficiaries with the ANOC in a single mailing. For the 2008 AEP, sponsors had the option to mail a short Summary of Benefits (SB) with the ANOC in October and follow this with the more detailed EOC in January. For the 2009 AEP, CMS requires all sponsors to mail to beneficiaries the ANOC and EOC together for receipt by October 31; the SB will be available to beneficiaries only upon request. According to CMS, this change gives beneficiaries comprehensive information on their current plan in advance of the AEP. Furthermore, CMS considers the EOC a resource document that beneficiaries will keep and refer to as appropriate.

Sponsors, advocates, and SHIPs expressed concern that sending the ANOC and EOC as one mailing results in a lengthy document that could confuse some beneficiaries and deter others from reading the materials. Because CMS’s new set of required materials replaces the abbreviated SB (approximately 4 pages in length) with the more detailed EOC (that could be more than 100 pages in length), the size of sponsors’ mailings for the AEP could grow from about 51 pages in 2008 to about 86 pages in the 2009 AEP. One sponsor noted that beneficiaries want information about changes that affect them significantly, such as changes to their formulary or cost-sharing responsibility. Another sponsor cited the importance of highlighting changes to step therapy and prior authorization for beneficiaries. These sponsors expressed concern that the long combined ANOC-EOC may not be useful for beneficiaries in understanding such changes.

According to the contract and CMS officials, the evaluation of beneficiary materials including the ANOC-EOC requires the development of shorter documents. However, it is unclear whether the evaluation will include an examination of alternatives such as the use of specific information tailored to the individual—an approach favored by communications researchers. It is also unclear whether the evaluation will include an assessment of the decision to combine the ANOC and EOC mailings despite concerns expressed in comments to CMS on the draft 2009 call letter.

Despite Improved Procedures, the AEP Schedule Does Not Allow Sufficient Time to Process All Enrollments

Despite improved AEP enrollment procedures, one in seven of the approximately 1 million beneficiaries choosing to switch PDPs were not fully enrolled in their new plan by January 1. CMS and sponsors made modifications to the enrollment process that resulted in a median processing time of 5 days for applications submitted throughout the 2008 AEP. However, the statutorily mandated AEP schedule—November 15 to December 31 with coverage effective January 1—lacks sufficient time in which to fully process enrollment applications. As a result, stakeholders reported inaccurate charges, additional administrative burden, and inconveniences for the beneficiary following the 2008 AEP. CMS officials and sponsors in our study agreed that creating an interval for enrollment processing between the end of the AEP and the effective date of new coverage would reduce the risk of these challenges.

CMS and Sponsors Improved Procedures to Reduce Enrollment Processing Time

For the 2008 AEP, CMS and sponsors implemented changes to expedite enrollment processing in order to avoid difficulties encountered the previous year. To be fully enrolled in a new plan a beneficiary must submit a complete application, eligibility must be verified by sponsors and CMS, billing codes must be assigned and disseminated, adjustments must be made to premium amounts and any relevant subsidies, and the beneficiary must receive documentation of new coverage, in the form of either a confirmation letter or a new membership card. The complete processing of an enrollment application requires data exchanges among not only CMS, sponsors, and pharmacies, but also the Social Security Administration (SSA), state Medicaid programs for certain beneficiaries, and various CMS contractors. The multiple data exchanges among partners that are necessary for processing a beneficiary’s change in plans occur sequentially over a period of time.

A previous study by GAO on Part D complaints and grievances found that 63 percent of the complaints received by CMS over an 18-month period cited problems related to processing beneficiary enrollments and disenrollments. We noted that CMS received numerous complaints about late or missing membership cards, incorrect enrollments and disenrollments, inaccurate premiums, involuntary switching, and problems regarding cost-sharing amounts. To address concerns, CMS continually works with its partners through work groups, task forces, and coalitions to improve program quality and improve Part D processes.

The changes CMS implemented for the 2008 AEP reduced the time needed for processing enrollments by at least 14 days, compared to the previous year. CMS achieved this reduction by requiring sponsors to: transmit new enrollment information to CMS “as early as possible” or, at most, within 7 days instead of the 14 days permitted during the 2007 AEP; contact beneficiaries regarding missing information within 10 days of receipt versus 21 days as previously required; and provide beneficiaries with information on their enrollment in a new plan from CMS’s earliest notification, which is likely to be the weekly report, rather than waiting for CMS’s monthly report as previously permitted.

In addition, CMS improved the process by requiring sponsors to assign billing codes to new enrollments earlier in the process. Pharmacies need these codes in order to identify and charge the appropriate plan and collect the correct copayment amounts from beneficiaries. Previously, sponsors assigned this information at various times and in separate transactions that sometimes followed CMS’s confirmation of a beneficiary’s Part D eligibility by as much as 14 days, delaying availability of billing codes at the pharmacy. In contrast, for the 2008 AEP, the agency required sponsors to submit the billing codes for each beneficiary simultaneously with the initial enrollment transaction. Since 2006, CMS has required sponsors to include this information on the acknowledgement and confirmation letters sent to beneficiaries informing them of the effective date of their new coverage. These letters could be used by pharmacists to verify coverage prior to the beneficiaries’ receipt of their new plan membership cards. Streamlining the assignment of the billing codes significantly decreased the time to complete enrollment processing and increased overall program efficiency.

Four sponsors in our study also took steps to complete AEP enrollments and transmit the billing codes to their claims systems prior to receiving the weekly report from CMS confirming eligibility. Two sponsors went further to expedite enrollments by establishing processes to independently obtain information needed to complete an application or verify enrollees’ eligibility for Part D. Because these sponsors did not wait for CMS to confirm eligibility via their weekly or monthly reports, they were able to provide pharmacies with information regarding a beneficiary’s new coverage more quickly.

Additional time-saving modifications to the enrollment process identified by CMS officials and sponsors in our study included: use of customer service representatives to complete telephone enrollments, conduct the preliminary eligibility check required by CMS, and ask the caller pertinent questions; more detailed beneficiary information provided by CMS to sponsors in the more detailed information provided to pharmacies by CMS and sponsors during the query used to obtain billing information for beneficiaries without membership cards or other documentation of coverage; increased staffing during December to manage the volume of late-month enrollments; and automation of certain tasks to reduce processing time.

Not All Beneficiaries Switching Plans Were Fully Enrolled Before Their New Coverage Began

Despite these improvements, we found that 15 percent of the approximately 1 million beneficiaries choosing to switch plans during the 2008 AEP were at risk of not having access to their new coverage on January 1, 2008. Reasons for these delayed enrollments included the volume of late-December applications combined with the processing time required to fully enroll a beneficiary in a new plan, and the AEP schedule that accepts enrollments through December 31 with coverage effective the next day. To prevent problems in January resulting from these delays, in 2007 CMS sponsored a media campaign and distributed guidance to its partners to encourage beneficiaries to submit their 2008 AEP applications by December 7, 2007. Despite this effort, CMS weekly report data revealed that 50 percent of the applications to change PDPs were received after December 10. Furthermore, sponsors received 5 percent of enrollment applications for beneficiaries during the last 2 days of the AEP. Figure 2 shows the distribution of enrollment applications received during the 2008 AEP.

CMS data also show that the time needed to fully process an enrollment application varied over the course of the AEP. Overall, the median processing time was 5 days. However, in week 1 of the AEP the median processing time was 20 days and in week 5 the median was 3 days.

Of the applications received after December 15—which accounted for nearly one third of all 2008 AEP applications—40 percent were not processed until after January 1. On average, applications received in late December took 3 days longer to process than applications received earlier in the month. Not until January 11—2 weeks into the new coverage year, did CMS and its partners complete the processing of 97 percent of the applications of beneficiaries choosing to switch PDPs during the 2008 AEP. Figure 3 shows when enrollment processing for the 2008 AEP was completed.

The capacity to process late December enrollments also varied across sponsors. We found that larger sponsors were quicker in processing enrollments received after December 15. Thus, sponsors with more than 3 million PDP beneficiaries were able to process 81 percent of late December applications prior to the effective date of new coverage. In contrast, sponsors with less than 100,000 PDP enrollees were able to process 48 percent of applications before the new year. Regardless of sponsor size, the AEP schedule provided insufficient time in which to fully process all enrollment applications.

The inability of CMS and sponsors to complete all the steps in the enrollment process prior to the effective date of new coverage for beneficiaries choosing to switch plans created a number of challenges. One consequence is the heightened risk of inaccurate charges or payment amounts for beneficiaries, pharmacies, and sponsors. Following the 2008 AEP, beneficiary advocates, SHIPS, and pharmacists reported that some individuals were charged the wrong copayment or deductible, especially those who had applied for a low-income subsidy—which must be authorized by SSA—to reduce their cost-sharing levels. Two pharmacy associations reported that if new coverage could not be verified, their members risked filling a prescription for which they would not get reimbursed or the beneficiary would need to pay for a temporary supply of the medication while coverage issues were resolved. Pharmacy association representatives also reported delayed receipt of payment from sponsors related to prescriptions filled when a beneficiary’s enrollment status changed. In addition, stakeholders told us about significant payment inaccuracies that took time to resolve.

Additional administrative burden was another consequence of the incomplete processing of all AEP enrollments prior to January 1, according to several stakeholders we interviewed. Until beneficiaries switching plans received documentation of their new coverage from the sponsor on a membership card or letter, pharmacies had to use alternative means to locate the updated enrollment and billing information in order to fill a prescription and submit a claim correctly. CMS guidance requires pharmacists to complete electronic inquiries and, if necessary, phone calls to try to identify the beneficiary’s correct enrollment status and billing codes if that information is not in the claims system. Pharmacy associations reported that this procedure was overly complex and required extensive staff time. Sponsors and pharmacy associations said that claims filed under a beneficiary’s old plan had to be reversed retroactively and charged to the correct plan, requiring additional time and resources. Stakeholders we interviewed noted that beneficiaries lack a single point of contact to resolve enrollment issues promptly and might need to follow up with multiple sources including their plan, CMS, SSA, and the prescribing physician.

Stakeholders Favor Changes to the AEP Schedule to Better Manage Plan Switching

CMS, sponsors, pharmacy associations, SHIPS, and beneficiary advocates recognize that the current AEP schedule—November 15 through December 31—is problematic. Some stakeholders we interviewed in our study said that creating an interval for enrollment processing between the end of the AEP and the effective date of coverage would help ensure that coverage for a beneficiary switching plans would be in place on January 1. Additional time for enrollment processing would also help beneficiaries receive their new membership information prior to the effective date of coverage. In addition, we recently reported that such an interval may address some challenges that result from premium withholdings from Medicare beneficiaries’ Social Security checks. Requiring a “quiet period” is standard practice in private health insurance and other federal health programs, allowing sponsors time to process applications and provide enrollees appropriate information about their new coverage prior to its effective date. For example, in Medicare Part B, open enrollment is followed by a 3-month processing interval that extends from March 31 to July 1. Similarly, in the FEHBP, enrollment is followed by approximately a 3-week processing interval that extends from the second Monday in December to January 1.

More than half the sponsors interviewed supported the creation of an enrollment processing interval. CMS officials and two sponsors recommended ending enrollment in mid December, while two other sponsors suggested ending the AEP on November 30. Stakeholders also noted that some of the difficulties associated with an AEP schedule that includes the end-of-the-year holidays could be avoided with an earlier end date.

Several sponsors recommended an earlier start date to address concerns they have regarding CMS’s guidance prohibiting sponsors from processing applications submitted between the receipt of the ANOC (October 31) and the beginning of the AEP (November 15). Although CMS officials told us they expected beneficiaries to use this time to become informed about their choices, sponsors reported that this waiting period was inconvenient for those beneficiaries who were prepared to make an enrollment change. Similarly, SHIP counselors pointed out that they too must wait until November 15 to forward beneficiaries’ completed applications. SHIP counselors in one state reported that the need to double check enrollment applications completed prior to November 15 limited the number of Part D beneficiaries they were able to assist during the AEP. However, stakeholders noted that starting the AEP earlier would have implications for the preceding AEP deadlines.

Conclusions

Effective written communication about plan changes helps beneficiaries determine whether their current PDP will continue to meet their needs and may reduce the risk of surprises at the pharmacy when beneficiaries fill their prescriptions in the new benefit year. From a program perspective, beneficiaries must be sufficiently aware of plan changes in order to fully use their ability to switch plans to foster the competition that Congress intended in designing the Part D program. To this end, CMS designed a model ANOC to provide a consistent format for the information sent to beneficiaries about upcoming plan changes. Sponsors as well as advocates have voiced concerns that the model lacked the attributes— particularly simplicity and personalization—that researchers say are needed for beneficiaries to understand and act on the information provided. Although CMS told us that they recently initiated an evaluation of its annual notification materials, it is unclear whether alternative formats for the ANOC-EOC will be considered. Based on our findings as well as research on the need to make information relevant to the reader, CMS’s evaluation should consider alternative models that incorporate a beneficiary’s personal drug information. Such an alternative may be more effective in highlighting key changes in drug costs and coverage for plan enrollees. Two sponsors in our study supplemented the 2008 ANOC by mailing additional information on specific drug coverage and cost changes to nearly 3.6 million enrollees, thus demonstrating the feasibility of providing such personalized information to their members.

Although CMS and sponsors implemented improvements to better manage the 2008 AEP enrollment process, their efforts are hampered by a schedule that lacks a sufficient interval in which to complete processing beneficiary enrollment changes prior to the effective date of new coverage. Under the current mandated schedule, it is not possible to guarantee that beneficiaries choosing to switch plans late in December are fully enrolled in their new plans with pharmacists having sufficient evidence of the new coverage by January 1. In addition, sponsors and pharmacies reported excessive administrative complexity and diminished program efficiency as a result of the nearly 15 percent of enrollments still in process in January. Stakeholders agree that modifying the schedule and creating an interval between the end of the AEP and the effective date of coverage would minimize these challenges as well as mitigate issues related to low-income subsidies and premium withholding from beneficiaries’ Social Security checks. Establishing a processing interval would be consistent with the open enrollment periods in Medicare Part B, the FEHBP, and commercial insurance and create a more streamlined program to better serve beneficiaries.

Matter for Congressional Consideration

To improve the Part D enrollment process, Congress should consider authorizing the Secretary of HHS to amend the current AEP schedule to include a sufficient processing interval to fully enroll beneficiaries prior to the effective date of their new coverage.

Recommendation for Executive Action

To ensure that beneficiaries are informed effectively of plan changes, we recommend that the Acting Administrator of CMS strengthen the agency’s evaluation of the ANOC-EOC by reviewing alternative formats that include personalized drug coverage and cost information.

Agency Comments and Our Evaluation

We provided CMS with a draft of this report for their review and comment. The agency provided written comments, which have been reprinted in appendix I. It also provided technical comments that we incorporated as appropriate.

CMS concurred with our recommendation and agreed that beneficiaries need plan benefit information that is easy to read and understand. The agency noted that its process for developing the model ANOC and the EOC included a review of other programs’ model materials such as those used in the FEHBP, as well as restructuring the model to eliminate duplication and increase readability. CMS pointed out that, in preparation for the 2010 AEP, it has engaged a contractor to evaluate and improve the required notification materials sent to beneficiaries. CMS expects this evaluation to further address issues of length and readability. The contractor will obtain input from beneficiaries as part of its effort to redesign the ANOC for the 2010 AEP.

Citing the near perfect timeliness rate for plans’ 2008 AEP ANOC mailing, CMS asserted that beneficiaries had the information they needed to make informed decisions about their plan options. However, we remain concerned that despite this timeliness, the volume and complexity of documents exceeding 100 pages continue to pose challenges for some beneficiaries. While CMS’s effort to evaluate the ANOC-EOC is an important, worthwhile step, such a review would benefit by a focus on streamlining as opposed to maximizing the amount of information that beneficiaries receive. Beyond the current evaluation, CMS should continue its efforts to improve the understandability of its AEP materials by testing more concise formats with beneficiaries. As we note in this report, a single-page, customized model that shows each beneficiary’s drug use and any upcoming changes in coverage and costs may more clearly communicate the essential information Part D beneficiaries need to be adequately informed.

CMS acknowledged the challenges inherent in the current AEP schedule. The agency reiterated its strategies for ensuring that beneficiaries are able to access their new plan benefits while their enrollment is still being processed. For example, CMS highlighted its consistent efforts to encourage beneficiaries to submit their enrollment applications by early December. However, as we discuss in this report, one consequence of this approach is a reduction in the amount of time beneficiaries have to consider and enroll in an alternative plan that could better meet their needs.

We are sending copies of this report to the Administrator of CMS, committees, and others. The report also is available at no charge on the GAO Web site at http://www.gao.gov/.

If you or your staff have any questions about this report, please contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.

Appendix I: Comments from the Centers for Medicare & Medicaid Services

Appendix II: GAO Contact and Staff Acknowledgments

Acknowledgments

In addition to the contact named above, Rosamond Katz, Assistant Director; Jennie Apter; Ramsey Asaly; Anne Hopewell; JoAnn Martinez- Shriver; Jessica Smith; and Hemi Tewarson made major contributions to this report.

Related GAO Products

Medicare Part D: Complaint Rates Are Declining, but Operational and Oversight Challenges Remain. GAO-08-719. Washington, D.C.: June 27, 2008.

Medicare Part D Low-Income Subsidy: SSA Continues to Approve Applicants, but Millions of Individuals Have Not Yet Applied. GAO-08-812T. Washington, D.C.: May 22, 2008.

Medicare Part D: Plan Sponsors’ Processing and CMS Monitoring of Drug Coverage Requests Could Be Improved. GAO-08-47. Washington, D.C.: January 22, 2008.

Medicare Part D Low-Income Subsidy: Additional Efforts Would Help Social Security Improve Outreach and Measure Program Effects. GAO-07-555. Washington, D.C.: May 31, 2007.

Retiree Health Benefits: Majority of Sponsors Continued to Offer Prescription Drug Coverage and Chose the Retiree Drug Subsidy. GAO-07-572. Washington, D.C.: May 31, 2007.

Medicare Part D: Challenges in Enrolling New Dual-Eligible Beneficiaries. GAO-07-272. Washington, D.C.: May 4, 2007.

Medicare Part D: Prescription Drug Plan Sponsor Call Center Responses Were Prompt, but Not Consistently Accurate and Complete. GAO-06-710. Washington, D.C.: June 30, 2006.