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+
+ - MEDICARE DRUG DISCOUNT CARD
+
+[House Hearing, 108 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+
+ MEDICARE DRUG DISCOUNT CARD
+
+=======================================================================
+
+
+
+
+
+
+ HEARING
+
+ before the
+
+ SUBCOMMITTEE ON HEALTH
+
+ of the
+
+ COMMITTEE ON WAYS AND MEANS
+
+ U.S. HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED EIGHTH CONGRESS
+
+ SECOND SESSION
+
+ __________
+
+ APRIL 1, 2004
+
+ __________
+
+ Serial No. 108-48
+
+ __________
+
+ Printed for the use of the Committee on Ways and Means
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+ _____
+
+ U.S. GOVERNMENT PRINTING OFFICE
+
+26-413 WASHINGTON : 2006
+_________________________________________________________________
+For sale by the Superintendent of Documents, U.S. Government
+Printing Office Internet: bookstore.gpo.gov Phone: toll free
+(866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2250 Mail:
+Stop SSOP, Washington, DC 20402-0001
+
+
+
+
+
+
+
+
+
+
+ COMMITTEE ON WAYS AND MEANS
+
+ BILL THOMAS, California, Chairman
+
+PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
+E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California
+NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
+AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
+WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
+JIM MCCRERY, Louisiana JIM MCDERMOTT, Washington
+DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
+JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
+JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
+SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
+JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
+MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
+ROB PORTMAN, Ohio XAVIER BECERRA, California
+PHIL ENGLISH, Pennsylvania LLOYD DOGGETT, Texas
+J.D. HAYWORTH, Arizona EARL POMEROY, North Dakota
+JERRY WELLER, Illinois MAX SANDLIN, Texas
+KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
+SCOTT MCINNIS, Colorado
+RON LEWIS, Kentucky
+MARK FOLEY, Florida
+KEVIN BRADY, Texas
+PAUL RYAN, Wisconsin
+ERIC CANTOR, Virginia
+
+ Allison H. Giles, Chief of Staff
+ Janice Mays, Minority Chief Counsel
+
+ ______
+
+ SUBCOMMITTEE ON HEALTH
+
+ NANCY L. JOHNSON, Connecticut, Chairman
+
+JIM MCCRERY, Louisiana FORTNEY PETE STARK, California
+PHILIP M. CRANE, Illinois GERALD D. KLECZKA, Wisconsin
+SAM JOHNSON, Texas JOHN LEWIS, Georgia
+DAVE CAMP, Michigan JIM MCDERMOTT, Washington
+JIM RAMSTAD, Minnesota LLOYD DOGGETT, Texas
+PHIL ENGLISH, Pennsylvania
+JENNIFER DUNN, Washington
+
+Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
+hearing records of the Committee on Ways and Means are also published
+in electronic form. The printed hearing record remains the official
+version. Because electronic submissions are used to prepare both
+printed and electronic versions of the hearing record, the process of
+converting between various electronic formats may introduce
+unintentional errors or omissions. Such occurrences are inherent in the
+current publication process and should diminish as the process is
+further refined.
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+ C O N T E N T S
+
+ __________
+
+ Page
+
+Advisory and revised advisory announcing the hearing............. 2
+
+ WITNESSES
+
+Centers for Medicare and Medicaid Services, Center for
+ Beneficiary Choices, Michael McMullan, Deputy Director......... 7
+
+ ______
+
+Aetna, Inc., Susan E. Rawlings................................... 24
+Health Net, Inc., Steven H. Nelson............................... 29
+Consumers Union, Gail Shearer.................................... 34
+
+ SUBMISSION FOR THE RECORD
+
+AARP, statement.................................................. 49
+
+
+
+
+
+
+
+
+
+
+
+
+
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+
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+
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+
+
+ MEDICARE DRUG DISCOUNT CARD
+
+ ----------
+
+
+ THURSDAY, APRIL 1, 2004
+
+ U.S. House of Representatives,
+ Committee on Ways and Means,
+ Subcommittee on Health,
+ Washington, DC.
+
+ The Subcommittee met, pursuant to notice, at 2:50 p.m., in
+room 1100, Longworth House Office Building, Hon. Nancy L.
+Johnson (Chairman of the Subcommittee) presiding.
+ [The advisory and revised advisory announcing the hearing
+follow:]
+
+ADVISORY
+
+FROM THE
+COMMITTEE
+ ON WAYS
+AND
+MEANS
+
+ SUBCOMMITTEE ON HEALTH
+
+ CONTACT: (202) 225-3943
+FOR IMMEDIATE RELEASE
+March 25, 2004
+No. HL-7
+
+ Johnson Announces Hearing on
+
+ Medicare Drug Discount Card
+
+ Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
+Health of the Committee on Ways and Means, today announced that the
+Subcommittee will hold a hearing on the discount drug card. The hearing
+will take place on Thursday, April 1, 2004, in the main Committee
+hearing room, 1100 Longworth House Office Building, beginning at 10:00
+a.m.
+
+ In view of the limited time available to hear witnesses, oral
+testimony at this hearing will be from invited witnesses only. However,
+any individual or organization not scheduled for an oral appearance may
+submit a written statement for consideration by the Committee and for
+inclusion in the printed record of the hearing.
+
+
+BACKGROUND:
+
+
+ As part of the Medicare Prescription Drug, Improvement and
+Modernization Act (MMA) (P.L. 108-173) that was signed on December 8,
+2003, Congress provided for an interim prescription drug discount card
+program for 2004 and 2005. Approved cards will be endorsed by Medicare
+and available to all seniors on a voluntary basis. For up to a $30
+annual fee, the U.S. Department of Health and Human Services estimates
+seniors will save 10 to 25 percent on the costs of their prescriptions
+due to the negotiated savings available through the discount cards. In
+addition, certain low-income seniors who are not eligible for Medicaid
+will receive up to $600 annually through the discount card in which
+they enroll to assist with purchases of prescription medicines.
+Considering that the typical senior will spend approximately $1,500
+this year on prescriptions, the low-income transitional assistance will
+provide substantial support.
+
+ The drug cards will be available to Medicare beneficiaries until
+the full prescription drug benefit is implemented in 2006. Medicare
+beneficiaries will be able to enroll in approved cards in May, and
+discounts and transitional assistance will be available beginning in
+June.
+
+ In announcing the hearing, Chairman Johnson stated, ``The drug
+discount card is the first, immediate step towards providing a full
+prescription drug benefit for our nation's seniors. The drug discount
+card will help 40 million Medicare beneficiaries save money on their
+medicines and will provide critical financial assistance to vulnerable,
+low-income seniors.''
+
+
+FOCUS OF THE HEARING:
+
+
+ Today, the Centers for Medicare and Medicaid Services announced the
+final list of approved drug card sponsors. Panel members at the hearing
+will include approved card sponsors, and testimony will focus in part
+on how sponsoring organizations will develop and market their discount
+cards to Medicare beneficiaries. The hearing continues the series of
+hearings held by the Subcommittee on the implementation of the Medicare
+Modernization Act.
+
+DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
+
+ Please Note: Any person or organization wishing to submit written
+comments for the record must send it electronically to
+hearingclerks.waysandmeans@ mail.house.gov, along with a fax copy to
+(202) 225-2610, by close of business Thursday, April 15, 2004. In the
+immediate future, the Committee website will allow for electronic
+submissions to be included in the printed record. Before submitting
+your comments, check to see if this function is available. Finally, due
+to the change in House mail policy, the U.S. Capitol Police will refuse
+sealed-packaged deliveries to all House Office Buildings.
+
+FORMATTING REQUIREMENTS:
+
+ Each statement presented for printing to the Committee by a
+witness, any written statement or exhibit submitted for the printed
+record or any written comments in response to a request for written
+comments must conform to the guidelines listed below. Any statement or
+exhibit not in compliance with these guidelines will not be printed,
+but will be maintained in the Committee files for review and use by the
+Committee.
+
+ 1. Due to the change in House mail policy, all statements and any
+accompanying exhibits for printing must be submitted electronically to
+[email protected], along with a fax copy to
+(202) 225-2610, in WordPerfect or MS Word format and MUST NOT exceed a
+total of 10 pages including attachments. Witnesses are advised that the
+Committee will rely on electronic submissions for printing the official
+hearing record.
+
+ 2. Copies of whole documents submitted as exhibit material will not
+be accepted for printing. Instead, exhibit material should be
+referenced and quoted or paraphrased. All exhibit material not meeting
+these specifications will be maintained in the Committee files for
+review and use by the Committee.
+
+ 3. Any statements must include a list of all clients, persons, or
+organizations on whose behalf the witness appears. A supplemental sheet
+must accompany each statement listing the name, company, address,
+telephone and fax numbers of each witness.
+
+ Note: All Committee advisories and news releases are available on
+the World Wide Web at http://waysandmeans.house.gov.
+
+ The Committee seeks to make its facilities accessible to persons
+with disabilities. If you are in need of special accommodations, please
+call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
+business days notice is requested). Questions with regard to special
+accommodation needs in general (including availability of Committee
+materials in alternative formats) may be directed to the Committee as
+noted above.
+
+
+
+ * * * Change in Time * * *
+
+ADVISORY
+
+FROM THE
+COMMITTEE
+ ON WAYS
+AND
+MEANS
+
+ SUBCOMMITTEE ON HEALTH
+
+ CONTACT: (202) 225-3943
+FOR IMMEDIATE RELEASE
+March 26, 2004
+HL-7-Revised
+
+ Change in Time for Hearing on
+
+ Medicare Drug Discount Card
+
+ Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
+Health of the Committee on Ways and Means, today announced that the
+Subcommittee hearing on the Medicare Drug Discount Card, previously
+scheduled for 10:00 a.m. on Thursday, April 1, 2004, in room 1100
+Longworth House Office Building, will now begin at 2:00 p.m.
+
+ All other details for the hearing remain the same. (See Health
+Advisory No. HL-7, March 25, 2004).
+
+
+ Chairman JOHNSON. Good afternoon, everyone. Mr. Stark is on
+his way, and I am going to start with my opening statement,
+given the delay in this hearing and the courtesy of the various
+people who are going to testify in waiting around. Today, I am
+very pleased to Chair this hearing on the progress made in
+implementing the Medicare prescription drug discount card. The
+discount card will help millions of Medicare beneficiaries save
+money on their medicines and will provide critical financial
+assistance to vulnerable low-income seniors. These important
+provisions in the Medicare Prescription Drug Improvement, and
+Modernization Act of 2003 (P.L. 108-173), those associated with
+the discount card, were negotiated over several months with
+staff, and Members of both parties, both the majority and the
+minority from the Committee on Ways and Means and the other
+committees of jurisdiction.
+ The discount card proposal, as it is currently being
+implemented by the Centers for Medicare and Medical Services
+(CMS), was agreed to in a bipartisan meeting of Medicare
+conferees by voice vote on September 9, 2003. That is why I am
+glad this achievement is moving forward rapidly, with the hope
+that significant discounts on prescription drugs will be
+delivered within just a few weeks. This bill, the Medicare
+Modernization and prescription drug bill, was the first and
+only legislative initiative to provide this kind of near-term
+relief for our seniors. It was bipartisan. A total of 71
+organizations have been selected by the U.S. Department of
+Health and Human Services to provide discount cards to our
+seniors. Twenty-seven cards will be available to all seniors
+across the Nation, while other cards will be available on a
+regional basis or through Medicare Advantage plans. Seniors
+will therefore have a wide range of choices in selecting the
+card that best meets their needs. The competition among cards
+will help ensure significant discounts on prescriptions.
+ For those seniors not eligible for Medicaid or other third-
+party arrangements, the Transitional Assistance Program offers
+up to $600 annually to Medicare beneficiaries with incomes up
+to 135 percent of poverty. In 2004, the typical senior will
+spend approximately $1,500 on prescriptions. The $600 in
+assistance provided to low-income beneficiaries will cover a
+substantial share of this amount. In addition, the annual
+enrollment fee charged to these individuals will be paid by the
+Secretary. Our witnesses today will provide us with an overview
+of how the discount card will operate. I am pleased to welcome
+Michael McMullan, Deputy Director of the Center for Beneficiary
+Choices within the CMS. I look forward to hearing her testimony
+regarding the operation of the program, the characteristics of
+the card sponsors that CMS has endorsed, the systems CMS has
+for assisting beneficiaries in selecting a card, and the plans
+CMS has in place for monitoring the activities of card sponsors
+and preventing bait-and-switch abrogations of contract
+obligations.
+ I know that we all share an interest in ensuring that our
+seniors have access to all of the information they need to make
+informed choices, and that plans deliver the benefits promised.
+I look for-
+
+ward to hearing from both Aetna, Inc. and Health Net, Inc.
+regarding their specific drug card programs, and Aetna will be
+offering a national card, while Health Net will be providing a
+card exclusively to its Medicare Advantage enrollees in
+Connecticut, California, and several other States. I am eager
+to hear about the specific programs the two organizations will
+have in place to meet the need of those seniors who select
+their cards. Finally, we will hear from Consumers Union about
+their views of the program. The discount card program is the
+first concrete step toward making the promise of prescription
+drugs a reality for our seniors. I look forward to hearing more
+about the program today. Mr. Stark, welcome. We are ready for
+your comments.
+ Mr. STARK. Thank you, Madam Chair, for holding this
+hearing. You certainly picked the right day because this
+program--I don't think could be more of a cruel April Fools
+joke on the seniors than anything we could dream of. The
+Administration parades these Medicare-approved, as they are
+referred to, discount cards as a great tool for seniors to save
+money. However, there is nothing in the legislation that
+requires them to save money or states how much money they will
+save, if any. It is conceivable that those cards will end up
+costing them money.
+ We have never before, at least in my knowledge, used either
+Medicare's brand, if you will, or any government agency's brand
+to endorse private sector products. Given that we have asked
+these companies not to do very much in exchange for using
+Medicare's good name, I am worried that any bad behavior or
+disappointment in the program will reflect poorly on Medicare
+and that would set, I think, a bad precedent. The most
+efficient discount program we could have created would have
+been to use the purchasing power of the Medicare Program to
+negotiate discounts. However, your majority decided to outlaw
+that, and not let us do what any other private enterprise
+purchaser would do, and that is, get the best deal for our
+market power.
+ There is a modest help to some low-income people, although
+I am sure they will be confused and avoided by the discount
+programs, and unless we can do something to simplify the forms,
+I am afraid that many of the people who are entitled to that
+$600 won't get it. Now, why am I skeptical about these cards?
+First of all, the legislation and the regulations do not
+require discount card sponsors to pass through to consumers all
+discounts, rates, rebates, and other savings. There is evidence
+that the prices of many of the drugs used have all been pushed
+up by the pharmaceutical manufactures in anticipation of this
+new program.
+ So, if they increased the price 20 percent over the last
+year, and then give a 10-percent discount, they are still
+making unconscionable profits on the backs of our seniors. The
+current design of the program is a poster for fraudulent and
+manipulative practices. Medco, Inc., which I understand has
+been approved, is currently the defendant in a false claims act
+filed by the U.S. Department of Justice alleging that Medco has
+stolen money from our own plan under the Federal Employees
+Benefit Plan, that they have been canceling prescriptions and
+changing them without physician's orders.
+ I gather short-counting, and there is nothing that I know
+of that vets out these proposed providers to see whether they
+are honest, much less able to save beneficiaries any money. So,
+our beneficiaries also are going to have trouble choosing a
+discount card that is financially beneficial to them, because
+information is not being provided in a responsible manner. So,
+the needs of our seniors are being ignored, and this discount
+program appears just to be a fig leaf to try and cover for the
+inadequacy of the drug benefit, which is supposed to show up in
+2006. So, I look forward to the panelists trying to explain to
+us what possible good this will do for our seniors.
+ Chairman JOHNSON. I would like to just comment, Mr. Stark,
+that I apologize for starting before you got here. I did it
+with the agreement of your staff. I regret having done it,
+because your opening statement is hard for people watching this
+hearing to integrate with the fact that the Democratic staff of
+this Committee, your staff, Ranking Member Rangel's staff, my
+staff, Chairman Thomas's staff, the staff of the Committee on
+Commerce from both sides of the aisle, the staff of the Senate,
+both sides of the aisle, all negotiated this discount card,
+many, many months, and consequently it does reflect the best
+thinking of the Members of both parties on how to deliver an
+advanced early benefit to seniors.
+ Certainly the questions you raise are legitimate questions,
+and I respect them. I think it is very important for the record
+to note that not only was this negotiated over a number of
+months because there are a lot of details, by both parties, but
+that we approved it by voice vote without dissent. The whole
+Conference Committee. It is one of the few portions of the bill
+that was totally bipartisan.
+ Mr. STARK. Our staff was invited for the first month. None
+of their recommendations were even listened to. Our staff was
+ignored and finally kicked out of the meeting as our Members
+were kicked out of the Conference. So, to suggest that our
+staff participated in this turkey is a falsehood.
+ Chairman JOHNSON. Mr. Stark, the record is clear that on
+this provision of the bill--and the record is clear because
+there was a Conference vote that was recorded, and there were
+no dissenters on just this passage of the bill.
+ Mr. STARK. There weren't any House Democrats there.
+ Chairman JOHNSON. That did not work on the whole bill. You
+did not participate in parts of it.
+ Mr. STARK. How could we object when we weren't allowed in?
+ Chairman JOHNSON. You are talking about later on in the
+Conference. On this provision you were there and the Democrats
+did vote and they agreed. The Members that were in attendance
+were Senators Rockefeller, Baucus, Breaux, Kyl, Nickles, and
+Grassley, and Representatives Thomas, Tauzin, Johnson,
+Bilirakis, Dingell, and Berry.
+ So, you were not there. Absent was DeLay, Rangel, Frist,
+and Hatch. So, absent were three Republicans and one Democrat.
+Present were the majority of the Democrats of the Committee.
+So, it is just simply a fact that this portion of the bill was
+negotiated by both parties. There was not agreement on the
+other parts of the bill. I respect that. I am not claiming it.
+ The public needs to understand that this portion was
+extensively negotiated with staff from both sides of the aisle,
+in both Chambers. Now, our job is to make it workable and
+work--have it work. The problems you point to are problems many
+of us are concerned about. Ms. McMullan, we look forward to
+your explanation of what CMS has done and plans to do. I am
+sure there will be plenty of questions. You are recognized.
+
+ STATEMENT OF MICHAEL MCMULLAN, DEPUTY DIRECTOR, CENTER FOR
+BENEFICIARY CHOICES, CENTERS FOR MEDICARE AND MEDICAID SERVICES
+
+ Ms. MCMULLAN. Chairman Johnson, Representative Stark,
+distinguished Committee Members, thank you for inviting me here
+today to discuss the Medicare-approved prescription drug
+discount card and Transitional Assistance Program. This
+voluntary drug card program will give immediate relief to many
+seniors and disabled people covered under Medicare by reducing
+their cost of outpatient prescription drugs. In addition to
+expected savings from the drug discount card, certain low-
+income beneficiaries will qualify for an additional assistance
+of a $600 credit.
+ The CMS staff are working diligently so that these
+beneficiaries in need can begin using the cards and the credit
+this June. Just last week, we announced the approval of 28
+general card-sponsoring organizations. Additionally, CMS
+approved 43 Medicare managed care applications to provide the
+drug card as an integrated part of the Medicare Advantage and
+the Medicare cost plan benefit package. These organizations
+will make it possible for Medicare beneficiaries nationwide to
+take advantage of the benefits you provided in the Medicare
+Prescription Drug Improvement and Modernization Act.
+ The CMS solicited applications from potential drug card
+sponsoring organizations on December 15, 2003, and these
+applications were due back on January 30. We evaluated each
+application against the requirements to operate a drug card
+program, and the sufficiently complete and correct applications
+were approved. A number of the applications were disapproved
+since they did not fully meet all of the key requirements. Do
+to the short timeframe to implementation, we are providing such
+applicants a 2-week window to correct such deficiencies, and we
+will review this information on a rolling basis to determine if
+these applications can also be approved.
+ Approved drug discount card sponsors will negotiate
+discounts with manufacturers and pharmacies and pass these
+savings on to beneficiaries who select their cards. We estimate
+that beneficiaries will save 10 to 15 percent on their overall
+prescription costs and up to 25 percent on some drugs. Just
+today, CMS posted on the www.medicare.gov website the names,
+telephone numbers, website, customer service hours, and
+enrollment fees on all of the approved sponsors. Enrollment
+fees vary within the $0 to $30 allowed range, with most managed
+care organizations choosing to waive the enrollment fee for
+their members.
+ The CMS anticipates posting data from the drug card sponsor
+with the specific price and participating pharmacies on April
+29. The Medicare approved drug discount card sponsors will
+negotiate with manufacturers and pharmacies for rebates and
+discounts off the average wholesale price for drugs covered
+under the drug program. The poster that I have on display
+outlines the process as it will work. In order to get the most
+competitive savings for beneficiaries, some cards will use
+formularies which will improve their negotiating leverage with
+the pharmaceutical manufacturers.
+ [The information was not received at the time of printing.]
+ For sponsors who do use formularies, they must assure that
+those drugs commonly needed by Medicare beneficiaries are
+included in their formularies. Beneficiaries will be guaranteed
+a percentage savings on each purchase they make with their
+card. While individual prices may change as the average
+wholesale price moves up and down, this is not different from
+the way the drug pricing works in the market today. In typical
+industry practice, a pharmacy benefit manager guarantees by
+contract a certain discount off of the average wholesale price
+to its payers. Within the universe of thousands of prescription
+drugs on the market, there are changes in average wholesale
+price (AWP) in response to price shift in labor, raw
+ingredients, as well as supply and demand. However, taken
+individually, when the AWP changes for the vast majority of
+drugs, these changes are by a modest amount.
+ Once a card is selected, beneficiaries are committed to
+their card for the calendar year. This is a key design feature
+and it allows the drug--or the prescription benefit managers to
+negotiate. Historically, drug discount cards have not included
+discounts from manufacturers because sponsors could not
+guarantee market share. By having committed beneficiaries,
+Medicare approved sponsors are able to guarantee a certain
+patient population. The guarantee increases their negotiating
+leverage with manufacturers and improves their ability to
+secure discounts and rebates which are passed on to the
+Medicare beneficiaries.
+ The CMS plans an extensive education effort with a special
+emphasis on low-income individuals to inform beneficiaries of
+the drug discount program, including an Internet-based
+comparison tool which will allow them to see precisely what
+price sponsoring organizations are charging for each drug they
+cover. This comparison tool will allow beneficiaries to
+identify the specific drugs they take and the cards that will
+result in the most savings to them. The comparison tool will
+show actual prices as opposed to the percent discount off of
+the average wholesale price, as these are more understandable
+to the individual. This same tool will be used by the customer
+service representatives at 1-800-MEDICARE, where beneficiaries
+can call and be walked through the decision process and be able
+to compare cards and we will then mail them the results of the
+analysis.
+ Beneficiaries can also obtain help from community-based
+organizations, such as our State health insurance assistance
+programs, as well as other community-based organizations that
+we are working with to particularly identify those individuals
+who have access barriers to information, such as language,
+literacy, or culture. It was mentioned that there was a concern
+about fraud. Although the drug discount program has not yet
+been implemented, some Medicare beneficiaries have already
+received calls, as well as in-person solicitations from
+individuals and companies posing as Medicare officials
+attempting to gain personal information from beneficiaries for
+identity theft.
+ In response to these complaints, CMS is coordinating
+information through our 1-800 number, as well as other
+information resources, such as our State health insurance
+assistance program. We have recently produced a press release
+to make sure that people with Medicare understand that they
+should never share their personal information, such as bank
+account numbers, Social Security number, or health insurance
+claim number with any individual who calls them or who solicits
+door-to-door. The CMS is continuing to explore methods to limit
+the scope of the risk to beneficiaries and to develop a process
+to work with appropriate law enforcement agencies to avoid
+further spread of this type of activity. The CMS's office of
+program integrity is hosting a law enforcement fraud and abuse
+meeting this month particularly on this issue, and we are
+working with the Department of Justice, the Federal Bureau of
+Investigation (FBI), and our own Inspector General. The CMS
+looks forward to continuing work on the implementation of this
+important program, and I thank the Committee for its time and
+will answer any questions that you have of me.
+ [The prepared statement of Ms. McMullan follows:]
+Statement of Michael McMullan, Deputy Director, Center for Beneficiary
+ Choices, Centers for Medicare and Medicaid Services
+ Chairwoman Johnson, Representative Stark, distinguished Committee
+Members, thank you for inviting me here to discuss the Medicare
+Prescription Drug Discount Card and the Transitional Assistance
+Program, which were enacted into law on December 8, 2003, as part of
+the Medicare Prescription Drug, Improvement and Modernization Act of
+2003 (MMA). In May of 2004, as an important first step towards
+comprehensive Medicare prescription drug coverage, Medicare
+beneficiaries will be able to enroll in a Medicare-approved drug card
+program that will offer discounts on their prescription drugs. This
+voluntary drug card program will give immediate relief to seniors and
+persons with disabilities covered under Medicare to reduce their costs
+for prescription drugs. In addition to the expected savings from the
+drug discount card, certain low-income beneficiaries will qualify for
+additional assistance in the form of a $600 annual credit. CMS is very
+proud to have a significant role in this important first step towards a
+comprehensive Medicare prescription drug benefit, which is slated to
+begin on January 1, 2006. CMS is working diligently to meet the
+aggressive deadline to implement the drug card and transitional
+assistance program. To this end, the Secretary last week announced the
+approval of 28 general and special cards, and 43 exclusive cards. We
+are confident drug card sponsors will begin marketing and enrollment
+efforts on May 3, 2004, with beneficiaries beginning to see discounts
+beginning June 1, as scheduled. We are also launching aggressive
+education campaigns to help beneficiaries choose the best card to fit
+their needs, and are planning strict monitoring efforts to ensure that
+card sponsors are not changing prices for unwarranted reasons.
+BACKGROUND
+ Currently, Medicare beneficiaries who lack outpatient drug coverage
+pay among the highest prices for prescription drugs, as much as 20
+percent higher than people with drug coverage according to a study of
+drug pricing prepared by the Department of Health and Human Services'
+Office of the Assistant Secretary for Planning and Evaluation. Under
+the Medicare Prescription Drug Discount Card Program, we expect
+beneficiaries to save an estimated 10 to 15 percent off the retail
+price on their overall prescription drug costs, and up to 25 percent on
+some drugs. The drug card will pass savings on to beneficiaries in the
+form of price concessions. While not a drug benefit, the voluntary drug
+card program is an important first step in providing Medicare
+beneficiaries with the tools they need to better afford the cost of
+prescription drugs.
+SPONSOR SOLICITATION
+ CMS has already begun implementation of the drug card program. We
+received 106 applications by the January 30, 2004, deadline. Five
+applications were withdrawn or merged by the applicants, leaving a
+total of 101. To be considered for the program, organizations were
+required to complete a detailed application concerning their
+qualifications and the design of their proposed drug discount card
+program. Applicants that did not receive our approval have a right to
+request a reconsideration within 15 days from the notice of initial
+determination. Any reconsideration determination will be final and
+binding on the parties and not subject to judicial review.
+ CMS solicited applications by potential drug discount card
+sponsoring organizations on December 15, 2003, and applicants were due
+back on January 30. We evaluated each application against the
+requirements to operate a drug card program, and the sufficiently
+complete and correct applications were approved. A number of the
+applications were disapproved if, for example, they did not fulfill
+entirely a key requirement, such as providing a contract or letter of
+agreement (signed by both parties) when the sponsor indicated a plan to
+contract out a key function such as administering the $600 credit.
+Because of the short timeframe to implementation, we are providing such
+applicants with a two-week window to correct such deficiencies, and we
+will review this information on a rolling basis to determine if these
+applications can be approved.
+ We have approved 28 general card applications (of the 55 general
+applications considered). As approved sponsors can offer more than one
+card program, this results in 28 national approved programs and 19
+regional approved programs. Twenty-seven potential sponsors were
+rejected based on failing to completely satisfy fundamental
+requirements of the solicitations, including liabilities exceeding
+assets and the failure to demonstrate the capacity to manage
+transitional assistance. CMS also approved 43 (of 44) exclusive card
+applications, associated with 84 Medicare managed care organizations,
+to provide the drug card as an integrated part of the Medicare
+Advantage benefit package available to beneficiaries enrolled in those
+plans. The recommended approvals allow for a manageable number of cards
+from which people with Medicare will select, and reflects the high
+standards attributed to the use of the Medicare name. The 28 general
+card applicants represent card programs that would be administered by
+insurers, pharmacy chains, and pharmacy benefit managers. We expect
+that beneficiaries can begin to enroll in these card plans in May and
+begin using their drug cards in June 2004.
+ We also awarded a ``special approval'' to: three applicants to
+provide access to the $600 credit through long-term care pharmacies;
+two applicants to provide discounts to residents of the territories;
+and one applicant to service Federally recognized Indian tribe and
+tribal organization pharmacies. The MMA requires CMS to have one
+additional contractor for the tribal pharmacies. We have re-issued a
+solicitation to receive additional applications to meet this
+requirement, and several organizations have responded with a notice of
+intent to submit a proposal.
+ All applications of contractors that currently administer State
+pharmacy assistance programs will receive a Medicare approval,
+covering: IA, IL, KS, MA, MD, MI, NH, NY, OH, OR, PA, RI, SC, VT, and
+WV. States have the ability to exclusively contract with a Medicare
+approved card program. If a state's current contractor did not apply
+for an approval, the state may work with another (approved) card
+sponsor.
+ To ensure that beneficiaries have convenient access to their
+neighborhood pharmacies, card sponsors will not be permitted to limit
+their services to mail-order programs. Instead, all approved cards must
+include an extensive national or regional network of retail pharmacies,
+which must meet minimum requirements. For example, in urban areas, at
+least 90 percent of Medicare beneficiaries must live within two miles
+of a participating pharmacy. In suburban areas, 90 percent of Medicare
+beneficiaries must live within five miles, and in rural areas, 70
+percent of beneficiaries must live within 15 miles of a participating
+pharmacy.
+ Drug card sponsors will be required to provide information to
+beneficiaries on the program's enrollment fee, which cannot exceed $30
+per year, and to publish discounted prices available through their
+cards. In addition, Medicare will ensure that beneficiaries have at
+least two choices of approved general cards in each state, with the
+state being the smallest service area permitted under this program. If
+a card sponsor's service area includes additional states, the entire
+additional state must be included. Medicare will also provide reliable,
+easy-to-compare information that will show beneficiaries which programs
+are in their area, and allow beneficiaries to choose the discount card
+program that best meets their needs. Medicare will also inform
+enrollees that prescription drug card sponsors must protect personal
+and medical information consistent with the privacy requirements of the
+Health Insurance Portability and Accountability Act.
+BENEFICIARY ELIGIBILITY
+ To qualify for the drug discount card, Medicare beneficiaries must
+be entitled to or enrolled under Part A and/or enrolled under Part B,
+but may not be receiving outpatient drug benefits through Medicaid,
+including 1115 waivers. The Federal Government will also pay the full
+annual enrollment fee, which is not to exceed $30, for these
+cardholders.
+ To enroll, beneficiaries will submit basic information to the
+selected approved discount card sponsor of their choosing about their
+Medicare and Medicaid status. Those beneficiaries requesting the $600
+credit also must submit income and other information about retirement
+and other health benefits to the card sponsor, and attest to
+truthfulness of the information. CMS will verify this information and
+notify the approved discount card program of the beneficiary's
+eligibility and enrollment outcome. If a beneficiary is found to be
+ineligible for a drug card, the card sponsor will send written notice
+to the beneficiary explaining why he or she was found to be ineligible.
+For beneficiaries who are eligible, sponsors will send a welcome
+package, including their new drug card, so that they can begin
+obtaining discounts and, if receiving the $600 credit, using these
+funds to purchase prescription drugs, upon receiving their cards.
+Individuals found to be ineligible for either the discount card or the
+$600 credit may request reconsideration if they still believe they
+qualify.
+ An eligible beneficiary can enroll in an approved discount card
+program at any time. After the initial election in 2004, beneficiaries
+will have the option, for 2005, of choosing a different card program
+during the second election period between November 15 and December 31,
+2004. In addition, a beneficiary may change cards under certain
+circumstances if, for example, the beneficiary enters a long-term care
+facility, moves outside of the area served by the beneficiary's
+approved program, or enrolls in or drops a Medicare managed care plan
+that is also providing an exclusive drug discount card program in which
+the beneficiary was enrolled.
+TRANSITIONAL ASSISTANCE PROGRAM
+ In addition to providing a discount off the price of prescription
+drugs, MMA creates the Transitional Assistance program, which provides
+up to $600 in an annual credit for Medicare beneficiaries whose incomes
+do not exceed 135 percent of the federal poverty level ($12,569 for
+individuals, $16,862 for couples for 2004). When applying the $600
+toward prescription drug purchases, beneficiaries at or below 100
+percent of poverty will pay 5 percent coinsurance, and beneficiaries
+between 100 and 135 percent of poverty will pay a 10 percent
+coinsurance. The credit, in conjunction with the discount card, will
+give these most vulnerable beneficiaries immediate assistance in
+purchasing prescription drugs they otherwise may not be able to afford.
+For example, Medicare beneficiaries without prescription drug insurance
+on average would pay about $1,300 for prescription drugs in 2004. The
+expected savings of approximately 10 to 15 percent translates to $140
+to $210. This savings added to the $600 credit will be of substantial
+help to those who need it most.
+EDUCATION
+ To help explain the drug discount card to beneficiaries and help
+them navigate among cards to choose the card that best fits their
+needs, CMS has a number of education and outreach efforts underway.
+Print, radio, and television advertisements will highlight the upcoming
+changes to the Medicare program, including the addition of the drug
+discount card. The advertising campaign--presented in both English and
+Spanish--also includes Internet-banner ads and a 10-minute pre-recorded
+informational radio interview to educate beneficiaries about the
+upcoming drug discount cards.
+ These advertisements will direct beneficiaries to 1-800-MEDICARE
+and Medicare's website, www.medicare.gov, for more information. CMS is
+working to ensure that customer service representatives at 1-800-
+MEDICARE have up-to-date information on the drug card, as well as other
+CMS programs. Based on our analysis, we estimate 1-800-MEDICARE will
+receive 12.8 million calls in FY2004. This compares to an FY2003 call
+volume of approximately 5.6 million calls. The 12.8 million calls
+include an estimated increase of 5.5 million calls as a result of the
+new Medicare law and 7.3 million calls for routine 1-800-MEDICARE call
+topics. We plan to increase our CSR level at 1-800-MEDICARE in May 2004
+to handle the expected increase in call volume.
+ An additional feature of the website will be a new price comparison
+tool, Medicare Price Comparison. Under the drug card program, card
+sponsors will negotiate drug discounts with both pharmacies and drug
+manufacturers. The new comparison tool will give beneficiaries, or
+their representatives, the capacity to find the sponsor-negotiated
+price for each drug or all their drugs at pharmacies in their area.
+Pricing information will be available for brand name, generic, and
+mail-order prescriptions offered through each card sponsor's program.
+Drug card sponsors will be able to update the drug pricing information
+on a weekly basis. Starting in late April, beneficiaries will be able
+to use the comparison tool by going to www.medicare.gov or by calling
+1-800-MEDICARE. Customer service representatives at 1-800-MEDICARE also
+will be able to answer questions about the program, help them compare
+drug cards on price and network pharmacies, and refer callers to other
+appropriate resources. They will also mail the results of the
+comparison to seniors.
+ CMS also has a number of beneficiary publications planned for 2004
+to explain changes in the Medicare program. For example, HHS has
+prepared a detailed ``Guide to Choosing a Medicare-Approved Drug
+Discount Card'' for beneficiaries that explains the program, including
+eligibility and enrollment information, and provides step-by-step
+guidance for comparing discount cards and choosing one. The booklet
+currently is posted at www.medicare.gov, and printed copies will be
+available for free through 1-800-MEDICARE. CMS also will publish a
+small pamphlet with an overview of the drug card program and an
+introduction to the discount cards and the $600 low-income credit. In
+addition, a brief document that introduces beneficiaries to the
+discount cards and the Medicare-approved seal will be mailed directly
+to beneficiary households. This mailing, which will correspond with the
+television information campaign, is scheduled for late April 2004.
+Also, as required by MMA, CMS will work with its partners at the Social
+Security Administration to facilitate a mailing targeted toward low-
+income Medicare beneficiaries detailing the drug card and transitional
+assistance program.
+ To assist in beneficiary education and outreach, CMS increased
+funding to State Health Insurance Assistance Programs' (SHIPs) grants
+and REACH from $12.5 million last year to about $21.1 million for
+fiscal year 2004--a 69 percent increase above the fiscal year 2003
+total. In addition, HHS' budget plan for fiscal year 2005 allocates
+$31.7 million to SHIPs--more than double the amount awarded in fiscal
+year 2003. With the new funding, SHIPs will be able to expand their
+efforts to work with and reach even more Medicare beneficiaries and
+increase and enhance their volunteer staff through additional training
+and resources.
+ To educate providers and pharmacists, as well as the States and
+other stakeholders, CMS will sponsor conferences and conduct a number
+of teleconferences to make the information available nationwide. For
+example, in-person training will take place at the CMS-sponsored drug
+card conference, which is scheduled for April 7-8. CMS staff will be
+available to provide technical assistance and support as the program
+begins.
+COVERAGE
+ The discount card and $600 in transitional assistance can be used
+to purchase nearly all prescription drugs available at retail
+pharmacies. Syringes and medical supplies associated with the injection
+of insulin, such as needles, alcohol, and gauze, are also included. It
+is anticipated that many approved programs will use formularies to
+obtain deeper discounts on prescription drugs. If an approved discount
+card program uses a formulary then the drugs most commonly needed by
+Medicare beneficiaries must be included. At a minimum, each program
+must offer a discount on at least one drug in each of the 209
+therapeutic categories of prescription drugs. However, even if a
+prescription drug is not on the sponsor's formulary, the $600 must
+still be applied to all the covered prescription drugs available at the
+pharmacy if the beneficiary uses the discount card toward the purchase.
+Drug card sponsors also may choose to offer discounts on over-the-
+counter (OTC) drugs, but the $600 cannot be used toward the purchase of
+OTC drugs. CMS made public on April 1, 2004 the enrollment fee for each
+drug card on the PDAP website, and the discounted prices will be posted
+at the end of April.
+ Medicare approved drug discount card sponsors will negotiate with
+manufacturers and pharmacies for rebates and discounts off the average
+wholesale price (AWP) for drugs covered under the drug card program. In
+order to get the most competitive savings to beneficiaries, some cards
+will use formularies, which can improve the negotiating leverage
+sponsors have with pharmaceutical manufacturers.
+ Beneficiaries will be guaranteed a percentage savings (or discount)
+on each purchase they make with their card. Individual prices may
+change, as AWP moves up and down, but the discount rate to which the
+card entitles them will not move, unless the sponsoring organization
+can satisfactorily report to CMS a good cause for such a move. The
+attached chart outlines how this process works. CMS expects to receive
+detailed information from program sponsors concerning specific
+discounts in the near future.
+ It is true that drug prices under the drug card may change. But
+this is not different from the way drug pricing works in the
+marketplace today. In typical industry practice, a pharmacy benefits
+manager guarantees, by contract, a certain discount off of the average
+wholesale price (AWP) to its payers. Within the universe of the
+thousands of prescription drugs on the market, there are changes in AWP
+in response to price shifts in labor and raw ingredients, as well as to
+supply and demand. However, taken individually, the AWP for the vast
+majority of drugs either does not change or changes several times a
+year by a modest amount.
+ Once a card is selected, beneficiaries are committed to their card
+for the calendar year (with a few exceptions). This is a key program
+design feature to improve the discounts to beneficiaries under a drug
+discount card. Historically, drug discount cards have not included
+discounts from manufacturers because sponsors could not guarantee
+market share. By having committed beneficiaries, Medicare approved
+sponsors are able to guarantee a certain patient population. This
+guarantee increases their negotiating leverage with manufacturers and
+improves their ability to secure discounts and rebates, which are
+passed on to the beneficiaries. Because approved programs will be
+competing for Medicare beneficiaries to be able to increase their
+negotiating power, the programs will have an incentive to pass
+negotiated savings along to the beneficiaries in the form of the lowest
+possible drug prices.
+ While approved discount card programs may update their prices and
+lists of offered drugs on a weekly basis, CMS will monitor drug price
+changes to ensure that prices do not deviate from expected market
+changes, such as those in average wholesale price. While we do not
+anticipate that sponsors will be changing prices for unwarranted
+reasons, CMS will nonetheless closely monitor changes in prices over
+time for each drug that a card sponsor offers:
+
+ If a card sponsor's drug prices change in an amount that
+is not consistent with the expected change due to AWP, then the sponsor
+must report it and provide a rationale.
+ Also, CMS will routinely check for price changes from
+week to week compared to what is expected, based on changes in AWP.
+Price changes that are not expected will be flagged and evaluated.
+ If the price change is not due to legitimate changes in
+their operating environment, such as losing a manufacturer contract, or
+unexpected costs of operating the call center, then a card sponsor
+could be sanctioned by CMS.
+ Sanctions could include prohibiting further marketing and
+enrollment, monetary penalties, and terminating the card program.
+FRAUD
+ Although the drug discount card program has not yet been
+implemented, some Medicare beneficiaries have already received calls as
+well as in-person solicitations from individuals/companies posing as
+Medicare officials attempting to gain personal information from
+beneficiaries for identity theft.
+ A beneficiary should NEVER share personal information such as their
+bank account number, Social Security number or health insurance card
+number (or Medicare number) with any individual who calls or comes to
+the door claiming to sell ANY Medicare related product.
+ Beneficiaries who are contacted by these false card companies
+should remember that Medicare-approved cards will not be available
+until May. The names of approved card sponsors have been made public
+and the companies will begin to market their cards through commercial
+advertising and direct mail beginning this month. Medicare-approved
+card sponsors will not market their cards door-to-door or over the
+phone.
+ In response to these complaints, CMS is coordinating information
+with customer service representatives at 1-800-MEDICARE, the call
+centers at the Medicare contractors and the State Health Insurance
+Assistance Programs (SHIPs). CMS has already informed the public
+through a press release about how to protect themselves from fraud. OIG
+referrals have been made for two complaints where we had specific
+enough information to make a fraud referral.
+ CMS is continuing to explore methods to limit the scope of these
+scams and develop a process to work with the appropriate law
+enforcement agencies to avoid further spread of this type of activity.
+CMS' Office of Program Integrity is hosting a law enforcement fraud and
+abuse meeting this month. The primary participants will include the
+Department of Justice, Federal Bureau of Investigation, and the DHHS'
+Office of the Inspector General. Participants from other agencies that
+have dealt with issues of Prescription Drug fraud will also be invited.
+The primary topic of this meeting will be the discussion of the drug
+discount card program and how to prevent and deter fraud, waste and
+abuse in this area.
+CONCLUSION
+ Thank you again for the opportunity to testify today about this new
+important transition toward a prescription drug benefit for Medicare
+beneficiaries. This voluntary drug discount card program will provide
+immediate assistance in lowering prescription drug costs for Medicare
+beneficiaries until the new Medicare drug benefit takes effect on
+January 1, 2006. We recognize the importance of the discount cards and
+the low-income credit to Medicare beneficiaries, who, for too long,
+have gone without outpatient prescription drug coverage. We at CMS are
+dedicated to meeting the deadlines set out in the historic Medicare
+Prescription Drug, Improvement and Modernization Act of 2003 and are
+working expeditiously to satisfy the May 3 and June 1, 2004, effective
+dates for enrollment and implementation, respectively. Thank you again
+for this opportunity, and I look forward to answering any questions you
+might have.
+
+
+
+ Chairman JOHNSON. Thank you very much. Could you go into
+some further detail about how you plan to monitor the prices
+that companies put up on their website? I am very pleased that
+they have to put up a price, and that there will be some people
+to help seniors determine which plan is best for them.
+ If they put up the price, and you join the plan and then
+they double the price, to me that will represent failure. I
+know that represents failure to you, too. You have done a lot
+of thinking about how you prevent that kind of bait-and-switch
+activity by plans. First of all, would you tell us what in the
+contracting language prohibits them from indulging in this kind
+of behavior, and then what kind of oversight will you have and
+what kind of penalties will you impose?
+ Ms. MCMULLAN. The contract requires them to provide us with
+a percent discount off of the average-wholesale price. If they
+need to change the percent discount, it has to be for cause.
+The cause would be something like losing a manufacturer
+contract or something else in the business part of the
+relationship in getting the rebates or the discount.
+ So, there has to be cause for them to change the percent
+discount. Without any cause, then they guaranteed a percent
+discount off of the average-wholesale price. We will monitor
+those prices to ensure that they are doing that. We get the
+pricing files from all of the drug card sponsors. We have a
+monitoring mechanism in place to evaluate these, to make sure
+that they stay within the expected range of prices, and we
+review them. We will review them for any kind of trends and
+patterns that we do not expect. In addition, our program
+integrity contractor will be looking carefully for any
+potential issues that have been identified through the
+complaint process or the grievance process to ensure that the
+contractors are doing what they have committed to do in the
+contract.
+ In addition, there is the power of the marketplace, and the
+fact that we have these prices on the website so people can see
+what other card sponsors are offering and ensure that the card
+sponsor that they have elected is staying within the market
+price and that feedback will come to us and we will also be
+responding to any concerns that are raised to us. So, we have
+an extensive analytic process to look at all of those drug--all
+of the drug data, to review it for any kinds of patterns. In
+addition, we will be doing regular monitoring type of reviews
+with contractors.
+ Chairman JOHNSON. If you discover behavior you think is not
+in conformance with the contract agreement, then what?
+ Ms. MCMULLAN. The contractor would then be required to cure
+the error. They could be subject to sanctions with the ultimate
+sanction being the termination of their contract.
+ Chairman JOHNSON. Thank you. Mr. Stark.
+ Mr. STARK. Is there any guaranteed or minimum discount in
+this plan?
+ Ms. MCMULLAN. There are guaranteed discounts. The
+guaranteed discount is exactly what we are contracting for.
+ Mr. STARK. What is the minimum discount that you accept?
+What is the lowest discount? Five percent? Three percent? Two
+percent? What?
+ Ms. MCMULLAN. I am not familiar enough with each of the
+contracts to tell you that. We anticipate the discounts to be
+between--the overall discounts to be between 10 and 15 percent
+and as high as 25 percent on an individual drug.
+ Mr. STARK. Don't you have any comprehensive list? That
+wasn't established before you granted the license to these
+companies? There was no established discount?
+ Ms. MCMULLAN. There was no established discount.
+ Mr. STARK. So, it could be anything. It could be 2 percent,
+or 1 percent or 100 percent?
+ Ms. MCMULLAN. It could be.
+ Mr. STARK. Is there anything that sets the discount other
+than these plans?
+ Ms. MCMULLAN. Our anticipated level----
+ Mr. STARK. I don't care what you anticipated. Is there
+anything in the law or the regulation that requires a discount
+to be a certain amount?
+ Ms. MCMULLAN. We anticipated--we asked them to do it within
+the market. We anticipated----
+ Mr. STARK. What if they don't? What if they don't do it?
+What if they all come in at 2 percent?
+ Ms. MCMULLAN. Well, we do not see that happening.
+ Mr. STARK. I know you don't see it happening. You don't
+have a crystal ball. In the free market you don't have any
+control. So, what happens if they all come in at 2 percent?
+ Ms. MCMULLAN. They will all come in----
+ Mr. STARK. Somebody just gave you a note. She may know what
+happens. Do you know, lady, whoever it was that handed her the
+note? What does the note say?
+ Ms. MCMULLAN. The drug card sponsors were given an idea of
+what we were looking for. We--in our impact analysis, we told
+them about our anticipated----
+ Mr. STARK. So, what you are telling me is there is no
+discount set?
+ Ms. MCMULLAN. What they have to----
+ Mr. STARK. Just a second. I don't want to hear this. I am
+going to let her finish. I want to know if there is a number.
+Is there a number that I can see to look forward to, Ms.
+McMullan? Is there a number?
+ Ms. MCMULLAN. We believe----
+ Mr. STARK. Yes or no?
+ Ms. MCMULLAN. We believe between 10 and 15 percent.
+ Mr. STARK. If that isn't there, what are you going to do?--
+there is no guarantee, is there? There is no guarantee of it,
+is there?
+ Ms. MCMULLAN. The percentage discounts that come in----
+ Mr. STARK. Stop. Is there a guarantee that it will be
+between 10 and 15 percent?
+ Ms. MCMULLAN. No.
+ Mr. STARK. All right. That is what I want. It took you a
+long time to get there, but thank you for your answer. Now, is
+there any guarantee that a drug will not be dropped once
+someone signs up and they have to stay in the program for a
+year, is there any guarantee that a drug that their physician
+has prescribed will not be dropped from the program?
+ Ms. MCMULLAN. The----
+ Mr. STARK. Yes or no?
+ Ms. MCMULLAN. A drug card sponsor can drop a drug.
+However----
+ Mr. STARK. So, that is it. I--Hello, Mrs. Chairman. Let me
+finish talking. If you want to inquire you can----
+ Chairman JOHNSON. The witness will not respond until the
+gentleman has finished talking. Then the gentleman will not
+interrupt the witness until the witness has finished talking.
+ Mr. STARK. The Chairman won't interrupt me on my time.
+Thank you very much. Now, would you like to tell me, if you
+know, Ms. McMullan--or if you are willing, is there anything
+that guarantees that a drug will not be dropped from a program.
+Yes or no?
+ Ms. MCMULLAN. No.
+ Mr. STARK. That is what I thought. So, there is no
+guarantee that once somebody signs up for a year, that their
+drug which they need and has been prescribed by their physician
+may not be dropped, and there is no guarantee of any particular
+size of discount. So----
+ Ms. MCMULLAN. The market will act and ensure that the drug
+card sponsors----
+ Mr. STARK. What do you know about the market, Ms. McMullan?
+Have you ever had a job in private industry? Do you know
+anything about the market?
+ Ms. MCMULLAN. The----
+ Mr. STARK. What do you know about the market? Could you
+explain your knowledge of the market?
+ Ms. MCMULLAN. The analysis that went into the development
+of this program, included an analysis of how the market works.
+The market will provide the incentives to the drug card
+sponsors to provide the kinds of discounts that----
+ Mr. STARK. However, there are no guarantees. So, if you
+don't think the analysis is any good, there is no guarantee.
+ Ms. MCMULLAN. We have no----
+ Mr. STARK. Madam Chairman----
+ Mrs. JOHNSON. You have interrupted her three consecutive--
+--
+ Mr. STARK. You have interrupted more often than anybody
+has. If you would be quiet on my time, we could get this done.
+ Chairman JOHNSON. Luckily your time is about to expire.
+ Mr. STARK. That is right. If I start interrupting you, the
+way you have been interrupting me, you would be unhappy.
+ Chairman JOHNSON. I am asking for common courtesy.
+ Mr. STARK. I don't care what you are asking for. I have the
+time.
+ Chairman JOHNSON. I had her let you finish. I asked you to
+let her finish, in response.
+ Mr. STARK. Look, ma'am, I can interrogate a witness in any
+manner that I choose. If you can find something in the rules to
+change that, I would be glad to listen. If you would just let
+people have their time instead of interrupting them.
+ Chairman JOHNSON. The gentleman's time has expired. Mr.
+McCrery.
+ Mr. MCCRERY. I thank the Chairman. In listening to the
+gentleman from California's remarks, his point of view is
+perfectly legitimate. He has expressed it many times over the
+years that I have been on this Committee. He doesn't often have
+a lot of confidence in the market to provide benefits to
+consumers, and I understand that. That is a legitimate point of
+view. That is why we do have some government regulations and so
+forth to try to make sure that markets do work. In the case of
+a discount card, I think there is already a lot of experience
+in the market for discount cards. For example, my stepmother,
+prior to my purchasing a discount card for her in the open-
+market, admittedly, I am paying $28 a month for this card, but
+still it is an open-market creation, it is a free-market
+creation, her drug bills were close to $8,000 a year.
+ Now, they are about $5,000 a year. That is a significant
+savings for my stepmother she got through the free market by
+purchasing a discount card. They, I am sure, are using the very
+same principles that these companies that have asked to qualify
+for Medicare discount cards are going to use. Now, they may not
+be able to do quite as good a job because they are not going to
+be charging as much, $30 a year as opposed to $30 a month.
+Still, I expect they will be able to use their purchasing power
+and the allure of a long list of member Medicare seniors to
+attract discounts. So, there is some proof in the market that
+this concept can work. Is there any guarantee it will work? No,
+sir, there is no guarantee. Some of us do have a little more
+faith in the markets than my colleague from California, and we
+hope we are right. We think we will be. No, there is no
+guarantee. I don't think that is so bad. Now, Ms. McMullan,
+there is going to be a lot of choices for seniors, 28 national
+cards, 28 different cards. What plans does CMS have to help
+beneficiaries make sure that they pick the best card that is
+available, or that they know everything about the various cards
+that are going to be out there?
+ Ms. MCMULLAN. We are doing a substantial amount of
+education about the availability of drug cards, including a
+direct mail to all Medicare beneficiary households telling them
+about the card, and telling them that they can get assistance
+by calling 1-800-MEDICARE, or by going to www.medicare.gov. The
+tool that I mentioned in my testimony will provide either the
+individual themselves, if they are an Internet user, or by
+calling 1-800-Medicare, or by going to a local community-based
+organization, the opportunity to compare drugs on the issues
+that are important to them, including the availability of
+pharmacies within a geographic area, within 5 miles of their
+home, or if they want a particular pharmacy that they use, they
+can specify the pharmacy on the corner that they are accustomed
+to.
+ We will then ask them for the drugs that they are using and
+the dosage, and all of that information will be fed into a
+screening tool that then presents back to them the available
+drug cards that meet their specifications, and will show their
+aggregate savings in descending order from the most savings to
+the least, and then they can go in and look at the exact
+savings on a drug-by-drug basis. So, they can use that
+information in evaluating what is more important to them, and
+maybe more important to them that the pharmacy is closer to
+them, or the amount of savings. We will narrow the number of
+pharmacies that they have to consider, the pharmacy of the drug
+card plans that they will have to consider.
+ Mr. MCCRERY. Now, some have criticized the ability of these
+plans to change their prices and formularies during the course
+of the year. Why should we allow them to change their prices
+and formularies?
+ Ms. MCMULLAN. Well, the changes will reflect any changes in
+the average-wholesale price. These changes can go up and they
+can go down. As I said, they are reflected to changes in the
+manufacturers cost and of supply and demand. So, they can go
+down as well as going up.
+ As far as what is included in the formulary, again, we
+don't anticipate that they are going to change them in any kind
+of wholesale way. We have asked the drug card sponsors to
+include those drugs that are most commonly used by the Medicare
+population, and there are strong incentives for these drug card
+sponsors to give the beneficiaries what they need, because they
+want to keep the loyalty of these individuals into the 2005
+year, and also many of these drug card sponsors are positioning
+to become part of the Part D benefit, and so all of this, they
+want to have good will and good faith of the members of their
+drug card plans.
+ Mr. MCCRERY. Thank you. Thank you, Madam Chair.
+ Chairman JOHNSON. Thank you. Mr. Cardin.
+ Mr. CARDIN. Madam Chair, I think Mr. Doggett was here
+first. Thank you, Madam Chair. Thank you for the courtesy of
+allowing me to ask these questions. Ms. McMullan, I appreciate
+the reference in your opening comments to the fraud that we are
+discovering with telemarketers who are alleging that they are
+Medicare-approved discount card sponsors, getting information
+from beneficiaries. We believe their goal is identity theft,
+and perhaps also to get money out of beneficiaries.
+ I have a concern about implementation of this new program.
+You plan to permit the approved plans to contact Medicare
+beneficiaries who are already very sensitive about being
+contacted by telephone. We should restrict marketing to means
+other than via telephone, which, I think, is somewhat
+threatening to handle for many elderly persons. On February 24,
+I wrote a letter to Secretary Thompson about this. I urge you
+to develop a code of conduct for the approved plans, as to how
+they can contact seniors, obtain and update information, et
+cetera, so that we don't encounter abusive behavior by these
+now-approved plans.
+ Ms. MCMULLAN. We have published some of the marketing
+guidelines. We continue to refine those, and will take your
+concerns into consideration in making sure that they are as
+tight as possible in protecting the Medicare population. We are
+very aware of this and very concerned that we don't expose
+people with Medicare to any of this risk. Currently, our
+approach is to only allow calls that the beneficiary seeks the
+caller or agrees to get a call.
+ Mr. CARDIN. I think that would be an improvement, if there
+is an express consent to the call. This still raises the fact
+that, it is hard to document what occurs during a phone call.
+Whereas, if it is done by mail or e-mail, we know that we have
+some documentation which is useful for us to be able to monitor
+conduct. If there is a specific request from a beneficiary to
+handle the transaction by telephone, then obviously that would
+be fine. Just be cautious in this area. Let me just return to
+the point that was mentioned earlier, Mr. McCrery mentioned it
+and Mr. Stark mentioned it. There are discount cards out now
+today, obviously not Medicare-approved.
+ I understand your point about market share--trying to lower
+the cost by locking in a beneficiary for a year. The concern
+that has been expressed, though, is that because the plan can
+change the drugs that are covered on a weekly or bi-weekly
+basis, and beneficiaries are locked in for a long period of
+time, although the drugs can change, we know that
+pharmaceutical prices are going up well beyond the cost of
+inflation and discounts are not guaranteed.
+ All of that put together, we are not exactly sure how much
+impact these cards will have on the actual out-of-pocket costs
+for Medicare beneficiaries, particularly those who do not
+qualify for low-income assistance. That is our concern. We
+would hope that while these plans are in effect, there will be
+some way to monitor exactly what is happening with plans
+dropping drugs, and why are they dropping drugs.
+ Was it a come-on to get people to enroll in the program,
+and then after they are enrolled to go to a different drug on
+which they can make a greater profit? I don't know. These are
+some of the concerns that many of us have, because this is new
+for the government to be involved in this type of program. We
+ask you to monitor this very carefully and very closely, and
+report back to this Committee and to Congress as to what is
+happening as far as the approved plans, dropping drugs, or
+changing the discount levels, knowing that the beneficiary is
+locked in for a year.
+ Ms. MCMULLAN. We intend to do that. We have a pretty
+sophisticated analysis of the different drug offerings, plan to
+look at both the changes in formularies and in the changes in
+prices. Again, we do not believe that the incentives are there
+to do that, and the contract also requires these companies to
+provide the drugs that are most usually needed by people with
+Medicare. So, we don't anticipate that we are going to see
+this, because it doesn't set them up very appropriately. We
+will monitor for it. If it does occur, we will act upon it.
+ Mr. CARDIN. Let me just challenge that statement. Having a
+particular drug in your formulary may be very important for
+marketing, but you may not have a particularly good
+relationship with the manufacturer. You may use it as a
+marketing tool, but later drop it from your formulary because
+of the profit level. So, I think you need to monitor that
+practice. Just don't assume that plans will have and continue
+to offer all those drugs.
+ Ms. MCMULLAN. We will.
+ Chairman JOHNSON. Mr. Camp.
+ Mr. CAMP. Thank you, Madam Chair.
+ Ms. McMullan, I appreciate your testimony. I have had a
+chance to look at the written portion of it. If you could tell
+me, it appears as though there will be 28 various drug cards,
+discount drug cards being offered or prescription cards. Can
+you tell me, how will seniors keep track of the fact that the
+discounts and benefits can vary among those cards? How will
+seniors follow that and be aware of that?
+ Ms. MCMULLAN. We are going to be ensuring that individuals
+with Medicare--they will receive a direct mail. We are also
+doing advertising too, to let them know that they can all call
+1-800-MEDICARE, or go to the website to get information about
+the drug cards that are available to them in their area. We
+will then use--we have a tool that we have on the website that
+our customer service representatives will use. We are also
+training community-based organizations to use this tool, like
+State health insurance assistance programs and others. What
+that tool does is asks the individual for a set of eligibility
+information, asks them what is important to them, like are they
+interested in retail pharmacy, mail order pharmacy, how close
+would they like a pharmacy to be to them? What drugs do they
+take? If they have a particular pharmacy that they want to use,
+they can specify that pharmacy.
+ Using all of that information, we then present to them the
+drug cards that are available that meet those parameters. We
+list those in descending order by the lowest price to the
+highest price. They can see both the aggregate savings as well
+as the per-drug savings that each of those cards offers, and
+then each individual makes the decision that is best for them
+based on what their evaluation is, whether it is convenience of
+pharmacy, lower cost, and--but we will narrow the field to
+those that meet the parameters that the individual has
+specified.
+ Mr. CAMP. Any senior not enrolled in Medicare Advantage
+would be eligible to receive one of those cards?
+ Ms. MCMULLAN. Yes.
+ Mr. CAMP. Is there any chance that a beneficiary could be
+worse off financially with any of the available cards than they
+are today?
+ Ms. MCMULLAN. The target for the drug discount card are
+those people who don't have drug--outpatient prescription drug
+coverage now. So, that is a significant number of people.
+Within that, the advantage of the $600 credit for those people
+who are below the 135 percent of poverty. So, the target for
+this card are people who don't have discounts now, who pay cash
+prices at the register, and the people who have the opportunity
+to get $600 against their $1,400 on average drug cost a year.
+So, the target is going to be advantaged.
+ Mr. CAMP. I think just for people that are watching, the
+poverty rate really means for a married couple an income level
+of $16,862, and then for a single it would be an income of
+$12,569. Those income levels and below, they would be able to
+be eligible for the $600 discount?
+ Ms. MCMULLAN. Yes.
+ Mr. CAMP. What--if you can tell me, there has been some
+concern that there may be fraudulent cards in the marketplace,
+that may be marketed. What are you doing to ensure that some
+beneficiaries may not enroll in the wrong kind of card program?
+ Ms. MCMULLAN. We have, as I mentioned, we are doing a
+direct mail that will go out at the end of April and the
+beginning of May that gives beneficiaries information about the
+drug cards. In this, we tell them to look for the Medicare
+approved seal which has to be on one of these cards in order to
+make them an authentic approved Medicare card. In addition, we
+have a booklet that we will make available, it is on the
+website now, and can be ordered through 1-800-MEDICARE, that
+gives them much more detailed information. Again emphasizes the
+fact that in order for it to be an authentic card, it has to
+have the Medicare approved seal on the card. So, we are using
+our different educational channels to make sure that people get
+this information and engaging as many community partners as we
+can to make sure that people at a local level also get this
+information.
+ Mr. CAMP. Thank you. Thank you, Madam Chairman.
+ Chairman JOHNSON. Mr. Doggett.
+ Mr. DOGGETT. Thank you, Madam Chairman. Like my colleagues,
+Mr. Camp and Mr. Cardin, and Ms. McMullan, I am concerned about
+the potential for fraud with these cards, the reports that are
+already out. What is the approximate dollar value of the
+additional resources that the agency has allocated to combating
+fraud with much greater potential for fraud with these cards?
+ Ms. MCMULLAN. I don't know the dollar value. I will be
+happy to provide that for the record. We are taking this issue
+very seriously. We are engaging with our partners in the law
+enforcement area, as I mentioned earlier. We are sponsoring a
+meeting among the Department of Justice, the FBI, and the
+Inspector General to ensure that we are all working together on
+identifying both the risks to individuals as well as the
+opportunities to prevent those risks. We are taking very
+seriously the reports that we have gotten thus far and will
+continue to monitor that.
+ [The information was not received at the time of printing.]
+ Mr. DOGGETT. I believe there are some more precise figures
+that you have for fraud with reference to the media campaign to
+promote this system. I believe that is a campaign that the U.S.
+General Accounting Office has found to, quote, ``have notable
+omissions and other weaknesses.'' It is still investigating the
+legality of the video news releases that are a part of that
+campaign. Am I correct that the approximate cost of the
+promotional campaign is about $12 million on broadcast media
+that fill our airwaves and about $10 million on the flyer you
+have sent out to all Medicare recipients?
+ Ms. MCMULLAN. That--those numbers are correct.
+ Mr. DOGGETT. That is a contract that was given to the same
+public relations firm that is handling the Bush-Cheney 2004
+campaign, isn't it?
+ Ms. MCMULLAN. The prime contractor for our ad work is
+Ketcham & Associates.
+ Mr. DOGGETT. The same firm that is handling the President's
+reelection campaign, right?
+ Ms. MCMULLAN. I don't know that.
+ Mr. DOGGETT. Was that a Halliburton sole source contract,
+or how was that contract awarded?
+ Ms. MCMULLAN. It was competitively awarded.
+ Mr. DOGGETT. In what way? By what standards and when?
+ Ms. MCMULLAN. One of the mechanisms that we use in the
+Federal acquisition is something called an indefinite delivery
+indefinite quantity contract. We competed those contracts, the
+contracts to do beneficiary communications and customer
+consumer research fully, and then we have a stable of
+contractors that we do limited competitions among. We did a
+limited competition among that group of indefinite delivery
+indefinite quality contracts, and Ketcham & Associates is the
+prime contractor that was awarded the contract.
+ Mr. DOGGETT. It was awarded under what you referred to as a
+limited competition. So----
+ Ms. MCMULLAN. A limited competition after a full and open
+competition.
+ Mr. DOGGETT. Have they done any work for the agency
+previously?
+ Ms. MCMULLAN. Yes, they have. I can't tell you exactly what
+work. However, yes, they have.
+ Mr. DOGGETT. On the--are they--I just had one other
+question and then I will yield back my time. Go ahead.
+ Chairman JOHNSON. I wanted her to clarify the difference
+between a general open competition.
+ Ms. MCMULLAN. In order to create the smaller group that you
+can do a limited competition among, you have to do a full and
+open competition, which is the broad competition, to get down
+to the smaller number, and then qualify for a limited
+competition. It is a two-stage process. We have a list of four
+contractors that are within that stable of contractors that
+then qualify for a limited competition. They won in both the
+large contract to be listed among the four, and then won within
+the limited competition.
+ Mr. DOGGETT. On a different topic, the transitional
+assistance, the $600, I believe the plan is that you have to
+certify the enrollees before they will qualify for the
+conditional assistance. How do you plan to certify the
+applicants so that they get that benefit as soon as possible?
+ Ms. MCMULLAN. We have worked very hard during the months
+leading up to this to enter into agreements to get information
+from the Internal Revenue Service (IRS), from the Office of
+Personnel Management (OPM), for the Federal employees, from the
+U.S. Department of Veterans Affairs (VA), and from the Railroad
+Retirement Board in order to get the information that we need
+to assure that when people attest to their--that they qualify
+for these cards, that they are qualified. Then we can enroll
+them.
+ Mr. DOGGETT. When would you expect that the first
+assistance would be available?
+ Ms. MCMULLAN. June 1.
+ Mr. DOGGETT. On the flyer that was sent out to Medicare
+recipients, was that prepared with the--in consultation with
+the same firm that did the television ads?
+ Ms. MCMULLAN. I don't remember if we did any consultation
+with them on that at all. That was done mainly within the
+Federal staff. Then we printed it using the U.S. Gvernment
+Printing Office.
+ Mr. DOGGETT. Thank you very much. Thank you, Madam
+Chairman.
+ Chairman JOHNSON. To follow up on a preceding question.
+Would you clarify who can get a discount card. If you are
+already on Medicaid, if you are already qualified under the VA
+system, can you get a card? If you are qualified under a State
+drug subsidy program, can you get a card? If you are a senior
+that just already has a private card, can you get a card?
+ Ms. MCMULLAN. The only people with Medicare who are not
+able to get a card are people with Medicaid. The transitional
+assistance is not available to people who already have
+outpatient prescription drug coverage. So, a card, anyone with
+Medicare who does not also have Medicaid, full outpatient
+prescription drug coverage under Medicaid, or an 1115 waiver,
+they do not qualify for the card. Anyone other than that can
+get a card. Those people who, in order to qualify for the $600
+transitional assistance, you may not have other outpatient drug
+coverage, such as Federal Employees Health Benefits Program
+(FEHBP), TRICARE, or employer group coverage.
+ Chairman JOHNSON. You can have another discount card?
+ Ms. MCMULLAN. Yes.
+ Chairman JOHNSON. A private discount card?
+ Ms. MCMULLAN. Yes.
+ Chairman JOHNSON. So, all of those people not eligible for
+Medicaid in the 38 States that define Medicaid as 75 percent of
+poverty, of the Federal poverty income, are under. So, all of
+those people that are in between 75 percent of poverty income
+and 135 percent of poverty income, in all of those 38 States,
+they all will get the $600 and have the discount card, and if
+they already have a discount card, they can have two, so they
+can select the one that gives them the most discount on
+whatever drug they intend to buy?
+ Ms. MCMULLAN. Yes. You asked about State pharmacy
+assistance programs. Members of State pharmacy assistance
+program plans may also get the card, and if they qualify on
+income, the transitional assistance.
+ Chairman JOHNSON. Well, that is very interesting. Since,
+some of the State pharmacy assistance programs have very high
+deductibles. So, they can effect that high deductible by using
+their discount card. Are there other questions of the CMS
+representative? Thank you very much, Ms. McMullan, for being
+with us. I appreciate your hard work to get this launched, and
+the good attention that you have paid to helping seniors with
+their choices. There was--I am sorry. There was one thing that
+needed to be clarified. You have identified the cards at this
+time. Have the cards negotiated their prices yet?
+ Ms. MCMULLAN. In order--we notified the card sponsors that
+we were going to approve them. They are now finalizing their
+contracts. They will start sending us the pricing information
+during the month of April, and we will have that information on
+the website by April 29.
+ Chairman JOHNSON. So, you actually don't know at this time.
+You just approved their structure, and the fact that they could
+do the job, and so on?
+ Ms. MCMULLAN. Also discount----
+ Chairman JOHNSON. We don't know what kind of prices they
+are going to be able to negotiate from the manufacturers. The
+seniors themselves, before they sign up, will know the prices
+at their nearest pharmacy, or they can ask the lowest price in
+their area, so the--but by the time this goes into effect,
+those negotiated prices will be known, but they are not known
+now?
+ Ms. MCMULLAN. Correct.
+ Chairman JOHNSON. That is part of the reason why you can't
+say whether they will be 10 percent across the board, 15
+percent across the board, or they will be 40 percent here and 1
+percent there in the same plan for different drugs. Thank you
+for clarifying that. Now, let's turn to the second panel, if
+they will come to the dais, please.
+ I would like to welcome Susan Rawlings, the Vice President
+and head of Retiree Markets of Aetna. I would like to welcome
+Steven Nelson, the Senior Vice President, Senior Products
+Division, Health Net. I would like to welcome Gail Shearer, the
+Director of Health Policy Analysis of the Consumers Union.
+Thank you very much for being here. I apologize for having kept
+you so long this afternoon. Ms. Rawlings.
+
+STATEMENT OF SUSAN RAWLINGS, VICE PRESIDENT AND HEAD OF RETIREE
+ MARKETS, AETNA, INC.
+
+ Ms. RAWLINGS. Thank you. Good afternoon, Madam Chairman,
+Congressman Stark, and Members of the Subcommittee. My name is
+Susan Rawlings, and I am the Vice President and head of Retiree
+Markets for Aetna. I am very pleased to be here this afternoon
+to talk with you about Aetna's role as one of the carriers
+selected to issue a prescription drug discount card to
+America's seniors.
+ I want to begin by emphasizing that Aetna strongly supports
+the Medicare Modernization Act, and I would like to highlight
+for you the immediate impact of this law passed just 3 months
+ago on seniors. As a result of the increased payments under the
+new law, Aetna has revised its existing coverage effective
+March 1, 2004. We applied 50 percent of the new money to
+reducing member premiums and lowering costs, 30 percent of the
+new money was applied to increasing benefits and preventive
+care, and the remaining 20 percent of the money was applied to
+improving our provider networks. My written statement includes
+these details and the enhancements we made to our product
+portfolio.
+ Aetna's participation in Medicare dates all of the way back
+to the beginning, when we paid the very first Medicare claim on
+July 9, 1966. Today we serve more than 105,000 beneficiaries
+through health plans that we offer in 5 States. As we look to
+the future, we are evaluating several options to expand our
+participation in the Medicare program. For example, the disease
+management demonstration project, for which we are immediately
+and intimately waiting for the request for proposals that we
+expect to get at any moment. We are very excited about that.
+Providing an even broader range of health plan choices down the
+road, including potential Medicare Advantage service area
+expansions in 2004 and 2005, and participation in the regional
+preferred provider organization (PPO) and Medicare Part D
+coverage that are authorized by the Medicare Modernization Act
+beginning in 2006.
+ Now, we would like to talk in more detail about the Aetna
+Rx savings card. Effective June 1, beneficiaries will receive
+further assistance under another important initiative
+established by the Medicare Modernization Act, the Medicare
+approved prescription drug discount card. At Aetna, we are
+proud that we have been approved as a national card sponsor. In
+order to better understand the needs of eligible beneficiaries
+who might seek this card, we wanted to talk directly with them.
+We conducted focus groups in California, Colorado, and Florida
+in early March of this year. We sought the opinion of these
+beneficiaries in order to gauge their understanding of the
+discount card program, how they viewed the value of the
+program, and in what manner they would prefer to receive
+information.
+ These discussions and the insights received will enable us
+to better communicate with seniors and allow us to implement
+the program to best serve their needs. Aetna's card will be
+available to all Medicare beneficiaries, eligible Medicare
+beneficiaries in all 50 States, which will enable Aetna to
+support the intent of the Medicare Modernization Act by
+increasing access to more affordable prescription drugs.
+Eligible beneficiaries include all enrollees in the original
+Medicare fee-for-service system, enrollees in Aetna's
+Medicare's advantage plans, and enrollees in other Medicare
+Advantage plans that do not sponsor the exclusive drug cards.
+ The Aetna Rx savings card includes a number of standard
+features supplemented by several features unique to Aetna that
+will enable beneficiaries to receive maximum value from the
+discount card program. For example, the card will give
+enrollees access to Aetna InteliHealth, our online consumer
+health information resource. This website contains the Ask the
+Pharmacist feature and offers health information that consumers
+in consultation with their health care professionals may use to
+take an active role in their health care decisions.
+Additionally, our discount card will also enable enrollees to
+receive discounts on over-the-counter vitamins and nutritional
+supplements through our Vitamin Advantage program. Our card
+will be an open formulary card. Instead of adopting a closed
+formulary, the Aetna savings card will offer discounts on all
+prescription drugs that are allowed by CMS. We do not intend to
+limit the prescription drugs available for discount.
+ Based on focus groups we conducted, we gained insights that
+will help us provide information on how to enroll for the card.
+In early May Aetna will launch a new website to provide
+beneficiaries with answers to frequently asked questions and
+other educational information on the card program. This website
+will include instructions to help beneficiaries enroll in our
+drug card through an online enrollment form. We also plan to
+work with our provider network to help identify needy
+beneficiaries who might qualify for the transitional assistance
+benefit. Furthermore, we plan to share information on the Aetna
+Rx savings cards with the 13 million medical members of Aetna's
+health plans so that they can be equipped with the knowledge of
+the card's benefits and how it might be of value for their
+Medicare-eligible family and friends.
+ Beneficiaries who choose the Aetna Rx savings card will be
+aided by customer service representatives who have received
+specialized training on how to effectively communicate with
+seniors and respond to their questions. Aetna will begin making
+information available to Medicare beneficiaries as soon as
+possible. Enrollment should start in early May with an
+effective coverage date of June 1. The Aetna Rx savings card
+will use private sector pharmacy benefit management tools and
+techniques such as negotiated discounts on brand-name drugs,
+the option to use mail-order pharmacies, and programs that
+encourage the use of generic drugs. These tools will increase
+beneficiaries' access to prescription drugs, and reduce out-of-
+pocket costs, and form a bridge to the Part D program in 2006.
+ In conclusion, I would like to thank the Subcommittee
+Members for your interest in the Medicare-approved prescription
+drug discount program and for closely monitoring its
+implementation. Please be assured that Aetna is strongly
+committed to making this program work for Medicare
+beneficiaries. We believe that our plan to make information
+available to beneficiaries will help minimize the confusion
+while they are choosing their prescription drug discount card.
+We are confident that this card will maximize access to and the
+affordability of prescription drugs seniors need. Thank you
+very much.
+ [The prepared statement of Ms. Rawlings follows:]
+ Statement of Susan E. Rawlings, Vice President and Head of Retiree
+ Markets, Aetna, Inc., Hartford, Connecticut
+ Good afternoon, Madam Chairwoman and Members of the Subcommittee. I
+am Susan Rawlings, Vice President and Head of Retiree Markets for
+Aetna. I appreciate having this opportunity to testify about Aetna's
+longstanding commitment to meeting the health care needs of Medicare
+beneficiaries, as well as our enthusiasm about serving beneficiaries
+through the new programs that were authorized by the Medicare
+Modernization Act of 2003 (MMA).
+ I want to begin by emphasizing that Aetna strongly supports the
+MMA. Throughout the 2003 Medicare debate, we played an active role in
+encouraging Congress to enact legislation to provide Medicare
+beneficiaries with access to high quality health care and the widest
+range of choices. The MMA advances these goals in several ways: by
+immediately increasing funding for the health benefits of Medicare
+health plan enrollees; by establishing a new regional PPO program in
+2006; by providing beneficiaries with short-term prescription drug
+assistance in 2004 and 2005; by establishing a permanent prescription
+drug benefit in 2006; and by expanding beneficiary access to preventive
+services and disease management services that were pioneered by the
+private sector. We applaud Congress for enacting this historic
+legislation to improve choices and benefits for Medicare beneficiaries.
+ Aetna's participation in Medicare dates all the way back to July
+1966 when we paid the first claim in the history of the Medicare
+program. In the intervening years, we have expanded our involvement by
+providing comprehensive health coverage through Medicare's private
+health plan program, which is currently known as Medicare Advantage.
+Today, we serve more than 105,000 beneficiaries through health plans we
+offer in five states: California, New Jersey, New York, Pennsylvania,
+and Maryland. This includes active participation in the Medicare+Choice
+point-of-service plan offered under the demonstration project announced
+in 2002 by CMS.
+ Looking to the future, we are eager to further expand our
+participation in Medicare by sponsoring Medicare-approved prescription
+drug discount cards and we will evaluate offering beneficiaries a
+broader range of health plan options, including the regional PPOs that
+are authorized by the MMA beginning in 2006. We are prepared to
+carefully review the CMS proposed regulations that we anticipate will
+provide the industry with further guidance in late spring.
+Improvements in Medicare Advantage
+ Although the Medicare-Approved Prescription Drug Discount Card
+Program is the official topic of today's hearing, I want to begin by
+highlighting the benefit enhancements and cost savings that our
+Medicare Advantage enrollees are already receiving as a direct result
+of the additional funding the MMA provided for the Medicare Advantage
+program in 2004.
+ In late January, Aetna submitted revised 2004 benefit packages--
+also known as adjusted community rate (ACR) proposals--to the Centers
+for Medicare and Medicaid Services (CMS), specifying how we proposed to
+use the MMA funding to improve benefits and lower costs for our
+Medicare enrollees. Our revised benefit packages were subsequently
+approved by the agency and, since March 1, beneficiaries have seen
+numerous improvements in Aetna's Golden Medicare Plan HMO\TM\ and in
+Aetna's Golden Choice\TM\ POS Plan, such as:
+
+ Reduced Member premium or enhanced benefits--and
+sometimes both--in every market we serve;
+ Generic prescription drug coverage available in every
+county we serve;
+ The addition of brand name prescription drug coverage in
+many counties, including all of our service areas in Pennsylvania and
+Maryland;
+ Reduction of co-payments for inpatient hospital care by
+50 percent--from $200 to $100 per day--in several counties in New
+Jersey and New York; and
+ The elimination of co-payments for a broad range of
+preventive services including routine physicals, bone mass
+measurements, colorectal screening exams, prostate screening exams,
+mammograms, pelvic exams, and routine hearing and vision exams.
+
+ Across our services areas, our members and providers benefited
+directly from the passage of the MMA. 50% of the MMA dollars were
+applied in the form of member premium reductions, 30% in benefits
+enhancements and 20% in network development because of the passage of
+the MMA. I have attached a sample communications package on our new
+benefits and premiums (as of March 1, 2004) to demonstrate just how
+thorough and comprehensive we are when it comes to communicating with
+seniors. We will prepare and distribute similar communications
+materials to seniors as needed to implement the discount card program.
+ Similar coverage improvements have been adopted by Medicare
+Advantage plans all across the nation. CMS recently reported that the
+2004 funding increase for the Medicare Advantage program has resulted
+in improved benefits for 3.7 million beneficiaries, lower cost-sharing
+for 2 million beneficiaries, and reduced premiums for 1.9 million
+beneficiaries. These improvements are clear evidence that the MMA is
+providing significant value for seniors and disabled Americans, less
+than four months after the President signed this measure into law.
+The Aetna Rx Savings Card\SM\
+ Beginning June 1, beneficiaries will receive further assistance
+under another important initiative established by the MMA: the
+Medicare-Approved Prescription Drug Discount Card Program.
+ In order to meet the needs of eligible Medicare beneficiaries we
+conducted focus groups in California, Colorado and Florida in March
+2004. We sought the opinion of these beneficiaries in order to gauge
+their understanding of the discount drug card program, how they viewed
+the value of the card, and in what manner they would prefer to receive
+information. These discussions will enable us to better communicate and
+allow us to implement procedures to serve their needs.
+ Aetna strongly supports the steps this program will take to provide
+beneficiaries with discounted prices on prescription drugs and, at the
+same time, provide up to $600 annually in added assistance for those
+with low incomes. On March 25, CMS announced that Aetna has been
+approved as a general card sponsor on a nationwide basis, meaning that
+our Aetna Rx Savings Card will be available to all eligible Medicare
+beneficiaries in all 50 states which enables Aetna to support the
+intent of the MMA by broadening access to more affordable prescription
+drugs through the country. Eligible beneficiaries include all enrollees
+in the Medicare fee-for-service system, enrollees in Aetna's Medicare
+Advantage plans, and enrollees in other Medicare Advantage plans that
+do not sponsor drug cards.
+ The Aetna Rx Savings Card includes a number of features--and is
+supplemented by several Aetna initiatives--that will enable
+beneficiaries to receive maximum value from the discount drug card
+program. For example:
+
+ The Aetna Rx Savings Card will give enrollees access to
+``Aetna InteliHealth','' an online consumer health
+information resource. This website includes an ``Ask the Pharmacist''
+feature and offers health information that consumers, in consultation
+with their health care professionals, may use to take an active role in
+their health care decisions.
+ Our discount drug card will also allow enrollees to
+receive discounts on over-the-counter vitamins and nutritional
+supplements through the Vitamin Advantage\TM\ program.
+ Aetna will begin making information available to Medicare
+beneficiaries as soon as possible. Approval to market is expected in
+early May 2004 and we expect our first members to be effective June 1.
+Aetna is committed to communicating quickly and thoroughly on changes
+such as these, as evidenced by the recent communications supporting the
+Medicare Advantage improvements March 1 (an example is attached as
+exhibit 1).
+ Instead of adopting a closed formulary, the Aetna Rx
+Savings Card will offer discounts on all prescription drugs that are
+allowed by CMS. We do not intend of limit the drugs available for
+discount.
+ When drug card enrollment begins in early May, Aetna will
+launch a new website to provide beneficiaries with answers to
+Frequently Asked Questions (FAQs) and other educational information on
+the discount card program. This website will also include instructions
+to help beneficiaries enroll in our drug card through an online
+enrollment form.
+ Beneficiaries who choose the Aetna Rx Savings Card will
+be aided by customer service representatives located in service centers
+in the United States. These representatives have received specialized
+training on how to effectively communicate with seniors and respond to
+their questions.
+ The $30 annual enrollment fee for beneficiaries who
+qualify for low-income assistance under the discount drug card program
+will not apply, as this fee will be paid by CMS.
+Value of Private Sector Tools and Techniques
+ The discount card program, along with other key components of the
+MMA, establishes an important role for the private sector. We believe
+this is good news for beneficiaries, considering that the private
+sector has a strong track record of providing high value under the
+Medicare program.
+ The Aetna Rx Savings Card will use United States based private
+sector pharmacy benefit management tools and techniques such as
+negotiated discounts on brand name drugs, the option to use mail-
+service pharmacies, and programs that encourage the use of generic
+drugs. These tools will increase beneficiary access to prescription
+drugs by reducing out-of-pocket costs.
+ A number of studies have demonstrated that the use of these
+techniques by private sector health plans is beneficial to enrollees in
+public programs. For example, a 2003 study, conducted by Associates and
+Wilson \1\ on behalf of America's Health Insurance Plans (AHIP), found
+that the PACE program in Pennsylvania--the largest state pharmacy
+assistance program in the nation--could save up to 40 percent by
+adopting the full range of private sector pharmacy benefit management
+techniques.
+---------------------------------------------------------------------------
+ \1\ Prescription Drug Benefit Management: Improving Quality,
+Promoting Better Access and Reducing Cost, Associates & Wilson, October
+2003.
+---------------------------------------------------------------------------
+ In addition, the General Accounting Office (GAO) \2\ has reported
+that pharmacy benefit management techniques used by health plans in the
+Federal Employees Health Benefits Program (FEHBP) resulted in savings
+of 18 percent for brand-name drugs and 47 percent for generic drugs,
+compared to the average cash price customers would pay at retail
+pharmacies.
+---------------------------------------------------------------------------
+ \2\ Federal Employees' Health Benefits: Effects of Using Pharmacy
+Benefit Managers on Health Plans, Enrollees, and Pharmacies, U.S.
+General Accounting Office, January 2003.
+---------------------------------------------------------------------------
+ These findings demonstrate that Aetna and other private sector
+companies are well-positioned to use our experience and capabilities to
+make prescription drugs more affordable for a broader range of Medicare
+beneficiaries. With respect to both the quality and affordability of
+health care, the private sector has a strong track record that bodes
+well for its involvement in the discount card program as well as
+longer-term Medicare reforms.
+Conclusion
+ In conclusion, I want to thank Subcommittee Members for your
+interest in establishing the Medicare-Approved Prescription Drug
+Discount Card Program and for closely monitoring its implementation.
+Please be assured that Aetna is strongly committed to making this
+program work for Medicare beneficiaries.
+ We plan to make information available that will help minimize the
+confusion of Medicare beneficiaries while they are choosing their
+prescription drugs and maximize their access to the prescription drugs
+they need.
+ We are confident that a strong public-private partnership will
+enable the discount card program to fulfill its potential to provide
+beneficiaries with more affordable prescription drugs over the next two
+years and lay the groundwork for the Medicare prescription drug benefit
+that will be implemented in 2006.
+
+
+
+ Chairman JOHNSON. Thank you, Ms. Rawlings. Mr. Nelson.
+
+ STATEMENT OF STEVEN H. NELSON, SENIOR VICE PRESIDENT, SENIOR
+PRODUCTS DIVISION, HEALTH NET, INC., WOODLAND HILLS, CALIFORNIA
+
+ Mr. NELSON. Thank you. Good afternoon, Chairman Johnson,
+and Congressman Stark and Members of the Subcommittee. I am
+Steve Nelson, head of Medicare programs for Health Net, Inc.,
+and I appreciate the opportunity to testify about Health Net's
+participation in this important program. I will offer specific
+examples of how our programs are working and the value they
+bring to beneficiaries. For more than 10 years, we have been
+proud to serve Medicare beneficiaries. My message to the
+Subcommittee today is what Congress passed, and was signed in
+December, has already had a tangible positive impact. We look
+forward to our participation in the drug discount program. We
+have been providing pharmacy benefits to most of our senior
+members, and this new program will make sure their dollars go
+farther. Congress' decision to provide transitional benefits to
+low-income seniors means that a number of our beneficiaries
+will get a $600 subsidy to help them purchase prescription
+drugs.
+ Since the passage of the Medicare Modernization Act, Health
+Net has made significant improvements to the benefits we
+provide our Medicare members. These include lower premiums for
+more than 65 percent of our members, lower copayments for more
+than 90 percent, enhanced benefits for approximately 20
+percent, and a drug discount card for every single member. That
+is really all within the last 3 months. This is all compelling
+evidence that our 171,000 beneficiaries are better off today
+than they were just 3 months ago. Before we made these
+improvements, we conducted focus groups and listening sessions
+to gain new insights into our seniors' health care needs. In
+California, we learned that our beneficiaries wanted lower
+premiums and a better drug benefit. So, in one California
+county, for example, members now have no monthly premium
+compared with a $40 monthly premium last year, unlimited
+generic drug coverage, and $500 annual brand drug benefit
+compared to no drug benefit at all last year. In Connecticut
+they wanted lower out-of-pocket costs. Now copayments have
+dropped by as much as 50 percent.
+ Two months from today, on June 1, our Medicare
+beneficiaries will see another significant improvement in their
+benefits when our drug card goes into effect, giving them
+discounted prices on prescription drugs. We have been approved
+to offer a card exclusively to enrollees in our health plans,
+and we will waive the annual enrollment fee of $30. With the
+card our beneficiaries will see immediate savings of up to 25
+percent on the cost of their medications. We have launched a
+companywide effort to provide more support for seniors with the
+following goals in mind: one, providing easy-to-understand
+information; two, lowering prescription drug costs; three,
+integration of the drug card with existing pharmacy benefits;
+and four, expanding our care coordination programs.
+ Health Net is implementing a series of educational
+initiatives that assist beneficiaries in navigating through the
+program with easy-to-follow instructions, answers to frequently
+asked questions, and pertinent information about transitional
+assistance. As part of our ongoing education effort,
+beneficiaries will also receive a brochure on our drug discount
+card and related information in our summary of benefits and our
+evidence of coverage documents. We are also publishing new
+webpages to support the Medicare drug discount card program and
+updating Health Net's Medicare website to include new Medicare
+prescription benefits. In addition, we have enlisted our
+physicians and pharmacy partners in an education campaign for
+beneficiaries. In fact, just this week Health Net volunteered
+to participate in a pilot test run by CMS where beneficiaries
+will be invited to review our materials and participate in
+practice calls to our customer service representatives.
+ To make things simple and effective for beneficiaries, we
+are doing the following things. We are working closely with our
+pharmacy partners to assure that members will receive the
+lowest cost at the time the medication is dispensed by simply
+presenting their Health Net Medicare drug discount
+identification card. We are enhancing our patient safety
+programs to reduce potential drug errors. We are improving
+customer service capacity to help members take full advantage
+of the new programs, including transitional assistance. We will
+improve patient support by encouraging members to call health
+coaches, who are experienced clinical nurses, to discuss any
+significant medical event, chronic therapy, or symptom concern.
+Health Net is making every effort to ensure our beneficiaries
+receive the greatest possible value for their drug card. Our
+goal is to ensure access to an affordable drug benefit for all
+our Medicare members. I am pleased to have had this opportunity
+to share with you our ideas for making this program a success,
+and would be happy to answer any questions.
+ [The prepared statement of Mr. Nelson follows:]
+ Statement of Steven H. Nelson, Senior Vice President, Senior Products
+ Division, Health Net, Inc., Tempe, Arizona
+ Good afternoon, Chairwoman Johnson, Congressman Stark and
+distinguished Members of the Subcommittee. I am Steve Nelson, Senior
+Vice President, Senior Products Division of Health Net, Inc. I
+appreciate the opportunity to discuss Health Net's participation in the
+Medicare Prescription Drug Discount Card and Transitional Assistance
+Program.
+ Health Net's HMO, insured PPO and government contracts subsidiaries
+provide health benefits to approximately 5.3 million individuals in 14
+states through group, individual, Medicare, Medicaid and TRICARE
+programs. Health Net's subsidiaries also offer managed health care
+products related to behavioral health and prescription drugs.
+Introduction
+ Health Net is strongly committed to serving the health care needs
+of Medicare beneficiaries. For more than ten years, we have
+participated in the Medicare health plan program--through
+Medicare+Choice, and now Medicare Advantage.
+ Currently, our Medicare Advantage HMO plans provide coverage to
+171,000 beneficiaries in 44 counties in Arizona, California,
+Connecticut, New York, and Oregon. Health Net offers a Medicare
+Advantage Preferred Provider Organization (PPO) product, called Health
+Net Options Plus, in 21 counties in Arizona, Oregon, and Washington. We
+are offering this PPO plan under a demonstration project the Centers
+for Medicare and Medicaid Services (CMS) launched in late 2002.
+ Looking forward, we are excited about expanding our participation
+in Medicare under the new programs authorized by the Medicare
+Modernization Act of 2003 (MMA), including the discount card program
+that is the focus of today's hearing. We commend Congress for enacting
+this important legislation that enhances choices and benefits for
+current and future generations of Medicare beneficiaries.
+Medicare Advantage: Enhanced Benefits and Lower Costs
+ Although my testimony will focus primarily on the discount card
+program, I will briefly review another component of the MMA that is
+providing real and meaningful value to millions of Medicare
+beneficiaries. Specifically, I am referring to the additional funding
+that Congress provided, beginning in 2004, for the health benefits of
+Medicare Advantage enrollees. These urgently needed funds enabled
+Health Net to reduce out-of-pocket costs and expand benefits for
+enrollees in our Medicare Advantage plans.
+ Here are a few examples of how Health Net's Medicare Advantage
+enrollees have seen their coverage improve, effective March 1, as a
+result of the MMA:
+
+ more than 65 percent of our Medicare Advantage enrollees
+have had their plan premiums either reduced or completely eliminated;
+ more than 90 percent have lower copayments for physician
+and hospital services, with hospital copayments reduced by more than 40
+percent in some cases; and
+ approximately 20 percent now have access to enhanced
+benefits.
+
+ For enrollees in our Medicare Advantage plans--and for millions of
+other beneficiaries all across America--these coverage improvements are
+extremely important. Because we serve a disproportionately large share
+of low-income beneficiaries--as do many Medicare Advantage plans--the
+2004 funding increase makes a huge difference in the lives of many
+seniors and disabled persons who rely on Medicare Advantage.
+The Discount Card Program: Lower Drug Prices and Low-Income Assistance
+ Two months from today, on June 1, beneficiaries will see another
+significant improvement in Medicare when the drug discount card program
+goes into effect, giving them discounted prices on prescription drugs.
+This program will also give low-income beneficiaries as much as $600
+annually in transitional assistance to apply toward the purchase of
+prescription drugs.
+ On March 25, CMS officially approved Health Net to offer a drug
+discount card exclusively to enrollees in our Medicare Advantage health
+plans and our PPO demonstration plans. Although the MMA allows card
+sponsors to charge an annual enrollment fee of $30, we will not charge
+any fee for our card. We anticipate that our enrollees will see
+immediate savings of 10 to 25 percent on the cost of their medications.
+Exclusive Sponsorship: Integration of Drug Card With Existing Drug
+ Benefits
+ As an ``exclusive'' card sponsor, our program differs from general
+card programs. First, our drug discount card is available only to
+beneficiaries covered by our Medicare Advantage plans. Second, as
+required by MMA, beneficiaries covered by our Medicare Advantage plans
+are not permitted to choose any other Medicare-approved drug discount
+card while they are Health Net members. These rules allow us to
+integrate our drug discount card with our current prescription drug
+benefit thus making the program simpler for beneficiaries.
+ For example, in cases where beneficiaries receive transitional
+assistance, Health Net will allow the $600 to be applied to the Health
+Net drug benefit co-payments and deductibles. As long as their
+transitional assistance is available, members who use Health Net drug
+benefits will have minimal out-of-pocket drug expenses up to our
+benefit limits.
+Beneficiary Education Initiatives
+ Health Net is implementing a series of education initiatives based
+on CMS requirements and model materials, to ensure that beneficiaries
+are fully informed about our drug discount card. As a starting point,
+we have developed educational materials that will assist beneficiaries
+in navigating through the program with easy-to-follow instructions,
+answers to frequently asked questions (FAQs), and pertinent information
+about the transitional assistance.
+ Health Net also will provide all of our enrollees information about
+the program, prior to its initiation, through:
+
+ a member notification letter,
+ a member handbook,
+ discounted price information about the top 100
+prescription drugs, and
+ an application form for transitional assistance.
+
+ As part of our ongoing education effort, beneficiaries will also
+receive a brochure on our drug discount card and related information in
+our summary of benefits and our evidence of coverage documents. We are
+also publishing new webpages to support the Medicare Drug Discount Card
+Program, and updating Health Net's Medicare website to include new
+Medicare prescription benefits.
+ In addition, we are developing a two-phased approach to our
+customer service operations. During the program's start-up phase,
+customer service and call center representatives are being trained to
+respond to initial questions about what the program does and give
+detailed guidance to Medicare beneficiaries about how to enroll and
+apply for transitional assistance. Beneficiaries are also being
+referred to the 1-800 Medicare call center. Once the program is
+underway, Health Net will adjust these messages on an ongoing basis and
+conduct refresher training as we learn more about how beneficiaries use
+their discount cards to obtain prescription drugs. Finally, our
+pharmacies and physicians will receive the same Medicare-approved
+outreach materials that our enrollees will receive in recognition of
+the important role they have in beneficiary education.
+ Health Net assigns a high priority to ensuring that beneficiaries
+are fully educated about this program. Accordingly, we are one of three
+drug card sponsors that have volunteered to participate, beginning this
+week, in a pilot test run by CMS. Under this pilot test, Medicare
+beneficiaries will be invited to take part in a review of our proposed
+materials, as well as in mock customer calls to our customer service
+representatives. With this review, we believe that CMS and Health Net
+will receive firsthand information about the adequacy and clarity of
+our materials and the capabilities that our customer call centers must
+have to meet the information needs of interested Medicare
+beneficiaries.
+Serving Our Low-Income Beneficiaries
+ Health Net believes it is imperative that all of our members who
+meet the income eligibility requirements receive transitional
+assistance. As an exclusive card sponsor, Health Net Medicare members
+will be able to use their transitional assistance to complement the
+drug benefits they receive under their Medicare Advantage plan. By
+using transitional assistance for copayments or coinsurance, Medicare
+members will be able to conserve limited income. In addition, with
+transitional assistance, beneficiaries are far more likely to comply
+with drug regimens--a critical factor in maintaining health status.
+Members will not have to make the awful choice between the rent and
+their prescriptions.
+ It is important to note that each member with transitional
+assistance will use these funds on a dollar-for-dollar basis for any
+drug they purchase. If the beneficiary does not use his or her
+transitional assistance dollars, these amounts will not accrue to
+Health Net.
+Start-Up Requirements
+ Launching a drug discount card under the MMA program requires a
+significant commitment from card sponsors. To qualify as an approved
+exclusive card sponsor, Health Net completed an application that
+demonstrated our capability to undertake the program according to the
+regulatory requirements. As an organization, Health Net reviewed the
+requirements, developed operational plans, and identified and overcame
+obstacles to provide an application that was fully responsive to CMS.
+Operational Requirements
+ Health Net's preparation for participating in the drug discount
+card program has been extensive. These preparations affect almost every
+area of our Medicare Advantage plans and their operations. The time
+period for implementation of the program is extremely short given the
+number of systems, safeguards, and communications necessary for its
+operation.
+ Moreover, requirements of the new program impact a significant
+number of Health Net operational areas. As a result, Health Net has
+made extensive operational changes, including updating existing
+processes or creating new procedures for operational areas such as
+enrollment, billing or customer service. Health Net has also made
+extensive enhancements to all business systems to support this new
+program. System updates have been adopted to help facilitate
+communications between Health Net business systems and CMS, thus
+allowing accurate and timely data exchanges and reporting. Health Net
+is also working very closely with our pharmacy claims processing
+vendors to implement major system enhancements to administer the
+beneficiary discounts and the transitional assistance, along with the
+integration of the current prescription drug benefits.
+Implementation Activities
+ In spite of the complexities we have described, Health Net has
+engaged in companywide activities in the following areas to make the
+program as simple as possible for the beneficiaries. These are all
+steps Health Net is taking to ensure implementation results that (1)
+minimize confusion for the beneficiaries; (2) lower prescription drug
+costs for the beneficiaries; and (3) integrate the drug discount card
+with existing pharmacy benefits.
+
+ Information & Outreach: To ensure an accurate and
+consistent message, we have synchronized the timing and message of our
+announcements about the program with CMS' announcements. CMS is widely
+advertising this program and has developed an extensive library of
+outreach and membership materials. To minimize confusion, we want our
+information to be consistent with the agency's message and we are
+therefore adopting the CMS materials to the greatest possible extent.
+ Prescription Benefits Management & Pharmacy Operations:
+Health Net is working closely and extensively with our pharmacy claims
+processors to assure that the necessary design and programming is
+accomplished, in order to ensure that members will receive the lowest
+cost at the time the medication is dispensed at the pharmacy, by simply
+presenting their Health Net Medicare drug discount identification card.
+ Care Management Programs: As a result of having
+prescription data available for all medications filled by the
+beneficiaries under the drug discount card program, our health care
+management programs will be enhanced. These programs integrate
+pharmaceutical and medical care, help to reduce potential drug errors,
+avoid drug-to-drug and drug-disease interactions, and enhance the
+overall use of medications by our beneficiaries.
+ Call Centers & Customer Services: Health Net is enhancing
+these capabilities focused on the eligibility requirements for the
+discount card and transitional assistance, the timing of marketing and
+enrollment activities, helping beneficiaries complete the drug card and
+transitional assistance enrollment forms, and helping them understand
+the information and outreach materials they will receive from CMS and
+from Health Net.
+ Enrollment & Membership: Health Net is integrating
+enrollment processes for the drug card into our existing Medicare
+Advantage enrollment processes. This enables us to utilize the same
+trained staff that has been successfully processing Medicare health
+plan enrollments and disenrollments for the past 10 years.
+ Disease Management: Our drug discount card will also be
+integrated with Health Net's Decision Power\SM\ disease management
+program. One key component of this program allows members to contact
+Health Coaches by phone to discuss any significant medical event,
+chronic therapy, or symptom concern. With Decision Power\SM\, Health
+Net engages our members as active participants in making decisions
+about their health care.
+Working With CMS
+ Health Net believes this program brings considerable value to our
+Medicare members and we are proactively engaged with CMS to make this
+program available to beneficiaries as rapidly as possible.
+ CMS has provided necessary direction and flexibility to enable
+sponsors to develop programs for beneficiaries. Given the timeframes
+and the complexities of this program, CMS has conducted an
+implementation program that is unprecedented to meet these challenges.
+These include
+
+ establishing a specific drug sponsor website with
+technical and operational questions and answers, systems and file
+specifications, member materials, conference presentations, and much
+more;
+ conducting frequent sponsor calls to discuss technical
+and operational issues;
+ granting waivers and extending deadlines to make the
+process successful;
+ providing computer software and connectivity for sponsors
+to communicate enrollments and reports electronically; and
+ reviewing marketing materials on a flow basis.
+
+ We believe that the combined efforts of CMS and Health Net will
+result in a very successful and timely launch of this program. Every
+effort is being made to ensure that beneficiaries will be fully
+informed about the program and that they will receive discounted prices
+on their prescription drugs--just as the MMA intended.
+Conclusion
+ Health Net is committed to working with the government in the
+spirit of public-private partnership to meet the health care needs of
+America's seniors and individuals with disabilities. Our company vision
+is to add value to the lives of the people we serve by delivering:
+
+ access to quality health care that helps people achieve
+improved health outcomes;
+ understandable, reliable and affordable products; and
+ service that exceeds expectations.
+
+ Looking ahead, the Medicare Prescription Drug Discount Card and
+Transitional Assistance Program is an important step toward providing
+beneficiaries with the prescription drug benefit scheduled to start in
+2006. This program is providing an opportunity to build on our
+extensive experiences in administering prescription drug programs for
+Medicare beneficiaries, as well as communicating with beneficiaries
+about how to make the best use of prescribed medications. We believe
+this experience will be helpful to our organization, our health care
+providers, CMS--and most importantly--to all Medicare beneficiaries.
+ As we begin to implement the drug discount card program, Health Net
+is making every effort to ensure that our beneficiaries receive the
+assistance and tools they need to understand how to receive the
+greatest possible value from our drug discount card--to help achieve
+our ultimate goal of ensuring access to an affordable drug benefit for
+our Medicare members. I am pleased to have had this opportunity to
+share with you our ideas for making this program a success for our
+beneficiaries.
+
+
+
+ Chairman JOHNSON. Thank you, Mr. Nelson. Ms. Shearer.
+
+ STATEMENT OF GAIL SHEARER, DIRECTOR, HEALTH POLICY ANALYSIS,
+ CONSUMERS UNION
+
+ Ms. SHEARER. Thank you, Madam Chairman and Members of the
+Committee. Thank you so much for providing Consumers Union the
+opportunity to testify today. American consumers are desperate
+for relief from the high prices they are charged for
+prescription drugs. Consumers Union is not optimistic that the
+new discount drug card program enacted as part of the Medicare
+Modernization Act will provide the level of relief needed. We
+are concerned that Medicare beneficiaries will be confused by
+the new program and will be at risk of being victimized by
+companies who will seek to take advantage of their confusion.
+ We believe that the challenge of making prescription drugs
+affordable to all consumers deserves immediate focus by
+Congress. The costs of failing to do so are high. Recently
+there were reports in the press that 23 million Americans are
+not taking statins to lower their high cholesterol level even
+though they are recommended for them because they cannot afford
+them. These press reports came to light in the wake of new
+research that shows the high effectiveness in terms of reduced
+heart attacks and mortality of using cholesterol-reducing
+medicines. If just 5 percent of those unable to afford statins
+suffer negative health consequences, then more than 1 million
+consumers in this country will be victims of our failed health
+care policies. We urge you to consider the reality that
+medicines that are unaffordable mean dire consequences for
+those who cannot take them.
+ In my testimony, I will highlight key concerns that we have
+with the new discount drug card program. Seniors and the
+disabled will be confused about how to choose and whether to
+choose a discount drug card. We don't need elaborate surveys
+about discount drug cards when we are able to poll our mothers
+to quickly discover that there is already a high degree of
+confusion and anxiety about the choices that they will soon
+face regarding discount drug cards.
+ It is important to remember the characteristic of the
+population that will be eligible. An estimated 23 percent have
+cognitive impairments and are likely to be overwhelmed by the
+task of selecting a card. One of the lessons of the Medigap
+market in the 1970s and 1980s, and I know that the Members here
+today will remember that, is that complicated choices in the
+health insurance marketplace can result in fraudulent schemes
+that victimize a vulnerable population. It is important that
+CMS aggressively police against fraud. Congress must provide
+resources and make a commitment to help consumers sort out the
+confusion.
+ The CMS must be vigilant in curbing marketplace behavior
+that complicates the market and creates financial burdens for
+beneficiaries who choose the wrong discount drug card. Centers
+for Medicare and Medicaid Services must guard against bait and
+switch or other market manipulation. If price changes are large
+and frequent, or if the drug list changes frequently and drugs
+are dropped, then CMS should consider revoking the approval for
+a card while protecting existing enrollees. In addition, this
+type of practice should disqualify a company from serving as a
+prescription drug plan when the Medicare drug benefit begins in
+2006.
+ The CMS should aggressively expand the role of generics in
+the marketplace and police against discount drug cards that
+steer beneficiaries toward brand-name drugs. For example, we
+would like the Medicare website to automatically include
+comparative pricing information for generic drugs whenever they
+are available, even if they are not available through the
+discount drug card offer. The CMS should compare the discounts
+available from all discount drug cards with a standard pricing
+basis such as the Federal Supply Schedule to help consumers
+compare cards. If prices are rising at a rate of 10 percent to
+15 percent per year, then a discount of 10 percent would not
+provide substantial financial relief. The CMS should establish
+a reliable measure of the discounts.
+ The CMS and Congress should pay particular attention to the
+use of formularies, drug lists by the discount drug card
+companies. Formularies are basically lists of prescription
+drugs, in this case for which the discount drug card company
+will negotiate a discount on behalf of enrollees. Formularies
+in the eventual Medicare prescription drug benefit have a far-
+reaching impact since they will determine whether the drug is
+covered by the enrollee's insurance coverage and whether any
+out-of-pocket costs count toward reaching the catastrophic
+benefit. It is unclear what the benefits for consumers are of
+having scores of different formularies--drug lists--for each
+discount drug card. Whether formularies, as determined by
+companies offering discount drug cards, serve the best interest
+of consumers should be monitored carefully throughout this
+program.
+ In light of the fact that high prescription drug prices are
+denying millions of Americans access to needed prescription
+drugs, Congress should take steps to lower prescription drug
+prices for all, including those not eligible for Medicare. We
+urge you to fund Section 1013 of the Medicare Modernization Act
+that calls for synthesis of medical evidence about the
+comparative clinical effectiveness of alternative prescription
+drugs by the Agency for Health Care Research and Quality. When
+implemented, this provision will provide consumers and
+government programs with a scientific basis and analysis to
+make sound decisions based on evidence, reducing the impact of
+the decisions that are based on an incomplete picture that is
+often presented in direct consumer advertising.
+ In conclusion, the challenge of assuring that Medicare
+beneficiaries and all Americans have access to affordable
+prescription drugs is daunting. The Congress and the
+Administration should take steps to reduce confusion, police
+against fraud, guard against marketplace manipulation,
+encourage the use of generics, provide a standard basis for
+evaluating discounts offered, and aggressively pursue other
+steps to help all Americans have affordable--have access to
+affordable, safe medications. Thank you.
+ [The prepared statement of Ms. Shearer follows:]
+Statement of Gail Shearer, Director, Health Policy Analysis, Consumers
+ Union
+Summary: Consumers Union Testimony on Discount Drug Cards
+ Consumers of all ages are in dire need of relief from the high cost
+of prescription drugs. The discount drug card program that is about to
+begin may offer modest relief to some low-income Medicare
+beneficiaries, but Congress needs to do much more to provide meaningful
+discounts for Medicare beneficiaries and relief for non-beneficiaries
+as well. Ten of Consumers Union's concerns about the program are
+outlined below.
+
+ 1. Seniors and the disabled will be confused about how to
+choose--and whether to choose--a discount drug card.
+ 2. One of the lessons from the medigap market in the 1970's and
+1980's is that complicated choices in the health insurance marketplace
+can result in fraudulent schemes that victimize a vulnerable
+population.
+ 3. Congress must provide resources and make a commitment to help
+consumers sort out the confusion. The need for this is demonstrated by
+the fact that even the Federal Government is providing ``guidance''
+that could lead to some beneficiaries enrolling in programs that do not
+offer the most savings for them.
+ 4. The Centers for Medicare and Medicaid Services (CMS) must be
+vigilant in curbing marketplace behavior that complicates the market
+and creates financial burdens for beneficiaries who choose the
+``wrong'' discount drug card.
+ 5. The CMS should aggressively expand the role of generics in the
+marketplace, and police against discount drug cards that steer
+beneficiaries toward brand name drugs.
+ 6. The CMS should compare the discounts available from all
+discount drug cards with a standard drug-pricing basis such as the
+federal supply schedule to help consumers compare cards.
+ 7. The CMS and Congress should pay particular attention to the
+use of formularies (drug lists) by the discount drug cards.
+ 8. The CMS and Congress should apply additional lessons (e.g.,
+the reliance on evidence-based, scientific findings; changing coverage,
+changing prices; harm due to consumer lock-in) to refine and improve
+the Medicare prescription drug benefit scheduled to begin in 2006.
+ 9. The government should aggressively reach out to all those
+eligible for the $600 subsidy to assure that all who are eligible
+receive the subsidy, when that's the best deal for them.
+ 10. In light of the fact that high prescription drug prices are
+denying millions of Americans access to needed prescription drugs and
+contributing significantly to the high cost of health insurance,
+Congress should take steps to lower prescription drug prices for all,
+including those not eligible for Medicare.
+Introduction
+ American consumers are desperate for relief from the high prices
+they are charged for prescription drugs. Consumers Union \1\ is not
+optimistic that the new discount drug card program enacted as part of
+the Medicare Modernization Act will provide the level of relief needed.
+Indeed, it seems like a missed opportunity. We are concerned that
+Medicare beneficiaries will be confused by the new program and will be
+at risk of being victimized by companies who will seek to take
+advantage of their confusion. Even some of the government's efforts to
+educate consumers could deepen the level of confusion. We urge Congress
+to take further steps to achieve meaningful relief for all consumers,
+to police against market practices that could harm consumers, and to
+study and apply lessons from the discount drug program to the Medicare
+prescription drug program that begins in 2006.
+---------------------------------------------------------------------------
+ \1\ Consumers Union is a nonprofit membership organization
+chartered in 1936 under the laws of the State of New York to provide
+consumers with information, education and counsel about goods,
+services, health, and personal finance. Consumers Union's income is
+solely derived from the sale of Consumer Reports, its other
+publications and from noncommercial contributions, grants and fees. In
+addition to reports on Consumers Union's own product testing, Consumer
+Reports, with approximately 4.5 million paid circulation, regularly
+carries articles on health, product safety, marketplace economics and
+legislative, judicial and regulatory actions that affect consumer
+welfare. Consumers Union's publications carry no advertising and
+receive no commercial support.
+---------------------------------------------------------------------------
+ The potential for savings from the discount drug program are
+limited. CMS estimates that only 19% of Medicare beneficiaries will
+enroll, and about two thirds of enrollees will do so largely to get the
+$600 subsidy.
+ We believe that the challenge of making prescription drugs
+affordable for all consumers deserves immediate focus by Congress. The
+costs of failing to do so are high. Recently, there were reports in the
+press that 23 million Americans do not take statins to lower their
+cholesterol level--even though they are recommended for them--because
+they cannot afford them. These press reports came about in the light of
+new research that shows the high effectiveness (in terms of reduced
+heart attacks and mortality) of using cholesterol reducing medicines.
+If just five percent of those unable to afford statins suffer negative
+health consequences (and I believe this figure is an underestimate),
+then more than one million consumers in this country will be the
+victims of our failed health care policies. Because these are
+``statistical'' health consequences and deaths--and not discrete
+events--they have not captured the attention of policymakers and the
+public. But we urge you to consider the reality that medicines that are
+unaffordable do mean dire consequences for those who cannot take them.
+This crisis demands your attention.
+ In our testimony below, we explore ten key areas of concern
+regarding the discount drug care program.
+
+ 1. Seniors and the disabled will be confused about how to
+choose--and whether to choose--a discount drug card.
+
+ We don't need elaborate surveys about discount drug cards when we
+are able to poll our mothers and senior friends to quickly discover
+that there is already a high degree of confusion and anxiety about
+choices that they will soon face regarding discount drug cards. Should
+I get a discount drug card? Which one is best for me? Will I still be
+able to use other discount drug cards? Will the prices change? Will the
+drugs that I need continue to be covered? What if I want to change to a
+different card? These are not easily answered questions, especially in
+light of the possibility that prices and drugs on the list could change
+as often as once a week, but beneficiaries will be locked into the card
+that they select. A further complication is uncertainty about how the
+discount drug cards will work with existing state discount programs and
+existing prescription drug company subsidy programs.
+ It is important to remember the characteristics of the population
+that will be eligible for a discount drug card. These are not federal
+employees who are used to annual open enrollment decisions, with
+assistance from human resources staffs and Washington Checkbook.
+Instead, they are people 65 and over, and younger adults with
+disabilities. The Kaiser Family Foundation estimates that 36 percent of
+Medicare enrollees need assistance with at least one activity of daily
+living. An estimated 23 percent have cognitive impairments. The
+challenges of sorting out the best discount drug card for those who are
+cognitively impaired, for those who may have difficulty reading fine
+print, may be overwhelming. Yet the importance of making the right
+choice could be of great importance to them.
+ We have questions about whether the modest anticipated discounts
+(especially compared with other options that Congress has rejected)
+justify this program which will be confusing for beneficiaries and will
+require a huge resource commitment by senior health insurance
+counselors in order to help beneficiaries make a decision that will
+provide very short-term benefits for them.
+
+ 2. One of the lessons from the medigap market in the 1970's and
+1980's is that complicated choices in the health insurance marketplace
+can result in fraudulent schemes that victimize a vulnerable
+population.
+
+ As you know, the CMS has expressed concern about recent illegal
+activities. Individuals are incorrectly indicating that they are
+offering government-approved discount drug cards. Apparently, scam
+artists have made telephone calls and went door-to-door in Alabama,
+Georgia, Idaho, Nebraska, Oklahoma, New York, Rhode Island, and
+Virginia, peddling phony discount drug cards while indicating they were
+from the government.\2\ They tried to obtain personal information.
+---------------------------------------------------------------------------
+ \2\ Phony Medicare drug cards, Consumer Reports, May 2004.
+---------------------------------------------------------------------------
+ Recently, according to SCAMS--Senior Counselors Against Medicare
+Swindlers--the California Medicare Patrol Project, the consumer
+complaint website, http://ripoffreport.com/ reported having received
+700 e-mails complaining about a website called pharmacycards.com that
+claimed to offer 80 percent drug discounts, listing an address in
+British Columbia. This company was withdrawing cash from checking
+accounts from people who had never even heard of the site. While this
+scandal may be unrelated to the discount drug card issue before you
+today, it is a reminder that the lure of deep drug discounts, the
+increasing use of the Internet, and the potential to tap into seniors'
+checking accounts, can combine to set the stage for possible abuses in
+the future.
+ Members of this Committee may remember similar problems that arose
+in the Medicare supplement insurance (medigap) market in the 1970's and
+1980's, prior to the landmark reforms of OBRA 1990. Insurance agents
+preyed on the fears of vulnerable seniors (and sometimes represented
+that they were affiliated with the Medicare program) and this often
+resulted in abuses such as selling one person multiple duplicative
+policies. When seniors--many of whom have visual or cognitive
+impairments--are confused and overwhelmed with the choices that they
+face, this opens the door to predators in the marketplace who are out
+to make a quick buck at the expense of the vulnerable victim. It is
+important the CMS aggressively police against this type of preying on
+the nation's seniors and disabled.
+
+ 3. Congress must provide resources and make a commitment to help
+consumers sort out the confusion. The need for this is demonstrated by
+the fact that even the Federal Government is providing ``guidance''
+that could lead to some beneficiaries enrolling in programs that do not
+offer the most savings for them.
+
+ Will CMS educational materials be part of the solution or part of
+the problem? Recent materials offered as part of the CMS educational
+campaign raise serious concerns. On January 8, 2004, CMS released a
+document called: ``Better Benefits--More Choices: Good News About the
+Medicare Prescription Drug, Improvement and Modernization Act of
+2003!'' \3\ The sheet explains how the Medicare Endorsed Prescription
+Drug Discount Card will help those who need it most. The final bullet
+provides this example:
+---------------------------------------------------------------------------
+ \3\ http://www.cms.hhs.gov/medicarereform/issueoftheday/
+01082004iotd.pdf.
+
+ Beneficiary A needs to fill a prescription for Celebrex. In
+ 2002, an estimated retail price for 30 tablets of Celebrex (200
+ mg) was $86.28. For a low-income senior, the Act could mean a
+ savings of nearly $22 a month off the retail price and this
+ could be covered by the $600 in assistance. This example is
+---------------------------------------------------------------------------
+ based on a 20% discount off the retail price.
+
+ Unfortunately, there are several problems with this advice:
+
+ The government is making no attempt to help people
+compare the Medicare card savings against other discount options like
+the Pfizer Share card, for which anyone eligible for the low-income
+assistance would qualify. In effect, by encouraging beneficiaries to
+sign up for the discount drug card coverage (instead of other discount
+programs), the government is benefiting drug companies (who will have
+lower costs for their subsidy programs) at the expense of taxpayers
+(who will be bearing the cost of the $600 subsidy).
+ In addition, by failing to provide information about
+lower cost drug alternatives, the government is missing an opportunity
+to encourage consumers to consider lower-cost non-brand options. The
+state of Oregon recently conducted an in-depth evidence-based drug
+review for non-steroidal anti-inflammatory drugs (NSAIDSs) for
+arthritis and pain. The review concluded that ``all of the medicines
+listed [list includes Ibuprofen, Celebrex, and Vioxx] are equally
+effective in treating arthritis.\4\ The monthly cost of Celebrex was
+estimated (by AARP) to be $104, while the monthly cost of Ibuprofen
+(generic) $19.\5\ We believe that CMS should help consumers identify
+lower cost alternatives that are equally effective.
+---------------------------------------------------------------------------
+ \4\ Oregon Health Resources Commission. The review notes that
+``patients with recent history of bleeding ulcers should avoid using
+aspirin, NSAIDS or COX-2 inhibitors, and that ``compared to other
+NSAIDS, Vioxx and Celebrex may be less likely to cause bleeding ulcers
+in seniors.'' See: http://www.oregonrx.org/OrgrxPDF/
+One%20Page%20Summaries/OHPR%20factsheet%20NSAIDs1.pdf.
+ \5\ http://www.aarp.org/or/rx/Articles/a2003-10-02-or-rx-
+arthritustable.html.
+
+ 4. The CMS must be vigilant in curbing marketplace behavior that
+complicates the market and creates financial burdens for beneficiaries
+who choose the ``wrong'' discount drug card. CMS must guard against
+---------------------------------------------------------------------------
+``bait and switch'' or other market manipulation.
+
+ As you know, companies that offer discount drug cards will be
+allowed to change both the prices they charge for various medications
+and the list of drugs that are offered as often as once a week. At the
+same time, consumers are locked into the card that they select, and are
+allowed to switch cards only once (during a short period at the end of
+2004). This raises the troubling possibility that a diligent consumer
+will carefully complete worksheets comparing their savings from various
+discount drug cards, will commit to one card because it offers
+discounts on the drugs that he/she needs, and then will find that the
+company offering the card drops the drugs the individual needs from
+their list of covered drugs. Some have raised the prospects of large-
+scale ``bait and switch'' operations. Any consumer who loses discounts
+on the drug that they need is likely to be justifiably upset about this
+program. It is essential that CMS monitor the price changes and the
+drug lists carefully and take appropriate steps. If price changes are
+large and frequent, or if the drug list drops drugs frequently, then
+CMS should consider revoking the approval for a card (while protecting
+existing enrollees). In addition, this is the type of practice that
+should disqualify a company from serving as a prescription drug plan
+when the Medicare drug benefit begins in 2006.
+
+ 5. The CMS should aggressively expand the role of generics in the
+marketplace, and police against discount drug cards that steer
+beneficiaries toward brand name drugs.
+
+ We have questions about whether the discount drug card program will
+adequately encourage the use of generics instead of high-priced brand
+name drugs. CMS has established 209 drug categories. Generics must be
+offered in 55 percent of these categories (which, according to CMS,
+represents 95 percent of the drugs for which generics are
+available).\6\ This means that there will be only brand-name drugs
+available in 94 categories. We are concerned that the large number of
+drug categories may unnecessarily limit the inclusion of generic drugs.
+The Academy of Managed Care Pharmacy argues that fewer categories would
+have allowed larger discounts; similarly, fewer categories may have
+allowed for greater reliance on generics.\7\
+---------------------------------------------------------------------------
+ \6\ p. 69853, Federal Register notice, Medicare Program; Medicare
+Prescription Drug Discount Card, 42 CFR Part 403, CMS-4063-IFC.
+Department of Health and Human Services, Centers for Medicare &
+Medicaid Services.
+ \7\ ``Drug Makers Split with PBMs, Insurers Over Coverage of Drug
+Card,'' InsideHealthPolicy.com, February 4, 2004.
+---------------------------------------------------------------------------
+ We are concerned about the potential for drug manufacturers to
+manipulate the discounts that they offer in these categories to ensure
+a place on the sponsors' formularies, possibly through large discounts
+on these brand name drugs. The end result could be patients locked into
+brand-name drug therapy. We urge the CMS to carefully monitor whether
+the program in fact steers enrollees to brand name drugs when generics
+(possibly in other related categories) would be appropriate. We note
+that manufacturers have supported the CMS approach, while pharmacy
+benefit managers (PBMs) and pharmacies have opposed it. We would hope
+that the Medicare website would automatically include comparative
+pricing information (possibly at reputable websites) for generic drugs
+whenever they are available, even if they are not available through the
+discount drug card offered.
+
+ 6. The CMS should compare the discounts available from all
+discount drug cards with a standard drug-pricing basis such as the
+federal supply schedule to help consumers compare cards.
+
+ One troubling reality of the new discount drug care program is the
+failure of Congress and CMS to establish base reference prices against
+which the discounts are measured. Families USA has pointed out that
+``there are also no rules that prevent base prices from increasing
+substantially quickly.'' \8\ Between January 2002 and January 2003,
+prices for the top 50 drugs increased at a rate of almost three-and-
+one-half times the rate of inflation, according to Families USA.\9\ Not
+only should CMS establish a base price for comparison purposes, but it
+would be helpful if CMS also provided information about how the
+discount card prices compare with other prices. Beneficiaries who are a
+short bus trip away from Canada may well be interested in Canadian
+prices. People who are not eligible for federal programs (such as
+Medicaid and veterans' benefits) would not be able to benefit from the
+same low prices for prescription drugs in these programs. Still, they
+would be interested to know how their prices compare with the prices
+available to federal purchasers (i.e., the federal supply schedule),
+and to the VA to cover veterans' drugs (though of course veterans pay
+modest cost-sharing for this deeply discounted price). These programs
+can demonstrate to the public the benefits of negotiating for deep
+discounts and using bulk purchasing power saving money for consumers
+and taxpayers.
+---------------------------------------------------------------------------
+ \8\ The New Medicare Prescription Drug Discount Card: A Very Flawed
+Program, at www.familiesusa.org.
+ \9\ Dee Mahan, Out of Bounds: Rising Prescription Drug Prices for
+Seniors, Families USA, 2003.
+
+ 7. The CMS and Congress should pay particular attention to the
+---------------------------------------------------------------------------
+use of formularies (drug lists) by the discount drug card companies.
+
+ Formularies are basically lists of prescription drugs, in this
+case, for which the discount drug card company will negotiate a
+discount on behalf of enrollees. (Formularies in the eventual Medicare
+prescription drug benefit have more far-reaching impact since they
+determine whether the drug is covered by the enrollee's insurance
+coverage, and whether any out-of-pocket costs count toward reaching the
+catastrophic benefit.) One of Consumers Union's concerns about the
+ultimate implementation of the Medicare Modernization Act of 2003 in
+the year 2006 is the model that relies on participation by hundreds of
+insurance companies and health plans in providing the benefit, and
+their use, in turn, of possibly hundreds of formularies that determine
+which drugs are covered for enrollees. The intent of the legislation is
+that these formularies be evidence-based. It is unclear to us, given
+that all formularies are meant to be constructed based on objective
+scientific evidence, why there should be scores or hundreds of
+alternative formularies. In 2006, this will mean that a Medicare
+beneficiary on one street could have in effect different drug coverage
+than a beneficiary on the next street. More formularies do not
+necessarily result in more choice for beneficiaries, who remain at the
+mercy of decisions of the prescription plans to enter the market in
+their region. It is unclear what the benefits for consumers are of
+scores of different formularies/drug lists by each discount drug card.
+Whether formularies, as determined by the companies offering discount
+drug cards, serve the best interests of consumers should be monitored
+carefully throughout this program.
+
+ 8. The CMS and Congress should apply additional lessons from the
+discount drug program (e.g., the reliance on evidence-based, scientific
+findings; changing coverage, changing prices; harm due to consumer
+lock-in) to refine and improve the Medicare prescription drug benefit
+that begins in 2006.
+
+ Throughout this program that will last approximately one-and-one-
+half years, there will be issues that may have implications for the
+drug benefit that begins in 2006. We urge Congress--and CMS--to
+carefully consider the implications of this program for the future drug
+benefit. In addition to the use of formularies, Congress should
+consider whether additional limits should be placed on changes in
+formularies; prices charged; implications of consumers being locked-in
+to the plan they choose; the adequacy of choices available in different
+regions; the affordability of the coverage, and many other elements.
+This learning period will also be important for the discount drug card
+companies, many of which are participating with the intent of gaining
+experience (and market share) that will benefit them when the 2006
+benefit begins.
+
+ 9. The government should aggressively reach out to all those
+eligible for the $600 subsidy to assure that all who are eligible
+receive the subsidy, when that's the best deal for them.
+
+ Low- and moderate-income Medicare beneficiaries need all the help
+that they can get to make prescription drugs affordable. It is
+important that CMS take aggressive steps to be sure that these seniors
+and disabled enroll in the program that is best for them, while
+minimizing costs to the taxpayer. (As noted above, shifting costs from
+pharmaceutical company programs to the taxpayers, without extra relief
+for beneficiaries, is not a good idea). We would hope that the
+government would minimize the enrollment hoops demanded of
+beneficiaries, as these restrict access to the programs. For example,
+we urge Congress to encourage CMS to automatically enroll all current
+Medicare Savings Program beneficiaries (QMB, SLMB, and QI-1
+individuals) in the transitional assistance and special transitional
+assistance programs without requiring a separate enrollment process.
+
+ 10. In light of the fact that high prescription drug prices are
+denying millions of Americans access to needed prescription drugs,
+Congress should take steps to lower prescription drug prices for all,
+including those not eligible for Medicare.
+
+ In enacting the Medicare Modernization Act of 2003, Congress
+rejected other pricing models that have successfully saved money for
+consumers and taxpayers. A 1998 CBO study found that federal facilities
+paid 58 percent of the average invoice price paid by retail pharmacies
+for 100 brand-name drugs in 1994, compared with 91 percent for
+hospitals and 82 percent for HMOs.\10\ In other words, federal facility
+prices were 29 percent lower than HMO prices, a substantial savings.
+More recently, through the use of an evidence-based formulary and
+volume discounts, the Department of Veterans Affairs is able to achieve
+discounts well below the federal supply schedule prices, which are
+already among the lowest prices in the market.\11\
+---------------------------------------------------------------------------
+ \10\ p. 25, How Increased Competition From Generic Drugs has
+Affected Prices and Returns in the Pharmaceutical Industry,
+Congressional Budget Office, July 1998. See also: p. 155-156, and
+footnote 17, Huskamp, et. al., ``The Impact of a National Prescription
+Drug Formulary on Prices, Market Share, and Spending: Lessons for
+Medicare?'' Health Affairs, Vol. 22, No. 3, May/June 2003.
+ \11\ Description and Analysis of the VA National Formulary,
+Institute of Medicine, 2000.
+---------------------------------------------------------------------------
+ Another high priority for prompt Congressional attention (and the
+topic of an FDA task force) is the issue of legalization of
+reimportation of prescription drugs from other countries. Consumers
+Union believes that in light of the urgent need for relief from high
+prices and the reality of reimportation that is underway, Congress has
+a responsibility to help ensure the quality and safety of these
+medications in order to protect those consumers who are reimporting
+drugs. The lower prices from reimported drugs make the difference
+between many consumers being able to get needed medications and going
+without. The use of licensed brokers, with strict quality controls, as
+currently done successfully within Europe, is one model that should be
+carefully considered. Congress and the Food and Drug Administration
+should move forward expeditiously to make safe and fairly priced drugs
+available to U.S. consumers.
+ At the same time, it is important that the Congress recognize its
+responsibility in using market forces where possible to provide better
+value to taxpayers and consumers for prescription drug values. Oregon
+has done pioneering work that studies the scientific evidence about
+clinical effectiveness as a basis for the selection of drugs in its
+Medicaid program. The Medicare Modernization Act of 2003 includes a
+provision in section 1013 that calls for further synthesis of medical
+evidence about the comparative clinical effectiveness of alternative
+prescription drugs by the Agency for Healthcare Research and Quality.
+This important provision should be funded promptly and implemented soon
+to provide consumers and government programs with the scientific basis,
+and analysis, to make sound decisions based on evidence, reducing the
+impact of decisions that are based on an incomplete picture that is
+often presented in direct-to-consumer advertising.
+Conclusion
+ The challenge of assuring that Medicare beneficiaries (and all
+Americans) have access to affordable prescription drugs is daunting.
+The discount drug card program that will soon go into effect may offer
+beneficiaries modest relief (especially for those eligible for the $600
+subsidy). However, the program is fraught with potential problems:
+beneficiaries will be confused and bad actors will try to take
+advantage of their confusion. The Congress and the Administration
+should guard against marketplace manipulation, encourage the use of
+generics, provide a standard basis for evaluating the discounts
+offered, monitor the use of formularies, and aggressively pursue other
+steps to help all Americans have access to affordable, safe medicines.
+
+
+
+ Chairman JOHNSON. I thank the panelists very much. Ms.
+Shearer, I think your idea that we watch these plans and learn
+from them and draw some standards for those who participate in
+2006 is a very worthy comment. Surely if we see plans getting
+in and actually moving their prices a lot, that may very well
+not be a plan we want to be a permanent participant in the drug
+plan. So, I am sure you will be active in helping us watch
+performance. Certainly, what you do is more important than what
+you say, and we do need to watch carefully the performance of
+the plans as we look to the more permanent plan of 2006. It
+certainly is too bad that 23 million aren't taking statins they
+should. That is part education. These discounts will help. When
+the big plan comes in place, it is not just discounts, it is
+also a 75 percent subsidy for the majority of seniors. So, we
+should be making very good progress in that direction.
+ I am not quite as concerned as you are about the senior
+confusion because I have watched literally every senior center
+in my district learn exactly how to order drugs from Canada in
+a hurry. So, there will be a lot of good resources out there. I
+am sure every congressional office will work in their area as
+long as the--as well as the federally funded educators. I think
+the development of comparative pricing capability is very
+important in the long run, and we did make a step forward in
+this bill in that direction. I think your organization and
+others can help us on that as we go through this, and we can
+look back and then see what are the additional tools we need.
+ Mr. Nelson, let me just ask you a comment briefly, or ask
+you--I am really impressed that, first of all, the changes in
+the bill have had such a beneficial effect for your
+participants in your Medicare formerly Choice Now Advantage
+Plan, but I am particularly interested that you are using the
+discount card to give people access to other portions of your
+plan. Now, as I understand it, the discount card is only
+eligible to the people in your plan.
+ Mr. NELSON. That is correct.
+ Chairman JOHNSON. So, presumably they did have access to
+these things beforehand.
+ Mr. NELSON. Actually, the drug benefit programs that we
+offer with our Medicare Advantage plans vary by county. So, for
+example, in Oregon, and one county in Washington, we have a
+demonstration PPO plan. We have about 4,000 members there.
+However, a drug benefit is not available to them through this--
+through our demonstration PPO product.
+ Chairman JOHNSON. So, this will give a uniform access all
+across your plans except in those plans that already have the
+richer benefit.
+ Mr. NELSON. Correct. However, the transitional assistance
+program will apply to individuals in our plans where a drug
+discount, or where a drug benefit does exist. It will help with
+the copays, out-of-pocket expenses, and then it will also help
+when they reach their limit, which a lot of our drug benefits
+have.
+ Chairman JOHNSON. I do want to comment on the fact that you
+are hooking them into this Decision Power Disease Management
+Program, because I think that kind of advice, and you describe
+it as a coach, is extremely important. If now your seniors have
+access not only to health care, but to prescription drugs and
+have a chronic illness, using that coach, they will be able to
+really dramatically improve their health and reduce their
+costs. So, I was very glad to see that connecting up so early.
+So, by June, many will have much, much better access to disease
+management. Ms. Rawlings, I really am impressed with the
+research you have done and the quality of the product you are
+putting out there. I don't quite understand--can you tell us
+anything about what the average discount will be? Is there some
+goal you have? Will it vary tremendously per drug?
+ Ms. RAWLINGS. I think the best way to explain it is this.
+Our discounts, in terms of the specific question on the range,
+I think that public information we have discussed is ranges
+between 10 and 25 percent on different drugs during--through
+different processes it may be even a little bit higher. We are
+not sharing specifics just because we will be in a competitive
+environment, and until we are ready to launch, we frankly would
+like to keep our position a little secure. We chose to offer
+this card nationally to offer broader access to the millions of
+people who do not have an existing benefit today, and we felt
+by offering compelling discounts as I just mentioned, that we
+can expand access and create greater awareness of the drugs
+that are available and make them more affordable for people to
+receive them.
+ Chairman JOHNSON. I also understood in your testimony that
+you mentioned that the General Accounting Office has reported
+that pharmacy benefit management techniques, which this bill
+does allow, used by health plans in the FEHBP have resulted in
+savings of 18 percent for brand-name drugs and 47 percent for
+generic drugs. So, we can, I believe, hope that these discount
+cards, which is only the first step and doesn't involve quite
+as many price-cutting tools as the full bill allows, in this
+first step, because of the competition, there are multiple
+plans, that we will see discounts that will be 10 percent and
+much deeper.
+ I would--I think it didn't come out clearly earlier when we
+talk about the market, what we are really saying is that if a
+senior calls up and they find out that this company gives them
+a 1 percent discount at this drug store, they are unlikely to
+sign up with that company. So, your job will be to make sure--
+make clear to seniors kind of what general discount they get
+across the drugs, and then which particular drugs they get a
+really good deal with you, and to make sure that that discount
+gets down to the local pharmacist in their area that they
+choose to deal with. Is that a fair statement?
+ Ms. RAWLINGS. Yes, it is. If I might add, Madam Chair, I--
+our plan, the way our network--we have a national network in
+place to support this card, and they are negotiated. The
+discounts are negotiated on a pharmacy basis and apply to all
+drugs that would be purchased through that particular pharmacy
+all around the country.
+ I think it is an important point to note that--and you
+mentioned this a moment ago--that this particular program is an
+excellent first step toward moving to 2006 when the Medicare
+Advantage program offers broader choices and hopefully much
+broader participation around the country which will enable
+companies like Aetna to more fully integrate our disease
+management and care management programs across the country.
+ Chairman JOHNSON. Your card, unlike Mr. Nelson's card, is
+not available just to those who participate in some of your
+senior integrated care plans, but to all seniors, correct?
+ Ms. RAWLINGS. That is correct.
+ Chairman JOHNSON. Inside and outside of that network.
+ Ms. RAWLINGS. That is correct. If I could also add one
+point to that. When we did the research and did the focus
+groups in the three States that I mentioned, the probably most
+significantly shocking thing to me was that most folks were not
+all that aware of reform, which surprised me. Secondarily, they
+were all acutely aware of what they were spending on their
+pharmaceuticals. The majority of the folks in the room were on
+varying types of insurance or on traditional Medicare, and all
+seemed to be quite conscious of the fact that they would weigh
+the premium, whether there is one or not or what the level is,
+versus what discounts they would be able to achieve with that
+card and make a decision that was a very individual one.
+ I think the fact CMS mentioned they would have the pricing
+tool available on the web, I agree with you on making a clear
+comparison between brand and generics is an excellent service
+for these folks. I think all of the--my colleagues and
+competitors and all of us will have every interest to make sure
+that these folks feel like they are able to make a good, clear
+decision for what is right.
+ Chairman JOHNSON. It is disappointing when a senior can
+bring to you, who has done comparative shopping, something that
+shows that one pharmacy was going to cost them $93 for exactly
+the same prescription that someone else was going to charge
+them $20 for in the same shopping area. So, it is going to be
+important not only for people to understand what your discounts
+are, but what the price effect is going to be, because 40
+percent off of $93 is not as good a deal as 40 percent off of
+$20. So, thank you. Mr. Stark.
+ Mr. STARK. Thank you, Madam Chair. Ms. Shearer, in your
+opinion, how much of a discount might Medicare enrollees
+receive, and how--again, in your opinion--do you suppose the
+Medicare discount cards will compare with discount cards that
+are already out in the market, which many seniors already have.
+Pfizer Inc. has one if your income is below $28 thousand, I
+think, for certain drugs. How will this proposed Medicare drug
+card compare with what is already out there?
+ Ms. SHEARER. Congressman Stark, I wish I could give you a
+definitive answer. Let me just talk briefly about the cards
+that are on the market. When Consumer Reports has looked at
+them, and I am thinking really about the general discount drug
+cards, we have found that for the most part people are better
+off just doing some pretty aggressive shopping around. They
+don't save additional money; that the potential savings are
+very limited. I can't really estimate what the level of
+discount will be under this program.
+ I am concerned, though when you look at the numbers, CMS is
+estimating about 7.3 million enrollees in the first year and
+7.4 million in the second. If there are about 100 companies--I
+realize there could be somewhat less--it comes to about 700,000
+per card. I just question the economic analysis that leads to
+the conclusion that this kind of purchasing is the bulk
+purchasing that can lead to really significant discounts. Just
+in summing up, I am reminded of back in the days of the
+Kassebaum-Kennedy bill (P.L. 104-191) when that was enacted
+with great fanfare, that an estimated 25 million people were
+going to benefit, and now I am hearing words like up to 25
+percent. Honestly, I am skeptical about the savings on average.
+I mean, I think we would be lucky if they were 10 percent on
+average.
+ Mr. STARK. Kaiser has about 600,000 or 700,000 enrollees in
+my county in California, and they don't anticipate that they
+can provide significant discounts as big as they are. Had I
+been able to talk some more with our previous witness, I would
+have pointed out that the Secretary is supposed to require that
+card sponsors have business integrity in the contracting
+regulations, and Medco isn't here, but they have paid
+settlements of $2 million and $45 million for improper business
+practices. Aetna, some time ago was part of a class action that
+forced physicians to enter into economically unfavorable
+contracts, imposed unnecessary administrative burdens on
+providers, improperly denied claims in whole or in part, and
+did not pay their claims in a timely manner, or did not pay
+them at proper rates. I am just curious, Ms. Rawlings, how did
+the Secretary determine that your company had good business
+integrity, given that record?
+ Ms. RAWLINGS. Well, I can't speak for them. I will give you
+my view. I think first and foremost we have settled that
+lawsuit and have changed our leadership over the last several
+years to build strong relationships in the communities with our
+physician and hospital partners, and I think have made
+significant progress in reestablishing ourselves.
+ Mr. STARK. So, you have changed.
+ Ms. RAWLINGS. We have changed.
+ Mr. STARK. Good. Mr. Nelson, then let me ask you just one
+question, and my time will expire. Tell me if I am wrong, but
+it is my understanding that you are not going to charge the $30
+enrollment fee.
+ Mr. NELSON. Correct.
+ Mr. STARK. So, you are not going to make any money on that.
+ Mr. NELSON. Correct.
+ Mr. STARK. If you get a million enrollees, and you are one
+of the bigger providers, using the Consumers Union estimates of
+700,000 enrollees per card, you may get a couple million
+people, how are you going to make any money? Where does your
+profit come from, if you don't charge the fee for enrolling
+people? You have to get some kickback or share in the discounts
+which you keep and don't pass through to the cardholders; is
+that not correct?
+ Mr. NELSON. That is not correct.
+ Mr. STARK. How can you make a profit in this?
+ Mr. NELSON. The idea of adding additional benefits for our
+beneficiaries is, believe it or not, very exciting to us. It is
+an opportunity to do three things: extend a drug benefit to all
+of our enrollees; to offer the opportunity to participate in
+transitional assistance; and then, third, at least--or last but
+not least important is the opportunity to connect them into our
+pharmacy management system so we can interact with them and do
+all the things that our industry and our company is--has become
+very skilled at over the years.
+ Mr. STARK. So, only your existing members can join your
+card.
+ Mr. NELSON. That is correct.
+ Mr. STARK. Aetna, how will you make a profit, with your
+card being open to anyone who wants to enroll?
+ Ms. RAWLINGS. That is correct.
+ Mr. STARK. Where does the revenue come in? Mr. Nelson will
+get it through outreach and perhaps marketing, but where will
+your profit come from? How do you make money on this?
+ Ms. RAWLINGS. Well, our view on this card is something I
+mentioned earlier, is that it is a tool for Aetna to
+demonstrate to the broader country, if you will, our commitment
+to the Medicare program and our desire to broaden prescription
+drug access.
+ Mr. STARK. Okay. In the past both of you have dropped
+members from your managed care plans when you weren't making
+money on them. So, I don't suspect that you are going to
+operate a plan that doesn't make money over time.
+ Ms. RAWLINGS. Well, I think the way I would explain it is
+simply, and being conscious of your time as I can, is that we
+have every interest in broadening our participation in the
+Medicare program, and we feel, as I mentioned earlier, that the
+Medicare Modernization Act made significant changes to the
+program around aligning costs with trend that enables us to
+stay in.
+ I think secondarily, because of the strains that have been
+on the program over the last several years, and you just
+mentioned this, the industry and Aetna specifically have gotten
+much, much greater understanding of how older consumers access
+care and how we can best serve them. A lot of that is through
+disease management and care management programs that we offer
+as part of our basic package. The Medicare prescription drug
+discount card is a means by which Aetna can launch a card and
+serve hopefully as many millions of beneficiaries who would
+like to enroll, at the same time learn about them, contribute
+to the value of their pocketbook and enable them to learn about
+Aetna and the new programs available for 2006.
+ Mr. STARK. Do you ever anticipate that you will be able to
+deliver managed care for less than the fee-for-service fees
+that we pay for the Medicare standard benefit?
+ Ms. RAWLINGS. Well, it is a hard question to answer clearly
+because the fees move all over the place. What I can tell you
+is that we believe with an integrated approach that it involves
+disease management and care management, understanding where
+people have risk, and bringing them into the system, which is
+contrary to normal, or to some opinion, that you can actually
+balance the scales and lower costs over time while creating
+greater value. So, I can't really answer it specifically, but
+we do believe we bring the industry and us specifically brings
+great value through the integration of the health care system.
+ Mr. NELSON. Congressman Stark. If I might add to that, we
+are very proud of what we do and what we contribute to the
+health outcomes of the seniors that we serve. There is plenty
+of evidence out there that we provide additional choices,
+lower-cost care and better outcomes than the fee-for-service
+counterpart. So, I don't think there is really a question that
+we are capable of delivering better results.
+ Mr. STARK. We will see, I hope. You may be right. Thank
+you, Madam Chairman.
+ Chairman JOHNSON. Thank you, Mr. Stark. Mr. McCrery.
+ Mr. MCCRERY. Thank you. Ms. Shearer, I understand and
+recognize that your organization doesn't think that the
+legislation we passed last year goes far enough or provides
+enough help to seniors with their prescription drug needs. I
+think that is pretty close to what you stated in your
+testimony. However, don't you think that the legislation will
+provide significant assistance to a large number of seniors?
+ Ms. SHEARER. Well, there is no question----
+ Mr. MCDERMOTT. I am not talking about the 2006 program. I
+am talking about this drug card and the transitional
+assistance.
+ Ms. SHEARER. The $600 subsidy is a significant subsidy to
+those who will get it. I am not optimistic that the discount
+drug cards are going to yield the kind of savings that you
+would like, we would all like to see. I am happy to talk about
+other issues, but I think you really wanted me to limit it to
+the discount drug card.
+ Mr. MCDERMOTT. The $600 transitional assistance.
+ Ms. SHEARER. Yes.
+ Mr. MCCRERY. I mean, the drug card, we don't know what
+level of discount those are going to produce, and I admit that.
+Based on my own personal experience and the free market that is
+out there right now, I can tell you that there are significant
+very large discounts available from retail. You said, well, we
+have found or research has found that in most cases seniors can
+just do smart shopping and do just as well as buying one of
+these discount cards. Well, that was not my experience. We
+tried to do smart shopping. We were somewhat limited. My
+stepmother lives in a small town, and so our choices were
+limited at least in that geographic area, but we did try. This
+card that I ended up getting her into has just been a godsend
+to her. It has saved her a huge amount of money. So, my
+personal experience does not comport with your research, at
+least not as you described it today.
+ Ms. SHEARER. If I could just say, Congressman, I would
+really urge the Committee to make sure that CMS does careful
+analysis, because I think we all would like to know what the
+savings are, and the methodological challenges of measuring the
+savings are not very easy, because there are lots of different
+prices you could measure against. I think we need to design
+that study very carefully. I think we would all be interested
+in knowing just what level of savings are achieved.
+ Mr. MCCRERY. Yes. No, there is no question that it is hard
+to pinpoint a price in this market, as large as it is and as
+many points of delivery as there are. There is no question that
+is very difficult, if not impossible. I will be glad to give
+you the list of my stepmother's drugs, which were extensive,
+and tell you what she was paying at the drugstore and now what
+she is paying with her discount card. It is pretty plain to see
+the savings. Then the $600 subsidy to low-income seniors
+clearly is a very good benefit. It may not be enough, but it is
+certainly enough to provide those low-income seniors who need a
+statin with a statin at retail. Never mind any discount they
+might get. Retail. They can get a statin, these days, for $600
+a year. They can get two maybe.
+ Assuming that you agree with me that this legislation does
+help seniors to at least some degree, my question is, what is
+Consumers Union going to do to let seniors know what is out
+there, what is available, what to be wary of in the market,
+those kinds of things, or are you going to do anything to help
+seniors take advantage of this help that is now going to be
+available to them?
+ Ms. SHEARER. We have some possible projects under
+development. Like any organization, we need to figure out what
+the business model is, how we are going to produce them, who
+would do them. We are considering various things. I can't
+really say more, but we would like to help get the word out
+about just what the choices are in the marketplace. It is not
+clear exactly where that will all lead, but we are considering
+things.
+ Mr. MCCRERY. Okay. Good. Do you have anything already on
+the books? Since we only have 2 months until the seniors can
+start making choices. Have you done anything yet?
+ Ms. SHEARER. No. No, we have not. I mean, we are an
+organization a little bit different than many that are helping.
+We produce Consumer Reports. We have a Washington office. We do
+advocacy. We don't have a large niche in the marketplace to
+help seniors get this kind of information. So, this is a new
+area for us to consider. So, we are----
+ Mr. MCCRERY. Oh, I see press reports all the time citing
+Consumer Union. You could do a lot. You could hold a press
+conference. You could put in your Consumer Reports magazines,
+all kinds of things that you could do. I hope that you will
+help seniors, because your organization does claim to be
+looking out for the interest of consumers and regular folks,
+and so I hope that you will use all of that power to inform
+people and help them.
+ Chairman JOHNSON. Thank you, Mr. McCrery. I thank all the
+panelists. I would say, it could be very helpful to us, Ms.
+Shearer, if your organization--you worked with us. I have
+reviewed a number of things you have said about the bill, and
+they are quite factual and accurate, so, I would like to work
+more closer together so that you are working from, I think,
+more substantial data about the bill, because we can do our
+seniors in America no greater harm than confusing them, and
+some who could get really good benefits won't. Others will make
+poor choices. There isn't anyone--first of all, this is all
+voluntary. There isn't anyone who is going to do worse with one
+of these cards than without any card. So, what we need to do is
+help seniors understand what their options are and how
+important shopping is, just like it is important in food or any
+other area. So, I would very much like to work with you, having
+relied on Consumers Union some periods of my life quite
+heavily. I would have to say that I have been distressed as I
+sit and review materials that you put out that there is a lot
+of factual inaccuracies, and so I would like to work with you
+at the beginning and not at the end.
+ It is very nice to have you here to talk about your
+concerns, which are real, and legitimate, and the depth of
+research that the companies have done to get into this market,
+and I would say nothing was more discouraging than to watch
+some of the Choice plans withdraw, because they invested big
+money to get in. It is hard to put a product on the market and
+then not have it do well. I think everyone has the intention of
+making this all work, and I think working together,
+communicating aggressively to our seniors, helping them
+understand this isn't everything, this is merely a step, but I
+think together we can make a significant difference in the
+costs of drugs and the availability of medicines for other
+seniors in the next few weeks. I am pleased that this bill has
+had a near-term as well as a long-term impact for our seniors.
+Thank you all for participating today.
+ [Whereupon, at 4:30 p.m., the hearing was adjourned.]
+ [Submission for the record follows:]
+ Statement of AARP
+ On behalf of AARP's more than 35 million members, we thank you for
+holding this hearing on the new Medicare-endorsed prescription drug
+discount card program. AARP has consistently supported a discount card
+program as a building block for a full Medicare drug benefit. The
+discount card program will provide some help with drug costs right away
+by providing modest discounts for people who now pay full retail costs.
+It will provide additional help to those who need it most by providing
+a $600 credit on the cards in 2004 and 2005 for those with limited
+incomes. We are pleased to see this process now underway.
+ As we move forward, it is clear that we face significant challenges
+in educating beneficiaries and helping them to enroll in this program.
+This is especially true for those with limited incomes who qualify for
+the card programs' $600 annual transitional assistance. AARP is working
+through a broad coalition--the Access to Benefits Coalition for
+Prescription Drugs--to conduct hands-on, grassroots outreach efforts.
+ We believe success of the transitional assistance program could be
+greatly enhanced by removing regulatory barriers that were not mandated
+by the statute. Removing these barriers could expand eligibility and
+ease or even guarantee enrollment of many eligible people.
+Education and Enrollment Challenges
+ Educating beneficiaries and helping them to enroll in this program
+is a significant challenge. There will be many cards to choose from,
+each with different discounts, formularies, enrollment forms, and
+marketing campaigns. The challenge is not one of lack of communication
+but of information surfeit. The potential for confusion and
+miscommunication is substantial.
+ We will need to explain honestly to beneficiaries that the
+discounts provided by the cards are expected to be modest, averaging
+probably 10 to 15 percent off of full retail brand prices. Many
+beneficiaries already receive discounts of that magnitude, and it will
+be important to help people evaluate whether they would benefit
+additionally from the card program.
+ Those who can benefit will need help in determining which card
+would help them the most. Some cards may have tightly limited
+formularies that provide greater discounts on a smaller number of drugs
+and thus may be better for those who rely on a limited number of those
+specific medications. Other cards may have broad or open formularies
+that provide discounts on a wide range of drugs, which is an option
+that some beneficiaries may prefer. And each card will have its own
+network of retail pharmacies, requiring beneficiaries to determine
+whether they can use a given card in their neighborhood or at a
+favorite drug store.
+ Medicare is launching a broad education campaign and will be
+providing individual assistance through its 1-800 Medicare hotline and
+through a web-based tool to help individuals evaluate specific card
+options. These are valuable tools for assisting people in understanding
+the program and their specific options. However, they will bring
+beneficiaries only up to and not through the enrollment process.
+Beneficiaries will need to take an additional step on their own in
+finding, filling out, and submitting the right enrollment form for the
+card of their choice.
+Transitional Assistance is a Special Challenge
+ Perhaps the greatest opportunity--and challenge--is reaching those
+eligible for the $600 annual transitional assistance credit. People
+eligible for this program have limited incomes--below 135 percent of
+the federal poverty limit--and in most cases no other drug coverage.
+These are the people who most need help with prescription drug costs.
+ Outreach may be particularly challenging for beneficiaries in this
+population, as they may face the greatest barriers to learning about,
+understanding, and enrolling in the drug card program. Previous efforts
+to reach these same people have had very limited success. For example,
+virtually all of those eligible for transitional assistance are
+eligible for one of the Medicare Savings Programs (known separately as
+the QMB, SLMB, and QI1 programs) that help pay Medicare cost-sharing
+requirements. Yet less than two thirds of those eligible for these
+programs are enrolled.
+ It is clear that simply doing the kind of outreach that has been
+done before probably will not be enough to ensure broad enrollment.
+ABC Coalition
+ Because the challenge in reaching those eligible for transitional
+assistance is so great, we are working through a broad coalition--the
+Access to Benefits Coalition for Prescription Drugs--to target them
+through hands-on, grassroots outreach efforts.
+ The Coalition includes more than 40 groups representing
+beneficiaries, providers, and others that can help find, educate, and
+enroll eligible people in the program. The goal of the Coalition will
+be to ensure that all low-income beneficiaries know about and benefit
+from the discount card, as well as other available resources, for
+saving money on prescription drugs.
+ Coalition plans include a national media campaign and production of
+toolkits to help outreach workers explain and assist in enrollment. We
+also will organize, analyze and share knowledge about best practices
+and cost effective strategies that overcome barriers in reaching this
+important population.
+Removing Regulatory Barriers
+ In addition to grassroots outreach efforts, odds for success of the
+transitional assistance program could be greatly enhanced by removing
+regulatory barriers. Specifically, we believe the following changes in
+regulations issued by the Centers for Medicare and Medicaid Services
+(CMS) should be made:
+
+ A universal enrollment form should be authorized.
+Currently each card sponsor will have two different application forms,
+one for those who do not qualify for transitional assistance and
+another for those who do. This means local community outreach workers
+providing one-on-one help in evaluating cards and completing the
+application forms will need to carry around dozens of different forms.
+That will be unmanageable, with great potential for confusion and
+error. A universal application form that could be used to apply for
+different drug cards by checking off a box for the chosen card sponsor
+would greatly increase their ability to be effective.
+ Automatic enrollment for people in Medicare Savings
+Programs should be conducted. People eligible for transitional
+assistance are by definition eligible for these programs. They are very
+difficult to reach through traditional outreach efforts, as experience
+has proven with less than two thirds of all eligibles enrolled.
+Automatically enrolling people in Medicare Savings Programs into the
+discount card transitional assistance program if eligible beneficiaries
+do not choose a card after a specified time period, while still giving
+them an option to decline or change enrollment if they wish, would
+ensure that millions of difficult-to-reach people will receive this
+benefit.
+ State pharmacy assistance programs should be allowed to
+directly enroll their members when they already have the information
+necessary to determine eligibility. Many of these state programs
+already have income data telling them which of their enrollees qualify
+for transitional assistance. These state programs also are eager to
+maximize enrollment in transitional assistance--again while giving
+individuals the option to decline or change enrollment--because it will
+help stretch their own resources in these continuing times of state
+budget shortfalls.
+ Family size definitions should include entire household
+size. The legislation authorizes transitional assistance for
+beneficiaries below 135 percent of the federal poverty level. However,
+CMS regulations exclude many people who are below 135 percent of
+poverty by stipulating that income eligibility be based only by whether
+a beneficiary is married or single. They do not take into consideration
+any dependent children or grandchildren that may also be a part of a
+beneficiary's household, even though these dependents can be a
+significant drain on a low-income family's resources, and as part of
+the household increase the amount of income that falls below 135
+percent of poverty. For example, a married couple raising two
+grandchildren under the new 2004 poverty guidelines can have an income
+of up to $25,448 and be under 135 percent of poverty, which is
+substantially greater than the $16,862 allowed for this same household
+to qualify for transitional assistance under the CMS regulation.
+Conclusion
+ The Medicare-endorsed drug discount card program is important as a
+bridge to the overall effort to enact a comprehensive Medicare drug
+benefit. The transitional assistance component for those with limited
+incomes is particularly important because these are the people who most
+need help. Yet some program complexities could create significant
+amounts of confusion.
+ We believe that the changes outlined in our statement will help to
+make the program run more smoothly. Educating and enrolling people--
+especially those eligible for transitional assistance--will be a
+substantial challenge. Simply engaging in traditional outreach
+methods--particularly for a program designed to last only 18 months--
+will likely fall short. It is critical that we all work together to
+conduct the outreach efforts and take the regulatory steps that are
+essential for this program to be a success.
+
+
+
+