[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
_____
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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
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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
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.
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* * * 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.
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\1\ Prescription Drug Benefit Management: Improving Quality,
Promoting Better Access and Reducing Cost, Associates & Wilson, October
2003.
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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.
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\2\ Federal Employees' Health Benefits: Effects of Using Pharmacy
Benefit Managers on Health Plans, Enrollees, and Pharmacies, U.S.
General Accounting Office, January 2003.
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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.
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\2\ Phony Medicare drug cards, Consumer Reports, May 2004.
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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:
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\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
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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.
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\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
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``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\
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\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.
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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.
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\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
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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\
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\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.
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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.