Medicare Part D
Challenges in Enrolling New Dual-Eligible Beneficiaries
Gao ID: GAO-07-272 May 4, 2007
Since January 1, 2006, all dual-eligible beneficiaries--individuals with both Medicare and Medicaid coverage--must receive their drug benefit through Medicare's new Part D prescription drug plans (PDP) rather than from state Medicaid programs. GAO analyzed (1) current challenges in identifying and enrolling new dual-eligible beneficiaries in PDPs, (2) the Centers for Medicare & Medicaid Services' (CMS) efforts to address challenges, and (3) federal and state approaches to assigning dual-eligible beneficiaries to PDPs. GAO reviewed federal law, CMS regulations and guidance and interviewed CMS and PDP officials, among others. GAO also made site visits to six states to learn about the enrollment of dual-eligible beneficiaries from the state perspective.
CMS's enrollment procedures and implementation of its Part D coverage policy generate challenges for some dual-eligible beneficiaries, pharmacies, and the Medicare program. A majority of new dual-eligible beneficiaries--generally those on Medicare who have not yet signed up for a PDP and who become eligible for Medicaid--may be unable to smoothly access their drug benefit for at least 5 weeks given the time it takes to enroll them in PDPs and communicate information to beneficiaries and pharmacies. Pharmacies also may be affected adversely when key information about a beneficiary's dual eligibility is not yet processed and available. When dispensing drugs during this interval, pharmacies may have difficulty submitting claims to PDPs and accurately charging copayments. In addition, Medicare pays PDPs to provide these beneficiaries with several months of retroactive coverage but, until March 2007, CMS did not inform beneficiaries of their right to be reimbursed for drug costs incurred during these periods. CMS does not monitor its payments to PDPs for retroactive coverage or the amounts PDPs have reimbursed dual-eligible beneficiaries. Medicare paid PDPs millions of dollars in 2006 for coverage during periods for which dual-eligible beneficiaries may not have sought reimbursement for their drug costs. CMS has taken steps to address challenges associated with enrolling dual-eligible beneficiaries in PDPs. CMS has implemented a policy to prevent a gap in prescription drug coverage for those new dual-eligible beneficiaries whose Part D eligibility is predictable--Medicaid beneficiaries who subsequently qualify for Medicare. We estimate this group represents about one-third of new dual-eligible beneficiaries. In August 2006, CMS began operating a prospective enrollment process that should allow the agency and its Part D partners time to complete the enrollment processes and notify these beneficiaries before their effective enrollment date. Also, CMS is making changes to improve the efficiency of key information systems involved in the enrollment process. While the agency is performing some information systems testing, it is not planning to perform testing of the interactions of key information systems collectively, which is crucial to mitigating the inherent risks of system changes. Under federal law, CMS is required to assign dual-eligible beneficiaries to PDPs based on PDP premiums and geographic area. State Medicaid agency officials and others assert that this assignment method often places dual-eligible beneficiaries in PDPs that do not meet their drug needs. With CMS approval, Maine officials considered beneficiary-specific data to reassign nearly half of their dual-eligible beneficiaries to PDPs that better met their drug needs in late 2005. After the reassignment, the number of these dual-eligible beneficiaries whose PDP covered nearly all of their prescription drugs increased significantly. States choosing to make such reassignments in the future would need ready access to key information from PDPs. CMS contends that reassignments are not needed because beneficiaries may switch to drugs of equivalent therapeutic value or change plans at any time.
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GAO-07-272, Medicare Part D: Challenges in Enrolling New Dual-Eligible Beneficiaries
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
May 2007:
Medicare Part D:
Challenges in Enrolling New Dual-Eligible Beneficiaries:
GAO-07-272:
GAO Highlights:
Highlights of GAO-07-272, a report to congressional requesters
Why GAO Did This Study:
Since January 1, 2006, all dual-eligible beneficiaries”individuals with
both Medicare and Medicaid coverage”must receive their drug benefit
through Medicare‘s new Part D prescription drug plans (PDP) rather than
from state Medicaid programs. GAO analyzed (1) current challenges in
identifying and enrolling new dual-eligible beneficiaries in PDPs, (2)
the Centers for Medicare & Medicaid Services‘ (CMS) efforts to address
challenges, and (3) federal and state approaches to assigning dual-
eligible beneficiaries to PDPs. GAO reviewed federal law, CMS
regulations and guidance and interviewed CMS and PDP officials, among
others. GAO also made site visits to six states to learn about the
enrollment of dual-eligible beneficiaries from the state perspective.
What GAO Found:
CMS‘s enrollment procedures and implementation of its Part D coverage
policy generate challenges for some dual-eligible beneficiaries,
pharmacies, and the Medicare program. A majority of new dual-eligible
beneficiaries”generally those on Medicare who have not yet signed up
for a PDP and who become eligible for Medicaid”may be unable to
smoothly access their drug benefit for at least 5 weeks given the time
it takes to enroll them in PDPs and communicate information to
beneficiaries and pharmacies. Pharmacies also may be affected adversely
when key information about a beneficiary‘s dual eligibility is not yet
processed and available. When dispensing drugs during this interval,
pharmacies may have difficulty submitting claims to PDPs and accurately
charging copayments. In addition, Medicare pays PDPs to provide these
beneficiaries with several months of retroactive coverage but, until
March 2007, CMS did not inform beneficiaries of their right to be
reimbursed for drug costs incurred during these periods. CMS does not
monitor its payments to PDPs for retroactive coverage or the amounts
PDPs have reimbursed dual-eligible beneficiaries. Medicare paid PDPs
millions of dollars in 2006 for coverage during periods for which dual-
eligible beneficiaries may not have sought reimbursement for their drug
costs.
CMS has taken steps to address challenges associated with enrolling
dual-eligible beneficiaries in PDPs. CMS has implemented a policy to
prevent a gap in prescription drug coverage for those new dual-eligible
beneficiaries whose Part D eligibility is predictable”Medicaid
beneficiaries who subsequently qualify for Medicare. We estimate this
group represents about one-third of new dual-eligible beneficiaries. In
August 2006, CMS began operating a prospective enrollment process that
should allow the agency and its Part D partners time to complete the
enrollment processes and notify these beneficiaries before their
effective enrollment date. Also, CMS is making changes to improve the
efficiency of key information systems involved in the enrollment
process. While the agency is performing some information systems
testing, it is not planning to perform testing of the interactions of
key information systems collectively, which is crucial to mitigating
the inherent risks of system changes.
Under federal law, CMS is required to assign dual-eligible
beneficiaries to PDPs based on PDP premiums and geographic area. State
Medicaid agency officials and others assert that this assignment method
often places dual-eligible beneficiaries in PDPs that do not meet their
drug needs. With CMS approval, Maine officials considered beneficiary-
specific data to reassign nearly half of their dual-eligible
beneficiaries to PDPs that better met their drug needs in late 2005.
After the reassignment, the number of these dual-eligible beneficiaries
whose PDP covered nearly all of their prescription drugs increased
significantly. States choosing to make such reassignments in the future
would need ready access to key information from PDPs. CMS contends that
reassignments are not needed because beneficiaries may switch to drugs
of equivalent therapeutic value or change plans at any time.
What GAO Recommends:
GAO made six recommendations to CMS. CMS has taken steps to implement
some of them, including notifying beneficiaries of their right to
reimbursement and monitoring the number of individuals provided
retroactive coverage. However, CMS disagreed with GAO‘s other
recommendations, including monitoring PDP reimbursements to
beneficiaries, mitigating the risks of information system changes, and
facilitating states‘ access to certain drug-related information. GAO
maintains its support for these recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-272].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Kathleen King at (202)
512-7119 or kingk@gao.gov or David Powner at (202) 512-9286 or
pownerd@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Enrollment Processes and Coverage Policy Generate Challenges for Dual-
Eligible Beneficiaries, Pharmacies, and the Medicare Program:
CMS Has Taken Actions to Address Challenges Faced by New Dual-Eligible
Beneficiaries and Pharmacies:
CMS Randomly Assigns Dual-Eligible Beneficiaries to PDPs; Some States
Assigned Individuals Using a More Tailored Approach:
PDP Transition Process Compliance Improved but Beneficiary Confusion
Remains; 2007 Contracts More Specific:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Steps Involved in the Identification and Enrollment of
Dual- Eligible Beneficiaries into Medicare Part D:
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Appendix III: GAO Contacts And Staff Acknowledgments:
Tables:
Table 1: Maine Analysis of the Match Rate between Dual-Eligible
Beneficiaries' Drugs and Their CMS-Assigned PDP Formularies, 2005:
Table 2: Match Rates by PDP before and after Intelligent Random
Assignment for Those Reassigned Dual-Eligible Beneficiaries:
Figures:
Figure 1: Overview of the Major Systems and Steps Used to Enroll Dual-
Eligible Beneficiaries in PDPs:
Figure 2: Mr. Smith, a Hypothetical Example of the Enrollment Process
for a Newly Identified Dual-Eligible Beneficiary Who Was Medicare-
Eligible but without Previous Part D Coverage:
Figure 3: Mrs. Jones, a Hypothetical Example of the Enrollment Process
for a Newly Identified Dual-Eligible Beneficiary Who Was Medicare-
Eligible and Had Previous Part D Coverage:
Figure 4: Steps Pharmacies Take When a Dual-Eligible Beneficiary Lacks
Evidence of PDP Membership:
Abbreviations:
CMS: Centers for Medicare & Medicaid Services:
DI: Disability Insurance:
IRA: Intelligent Random Assignment:
IT: information technology:
MA: Medicare Advantage:
MMA: Medicare Prescription Drug, Improvement and Modernization Act of
2003:
NASMD: National Association of State Medicaid Directors:
OIG: Office of Inspector General:
PAAD: Pharmaceutical Assistance to the Aged and Disabled:
PDP: prescription drug plan:
SPAP: state pharmaceutical assistance program:
SSA: Social Security Administration:
SSI: Supplemental Security Income:
TRR: Transaction Reply Report:
United States Government Accountability Office:
Washington, DC 20548:
May 4, 2007:
The Honorable Max Baucus:
Chairman:
The Honorable Charles E. Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
The Honorable John D. Rockefeller IV:
Chairman:
The Honorable Orrin G. Hatch:
Ranking Member:
Subcommittee on Health Care:
Committee on Finance:
United States Senate:
The Medicare Prescription Drug, Improvement and Modernization Act of
2003 (MMA) established a voluntary outpatient prescription drug benefit
for Medicare--the federal health insurance program for elderly and
certain disabled individuals--known as Medicare Part D.[Footnote 1]
This benefit is provided through prescription drug plans (PDP)
sponsored by contracted private companies.[Footnote 2] These private
companies, termed sponsors, offer one or more benefit packages, through
individual PDPs that charge monthly premiums that cover different drugs
and have different beneficiary cost-sharing arrangements (such as
copayments and deductibles). Medicaid is a jointly funded federal-state
health care program that covers certain low-income families and low-
income individuals who are aged or disabled. Medicaid beneficiaries
receive their prescription drugs at no or low cost as part of their
Medicaid benefits.[Footnote 3] About 6 million people were eligible for
both full Medicare and Medicaid benefits in December 2005 and more
become eligible each month. For those who are dually eligible for both
Medicare and Medicaid, known as full-benefit dual-eligible
beneficiaries,[Footnote 4] the MMA required that drug coverage
transition from Medicaid drug coverage to Medicare Part D drug coverage
on January 1, 2006.[Footnote 5] Dual-eligible beneficiaries are
generally poorer, are more likely to have extensive health care needs,
and use more medications than other Medicare beneficiaries. To help
dual-eligible beneficiaries and other low-income Medicare beneficiaries
with the costs of prescription drug coverage, the MMA provided these
individuals with a low-income subsidy that covers most of their out-of-
pocket costs for Part D prescription drugs.[Footnote 6]
The Centers for Medicare & Medicaid Services (CMS)--the agency that
administers the Medicare program--has responsibility for assisting in
the transition of dual-eligible beneficiaries' drug coverage from
Medicaid to Medicare. In October and December 2005, CMS assigned each
dual-eligible beneficiary who had not already signed up for a Part D
plan to a PDP and notified these beneficiaries of their assignment.
Part D prescription drug coverage for these beneficiaries was effective
January 1, 2006. CMS also provided state pharmaceutical assistance
programs (SPAP) with the ability to enroll or reassign their members to
PDPs using additional criteria, with prior approval from CMS.[Footnote
7]
The agency also developed contingency measures to help with
administrative difficulties that could arise with the change in
coverage. It established an enrollment contingency option to ensure
that dual-eligible beneficiaries not yet enrolled in a PDP could get
their prescriptions and that pharmacies would be reimbursed for those
prescriptions. Also, CMS required PDPs to provide beneficiaries with a
short-term supply of needed drugs, known as a transition supply, if
they were prescribed a drug that was not on their PDP's list of covered
drugs, or formulary.
Shortly after the start of the program, the media reported that some
dual-eligible beneficiaries encountered difficulties that limited their
access to needed drugs. These included reports of dual-eligible
beneficiaries not enrolled in a PDP, enrolled in more than one PDP, not
correctly identified as a low-income beneficiary, charged incorrect
copayments at the pharmacy, and unable to obtain drugs because of
inadequate transition coverage. In February 2006, the Secretary of
Health and Human Services reported that these problems potentially
affected several hundred thousand dual-eligible beneficiaries.[Footnote
8] Some of these problems were the result of data transmission
difficulties among the states, CMS, and PDP sponsors. Responding to a
February 2006 survey by The Kaiser Family Foundation, 31 state Medicaid
directors reported widespread problems affecting a significant number
of dual-eligible beneficiaries.[Footnote 9] In response to the
problems, 29 state Medicaid agencies and the District of Columbia's
Medicaid agency interceded and provided temporary coverage to ensure
dual-eligible beneficiaries had access to prescription drugs.
Each month CMS randomly assigns and enrolls new dual-eligible
beneficiaries who are not already in a Part D plan.[Footnote 10] Of the
633,614 new dual-eligible beneficiaries that CMS automatically enrolled
in 2006, most were Medicare beneficiaries who subsequently qualified
for Medicaid, generally due to a loss of income and resources.[Footnote
11] Others were Medicaid beneficiaries who subsequently qualified for
Medicare, typically due to age or disability. In addition to new dual-
eligible beneficiaries, some previously assigned dual-eligible
beneficiaries may be reassigned each benefit year. In fall 2006, CMS
reassigned about 193,000 dual-eligible beneficiaries to new PDPs for
the 2007 benefit year. Consequently, the challenges of ensuring prompt
and accurate Part D enrollment are ongoing.
Given the reported problems that occurred during the early months of
the Part D program, you raised questions about whether difficulty
obtaining prescription drugs could continue to be a problem for many
newly identified dual-eligible beneficiaries. In this report, we
examine (1) current challenges in identifying and enrolling new dual-
eligible beneficiaries in PDPs, (2) CMS's efforts to address challenges
in enrolling dual-eligible beneficiaries, (3) federal and state
approaches to assigning dual-eligible beneficiaries to PDPs, and (4)
CMS's actions to ensure that PDPs implement effective transitional drug
coverage following enrollment.
To address these issues, we reviewed relevant federal laws and
regulations and guidance provided by CMS to state Medicaid agencies,
PDPs, and pharmacies on their respective roles in the Medicare Part D
benefit, CMS documents on the interaction of key information systems,
and the model contract between CMS and PDP sponsors.[Footnote 12] We
also interviewed CMS officials, including those responsible for
information systems, CMS contractors responsible for maintaining key
information systems, Social Security Administration (SSA)
officials,[Footnote 13] state Medicaid officials, and representatives
of pharmacy associations and long-term care provider
associations.[Footnote 14] We also interviewed representatives from
five PDP sponsors that represented about 54 percent of dual-eligible
PDP enrollment as of June 3, 2006.[Footnote 15] Each of these sponsors
offered a PDP that was eligible to receive assignments of dual-eligible
beneficiaries in 2006. To learn about alternative methods of assigning
Medicare beneficiaries to PDPs, we also interviewed representatives of
SPAPs.
We also conducted site visits in six states--California, Maine,
Maryland, Michigan, New Jersey, and Texas--to learn about the
transition of dual-eligible beneficiaries from the perspective of state
Medicaid agencies, pharmacies, and long-term care providers. Together,
these states accounted for 28 percent of all dual-eligible
beneficiaries enrolled in a PDP in May 2006. In selecting the states,
we chose states that represented a range in the number of dual-eligible
beneficiaries, the number of PDPs to which CMS assigned dual-eligible
beneficiaries, state involvement with PDP assignment, and state
size.[Footnote 16] Information from the six states cannot be
generalized to every state's experience with the Part D program because
each state Medicaid program is different. To assess the reliability of
Maine's data on the reassignment of dual-eligible beneficiaries--the
only state in our sample to have such information--we talked with Maine
Medicaid agency officials and state contractors about how the analyses
were conducted and reviewed documentation of the methodology. We
determined that the data were sufficiently reliable for the purposes of
this report. We conducted our work from March 2006 through April 2007
in accordance with generally accepted government auditing standards.
Results in Brief:
CMS's enrollment procedures and implementation of its Part D coverage
policy generate challenges for some dual-eligible beneficiaries,
pharmacies, and the Medicare program. A majority of new dual-eligible
beneficiaries enrolled by CMS--generally those on Medicare who have not
yet signed up for a PDP and who become eligible for Medicaid--may be
unable to smoothly access their drug benefit for at least 5 weeks given
the timing of the steps to enroll dual-eligible beneficiaries in PDPs
and communicate information to beneficiaries and pharmacies. Pharmacies
also may be affected adversely when key information about a
beneficiary's dual eligibility is not yet processed in the appropriate
eligibility and enrollment systems. When dispensing drugs to dual-
eligible beneficiaries during this interval, pharmacies may have
difficulty submitting claims to PDPs and accurately charging
beneficiaries for copayments. In addition, under CMS policy, Medicare
pays PDPs to provide these dual-eligible beneficiaries with retroactive
coverage that extends for several months. However at the time of our
review, CMS did not inform beneficiaries of their right to be
reimbursed for drug expenses incurred during retroactive coverage
periods. After reviewing a draft of this report, CMS revised the
enrollment notification letters informing dual-eligible beneficiaries
of their eligibility for reimbursement. Also, CMS does not monitor its
payments to PDPs for providing retroactive coverage or the amounts PDPs
have reimbursed dual-eligible beneficiaries. GAO found that Medicare
paid PDPs millions of dollars in 2006 for coverage during periods for
which dual-eligible beneficiaries may not have sought reimbursement for
their drug costs.
CMS has recently taken steps to address identified problems associated
with enrolling dual-eligible beneficiaries. The agency has implemented
a change in policy that should prevent a gap in drug coverage for those
new dual-eligible beneficiaries whose Part D eligibility can be
predicted. This group--about one-third of new dual-eligible
beneficiaries enrolled by CMS in a PDP--consists of Medicaid
beneficiaries whose drug coverage ends under Medicaid when they also
become Medicare eligible. In August 2006, CMS began operating a
prospective enrollment process that allows the agency and its Part D
partners the time needed to complete the enrollment processes and
notify this group of beneficiaries before PDP enrollment becomes
effective. CMS has also taken steps to improve the information
available to pharmacies when serving dual-eligible beneficiaries who do
not have evidence of PDP enrollment. In addition, CMS is redesigning
and integrating key information systems to reduce redundancies,
synchronize data, and increase the efficiency of the systems involved
in the enrollment process. While the agency is performing certain types
of systems testing to ensure that these changes are effectively
implemented, it is not planning to test the interactions of key
information systems collectively and their interfaces (commonly
referred to as end-to-end testing).
As required under the MMA and implementing regulations, when a dual-
eligible beneficiary has not chosen a Part D plan, CMS randomly assigns
and enrolls dual-eligible beneficiaries to a PDP. The only criteria CMS
may use in assigning these dual-eligible beneficiaries are the PDP's
monthly premium and the geographic location of the PDP. This is
designed to ensure that PDP sponsors enroll an approximately equal
number of beneficiaries. In a small number of cases, beneficiaries were
enrolled in a PDP that did not serve their geographic location because
CMS used an address from SSA that did not accurately reflect where they
lived. In response to a draft of this report, CMS made changes to
correct this problem. In late 2005, with approval from CMS, officials
in Maine reassigned nearly half of the state's dual-eligible
beneficiaries for the initial transition to Medicare Part D using
additional criteria they believed to be more appropriate for
beneficiaries' individual needs. A 2005 state analysis showed that
CMS's random assignment resulted in about one in five dual-eligible
beneficiaries having formulary match rates--the percentage of a
beneficiary's medications that appeared on the PDP formulary--of less
than 20 percent. After reassigning beneficiaries to eligible PDPs using
drug utilization and pharmacy preference information, these
beneficiaries' match rates approached 100 percent. Maine officials
noted that, to conduct yearly reassignments for the dual-eligible
population, they needed up-to-date beneficiary drug utilization and
formulary information from PDP sponsors. CMS and PDP sponsors informed
us, however, that reassigning dual-eligible beneficiaries to PDPs using
additional criteria is not necessary because beneficiaries may switch
to medications of equivalent therapeutic value or change plans at any
time during the year.
CMS actions to address problems associated with PDP implementation of
pharmacy transition processes led to a more uniform application of
transition processes; however, some dual-eligible beneficiaries remain
confused. Under PDP transition processes, beneficiaries should be
provided temporary coverage of existing prescriptions, regardless of
whether the drug is on the PDP's formulary, to allow them time to
contact their physician about switching to a medication on their PDP's
formulary or obtaining a formulary exception from their PDP. In early
2006, CMS officials learned that the way in which some PDP sponsors
implemented their transition policies adversely affected beneficiaries'
ability to obtain transition drug supplies. CMS responded by issuing a
series of memoranda to PDP sponsors to clarify its expectations.
Representatives of pharmacy and long-term care associations, state
Medicaid agencies, and PDP sponsors told us that the problem of uneven
availability of transition drug coverage has largely been resolved.
They noted, however, that dual-eligible beneficiaries remain unaware of
the implications of the transition supply and are not using the
transition period to address formulary issues. As a result, after
receiving a transition supply, these beneficiaries often return to the
pharmacy the following month and may encounter problems refilling these
same prescriptions. For 2007, CMS has added specific requirements to
its contract with PDP sponsors with respect to providing transition
drug coverage to new enrollees and for notifying beneficiaries and
pharmacists about transitional coverage.
We recommend that, to improve the process of enrolling dual-eligible
beneficiaries in PDPs, the CMS Administrator take actions to inform
dual-eligible beneficiaries of their right to reimbursement, track the
number of new dual-eligible beneficiaries receiving retroactive
coverage, determine the magnitude of payments to PDPs for retroactive
coverage periods and monitor PDP reimbursements to dual-eligible
beneficiaries, mitigate the risks associated with implementing changes
to Part D information systems by conducting additional testing, ensure
dual-eligible beneficiaries are enrolled in a PDP that serves the
geographic area where they live, and facilitate data sharing between
PDPs and authorized states that choose to reassign their dual-eligible
beneficiaries using alternative methods.
In comments on a draft of this report, CMS objected to what it
perceived as the overwhelmingly negative tone of our findings and
stated that our discussion of retroactive coverage was overly
simplified. Nevertheless, the agency stated that it was implementing
three of our six recommendations to improve existing procedures; it
disagreed with the remaining recommendations. We believe that our
findings are balanced and accurate and our recommendations are
appropriate. To clarify our message and to reflect information obtained
through agency comments, we have modified portions of the first finding
concerning the intervals associated with processing dual-eligible
beneficiaries' enrollments and the fact that Medicare pays plans during
periods when dual-eligible beneficiaries may be unlikely to seek
reimbursement for drug costs.
Background:
The Medicare Part D Program:
Medicare Part D coverage is provided through private plans sponsored by
dozens of health care organizations that may charge premiums,
deductibles, and copayments for the drug benefit.[Footnote 17] All Part
D plans must meet federal requirements with respect to the categories
of drugs they must cover and the extent of their pharmacy
networks.[Footnote 18],[Footnote 19] They must offer the standard
Medicare Part D benefit, or an actuarially equivalent benefit.[Footnote
20] Beyond these requirements however, the specific formulary and
pharmacy network of each PDP can vary.
Under the MMA, drug coverage for all dual-eligible beneficiaries
transitioned from Medicaid to Medicare Part D, on January 1,
2006.[Footnote 21] The MMA requires CMS to assign dual-eligible
beneficiaries to a PDP if they have not enrolled in a Part D plan on
their own.[Footnote 22] CMS may only assign dual-eligible beneficiaries
to PDPs serving their area with premiums at or below the low-income
benchmark amount and must randomly assign individuals if there is more
than one eligible PDP.[Footnote 23] During October and December 2005,
CMS randomly assigned to PDPs dual-eligible beneficiaries who had not
already enrolled in a Part D plan. The agency mailed notices to these
beneficiaries informing them of their assignment and also that they
could select a different PDP if they wished. If they did not switch
from their assigned PDP by December 31, 2005, their assignment took
effect, with coverage beginning January 1, 2006. CMS enrolled 5,498,604
dual-eligible beneficiaries during this first round of assignments and
continues to assign new dual-eligible beneficiaries into PDPs on a
monthly basis, when these beneficiaries do not independently enroll in
a Part D plan.
For some dual-eligible beneficiaries, some drugs that were previously
covered under Medicaid might not be covered by their Medicare PDP's
formulary. Subject to certain parameters,[Footnote 24] PDPs have the
flexibility to set their own formularies and, as a result, PDPs vary in
their inclusion of the drugs most commonly used by dual-eligible
beneficiaries. According to a 2006 report by the Department of Health
and Human Services, Office of Inspector General (OIG), one-fifth of
dual-eligible beneficiaries were assigned to PDPs that provide coverage
of all of the most commonly used drugs and one-third were assigned to
PDPs that provide coverage of less than 85 percent of these
drugs.[Footnote 25] However, dual-eligible beneficiaries are allowed to
switch to a different PDP at any time with coverage under a new PDP
effective the following month.
In addition, to help ensure a smooth transition to Part D, CMS requires
PDP sponsors to provide for a transition process for new enrollees
whose current medications may not be included in their PDP's
formulary.[Footnote 26] For 2006, CMS recommended that PDP sponsors
should fill a one-time transition supply of nonformulary drugs in order
to accommodate the immediate need of the beneficiary. In particular,
CMS suggested that PDPs provide at least a 30-day transition supply to
all beneficiaries and a 90-to 180-day transition supply for residents
in long-term care facilities.
Dual-Eligible Beneficiaries:
Dual-eligible beneficiaries are a particularly vulnerable population.
Totaling roughly 6.2 million in January 2006, they account for about 15
percent of all Medicaid beneficiaries and 15 percent of all Medicare
beneficiaries. In general, these individuals are poorer, tend to have
far more extensive health care needs, have higher rates of cognitive
impairments, and are more likely to be disabled than other Medicare
beneficiaries. A majority of dual-eligible beneficiaries live in the
community and typically obtain drugs through retail pharmacies. Nearly
one in four dual-eligible beneficiaries reside in a long-term care
facility and obtain their drugs through pharmacies that specifically
serve long-term care facilities.
While most Medicare beneficiaries enrolled in a PDP pay monthly
premiums, deductibles, and other cost-sharing as part of their benefit
package, the Medicare Part D program pays a substantial proportion of
dual-eligible beneficiaries' cost-sharing obligations through its low-
income subsidy program.[Footnote 27] For dual-eligible beneficiaries,
Medicare pays the full amount of the monthly premium that nonsubsidy
eligible beneficiaries normally pay, up to the level of the low-income
benchmark premium. Medicare Part D also covers most or all of the
prescription copayments: dual-eligible beneficiaries pay from $1 to
$5.35 copayments per prescription filled in 2007, with the exception of
those in long-term care facilities who have no copayments. In addition,
dual-eligible beneficiaries are not subject to a deductible or the so-
called "donut hole."[Footnote 28]
In addition to dual-eligible beneficiaries, the Part D low-income
subsidy is available to other low-income Medicare beneficiaries. Some
of these other Medicare beneficiaries must apply for the subsidy
through the SSA or a state Medicaid agency. The subsidy is available on
a sliding scale, according to income and resources. Dual-eligible
beneficiaries are automatically entitled to the full subsidy amount and
do not need to apply independently for the subsidy.
An individual can become a dual-eligible beneficiary in two main ways.
First, Medicare beneficiaries can subsequently qualify for Medicaid.
This occurs when their income and resources decline below certain
thresholds, and they enroll in the Supplemental Security Income (SSI)
program,[Footnote 29] or they incur medical costs that reduce their
income below certain thresholds. CMS data indicate that roughly two-
thirds of the 633,614 dual-eligible beneficiaries the agency enrolled
in 2006 were Medicare beneficiaries who subsequently qualified for
Medicaid, and had not already signed up for a PDP on their
own.[Footnote 30] According to CMS officials, it is not possible to
predict the timing of dual-eligibility for these individuals because
determining Medicaid eligibility is a state function.
Second, Medicaid beneficiaries can subsequently become eligible for
Medicare by either turning 65-years-old or by completing their 24-month
disability waiting period.[Footnote 31] This group represents
approximately one-third of the new dual-eligible beneficiaries enrolled
by CMS in PDPs. State Medicaid agencies can generally predict when this
group of individuals will become dually eligible.
Systems and Steps Involved in the Identification and Enrollment of Dual-
Eligible Beneficiaries:
Multiple parties and multiple information systems are involved in the
process of identifying and enrolling dual-eligible beneficiaries in
PDPs. In addition to CMS, the SSA, state Medicaid agencies, and PDP
sponsors play key roles in providing information needed to ensure that
beneficiaries are identified accurately and enrolled. SSA maintains
information on Medicare eligibility that is used by CMS and some
states. State Medicaid agencies are responsible for forwarding to CMS
lists of beneficiaries who the state believes to be eligible for both
Medicare and Medicaid. PDP sponsors maintain information systems that
are responsible for exchanging enrollment and billing information with
CMS.
For the most part, CMS adapted existing information systems used in the
administration of other parts of the Medicare program to perform
specific functions required under Part D. In addition, CMS worked with
the pharmacy industry to develop a tool specifically to aid pharmacies
in obtaining billing information needed to process claims for dual-
eligible beneficiaries without enrollment information. The principal
systems supporting the Part D program are as follows:
* The Medicare eligibility database.[Footnote 32] This system serves as
a repository for Medicare beneficiary entitlement, eligibility, and
demographic data. In the enrollment process for dual-eligible
beneficiaries, the database is used by CMS to provide up-to-date
information to verify the status of dual-eligible beneficiaries, as
well as to determine subsidy status and make assignments to PDPs. It
also provides data to other CMS systems, SSA, state Medicaid agencies,
PDPs, and pharmacies.
* The enrollment transaction system.[Footnote 33] This system is used
to enroll beneficiaries in PDPs. In addition, it informs PDPs about a
beneficiary's subsidy status and copayment information, calculates
Medicare payments to PDPs for each covered enrollee, and processes
changes in PDP enrollment, including those elected by the beneficiary.
* The eligibility query.[Footnote 34] This tool is used by pharmacies
to obtain Part D billing information from the Medicare eligibility
database. When filling a prescription for a beneficiary who does not
have proof of Part D enrollment or eligibility, a pharmacy submits a
request for billing information using the eligibility query. In
response, the pharmacy receives information on the beneficiary's PDP
enrollment, including the data necessary to bill the beneficiary's PDP
for the drugs dispensed.
The process of enrolling dual-eligible beneficiaries requires several
steps; it begins when the state Medicaid agency identifies new dual-
eligible beneficiaries and ends when PDPs make billing information
available to pharmacies. (For more detailed information on the steps
involved in identifying and enrolling dual-eligible beneficiaries, see
app. I.) The key information systems (see fig. 1) and steps in
identifying and enrolling dual-eligible beneficiaries are the
following.
Figure 1: Overview of the Major Systems and Steps Used to Enroll Dual-
Eligible Beneficiaries in PDPs:
[See PDF for image]
Source: GAO.
[End of figure]
1. State Medicaid agencies obtain Medicare eligibility information from
SSA or request data from CMS's Medicare eligibility database and match
that information against their own Medicaid eligibility files. The
state Medicaid agencies compile comprehensive files identifying all
dual-eligible beneficiaries, known as the dual-eligible files.[Footnote
35] CMS receives Medicare eligibility information from SSA daily.
2. State Medicaid agencies send CMS the dual-eligible files and CMS
matches the files against data in its Medicare eligibility database to
verify each individual's dual eligibility. The agency sends a response
file back to each state that includes the results of the matching
process for each submitted individual.
3. Those dual-eligible beneficiaries who were matched are considered
eligible for the full low-income subsidy and the Medicare eligibility
database sets the copayment information accordingly. This process is
referred to as deeming. The Medicare eligibility database also assigns
beneficiaries not already enrolled in a Part D plan to PDPs that
operate in regions that match the beneficiary's official SSA address of
record. Both the deeming and assignment information are sent to the
enrollment transaction system to be processed.
4. The enrollment transaction system processes the deeming and
assignment information in order to complete the enrollment and notifies
the PDPs of those dual-eligible beneficiaries who have been enrolled in
their PDP and their copayment amounts.
5. PDPs process the resulting enrollment, assign the standard billing
information, and send this information to the Medicare eligibility
database. In addition, the PDPs mail out ID cards and PDP information
to the enrolled beneficiary.
6. The Medicare eligibility database transmits the PDP's billing
information to the eligibility query system.
7. Using the eligibility query, pharmacies can access the billing
information needed to fill prescriptions and bill them to the assigned
PDP if beneficiaries lack their enrollment information.
Implementation of Part D Information Systems:
Under tight time frames, CMS and its partners integrated information
systems to support the Part D program. To support the Part D program,
CMS pieced together existing information systems that had related
Medicare functions.[Footnote 36] In addition, information systems
belonging to state Medicaid agencies and PDPs had to integrate with CMS
information systems and CMS did not establish formal agreements with
these partners until the time of implementation. Final regulations for
the program were not issued until January 28, 2005, and business
requirements for the program were not finalized until March 2005. Thus,
there was little time for testing given that requirements and
agreements were so late in being solidified.
A number of information systems problems surfaced in the early months
of the program. These problems included logic errors in the enrollment
process which generated cancellations to PDPs instead of enrollments,
the eligibility query being overwhelmed by the number of pharmacy
inquiries, and CMS difficulties matching data submitted by the state
Medicaid agencies to information in the Medicare eligibility database.
These problems can be attributed, in part, to poor systems testing.
Because of tight time frames associated with implementing Part D,
robust system-level and end-to-end testing did not occur.[Footnote 37]
In January 2006, CMS contracted with EDS, an information technology
consulting company, to identify opportunities for improvement in the
information systems and services for Medicare Part D. EDS's report
findings and observations addressed many overarching challenges in the
information systems infrastructure supporting the program, including
the observation that the aggressive time frame for implementation did
not allow sufficient time for end-to-end testing.[Footnote 38] CMS is
redesigning key information systems involved in the enrollment process
in order to improve the efficiency of these systems.
Enrollment Processes and Coverage Policy Generate Challenges for Dual-
Eligible Beneficiaries, Pharmacies, and the Medicare Program:
CMS's enrollment processes and implementation of its Part D coverage
policy generate challenges for some dual-eligible beneficiaries,
pharmacies, and the Medicare program. Because the interval between
notification of Medicaid eligibility and completion of the Part D
enrollment process can extend at least 5 weeks, some dual-eligible
beneficiaries--those previously on Medicare who subsequently become
eligible for Medicaid--may be unable to smoothly access their Part D
benefits during this interval. At the same time, pharmacies that are
unable to obtain up-to-date information about a dual-eligible
beneficiary's enrollment are likely to experience difficulties billing
PDPs. In addition, CMS has tied dual-eligible beneficiaries' effective
date of Part D eligibility to the date of Medicaid eligibility,
providing for several months of retroactive Medicare benefits. Although
the Medicare program pays PDP sponsors for the period of retroactive
coverage, beneficiaries were not informed of their right to
reimbursement for drug costs incurred during this period. GAO found
that Medicare paid PDPs an estimated $100 million in 2006 for coverage
during periods for which dual-eligible beneficiaries may not have
sought reimbursement for their drug costs.
CMS's Enrollment Processes Can Create Difficulties for Some Dual-
Eligible Beneficiaries:
The timing of steps to enroll dual-eligible beneficiaries in Part D and
to make billing information available to pharmacies generates a gap
between the date beneficiaries are notified of their dual eligibility
status and the date they receive their enrollment information. As a
result, some new dual-eligible beneficiaries may have difficulty
obtaining their drugs at the pharmacy counter or may pay higher than
required out-of-pocket costs. Among Medicare beneficiaries who
subsequently become eligible for Medicaid, Medicare-only beneficiaries
not previously enrolled in a PDP are likely to experience more
difficulties compared with those who had enrolled in a PDP prior to
becoming eligible for Medicaid. Because the information systems used
are not real-time processing systems, the enrollment process takes
place over a period of about 2 months.
Given the time involved in processing beneficiary data under current
procedures, pharmacies may not have up-to-date PDP enrollment
information on new dual-eligible individuals. This may result in
beneficiaries having difficulty obtaining medications at the pharmacy.
To illustrate why this occurs, we present the hypothetical example of
Mr. Smith, who, as a Medicare beneficiary did not sign up for the Part
D drug benefit and, therefore, upon becoming Medicaid-eligible, must be
enrolled in a PDP. (Fig. 2 shows the steps in Mr. Smith's enrollment
process.)
Figure 2: Mr. Smith, a Hypothetical Example of the Enrollment Process
for a Newly Identified Dual-Eligible Beneficiary Who Was Medicare-
Eligible but without Previous Part D Coverage:
[See PDF for image]
Source: GAO.
Note: The dates presented in this example of enrollment for Mr. Smith
generally represent the best-case scenario. The range of dates
represent the minimum and maximum length of elapsed time allowed for
processing and notification, based on information provided by CMS. GAO
makes no assurances that the events described would occur on the dates
provided for any specific dual-eligible beneficiary.
[A] The scenario presented reflects an application to Medicaid based on
a reason other than disability. State Medicaid agencies have 45 days to
make eligibility determinations not based on disability and 90 days for
eligibility determinations based on disability, subject to extensions
in certain circumstances.
[B] If the state Medicaid agency did not determine that Mr. Smith was
eligible for Medicaid before it submitted its September dual-eligible
file, his information could not be submitted until October. This
scenario is not presented in this figure.
[End of figure]
From the time Mr. Smith applies for his state's Medicaid program on
August 11, it takes about 1 month for him to receive notification from
the state that he is eligible for Medicaid. It takes until October 15
before the PDP notifies Mr. Smith of his enrollment and until October
16 before all the necessary information is available to his pharmacy.
If Mr. Smith had sought to obtain prescription drugs prior to October
16, the pharmacy would have had difficulty getting the PDP billing
information needed to process claims on his behalf.[Footnote 39]
The reason this gap occurs is that some of the enrollment and PDP
assignment processing steps are done at scheduled intervals, such as
once a month or once a week. According to CMS, because of the
challenges some state Medicaid agencies have in compiling the dual-
eligible file, CMS requires the file be submitted just once a month.
CMS waits until it receives the monthly dual-eligible files from all
state Medicaid agencies before determining each individual
beneficiary's subsidy level and making the PDP assignment for these
beneficiaries. State Medicaid agencies that submit their dual-eligible
file to CMS early in the monthly cycle do not have their beneficiaries'
subsidy levels determined or the assignments to a PDP made any sooner
than the last state to submit its file. Deeming and PDP assignment can
take up to 10 days. Similarly, CMS's system of notifying the PDP of a
beneficiary assignment is on a weekly cycle, beginning on Saturday.
Thus, regardless of what day in the week CMS's enrollment transaction
system receives a beneficiary's PDP assignment and processes that
enrollment, the information is not communicated to the PDP until the
following Saturday. It takes up to another week before the beneficiary
receives a membership card or other membership documentation from the
PDP or the pharmacy has computerized access to the Part D information
needed to properly process a claim if an eligibility query is used to
obtain billing information. Thus, the time elapsed from the date the
state notified Mr. Smith of his eligibility for Medicaid to the date
Mr. Smith was notified by his assigned PDP of his Part D enrollment was
at least 35 days.
Other new dual-eligible beneficiaries may incur out-of-pocket costs at
the pharmacy that are too high for their dually eligible status because
of the time it takes information on the beneficiary's new status to
reach their PDP. To illustrate this case, we present the hypothetical
example of Mrs. Jones, a Medicare beneficiary who becomes eligible for
Medicaid but had already enrolled in a PDP. (See fig. 3.) When Mrs.
Jones, who also applied for Medicaid on August 11, goes to the pharmacy
on September 12, the pharmacy charges Mrs. Jones the same copayments
that she was charged as a Medicare-only Part D beneficiary instead of
the reduced amount for dual-eligible beneficiaries. This occurs because
the PDP, and consequently the pharmacy, does not have up-to-date
information on Mrs. Jones's status as a dual-eligible beneficiary; this
information must go through processing steps similar to those for Mr.
Smith. That is, the state Medicaid agency must first submit Mrs.
Jones's name to CMS on its dual-eligible file, which is done monthly.
Subsequently, CMS must determine Mrs. Jones's level of subsidy
according to the agency's schedule for the deeming process. Mrs.
Jones's PDP will change her copayment information only after it
receives CMS's weekly notification of enrollment transactions on
October 7.
Figure 3: Mrs. Jones, a Hypothetical Example of the Enrollment Process
for a Newly Identified Dual-Eligible Beneficiary Who Was Medicare-
Eligible and Had Previous Part D Coverage:
[See PDF for image]
Source: GAO.
Note: The dates presented in this example of enrollment for Mrs. Jones
generally represent the best-case scenario. The range of dates
represents the minimum and maximum length of elapsed time allowed for
processing and notification, based on information provided by CMS. GAO
makes no assurances that the events described would occur on the dates
provided for any specific dual-eligible beneficiary.
[A] The scenario presented reflects an application to Medicaid based on
a reason other than disability. State Medicaid agencies have 45 days to
make eligibility determinations not based on disability and 90 days for
eligibility determinations based on disability, subject to extensions
in certain circumstances.
[B] If the state Medicaid agency did not determine that Mrs. Jones was
eligible for Medicaid before it submitted its September dual-eligible
file, her information could not be submitted until October. This
scenario is not presented in this figure.
[End of figure]
Any dual-eligible beneficiary who has a change in subsidy status, such
as dual-eligible beneficiaries who enter a nursing home, may
temporarily face higher than required out-of-pocket costs for drugs due
to processing delays. Residents of nursing homes who are dual-eligible
beneficiaries are not required to pay any copayments, but they could be
charged until the PDP updates its own data based on information
provided by CMS. Recognizing the time lags that pharmacies encounter in
receiving complete Part D information on dual-eligible beneficiaries,
CMS issued a memorandum in May 2006 requiring PDP sponsors to use the
best available data to adjust a beneficiary's copayment, meaning that
PDPs need not wait for CMS to notify them of a status change but can
make adjustments based on notification received from a nursing facility
or state agency. However, according to some we spoke with, PDPs vary in
terms of their willingness to act on information provided by a party
other than CMS.[Footnote 40]
The time intervals associated with the Part D enrollment process for
new dual-eligible beneficiaries can lengthen when data entry errors
occur or when a dual-eligible beneficiary is identified by the state
after the state has submitted its monthly dual-eligible file. For
example, if CMS cannot match information from its Medicare eligibility
database with a beneficiary's information listed in the state's dual-
eligible file, the state must find the source of the problem and
resubmit the beneficiary's information in the following month's dual-
eligible file. State Medicaid agency officials told us that generally
mismatches occurred in 2006 because of errors in a birth date or Social
Security number. CMS reported that for the month of June 2006, about
17,000 to 18,000 names in state Medicaid agencies' dual-eligible files
could not be matched against information in the Medicare eligibility
database. This number of mismatches is down from 26,000 mismatches
earlier in the program.
Tools Designed to Help Pharmacies Have Not Worked Well:
CMS has provided pharmacies with certain tools to help process a claim
when a beneficiary does not present adequate billing information or has
not been enrolled in a PDP. The eligibility query was designed to
provide billing information to pharmacies when dual-eligible
beneficiaries do not have their PDP information, but pharmacies report
problems using the tool. The enrollment contingency option was designed
to ensure that dual-eligible beneficiaries who were not yet enrolled in
a PDP could get their medications, while also providing assurance that
the pharmacy would be reimbursed for those medications. Problems with
reimbursements have led some pharmacies to stop using the enrollment
contingency option.
The eligibility query was developed by CMS to help pharmacies determine
which plan to bill when a dual-eligible beneficiary lacks proof of
enrollment, but about half of the time the query system returns a
response indicating a match was not found (see fig. 4). To obtain
billing information on individuals without a PDP membership card or
other proof of Part D enrollment, pharmacies have modified their
existing computer systems to allow them to query CMS's Medicare
eligibility database. Using the Part D eligibility query, pharmacies
can enter certain data elements--such as an individual's Social
Security number, Medicare ID number, name, and date of birth--to verify
whether the individual is a dual-eligible beneficiary and whether the
individual has been assigned to a PDP. Ideally, when a match occurs,
the pharmacy receives an automated response within seconds showing
codes that contain the standard billing information necessary to file a
claim--such as the identity of the PDP sponsor and the member ID
number. According to CMS, of all the eligibility queries pharmacies
initiated in September 2006, about 55 percent enabled them to match
data identification elements with an individual in the Medicare
eligibility database. In comments on a draft of this report, the agency
explained that pharmacies had used the eligibility query for
nonenrolled individuals whose data would not otherwise be in the
system.
Figure 4: Steps Pharmacies Take When a Dual-Eligible Beneficiary Lacks
Evidence of PDP Membership:
[See PDF for image]
Source: GAO.
[End of figure]
In cases where the PDP has not yet submitted standard billing
information to CMS, the pharmacy must spend additional time contacting
the PDP. In cases where the dual-eligible beneficiary has been assigned
to a PDP, but the PDP has yet to submit the standard billing
information, the eligibility query response contains only a 1-800 phone
number for the assigned PDP. In these cases, pharmacies must spend
additional time contacting the 1-800 number to obtain needed billing
information. In April 2006, about 13 percent of the eligibility query
responses that matched a beneficiary did not contain the standard
billing information.
Pharmacy association representatives and individual pharmacists we met
with told us that improvements to the eligibility query were needed.
They said the eligibility query would be more useful if the responses
pharmacies receive contained such information as the name of the PDP in
which the beneficiary is enrolled, the effective date of the
beneficiary's enrollment in the PDP, and the beneficiary's low-income
subsidy status, rather than just a 1-800 number or the standard billing
information that is now provided. They also noted that the frequency
with which the eligibility query responds without the standard billing
information is also problematic; without adequate billing information
the pharmacy has to make a telephone call to obtain the appropriate
billing information.
In cases where the eligibility query does not produce a match but the
pharmacy has other evidence that the individual is dually eligible for
Medicare and Medicaid, such as ID cards or a letter from the state, CMS
has provided pharmacies with an enrollment contingency option. That is,
the pharmacies can submit their claims to a nationwide PDP sponsor--
WellPoint--which CMS has contracted with to provide pharmacies with a
source of payment for prescriptions filled for dual-eligible
beneficiaries who have yet to be enrolled in a PDP. The WellPoint
enrollment contingency option was intended for use in cases where the
pharmacy can confirm that an individual is dually eligible for Medicare
and Medicaid but cannot determine the beneficiary's assigned PDP
through the eligibility query. In such cases, claims are screened for
eligibility, and if the beneficiary is indeed dually eligible, but has
not yet been enrolled in a PDP, the beneficiary gets enrolled in a PDP
offered by WellPoint.
The WellPoint enrollment contingency option has often not functioned as
intended. For example, WellPoint was billed for a number of claims
where the beneficiary was enrolled in another PDP. As of November 26,
2006, 46.0 percent of the 351,538 Medicare ID numbers with claims that
were billed to WellPoint had already been assigned to a PDP. CMS and
WellPoint officials told us WellPoint reconciles payment for these
claims directly with the beneficiary's assigned PDP. However, pharmacy
association representatives told us that, in some cases, WellPoint
required the pharmacies to refund payments for these claims to
WellPoint and then submit the claim to the appropriate PDP.[Footnote
41] In other cases, pharmacies bill WellPoint without supplying the
necessary beneficiary data elements. For instance, rather than entering
the individual's actual Medicare ID number, the pharmacy may enter
dummy information into the Medicare ID field. As of November 26, 2006,
CMS reported that, roughly 35 percent of the Medicare ID numbers
submitted to WellPoint were invalid, requiring pharmacies to refund
their outlays on claims using these numbers. In addition, about 4
percent of the Medicare ID numbers were valid but the individual was
either not eligible for Medicaid or was not eligible for Part D
enrollment (for instance due to incarceration). WellPoint required
pharmacies to refund money for these claims as well. According to one
state pharmacy association representative, some pharmacies in the state
have discontinued using the WellPoint contingency option because of the
reimbursement difficulties. Only about 15 percent of Medicare ID
numbers with claims filed through the WellPoint option were associated
with individuals eligible for enrollment in the WellPoint PDP.
Pharmacy association representatives noted that some pharmacies
dispense medications to individuals without proof of Part D enrollment,
hoping to get needed billing information at a later date that will
allow them to properly submit a claim. One state pharmacy association
representative noted that pharmacies serving only long-term care
facilities dispense medication without assurance of reimbursement
because they are required to do so under the contractual arrangements
they have with the long-term care facilities.
Pharmacy association representatives told us that after-the-fact
reimbursement of drug claims is problematic. According to the pharmacy
association representatives, it can be burdensome for staff to
determine where to appropriately resubmit the claim. They also noted
that PDPs will sometimes reject retroactive claims that are submitted
after a certain period of time has elapsed.
Medicare Pays PDPs to Provide Retroactive Coverage but Beneficiaries
Have Not Been Informed of Their Right to Reimbursement:
With the current combination of policies and requirements under which
CMS operates, Medicare pays PDPs to provide retroactive coverage to
Medicare beneficiaries newly eligible for Medicaid. However, until
March 2007, CMS did not inform these beneficiaries of their right to
seek reimbursement for costs incurred during the retroactive period
that can last several months. Given the vulnerability of the dual-
eligible beneficiary population, it seems unlikely that the majority of
these beneficiaries would have contacted their PDP for reimbursement if
they were not notified of their right to do so. GAO found that Medicare
paid PDPs millions of dollars in 2006 for coverage during periods for
which dual-eligible beneficiaries may not have sought reimbursement for
their drug costs.
Retroactive coverage for dual-eligible beneficiaries stems from both
CMS's Part D policy and from Medicaid requirements. Under the MMA, once
an individual who is not enrolled in a plan qualifies as a dual-
eligible beneficiary, CMS is required to enroll the individual in a
PDP.[Footnote 42] However, the MMA does not precisely define when Part
D coverage for these beneficiaries must become effective.[Footnote 43]
As initially written, when enrolling a Medicare beneficiary without
Part D coverage who became eligible for Medicaid, CMS's policy set the
effective coverage date prospectively as the first day of the second
month after CMS identified the individual as both Medicare and Medicaid
eligible.[Footnote 44] In March 2006, CMS changed this policy, making
coverage retroactive to the first day of the month of Medicaid
eligibility. In making this change, CMS cited concerns about enrollees
experiencing a gap in coverage under its prior enrollment policy.
Federal Medicaid law requires that a Medicaid beneficiary's eligibility
be set retroactively up to 3 months prior to the date of the
individual's application if the individual met the program requirements
during that time.[Footnote 45] Therefore, for this group of dual-
eligible beneficiaries, Part D coverage may extend retroactively for
several months prior to the actual date of PDP enrollment by CMS.
The mechanics and time frames for Part D retroactive coverage can be
illustrated by the hypothetical case of Mr. Smith, a Medicare
beneficiary who was not enrolled in a PDP when he applied for Medicaid.
On September 11, Mr. Smith's state Medicaid agency made him eligible
for Medicaid benefits as of May 11, 3 months prior to his August 11
program application, as he met Medicaid eligibility requirements during
that retroactive period. In October, CMS notified Mr. Smith of his
enrollment in a PDP and indicated that his Part D coverage was
effective retroactively as of May 1, the first day of the month in
which he became eligible for Medicaid.
Medicare's payment to Mr. Smith's PDP, beginning with his retroactive
coverage period, consists of three major components, two of which are
fixed and a third that varies with Mr. Smith's cost-sharing
obligations.
* The first component is a monthly direct subsidy payment CMS makes to
Mr. Smith's PDP toward the cost of providing the drug benefit.
* The second component is the monthly payment CMS makes to Mr. Smith's
PDP to cover his low-income benchmark premium.
* The third component covers nearly all of Mr. Smith's cost-sharing
responsibilities, such as any deductibles or copayments that he would
pay if he were not a dual-eligible beneficiary. CMS makes these cost-
sharing payments to his PDP based on the PDP's estimate of the typical
monthly cost-sharing paid by beneficiaries. CMS later reconciles Mr.
Smith's cost-sharing payments with the PDP based on his actual drug
utilization as reported by the PDP to CMS.[Footnote 46]
Under CMS's retroactive coverage policy, Mr. Smith's PDP receives all
three components of payments for the months of May, June, July, August,
and September, although Mr. Smith was not enrolled in the PDP until
October. Medicare pays Mr. Smith's PDP sponsor about $60 a month for
the direct subsidy and another monthly payment for the low-income
premium up to the low-income benchmark, which ranges from $23 to $36
depending on Mr. Smith's location.[Footnote 47] We estimate that for
all dual-eligible beneficiaries enrolled by CMS with retroactive
coverage, Medicare paid PDPs about $100 million in 2006 for these two
monthly payment components for the retroactive period.[Footnote 48]
Unlike the cost-sharing component of Medicare's payments, the two
monthly payment components are not subject to a reconciliation process
tied to utilization of the benefit.[Footnote 49] This means that if Mr.
Smith's PDP did not reimburse Mr. Smith for any prescription drugs
purchased during the retroactive coverage period, the PDP would have to
refund Medicare the cost-sharing payment, but would keep the direct
subsidy payments and the low-income premium payments.[Footnote 50]
Medicare makes the direct subsidy and low-income premium payments for
the retroactive coverage period because CMS requires PDP sponsors to
reimburse beneficiaries for covered drug costs incurred during this
period. However, we found that CMS did not inform dual-eligible
beneficiaries about their right to seek reimbursement or instruct PDP
sponsors on what procedures to use for reimbursing beneficiaries or
others that paid on the beneficiary's behalf for drugs purchased during
retroactive periods. The model letters that CMS and PDPs used until
March 2007 to notify dual-eligible beneficiaries of their PDP
enrollment did not include any language concerning reimbursement of out-
of-pocket costs incurred during retroactive coverage periods.[Footnote
51] After reviewing a draft of this report and our recommendations, CMS
modified the model letters that the agency and PDPs use to notify dual-
eligible beneficiaries about their PDP enrollment. The revised letters
let beneficiaries know that they may be eligible for reimbursement of
some prescription costs incurred during retroactive coverage periods.
Given the vulnerability of the dual-eligible beneficiary population, it
seems unlikely that the majority of these beneficiaries would have
contacted their PDP for reimbursement if they were not notified of
their right to do so nor would they likely have retained proof of their
drug expenditures.[Footnote 52] In the case of Mr. Smith, for example,
he would need receipts for any drug purchases made during the
retroactive period--about 5 months preceding the date he was notified
of his PDP enrollment--at a time when he could not foresee the need for
doing so. Finally, Mr. Smith or someone helping him would have to find
out how and where to claim reimbursement from his PDP. Under CMS's 2006
policy, even if Mr. Smith had submitted proof of his drug purchases, he
would not be eligible for reimbursement if CMS had enrolled him in a
PDP that did not cover his prescriptions or did not have Mr. Smith's
pharmacy in its network.[Footnote 53] Nevertheless, Mr. Smith's PDP
would have received monthly direct subsidy and low-income premium
payments for Mr. Smith for the retroactive coverage period.
For 2006, CMS did not calculate aggregate payments made to PDP sponsors
for retroactive coverage. Further, the agency did not monitor
reimbursements to dual-eligible beneficiaries for drug purchases made
during the retroactive period. Agency officials told us that they have
data to determine the PDP payments and beneficiary reimbursements. As a
result of not tracking this information, CMS does not know how much of
the roughly $100 million in direct subsidy and low-income premium
payments for retroactive coverage in 2006 was used by PDPs to pay for
drug expenses claimed by dual-eligible beneficiaries for drugs
purchased during retroactive coverage periods.
CMS Has Taken Actions to Address Challenges Faced by New Dual-Eligible
Beneficiaries and Pharmacies:
Given the experience of early 2006, CMS has taken several actions to
improve the transition of dual-eligible beneficiaries to Part D. First,
the agency has taken steps to facilitate the change in drug coverage
for Medicaid beneficiaries whose date of Medicare eligibility can be
predicted--about one-third of new dual-eligible beneficiaries enrolled
by CMS. In August 2006, CMS implemented a new prospective enrollment
process that state Medicaid agencies may use to eliminate breaks in
prescription drug coverage for these beneficiaries. Second, CMS is
taking steps to improve tools pharmacies use when dual-eligible
beneficiaries seek to fill a prescription, but do not have their PDP
enrollment information. Third, CMS has plans to integrate the agency's
information systems to increase the efficiency of the systems involved
in the enrollment process.
CMS Instituted Prospective Enrollment to Help Ease Challenges of
Certain New Dual-Eligible Beneficiaries:
CMS implemented a new prospective enrollment process in August 2006 to
help Medicaid beneficiaries who become Medicare eligible transition to
Part D without a break in coverage. Under the prospective enrollment
process, state Medicaid agencies voluntarily can include on the monthly
state dual-eligible file those Medicaid beneficiaries predicted to
become Medicare eligible, for instance Medicaid beneficiaries who are
nearing their 65th birthday. Two months prior to the date the
beneficiary will become Medicare eligible, CMS assigns the beneficiary
to a PDP. By completing the assignment process prior to when these
beneficiaries become Medicare eligible, CMS officials told us that
these beneficiaries should have all their PDP enrollment information
when their Medicare Part D coverage begins.
Prior to the prospective enrollment process, Medicaid beneficiaries who
became Medicare eligible experienced a gap of up to 2 months during
which they were no longer eligible for Medicaid prescription drug
coverage but had yet to receive information on their Medicare Part D
drug coverage. This is because state Medicaid agencies were allowed to
include in the monthly state dual-eligible file only those dual-
eligible beneficiaries who were known to be eligible for Medicaid and
Medicare at the time the file was sent. State Medicaid agencies were
required to end Medicaid coverage for prescription drugs when the
beneficiary became Part D eligible.
Because prospective enrollment was in its very early stages during our
audit work, we cannot evaluate how effectively the new process is
working to mitigate the gaps in coverage some new dual-eligible
beneficiaries faced. In the first month of implementation, 38 state
Medicaid agencies submitted records identifying at least some
prospective dual-eligible beneficiaries. CMS officials attributed the
lack of submission of the names of prospective dual-eligible
beneficiaries by some state Medicaid agencies in August 2006 to the
short time frame state Medicaid agencies were given to change how they
compiled the dual-eligible file. As of November 2006, the state
Medicaid agencies for all 50 states and the District of Columbia have
included prospective dual-eligible beneficiaries in their monthly file.
While it is too early to gauge the impact of the process on
beneficiaries, we believe that prospective enrollment has the potential
to provide continuous coverage for those beneficiaries who can be
predicted to become dually eligible. State Medicaid officials also told
us that prospective enrollment is a beneficial change to the process of
identifying and enrolling new dual-eligible beneficiaries.
CMS Working to Improve Utility of Eligibility Query and Billing
Contingency Option:
CMS is taking steps to improve the eligibility query and the billing
contingency option. CMS worked with the pharmacy industry to change the
format of the eligibility query to include more complete information.
Also, CMS officials said they planned to make changes to the enrollment
contingency contract to institute a preliminary screen of Medicare
eligibility and Part D plan enrollment before a claim goes through the
system.
In response to requests from pharmacies that more information be
provided through the eligibility query, CMS officials told us that
agency staff worked with the National Council for Prescription Drug
Programs, Inc.--a nonprofit organization that develops standard formats
for data transfers to and from pharmacies--to change the format of the
eligibility query and increase the amount of information pharmacies
could get from the responses. As part of the planned improvements,
eligibility query responses for beneficiaries identified in the
database will include--in addition to the data elements previously
included--the beneficiary's name and birth date, the PDP's
identification number, and the beneficiary's low-income subsidy status.
The new specifications for the eligibility query were released December
1, 2006. Pharmacies have to work with their own software vendors to
implement the changes to their own systems.
CMS is also taking steps to improve the availability of the information
pharmacies access through the eligibility query. CMS officials told us
that, after being notified of a confirmed enrollment by CMS via a
weekly enrollment update, PDPs should submit standard billing
information to CMS within 72 hours. However, sometimes PDPs hold the
information for longer than 72 hours. According to CMS, the time it
takes PDPs to submit billing information to the agency has improved
since the beginning of the Part D program. While CMS does not monitor
the amount of time it takes for PDPs to submit billing information, the
agency has begun monitoring Medicare's eligibility database to identify
PDPs that have a large number of enrollees for whom billing information
is missing. As part of this effort, CMS sends a file monthly to each
PDP that lists enrollees without billing information. CMS guidance to
PDPs states that each PDP should successfully submit standard billing
information for 95 percent of the PDP's enrollees each month. According
to CMS data, as of October 1, 2006, about 27 percent of PDPs with CMS-
assigned, dual-eligible beneficiaries had billing information for less
than 95 percent of their CMS-assigned, dual-eligible beneficiaries. Of
those that did not meet the 95 percent threshold, most had fewer than
20 CMS-assigned, dual-eligible beneficiaries.
CMS has implemented certain changes for 2007 to address the large
number of problematic claims going through the WellPoint enrollment
contingency option. It has directed WellPoint to check an individual's
Medicare eligibility and Part D enrollment before the claim is
approved, using a new daily update report from Medicare's eligibility
database. This is expected to allow WellPoint to deny claims at the
point-of-sale that should not be paid through this option, thereby
reducing the number of claims that must be reconciled at a later date.
CMS Is Attempting to Address Information Systems Issues, but without
Adequate Testing, Problems May Continue:
CMS is now making changes to improve the efficiency of key information
systems involved in the enrollment process. It is redesigning and
integrating these information systems to reduce redundancies and to
synchronize data currently stored in different systems, which should
lead to a more efficient enrollment process. While CMS is performing
unit, system, and integration testing on these changes, it has no
definitive plans to perform end-to-end testing on the changes to the
overall information systems infrastructure.[Footnote 54] CMS is
pursuing contractual help to determine the extent of testing that it
can perform in the future.
CMS is currently integrating information from the Medicare eligibility
database with information from the enrollment transaction system
because duplicative demographic and other data are stored in both
systems. According to CMS information technology (IT) officials,
because these data are not stored in one place and a huge amount of
enrollment traffic is moving back and forth between these two systems,
it has been a very large burden for the agency to synchronize and
maintain a single set of data. CMS IT officials told us that they spent
the first 6 months of Part D implementation stabilizing the supporting
information systems and have only now begun to look at efficiencies
that can be achieved through integration and mergers that can reduce
maintenance and processing times. In the long term, the agency hopes to
integrate all beneficiary, entitlement, and enrollment information into
one database.
CMS IT officials contend that true end-to-end testing of these current
changes may not be feasible given the agency's limited time and
resources and the number of scenarios that would have to be tested in
the more than 600 different PDPs. In addition, true end-to-end testing
would involve thorough interface testing with SSA, and state Medicaid
agency and PDP systems, which are not standardized and vary widely.
While we agree that end-to-end testing will be difficult given the
multiple partners involved and the complexity of the program's systems
infrastructure, it is crucial to mitigate the risks inherent in CMS's
planned changes. End-to-end testing is a highly recognized systems
development best practice and is considered essential to ensure that a
defined set of interrelated systems, which collectively support an
organizational core business area or function, interoperate as intended
in an operational environment. These interrelated systems include not
only those owned and managed by the organization, but also the external
systems with which they interface. Because end-to-end testing can
involve multiple systems and numerous partner interfaces, it is
typically approached in a prioritized fashion taking into consideration
resources, test environments, and the willingness of external parties
to participate. CMS IT officials acknowledge that there are risks
associated with implementing these changes but still do not plan to
conduct end-to-end testing even on a limited basis.
CMS Randomly Assigns Dual-Eligible Beneficiaries to PDPs; Some States
Assigned Individuals Using a More Tailored Approach:
As required under the MMA and implementing regulations, for dual-
eligible beneficiaries who have not enrolled in a Part D plan, CMS
makes random assignments to PDPs based only on the premium amount and
the geographic location of the PDP. This method ensures that PDP
sponsors enroll an approximately equal number of beneficiaries.
However, state Medicaid officials and others assert that dual-eligible
beneficiaries assigned to PDPs by CMS are often enrolled in PDPs that
do not meet their drug needs. For the initial PDP assignments for
January 2006, some SPAPs used additional criteria--including drugs used
by beneficiaries--to enroll or reassign beneficiaries to PDPs that were
more appropriate to their individual circumstances. SPAP officials
reported that these alternative methods produced beneficial results.
However, CMS and PDP sponsors pointed out that random assignment works
to enroll beneficiaries into PDPs, and that there is no need to use
additional criteria.
When Enrolling Dual-Eligible Beneficiaries, CMS Considers PDP Premiums
and Geographic Location:
CMS assists in the enrollment of dual-eligible beneficiaries who have
not enrolled in a Part D plan on their own by randomly assigning them
in approximately equal numbers among eligible PDP sponsors in each
region. Under the MMA, the agency may only consider the premiums of the
PDPs in the region when making these assignments.[Footnote 55] CMS
first distributes beneficiaries randomly among those PDP sponsors that
offer one or more PDPs at or below the low-income benchmark--the
average premium in a region--if there is more than one eligible PDP
serving the beneficiary's geographic location. It then assigns the
beneficiaries randomly among all eligible PDPs offered by each PDP
sponsor. Following the first round of enrollments, CMS has assigned new
dual-eligible beneficiaries to PDPs monthly.
Dual-eligible beneficiaries may change PDPs at any time during the
enrollment year.[Footnote 56] When dual-eligible beneficiaries change
PDPs, coverage under the new PDP becomes effective the following month.
As of November 2006, 29.8 percent--1,703,018--of dual-eligible
beneficiaries initially enrolled by CMS subsequently made a PDP
election of their own choosing.
During the original assignments for 2006, CMS assigned some dual-
eligible beneficiaries to PDPs that did not serve the area where they
lived. This occurred for about 107,000 dual-eligible beneficiaries, 1.9
percent of the population randomly assigned to PDPs at that time. In
these cases, CMS made inappropriate assignments because it used address
information from SSA that was out-of-date or that corresponded to the
individual's representative payee--the individual or organization who
manages the beneficiary's money on the beneficiary's behalf--rather
than to the beneficiary.[Footnote 57] For example, if a beneficiary
resides in Arizona and their representative payee resides in Virginia,
CMS would have assigned that beneficiary to a PDP serving Virginia. CMS
officials pointed out that this problem was relatively minor because
most of these dual-eligible beneficiaries (about 98.1 percent of those
affected) were either enrolled in a PDP offered by a PDP sponsor that
offered coverage in the beneficiary's actual region or that had a
national pharmacy network. CMS officials told us that PDP sponsors
serving the remainder of these beneficiaries were instructed to provide
benefits to this group in accordance with their out-of-network
benefits.[Footnote 58] CMS officials also told us that the fact that
dual-eligible beneficiaries can switch PDPs at any time addresses the
issue. PDP sponsors were still required to notify all affected
beneficiaries of the out-of-area assignment. CMS instructed PDPs to
notify those dual-eligible beneficiaries living in an area not served
by the PDP sponsor that they would be disenrolled at some future point
and must contact Medicare to enroll in an appropriate PDP.
Some States Have Assigned Individuals to PDPs Using a More Tailored
Approach:
Under the MMA, SPAPs may enroll Part D beneficiaries into PDPs as their
authorized representatives.[Footnote 59] Although CMS encouraged SPAPs
to follow the same enrollment process CMS uses for dual-eligible
beneficiaries, CMS has allowed certain SPAPs to use additional
assignment criteria. Qualified SPAPs may use alternative assignment
methods--often referred to as intelligent random assignment (IRA)--to
identify PDP choices for their members that meet their individual drug
needs. IRA methods consider beneficiary-specific information, such as
drug utilization, customary pharmacy, and other objective criteria to
narrow the number of PDP options to which a member could be assigned.
With CMS approval, SPAPs may enroll members randomly among PDPs that
meet these given criteria. However, SPAPs may not discriminate among
PDPs by enrolling members into a specific or preferred PDP--a practice
referred to as steering.[Footnote 60]
Using Additional Criteria, Maine Switched PDP Assignments to
Accommodate Drugs Used by Dual-Eligible Beneficiaries:
The SPAP in Maine is one example of an organization that took steps to
reassign noninstitutionalized, dual-eligible beneficiaries, with CMS
approval, by aligning their drug needs with PDP formularies, ultimately
reassigning nearly half of its dual-eligible population to PDPs other
than those assigned by CMS. In June 2005, state legislation was enacted
that authorized the inclusion of all dual-eligible beneficiaries in
Maine's existing SPAP membership.[Footnote 61] Maine officials sought
to pass this legislation in response to concerns that this population
could experience coverage disruptions during the transition to Medicare
Part D as implemented by CMS. They reported that, although these
individuals may switch PDPs at any time, it could take months for
beneficiaries to transfer to a more appropriate PDP. Thus, after CMS
had randomly assigned dual-eligible beneficiaries to PDPs, Maine
reassigned certain noninstitutionalized, dual-eligible beneficiaries to
different PDPs prior to January 1, 2006.
The state found support for its decision to reassign dual-eligible
beneficiaries in a state analysis, which indicated that CMS assignments
resulted in a poor fit for many dual-eligible beneficiaries in Maine.
(See table 1.) According to the analysis, CMS had assigned roughly one-
third of dual-eligible beneficiaries to PDPs that covered all of their
recently used drugs. However, nearly half of dual-eligible
beneficiaries in the state had a match rate--the percentage of a
beneficiary's medications that appeared on the CMS-assigned PDP
formulary--lower than 80 percent. The analysis also showed that about
one in five dual-eligible beneficiaries had match rates below 20
percent.
Table 1: Maine Analysis of the Match Rate between Dual-Eligible
Beneficiaries' Drugs and Their CMS-Assigned PDP Formularies, 2005:
Match rate (percentage): 100;
Number of dual-eligible beneficiaries: 10,778;
Percentage of full dual-eligible beneficiaries: 34.0.
Match rate (percentage): 80 to 99.99;
Number of dual-eligible beneficiaries: 6,393;
Percentage of full dual-eligible beneficiaries: 20.1.
Match rate (percentage): 60 to 79.99;
Number of dual-eligible beneficiaries: 5,103;
Percentage of full dual-eligible beneficiaries: 16.1.
Match rate (percentage): 40 to 59.99;
Number of dual-eligible beneficiaries: 2,211;
Percentage of full dual-eligible beneficiaries: 7.0.
Match rate (percentage): 20 to 39.99;
Number of dual-eligible beneficiaries: 860;
Percentage of full dual-eligible beneficiaries: 2.7.
Match rate (percentage): Less than 20;
Number of dual-eligible beneficiaries: 6,384;
Percentage of full dual-eligible beneficiaries: 20.1.
Match rate (percentage): Total;
Number of dual-eligible beneficiaries: 31,729;
Percentage of full dual-eligible beneficiaries: 100.0.
Source: Maine Department of Health and Human Services.
Notes: Maine officials calculated match rates for each dual-eligible
beneficiary by comparing each beneficiary's recent drug use with the
formulary of the CMS-assigned plan. These match rates were generated by
a computer program that used a system that scored two points if a drug
was covered without prior authorization, one point if a drug was
covered but required prior authorization, and no points for drugs not
covered. To calculate the match rate, the program divided the total
score by the potential beneficiary maximum score.
[End of table]
As an alternative to random assignment based on PDP premiums and
location, Maine officials developed an IRA method that considered a
beneficiary's drug utilization and customary pharmacy to make new PDP
assignments. Officials developed a computer program that generated
scores used to rank PDPs in order of best fit for each beneficiary. The
program included the 10 PDPs in the state with premiums at or below the
low-income benchmark that provided their formularies to the state. It
compared the drugs on these PDPs' formularies to the beneficiary's drug
utilization history compiled from Medicaid claims for the 3 months
prior to the date of assignment (September, October, and November 2005)
and assigned an aggregate score to each PDP. The scoring system
differentiated between instances where a drug was on the formulary with
and without prior authorization requirements.[Footnote 62] For PDPs
with identical scores, the program assessed pharmacy location. If more
than one PDP had the beneficiary's customary pharmacy in their network,
the program randomly assigned the beneficiary among those PDPs with the
highest scores. Although Maine officials conducted this analysis for
all of its 2005 dual-eligible beneficiaries, after they conferred with
CMS officials they reassigned only those dual-eligible beneficiaries
who had lower than an 80 percent formulary match, accounting for 14,558
individuals, about 46 percent of the state's dual-eligible population.
Maine officials reported that IRA resulted in a marked improvement in
match rates for beneficiaries compared to CMS's PDP assignments. For
each PDP, officials calculated the match rate before and after IRA for
reassigned beneficiaries. (See table 2.) This analysis showed that
before the use of IRA, the weighted average match rate for all
participating PDPs was 34.14 percent, and ranged from 20.59 percent to
38.64 percent across PDPs. Following the application of IRA, the
weighted average match rate rose to 99.86 percent, with little
variation across PDPs.
Table 2: Match Rates by PDP before and after Intelligent Random
Assignment for Those Reassigned Dual-Eligible Beneficiaries:
PDP: A;
Number of dual-eligible beneficiaries reassigned using IRA: 233;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 20.59;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 98.71.
PDP: B;
Number of dual-eligible beneficiaries reassigned using IRA: 3,125;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 33.18;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 99.90.
PDP: C;
Number of dual-eligible beneficiaries reassigned using IRA: 473;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 29.65;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 99.79.
PDP: D;
Number of dual-eligible beneficiaries reassigned using IRA: 946;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 29.17;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 99.58.
PDP: E;
Number of dual-eligible beneficiaries reassigned using IRA: 740;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 29.18;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 99.86.
PDP: F;
Number of dual-eligible beneficiaries reassigned using IRA: 5,306;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 38.64;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 100.00.
PDP: G;
Number of dual-eligible beneficiaries reassigned using IRA: 426;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 25.99;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 99.53.
PDP: H;
Number of dual-eligible beneficiaries reassigned using IRA: 64;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 28.67;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 98.44.
PDP: I;
Number of dual-eligible beneficiaries reassigned using IRA: 2,706;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 34.79;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 100.00.
PDP: J;
Number of dual-eligible beneficiaries reassigned using IRA: 539;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 24.67;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 99.07.
PDP: All PDPs;
Number of dual-eligible beneficiaries reassigned using IRA: 14,558;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): Before reassignment: 34.14;
Average formulary match rate for reassigned dual-eligible beneficiaries
(percentage): After reassignment: 99.86.
Source: Maine Department of Health and Human Services, GAO.
Note: To calculate the average match rate before reassignment for each
PDP, Maine officials averaged the individual match rates based on the
CMS-assigned PDP formulary for all dual-eligible beneficiaries the
state subsequently reassigned to that PDP. To calculate the average
match rate after reassignment for each PDP, Maine officials averaged
the individual match rates based on the reassigned PDP formulary for
all dual-eligible beneficiaries the state reassigned to that PDP. To
calculate an average match rate for all plans before and after
reassignment, we took a weighted average of the average match rates
calculated for each plan before and after reassignment.
[End of table]
Maine officials noted that their continued use of IRA for dual-eligible
beneficiaries is contingent on their access to key data. To make the
initial assignments for dual-eligible beneficiaries effective January
1, 2006, the state had drug utilization information from its own
Medicaid claims system. However, if the state chooses to reassign
individuals again, it must obtain up-to-date utilization information.
To help ensure that it would have the data needed to perform another
round of IRA in the future, Maine's SPAP included in its contract with
PDP sponsors a requirement to exchange with the SPAP information on
pharmacy networks, formularies, and drug utilization on an ongoing
basis.[Footnote 63] For 2007, Maine reassigned 10,200, about 22 percent
of dual-eligible beneficiaries, to a new PDP.
New Jersey's SPAP Used Drug Utilization Data to Identify Optimal PDP
Assignments Prior to CMS Enrollment:
The state of New Jersey's SPAP--known as the Pharmaceutical Assistance
to the Aged and Disabled (PAAD) Program--developed and implemented an
IRA method, with CMS approval, that allowed it to enroll its members in
PDPs that best served their drug needs.[Footnote 64] PAAD officials
designed their IRA to simulate the decision process that would occur if
beneficiaries had received assistance from a State Health Insurance
Assistance Program[Footnote 65] counselor or had used CMS's Web-based
formulary finder on their own.[Footnote 66]
PAAD officials engaged a contractor to develop a computer program that
would identify PDPs that cover each individual's prescription drug
needs. The program matched information on members' maintenance drugs
with formulary and pharmacy network information for all PDPs offered in
New Jersey at or below the low-income benchmark.[Footnote 67] The
program treated married couples as one member in the assignment process
to ensure that they would be enrolled in the same PDP. In all, PAAD
matched 210,000 beneficiaries among six PDPs.[Footnote 68]
Following the application of IRA and prior to enrolling individuals,
PAAD sent one of two letters to beneficiaries that explained the
results of the IRA method. PAAD sent a letter to some beneficiaries
indicating that one PDP best met their needs in terms of its formulary
match and inclusion of their customary pharmacy. Other beneficiaries
were sent letters informing them that their needs would be equally met
by multiple PDPs and identified those PDPs. To satisfy CMS's
requirement that the state not steer beneficiaries to a particular PDP,
New Jersey included a full list of all eligible PDPs in the state on
the back of the letter.
PAAD staff sent these letters in October 2005 and offered to enroll
these beneficiaries if they did not receive a response by November
2005. Individuals were asked to notify PAAD of the PDP that they wanted
to join and PAAD moved to enroll them in that PDP. For beneficiaries
who did not respond to their letters, PAAD enrolled them into the PDP
identified as the best fit by the IRA, or randomly among PDPs that
equally met their needs. Of the roughly 210,000 letters sent to SPAP
members, PAAD received about 130,000 letters requesting enrollment in
the suggested PDP within the first month or two after PAAD sent the
letters. In total, PAAD enrolled 165,207 beneficiaries, about 78.7
percent of those sent letters, into PDPs identified as the best fit by
the IRA.
Stakeholders' Reactions to States' Use of Intelligent Random Assignment
Protocols Are Mixed:
While CMS has allowed certain SPAPs to use IRA methods to assign or
reassign their members, CMS does not support the use of IRA methods to
assist dual-eligible beneficiaries with Part D enrollment. CMS
officials told us that any proposal to add drug utilization as a
criterion for PDP assignments assumes that a beneficiary should remain
on the same drugs. They contend that beneficiaries can change
prescriptions to a similar drug that is on their CMS-assigned PDP's
formulary and receive equivalent therapeutic value. Moreover, the
officials pointed out the ability of dual-eligible beneficiaries to
switch PDPs. Overall, CMS officials maintained the position that its
PDP assignment method for dual-eligible beneficiaries used in fall 2005
worked well.
In contrast, state Medicaid officials we met with generally support the
use of IRA methods to assist beneficiaries in choosing a PDP that meets
their individual circumstances. State Medicaid officials we met with
maintained that overall, dual-eligible beneficiaries would have been in
a better position during the initial transition to Medicare Part D if
drug utilization information were considered in the PDP assignment
process. A representative of the National Association of State Medicaid
Directors (NASMD)[Footnote 69] asserted that while CMS's assignment
process was fair to PDP sponsors, it did not ensure that beneficiaries
were enrolled in appropriate PDPs. The representative reported that CMS
referred individuals who wanted to take their drug usage into account
in selecting a PDP to the Medicare.gov Web site, which most dual-
eligible beneficiaries are not able to use.
Some state Medicaid agencies indicated their support for IRA in the
months prior to Part D implementation. At that time, 15 state Medicaid
agencies made commitments to a software vendor to use a free software
package designed to match beneficiaries' drug utilization history with
PDP formularies as an educational tool to help them choose the PDP best
aligned to their individual drug needs. However, litigation over use of
the IRA software led to delays, at the end of which CMS had already
assigned dual-eligible beneficiaries to PDPs. State Medicaid agencies
reported that they then did not have the time to match beneficiaries,
send out scorecards, and allow beneficiaries to switch PDPs before the
January 1, 2006, implementation date.
Executives of PDP sponsors we spoke with stated that CMS's assignment
method generally worked well; however, some executives raised concerns
about IRA methodology. Two PDP sponsors raised concerns that IRA
methods misinterpret formulary information. Executives from one PDP
sponsor contended that there is not a need to look at drug utilization
information because of the requirements for broad formularies. These
executives also told us that using this method could increase the
program's costs by making PDPs cover more drugs.
PDP Transition Process Compliance Improved but Beneficiary Confusion
Remains; 2007 Contracts More Specific:
CMS actions to address problems associated with PDP implementation of
pharmacy transition processes led to a more uniform application of
transition processes. Pharmacy transition processes allow new PDP
enrollees to obtain drugs not normally covered by their new PDP while
they contact their physician about switching to a covered drug. In
response to Part D sponsors' inconsistent implementation of transition
drug coverage processes in early 2006, CMS issued a series of memoranda
that clarified its expectations. PDP sponsors, pharmacy groups, and
beneficiary advocates told us that since then, beneficiaries' ability
to obtain transition drug coverage has substantially improved. However,
they also report that dual-eligible beneficiaries remain unaware or
confused about the significance of receiving a transition drug supply
at the pharmacy and are not using the transition period to address
formulary issues. CMS made the transition process requirements in its
2007 contracts with PDP sponsors more specific.
CMS Guidance on Transition Drug Coverage Improved PDP Performance:
After receiving complaints that Part D enrollees experienced
difficulties obtaining their medications, CMS took steps to address
issues related to the availability of transition drug supplies. Federal
regulations require PDP sponsors to provide for a transitional process
for new enrollees who have been prescribed Part D-covered drugs not on
the PDP's formulary.[Footnote 70] CMS instructed PDP sponsors to submit
a transition process, which would be subject to the agency's review, as
part of the application to participate in Part D.
Although CMS specified its expectations for a transition process in
March 2005 guidelines for Part D sponsors, the sponsors had discretion
in devising their processes. The March 2005 guidelines specified that
Part D sponsors should consider filling a one-time transition supply of
nonformulary drugs to accommodate the immediate need of the
beneficiary. The agency suggested that a temporary 30-day supply would
be reasonable to enable the relevant parties to work out an appropriate
therapeutic substitution or obtain a formulary exception, but it
allowed Part D sponsors to decide the appropriate length of this one-
time transitional supply. For residents in long-term care facilities,
CMS guidance indicated that a transition period of 90 to 180 days would
be appropriate for individuals who require some changes to their
medication in order to accommodate PDP formularies.
During the early weeks of the program, CMS received reports that the
way in which some PDP sponsors implemented their transition processes
adversely affected beneficiaries' ability to obtain transition
supplies. Sponsors differed in the time period set for providing
transition coverage; some PDPs provided the suggested 30-day supply,
while other PDPs provided beneficiaries with as few as a 15-day initial
supply. Some PDP sponsors did not apply their transition coverage
processes to instances where a formulary drug was subject to
utilization restrictions. For example, CMS received complaints that
individuals were not given a transition supply when their medications
had prior authorization, step therapy, or quantity limit
restrictions.[Footnote 71] Additionally, PDP sponsors' customer service
representatives and pharmacies were generally unaware of the transition
processes and how to implement them. Pharmacy association
representatives also told us of problems overriding the usual pharmacy
billing system in order to process a claim when dispensing a transition
supply.
CMS responded to the reported problems concerning the uneven
application of transition processes by issuing a series of memoranda to
PDP sponsors to clarify its expectations.
* On January 6, 2006, CMS issued a memorandum to PDP sponsors
highlighting the need for beneficiaries to receive transition supplies
at the pharmacy. The memorandum emphasized that PDP sponsors should (1)
train customer service representatives to respond to questions about
the PDP's transition process, (2) provide pharmacies with appropriate
instructions for billing a transition supply, and (3) ensure that
enrollees have access to a temporary supply of drugs with prior
authorization and step therapy requirements until such requirements can
be met.
* On January 13, 2006, CMS issued guidance stating that PDP sponsors
should establish an expedited process for pharmacists to obtain
authorization or override instructions, and authorize PDP customer
service representatives to make or obtain quick decisions on the
application of transition processes.
* In a January 18, 2006, memorandum, CMS reiterated its policy that PDP
sponsors should provide at least an initial 30-day supply of drugs and
that PDPs should extend that coverage even further in situations where
a longer transition period may be required for medical reasons. In
addition, CMS asked PDP sponsors to consider contacting beneficiaries
receiving transition supplies of drugs to inform them that (1) the
supply is temporary, (2) they should contact the PDP or physician to
identify a drug substitution, and (3) they have a right to request an
exception to the formulary and the procedures for requesting such an
exception.
* When many beneficiaries continued to return to the pharmacy for
refills without having successfully resolved their formulary issues,
CMS issued a memorandum on February 2, 2006, calling for an extension
of the Part D transition period to March 31, 2006.[Footnote 72] The
agency asserted that the extension was needed to give beneficiaries
sufficient time to work with their provider to either change
prescriptions or request an exception.
* In another memorandum to PDP sponsors on March 17, 2006, CMS
reemphasized the objectives of the transition process and highlighted
the need to inform beneficiaries of what actions to take to resolve
formulary issues following the receipt of a transition supply.
Since CMS clarified its transition process guidance to PDP sponsors,
many of the issues surrounding transition processes have been resolved.
Some of the pharmacy and long-term care associations, and Medicaid
officials we spoke with, told us that problems with providing
transition drug coverage have largely been addressed. They noted that
the issues surrounding the implementation of the transition processes
have significantly improved.
To oversee PDP compliance with transition coverage processes, CMS
tracks complaints and monitors the time it takes Part D sponsors to
resolve complaints. CMS officials said that they rely on beneficiary
and pharmacy complaints for information about problems with transition
coverage. The agency also assigns case workers to ensure that PDPs
resolve these issues. Although CMS can issue monetary penalties, limit
marketing, and limit enrollment for PDPs, officials reported that no
such punitive actions have been taken against any PDP regarding
transition process compliance.
Dual-Eligible Beneficiaries Often Confused about Implications of
Receiving Transition Fills:
Despite PDP sponsors' efforts to communicate with beneficiaries
receiving transition supplies, beneficiaries do not always take needed
action during the transition period. Consequently, some dual-eligible
beneficiaries return to the pharmacy without having worked with their
physician to apply to get their drugs covered or find a substitute
drug.
While three PDP sponsors told us how they conveyed information about
the transition period, two of these PDP sponsors acknowledged that dual-
eligible beneficiaries often do not use the transition period as
intended. For example, one PDP executive told us that beneficiaries
often do not realize that a transition supply has been provided and
that they have to apply to the PDP to continue receiving coverage for
that particular drug.
Representatives from some pharmacy associations and long-term care
groups that we spoke to also agreed that, even when notified, dual-
eligible beneficiaries are unaware of the implications of the policy.
Some pharmacy representatives we spoke with noted that when dual-
eligible beneficiaries receive a transition supply, they are often
unaware that this supply is temporary and therefore return to the
pharmacy the following month in an effort to refill the same
prescription without having tried to switch to a formulary medication
or obtain permission to continue to have the drug covered. Two other
pharmacy association representatives noted that beneficiary
understanding of transition supplies is a particular problem for dual-
eligible beneficiaries in the long-term care setting who often do not
open or read the notification letter sent from the PDP. Staff in long-
term care facilities often find unopened mail for the beneficiary sent
from their PDP.
For 2007, CMS Added Specific Transition Process Requirements to Its
Contracts with PDP Sponsors:
Unlike the discretion allowed PDP sponsors under the guidance for 2006,
CMS's 2007 contract incorporates specific requirements.[Footnote 73]
For example, the guidance for 2006 stated that, "we expect that PDP
sponsors would consider processes such as the filling of a temporary
one-time transition supply in order to accommodate the immediate need
of the beneficiary." As part of the 2007 contract, PDP sponsors must
attest that the PDP will follow certain required components of a
transition process. These components require that, among other things,
PDPs:
* provide an emergency supply of nonformulary Part D drugs for long-
term care residents,[Footnote 74]
* apply transition policies to drugs subject to prior authorization or
step therapy,
* add a computer code to their data systems to inform a pharmacy that
the prescription being filled is a transition supply,
* ensure that network pharmacies have the computer codes necessary to
bill transition supplies, and:
* notify each beneficiary by mail within 72 hours of a transition
supply of medications being filled.
To educate beneficiaries about the purpose of transition supplies, CMS
also added a requirement for PDP sponsors in its 2007 contracts to
instruct beneficiaries about the implications of a transition supply
and alert pharmacies that they are supplying a transition supply.
Beginning in 2007, PDP sponsors are required to notify each beneficiary
of the steps they should take during the transition period when they
receive a transition supply of a drug. In addition, PDP sponsors are
required to add a computer code to their systems so that after a
pharmacist fills a transition supply, a message back to the pharmacist
will alert them that the prescription was filled on a temporary basis
only. The pharmacist will then be in a better position to inform the
beneficiary of the need to take appropriate steps before the transition
period ends.
Conclusions:
Some challenges regarding the enrollment of new dual-eligible
beneficiaries have been resolved, while others remain. In particular,
CMS's decision to implement prospective enrollment for new dual-
eligible beneficiaries who are Medicaid eligible and subsequently
become Medicare eligible should alleviate coverage gaps this group of
beneficiaries previously faced. However, because of inherent processing
lags, most dual-eligible beneficiaries--Medicare beneficiaries new to
Medicaid--may continue to face difficulties at the pharmacy counter. In
addition, because of CMS's limited oversight of its retroactive
coverage policy, the agency has not been able to ensure efficient use
of program funds. Until March 2007, the letters used to notify dual-
eligible beneficiaries of their PDP enrollment and their retroactive
coverage did not inform them of the right to be reimbursed and how to
obtain such reimbursement. CMS monitoring of retroactive payments to
PDPs and subsequent PDP reimbursements to beneficiaries is also
lacking. We found that Medicare paid PDPs millions of dollars --we
estimate about $100 million in 2006--for coverage during periods for
which dual-eligible beneficiaries may not have sought reimbursement for
their drug costs.
After spending many months stabilizing the information systems
supporting the Part D program, CMS is now making changes to improve the
efficiency of its key information systems involved in the enrollment
process. While CMS officials are aware of the risks involved in these
changes, they are not planning to perform end-to-end testing because of
the complexity of the systems infrastructure, the multiple partners
involved, and time and resource constraints. While we agree that end-
to-end testing will be difficult, it is important to perform this
testing to mitigate risks and avoid problems like those that occurred
during initial program implementation.
CMS's assignment of dual-eligible beneficiaries to PDPs serving their
geographic area with premiums at or below the low-income benchmark
generally succeeded in enrolling dual-eligible beneficiaries into PDPs.
The experience of SPAPs in Maine and New Jersey, while limited,
demonstrates the feasibility of using IRA methods to better align
beneficiaries' PDP assignments with their drug utilization needs.
However, continued use of these methods is contingent on access to
beneficiary drug utilization and formulary information from PDPs. In
addition, some dual-eligible beneficiaries--those with representative
payees--were assigned to PDPs that did not serve the area where they
lived. Since CMS receives a file from SSA that includes an indicator
showing that an individual has a representative payee, the agency could
use this information to assign these beneficiaries to PDPs that serve
the area where they live.
To resolve problems associated with the uneven application of
transition policies, CMS clarified its previous guidance to plans and
added requirements to its 2007 contracts with PDP sponsors. The 2006
experience with plans' uneven implementation of CMS's transition policy
guidance demonstrated how inconsistent interpretations can lead to
problems for beneficiaries and pharmacies. CMS officials recognized
that the agency needed to be more directive by including specific
procedures in its 2007 PDP contracts. Even with consistent
implementation of transition policies and notification requirements,
however, without assistance, dual-eligible beneficiaries--a highly
vulnerable population--are likely to have difficulty resolving problems
that they encounter with the transition.
Recommendations for Executive Action:
We make the following six recommendations.
To help ensure that dual-eligible beneficiaries are receiving Part D
benefits, the Administrator of CMS should require PDP sponsors to
notify new dual-eligible beneficiaries of their right to reimbursement
for costs incurred during retroactive coverage periods.
To determine the magnitude of Medicare payments made to PDPs under its
retroactive coverage policy, the Administrator of CMS should track how
many of the new dual-eligible beneficiaries it enrolls each month
receive retroactive drug benefits and how many months of retroactive
coverage the agency is providing them.
To determine the impact of its retroactive coverage policy, the
Administrator of CMS should monitor PDP reimbursements to dual-eligible
beneficiaries, and those that paid on their behalf, for costs incurred
during retroactive periods through an examination of the prescription
utilization data reported by PDP sponsors.
To mitigate the risks associated with implementing Part D information
systems changes, especially in light of initial systems issues caused
by the lack of adequate testing, the Administrator of CMS should work
with key partners to plan, prioritize, and execute end-to-end testing.
To help ensure new dual-eligible beneficiaries are enrolled in PDPs
that serve the geographic area where they live, the Administrator of
CMS should assign dual-eligible beneficiaries with representative
payees to a PDP serving the state that submits the individual's
information on their dual-eligible file.
To support states with the relevant authority that want to use
alternative enrollment methods to reassign dual-eligible beneficiaries
to PDPs, the Administrator of CMS should facilitate the sharing of data
between PDPs and states.
Agency Comments and Our Evaluation:
CMS reviewed a draft of this report and provided written comments,
which appear in appendix II. In addition to comments on each of our
recommendations, CMS provided us with technical comments that we
incorporated where appropriate.
CMS remarked that we did an excellent job of outlining the complex
systems and steps involved in identifying, assigning, and enrolling new
dual-eligible beneficiaries into PDPs. However, the agency objected to
what it perceived as an overwhelmingly negative tone in our findings
and stated that our discussion of retroactive coverage was overly
simplified. CMS did note that the agency was in the process of
implementing three of our six recommendations to improve existing
procedures.
CMS's main concern regarding the draft report for comment centered on
our characterization of the interval between the effective date of Part
D eligibility and the completed enrollment process as a "disconnect."
Also, CMS officials noted that "it is not new or unusual for
individuals to pay out of pocket for their prescription drug or other
healthcare services, and then subsequently be reimbursed." The agency
explained that its policy of tying the effective Medicare Part D
enrollment date to the first day of Medicaid eligibility is intended to
ensure that dual-eligible individuals receive Part D benefits for the
period that they were determined by their state to be eligible for this
coverage. CMS asserted that it is the retroactive eligibility
requirement under Medicaid, not CMS policy, which causes the "space and
time conundrum" over which it has no control.
Regarding this broad concern from CMS, we note that our discussion of
the time to complete the enrollment process and the period of
retroactive coverage experienced by a majority of newly enrolled dual-
eligible beneficiaries was intended to describe CMS's implementation of
the enrollment process for new dual-eligible beneficiaries; we did not
evaluate CMS's policy. Recognizing the desirability of providing drug
coverage as soon as beneficiaries attain dual-eligible status, we do
not object to CMS's policy of linking the Part D effective coverage
date to Medicaid's retroactive eligibility date. However, our review
found that CMS had not fully implemented this policy and, as a
consequence, neither beneficiaries nor the Medicare program are well
served. Therefore, we have recommended actions that CMS should take to
better protect beneficiaries and ensure efficient use of Medicare
program funds. To clarify our message and to reflect information
obtained through agency comments, we modified portions of this
discussion and provided the revised sections to CMS for supplemental
comments.
In its supplemental comments, CMS again objected to what it believed is
our implication that retroactive coverage for dual-eligible
beneficiaries is inappropriate or that CMS has put the Medicare program
at unwarranted risk. As stated above, we do not disagree with the
policy of retroactive coverage for dual-eligible beneficiaries; rather
we are concerned with how CMS implemented this policy in 2006. Only by
monitoring the amounts paid to PDP sponsors for retroactive coverage
periods and the amounts PDP sponsors reimbursed dual-eligible
beneficiaries will CMS be in a position to evaluate the effectiveness
of its retroactive coverage policy.
Also, CMS asserted that we incorrectly imply that CMS had the
information needed to monitor reimbursements to dual-eligible
beneficiaries when such information is not expected to be available
until after May 31, 2007. During the course of our audit work in 2006,
CMS indicated no current or planned efforts to monitor or enforce PDP
sponsor reimbursements to dual-eligible beneficiaries. Only after
receiving our draft report did CMS state its intention to analyze the
data necessary to monitor plan compliance and evaluate agency policy.
In fact, we were told that CMS decided to conduct this analysis as a
direct result of our draft report's findings and recommendations.
CMS agreed with our recommendation to require PDP sponsors to notify
new dual-eligible beneficiaries of their eligibility for reimbursement
for costs incurred during retroactive coverage periods. To be
consistent with its retroactive coverage policy, CMS is in the process
of adding language to this effect in the notices that the agency and
PDP sponsors send to dual-eligible beneficiaries enrolled in a PDP. The
revised letters advise beneficiaries to tell their PDP if they have
filled prescriptions since the effective coverage date because they
"may be eligible for reimbursement for some of these costs." However,
contrary to comments CMS made on our draft report--that dual-eligible
beneficiaries will be told they should submit receipts for previous
purchases of Part D drugs--the revised letters do not explicitly tell
beneficiaries of the steps they would need to take to access their
retroactive coverage. The agency also reported that it plans to inform
its partners about the changes to the enrollment notification letters.
In response to our recommendation that CMS determine the number of
beneficiaries and the magnitude of payments made to PDP sponsors for
dual-eligible beneficiaries subject to retroactive coverage, CMS
indicated that it intends to continue to track the number of new dual-
eligible beneficiaries provided retroactive coverage. Although this
monitoring is important to managing the enrollment process for new dual-
eligible beneficiaries, it would be even more useful if CMS tracked the
number of months of retroactive coverage provided to beneficiaries it
enrolls in PDPs.
CMS disagreed with our recommendation that it monitor PDP reimbursement
of beneficiary expenses incurred during retroactive coverage periods.
We maintain that the agency should actively monitor its retroactive
coverage policy by examining data that plan sponsors routinely submit
to the agency. In their drug utilization records, sponsors must
indicate the amounts paid by the plan and by the beneficiary for each
claim. If it became evident that dual-eligible beneficiaries were not
filing claims for retroactive reimbursements while PDPs received
Medicare payments for their coverage, CMS would be in a position to
evaluate its effective coverage date policy.
Regarding our recommendation that the agency work with key partners to
plan, prioritize, and execute end-to-end testing, CMS disagreed and
questioned whether the benefits of doing so justify the associated
costs. We find this position on end-to-end testing to be inconsistent
with systems development best practices. Establishing end-to-end test
environments and conducting such tests is widely recognized as
essential to ensure that systems perform as intended in an operational
environment. CMS was alerted to this issue in a March 2006 CMS
contractor report that identified the lack of comprehensive end-to-end
testing as a weakness of the Part D program. We acknowledge that, given
the complexity of the program's infrastructure and the multiple
partners involved, end-to-end testing will be difficult. However, other
forms of testing, including integration and stress testing, should be
conducted in addition to, not as a replacement for, end-to-end testing.
CMS concurred with our recommendation that it ensure all new dual-
eligible beneficiaries are enrolled in PDPs that serve the geographic
area where they live. CMS reported that it has completed the underlying
changes necessary to implement this recommendation. Beginning in April
2007, the CMS auto-assignment process enrolls dual-eligible
beneficiaries into PDPs that operate in the state that submits that
individual in its dual-eligible file.
CMS disagreed with our recommendation that the agency facilitate
information sharing between PDPs and states that wish to use additional
information to reassign beneficiaries yearly. The agency asserted that,
for a number of reasons, efforts to match beneficiaries' customary
drugs to PDP formularies are not necessary or desirable. Furthermore,
CMS noted that it lacks the statutory authority and the drug
utilization data needed to assign beneficiaries to PDPs on anything
other than a random basis. We did not propose that CMS change its
assignment method and we did not take a position on the desirability of
states' use of intelligent random assignment methods. However, we
maintain that states wishing to reassign beneficiaries should have
access to PDP data once beneficiaries have been enrolled.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from the date of this report. We will then send copies to the
Administrator of CMS, appropriate congressional committees, and other
interested parties. We will also make copies available to others upon
request. This report is also available at no charge on GAO's Web site
at http://www.gao.gov.
If you or your staffs have any questions about this report, please
contact Kathleen King at (202) 512-7119 or kingk@gao.gov. Questions
concerning information systems issues and testing should be directed to
David Powner at (202) 512-9286 or pownerd@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made contributions to
this report are listed in appendix III.
Signed by:
Kathleen M. King:
Director, Health Care:
Signed by:
David A. Powner:
Director, Information Technology Management Issues:
[End of section]
Appendix I: Steps Involved in the Identification and Enrollment of
Dual- Eligible Beneficiaries into Medicare Part D:
The process of enrolling dual-eligible beneficiaries requires several
steps: It begins when the state Medicaid agency identifies new dual-
eligible beneficiaries and ends when PDPs make billing information
available to pharmacies.
1. States are responsible for identifying their Medicaid enrollees who
become dual-eligible beneficiaries. They combine data obtained from SSA
or requested from CMS on individuals eligible to receive Medicare
benefits with their own information on Medicaid enrollees to compile
the dual-eligible files. CMS receives Medicare entitlement information
daily from SSA.
2. After the 15th of the month and before midnight of the last night of
the month, states transmit their dual-eligible files to CMS. These
files contain information on all individuals identified by the states
as dual-eligible beneficiaries, including those newly identified and
those previously identified. Generally within 48 hours of receipt, CMS
processes state submissions. Within the Medicare eligibility database,
edits of the state files are performed. Based on the results of the
edits, the Medicare eligibility database transmits an e-mail to each
state telling the state its file was received and the results of the
edits. Files that fail the edits must be resubmitted. Once a file
passes the edits, the Medicare eligibility database matches the file
against the Medicare eligibility database to determine if it is a valid
(matched) beneficiary, eligible for Medicare, and passes business rules
for inclusion as a dual eligible. The results of this processing for
each transaction on the states' file are added to the response files,
which are sent back to the states.
3. After CMS has performed the matching process, the Medicare
eligibility database processes these files through two additional
steps:
(a) Deeming. Deeming takes the input from the matching process and a
monthly input file from SSA on beneficiaries receiving Social Security
Supplemental Income (SSI) to determine the copayment level for the dual-
eligible beneficiaries. Deeming is performed against these data
according to the business rules.
(b) Auto-assignment. Auto-assignment takes the results of deeming and
assigns each beneficiary to a PDP within the region that includes the
beneficiary's official address. Auto-assignment takes the total dual-
eligible population and eliminates records using 18 exclusions rules
resulting in the final set of beneficiaries to be auto-assigned.
Exclusions include beneficiaries who are already enrolled in a Part D
plan, currently incarcerated, and not a U.S. resident (residing outside
the States and territories). Auto-assignment uniformly assigns
qualified dual-eligible beneficiaries to designated PDPs across each
region.
The resulting deeming and assignment information is sent to CMS's
enrollment transaction system for processing. In addition, a mail tape
is prepared by CMS containing beneficiary names and addresses so that
mail can be generated that informs beneficiaries of the pending
enrollment and identifies the PDP to which they were assigned. A file
also is sent to each of the plans identifying the beneficiaries
assigned to their PDP.
4. Upon the receipt of the deeming and assignment information from the
Medicare eligibility database, CMS's enrollment transaction system
facilitates the changes in the copayments and the enrollment of the
beneficiaries into their assigned PDP. The enrollment transaction
system informs the PDP of the enrollment and copayment transactions via
a weekly Transaction Reply Report (TRR) that summarizes all
transactions that the enrollment transaction system has performed for
the respective PDP during the prior week, beginning on Saturday.
5. PDPs then process the resulting assignment and copayment changes,
assign standard billing information, and send the information to CMS's
Medicare eligibility database. The Medicare eligibility database
performs edits, such as matching each submitted beneficiary's
information with Part D enrollment information. For each match, the
standard billing information is added to the Medicare eligibility
database and a response is generated for the PDP, confirming that the
information was accepted. The PDPs mail out ID cards and plan
information to the enrolled beneficiary.
6. Nightly, the eligibility query receives billing information from the
Medicare eligibility database, making the updated standard billing
information available for use in the eligibility query system.
7. Pharmacies can use their computer systems to access billing
information needed to bill the assigned PDP for the beneficiary's
prescriptions if a beneficiary does not have their enrollment
information.
[End of section]
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Department Of Health & Human Services:
Centers for Medicare & Medicaid Services:
Administrator:
Washington, DC 20201:
Date: Feb 2 0 2001:
To: Kathleen M. King:
Director, Health Care:
Government Accountability Office:
From: Leslie V. Norwalk, Esq:
Acting Administrator:
Centers for Medicare & Medicaid Services:
Subject: Government Accountability Office (GAO) Draft Report: Medicare
Part D: Challenges in Enrolling New Dual-Eligible Beneficiaries (GAO-
07-272):
Thank you for the opportunity to review and comment on the above GAO
Draft Report. The GAO's study focused on the challenges involved in
identifying and enrolling dual-eligible beneficiaries into Medicare
prescription drug plans (PDPs) and the Centers for Medicare & Medicaid
Services' (CMS) efforts to address these challenges.
We appreciate the GAO's thorough review of the issues involved, as well
as the recommendations for fine-tuning the CMS procedures. In
particular, the report does an excellent job of outlining the complex
systems and steps involved in first obtaining information from States
regarding the dual-eligible population and then assigning them to, and
enrolling them into, a PDP. CMS welcomes constructive suggestions on
how to make this process work better, and we are in the process of
implementing some of the report's concrete recommendations. For
example, we have taken immediate steps to modify our notice to dual
eligibles who are auto-enrolled to further ensure that in situations
involving retroactive dual eligibility, they should submit receipts for
prescription drug costs incurred during that retroactive period for
reimbursement by the plan, as recommended in the report. We have made
similar changes to the model notice used by PDP sponsors to confirm the
auto-enrollment with their members. Revised notices will be sent to new
auto-enrollees beginning in March.
I However, this report contains a number of factual inaccuracies and we
must object to the overwhelmingly negative tone of the findings set
forth in the report. as illustrated in the more detailed comments
below. The challenges associated with transitioning the entire dual-
eligible population, and all new dual eligibles, to the Part D benefit
were immense and largely unprecedented, as you have no doubt become
aware in the course of conducting this study. In that context, the
report's draft recommendations clearly constitute minor refinements of
our existing procedures.
Thus, we believe that an even-handed report would begin by prominently
acknowledging the overall success of CMS' efforts. GAO could begin this
report by recognizing the difficulty - indeed the impossibility --of
delivering real time benefits to beneficiaries who become eligible for
those benefits retroactively, sometimes by several months. In this
respect, the Report could acknowledge that CMS has taken a number of
beneficial steps to eliminate the delay that some dual eligibles may
encounter in accessing their drug benefits under Medicare.
Instead, the report begins with a finding that is misleading at best:
"Some new dual-eligible beneficiaries --generally those on Medicare who
have not signed up for a PDP and become eligible for Medicaid - may not
access their drug benefit for several months because they are unaware
of their coverage." In fact, if a beneficiary is "on Medicare" and has
not signed up for a PDP, s/he has no "coverage" until s/he selects a
plan or is auto-enrolled. Moreover, the reason beneficiaries may not be
aware of the coverage for `'several months" is due primarily to the
fact that their eligibility for Medicaid, and thus their enrollment in
the PDP, is retroactive to the date of their Medicaid application, and
often earlier. No beneficiary can be aware of coverage s/he does not
yet have and retroactive coverage is not accessible until after it is
granted. Rather than explain this complexity, the report simply states:
"[T]his is due to a gap between the effective enrollment date and the
date beneficiaries receive notice of their coverage." This conclusion
is overly simplistic.
That same first paragraph goes on to state that CMS has put the
Medicare program ".at risk of paying PDP sponsors for several months
when they are not providing drug benefits." Please be advised that this
conclusion is unsubstantiated and factually incorrect. PDP sponsors, in
fact, have an obligation to reimburse their members (or another payer)
for costs incurred retroactively when the sponsor is the primary payer.
We have also educated our partners about this policy, so that they can
help to ensure that dual-eligible beneficiaries understand their right
to reimbursement for retroactive costs. As discussed above, we have
taken additional steps to ensure that beneficiaries are aware of their
right to request such reimbursement. Therefore, given the GAO's full
awareness of both the retroactivity of Medicaid eligibility
determinations and the statutory prohibition on Medicaid payments for
Part D drugs, we consider any implication that CMS is somehow
overpaying PDP sponsors to be inappropriate. Legally. CMS cannot
require PDPs to provide retroactive coverage without paying a premium
to the PDPs for the period of retroactive coverage. Thus, under current
law, the only way to avoid such payments would be to establish a
prospective effective date for drug coverage for these individuals.
However, such a polity would effectively preclude dual-eligible
individuals from any drug coverage during a period when they were
determined by the State to be eligible for such coverage.
We address each of the report's "Recommendations for Executive Action"
in the attached document, followed by more detailed technical comments.
Attachment:
Centers for Medicare & Medicaid Services' (CMS) Comments to the
Government Accountability Office's (GAO) Draft Report: Medicare Part D:
Challenges in Enrolling New Dual-Eligible Beneficiaries (GAO-07-272):
GAO Recommendation 1: To help ensure that dual-eligible beneficiaries
are receiving Part D benefits, the Administrator of CMS should require
PDP sponsors to notify new dual-eligible beneficiaries that they are
eligible for reimbursement for costs incurred during retroactive
eligibility periods.
CMS Response: We agree with this recommendation and, as noted above,
have inserted language to this effect in the notices that CMS and
prescription drug plan (PDP) sponsors send to dual-eligible
beneficiaries who are auto-enrolled into a plan. Again, we have also
educated our partners about this polity, so that they can help to
ensure that dual-eligible beneficiaries understand their right to
reimbursement for retroactive costs. However, we object to the report's
repeated references to "disconnects between CMS' enrollment policies
for dual-eligible beneficiaries and the enrollment processes" (first
paragraph under "Results in Brief," page 6), "Incongruent Enrollment
Policies and Enrollment Processes" (Heading, page 18), "Disconnect
Between Effective Enrollment Date and Completed Enrollment Process"
(Heading, page 19), etc. As GAO notes. CMS polity is that, for Medicare-
eligible individuals who subsequently become Medicaid- eligible, the
effective date of enrollment is tied to the first day of the month of
Medicaid eligibility. CMS established this polity to ensure that these
beneficiaries do not experience a gap in drug coverage. We are very
interested in whether GAO objects to this polity in any way or if GAO
has any constructive recommendations to address the real space and time
conundrum that beneficiaries face with retroactive Medicaid benefits, a
situation over which Medicare has no control. if so, we would welcome a
recommendation to that effect, or a suggested alternative approach. If
not, we believe that the repeated implications that CMS' implementation
of this polity is the source of problems should be eliminated.
Our continued belief is that, by statute, only PDP sponsors and not the
Medicaid program can legitimately pay the drug costs for dual-eligible
individuals. Thus, given the need to provide drug coverage for dual-
eligible individuals as soon as they attain dual-eligible status, the
logistical realities of obtaining dual-eligible data from States, and
the ongoing reality of retroactivity in State Medicaid eligibility
procedures, we believe that reimbursing PDPs for these retroactive
months is the only viable approach. As GAO has suggested, making
beneficiaries aware that they can save and submit receipts alter
eligibility is determined is consistent with this approach.
GAO Recommendation 2: To estimate the potential magnitude of payments
to PDP sponsors for time periods when dual-eligible beneficiaries
cannot access their drug coverage, the Administrator of CMS should
determine how many new dual-eligible beneficiaries each month or year
are Medicare beneficiaries who subsequently qualify for Medicaid, and
of those how many were previously enrolled in a PDP. The Administrator
of CMS should also determine how many months of retroactive coverage
the agency is providing to new dual-eligible beneficiaries.
CMS Response: As the GAO report notes on page 34, CMS has implemented
prospective enrollment for Medicaid-eligible individuals who then
attain Medicare eligibility; thus, we can readily identify the other
population-the Medicare first, Medicaid second group-and those within
that group who are already enrolled in a PDP. Factoring out the
existing Part 1) enrollees is an ongoing part of our monthly auto-
enrollment process. We have every intention of continuing to track
these enrollments, and can use this information to determine how many
months of retroactive coverage the Agency is providing to new dual-
eligible beneficiaries.
However, we do not agree that these individuals are necessarily unable
to access their drug coverage. As noted above, retroactive eligibility
is a long-standing element of the Medicaid program, and thus it is not
new or unusual for individuals to pay out of pocket for their
prescription drug or other health care services, and then subsequently
be reimbursed. In fact, retroactivity of benefits has been a
longstanding consideration that has been built into the business models
of many providers, especially Long Term Care providers. In this
respect, retroactivity of benefits is not new or unusual for many
providers who are now serving these beneficiaries under Part D.
GAO Recommendation 3: To reduce the risk of Medicare making payments to
PDPs for time periods when dual-eligible beneficiaries cannot access
their drug benefit, the Administrator of CMS should monitor PDP
reimbursements to dual-eligible beneficiaries and those that paid on
their behalf for costs incurred during retroactive eligibility periods
through an examination of the prescription utilization data reported by
PDP sponsors.
CMS Response: We disagree with GAO about the level of "risk" associated
with Medicare making payments to PDPs for time periods when dual-
eligible beneficiaries cannot access their drug benefit. As already
discussed, we do not believe that there are any viable alternatives to
making payments to PDPs for individuals who become dual-eligible on a
retroactive basis. PDP sponsors have an obligation to reimburse their
members (or another payer) for costs incurred retroactively when the
sponsor is the primary payer. Furthermore, as GAO has already
suggested, making beneficiaries aware at the time they are notified of
their auto-enrollment that they may collect and submit receipts upon
confirmation of eligibility will substantially reduce any risk or
inefficiencies in paying PDPs for the entire time beneficiaries are
allowed to access the benefit retroactively. Therefore, we have made
appropriate changes to the notices sent by CMS and the PDP sponsors to
new dual-eligible beneficiaries. As noted above, we have already
educated our partners about this polity, and we are letting them know
about the upcoming changes in the letters, so that they can continue to
help ensure that dual-eligible beneficiaries understand their right to
reimbursement for retroactive costs.
GAO Recommendation 4: To mitigate the risks associated with
implementing Part D information systems changes, especially in light of
initial systems issues caused by the lack of adequate testing, the
Administrator of CMS should work with key partners to plan, prioritize,
and execute end-to-end testing.
CMS Response: While we agree that there are benefits to "end-to-end"
testing, we believe that the benefits to be achieved from conducting
"end-to-end" testing in the Medicare Part D systems environment are
highly questionable, particularly given the prohibitive expenses and
resources involved in staging and re-setting the testing environments
across CMS and external parties. Thus, CMS has instead focused upon
thorough integration testing and stress testing of the key interfaces
that are required to keep the entire process working correctly. In
fact, this testing has identified significant issues that were dealt
with during the initial start-up, the resulting corrections, and the
work underway now to further integrate key systems and databases.
As CMS continues to test interfaces between systems within our
environment, we would appreciate any specific recommendations GAO has
to offer in this area. For example:
* How would the GAO propose setting up and managing an appropriate test
environment and test databases, which would have to be synchronized
across all the entities who were party to the testing?
* Could GAO give cost estimates involved in setting up such end-to-end
testing environments, processes and scenarios as well as estimate the
marginal benefit that would be achieved over the testing that is
currently done?
* The GAO does suggest prioritizing such testing considering factors
such as the "willingness of external parties to participate." If we
were to set up the environment, engage 1 or 2 States, 1 or 2 plans, the
TrOOP Facilitator, SSA, and all other parties to participate, what
would a successful test prove? What assurances would such testing
produce other than that beneficiaries in those particular States who
were enrolled in those particular plans were handled correctly under
those particular circumstances? This testing would offer no assurance
that the full range of beneficiaries, States, plans, and other parties
would also work correctly.
GAO Recommendation 5: To help ensure new dual-eligible beneficiaries
are enrolled in PDPs that serve the geographic area where they live,
the Administrator of CMS should assign dual-eligible beneficiaries with
representative payees to a PDP serving the state that submits the
individual's information on their dual-eligible file.
CMS Response: CMS agrees with this recommendation and has completed the
underlying systems changes necessary to implement this change.
Beginning in April 2007, the CMS auto-assignment process will assign
all dual-eligible beneficiaries to PDPs in the State that submits that
individual in its dual-eligible file. However, we would also note that
we currently have procedures in place designed to ensure that PDPs take
appropriate steps to ensure enrollment in the region of residence and
continuity of coverage until any needed enrollment changes take place.
GAO Recommendation 6: To support states with the relevant authority
that want to use alternative enrollment methods to reassign dual-
eligible beneficiaries to PDPs, the Administrator of CMS should
facilitate the sharing of data between PDPs and the states.
CMS Response: All PDPs have comprehensive formularies that are reviewed
by CMS to ensure that they can meet the prescription drug needs of
their enrollees; thus we do not accept the premise that exact drug
matches are necessary or desirable. CMS recommends that the GAO examine
the assignment processes in Maine and New Jersey to see what results
would have occurred if the State matched their individuals' formularies
to plans' formularies, including therapeutic (generic) alternatives,
and determined how many plans could have accommodated the beneficiary's
drug regimen by switching to generic alternatives. This would result in
savings to plans and eventually the Federal and State governments.
Maine has assumed that the beneficiaries' drug regimen was the most
appropriate for the beneficiary and the most cost-effective for the
State prior to the random assignment. This conclusion is not
necessarily supportable by available evidence.
Moreover, unlike Maine and other States, CMS does not have access to
prescription drug utilization data for beneficiaries prior to their
becoming eligible for Medicare and enrolling in a Part D plan. Thus,
even if CMS had the statutory authority to auto-enroll these
beneficiaries into Part D plans on anything other than a random basis,
we could not adjust our auto-enrollment process to take into account
beneficiaries' prior drug utilization, as some States have done. Given
that dual eligibles have the ability to change plans at any time, we
continue to believe that these beneficiaries, and the people who work
with them, are best suited to make these choices. We believe that re-
assignments at this point are likely to result in beneficiary confusion
and create unnecessary transition issues for this population.
We would also note that we have already worked with several States and
State Pharmaceutical Assistance Programs (SPAPs), including in Maine
and New Jersey, to assist in the assignment and enrollment of their
populations and will continue to do so; but, in all these cases, States
were in possession of the relevant drug utilization information.
Department Of Health & Human Services:
Centers for Medicare & Medicaid services:
Administrator:
Washington, DC 20201:
Date: Apr 1 2 2007:
To: Kathleen M. King:
Director, Health Care:
Government Accountability Office:
From: Leslie V. Norwalk, Esq.
Acting Administrator:
Centers for Medicare & Medicaid Services:
Subject: Government Accountability Office (GAO) Draft Report: Medicare
Part D: Challenges in Enrolling New Dual-Eligible Beneficiaries (GAO-
07-272) (Revised):
Thank you for the opportunity to review and comment on the revised
sections of the draft report entitled: MEDICARE PART D: Challenges in
Enrolling New Dual-Eligible Beneficiaries. Our understanding, based on
your April 6, 2007 letter, is that the revised material will replace in
its entirety the section formerly entitled, "Medicare Makes Payments to
PDP Sponsors When Beneficiaries Cannot Access Coverage," but that the
related material in the earlier sections of the report is essentially
unchanged.
Thus, as discussed in detail in our February 20, 2007 response, we
continue to object to any implications that retroactive coverage for
dual eligible beneficiaries is somehow inappropriate or that CMS has
somehow put the Medicare program at unwarranted risk. Again, we note
that GAO apparently supports this retroactive payment policy, given the
lack of any recommendation to the contrary. We respectfully suggest
that a fair-minded report would acknowledge this simple but critical
fact.
It is also important to note that the revised report incorrectly
indicates that CMS has had access to evidence that would permit
monitoring of reimbursements to dual eligible individuals for drug
purchases made during retroactive periods (Page 5, first full
paragraph). Our first opportunity to compare these so-called "PDE data"
(prescription drug event data) for individuals enrolled retroactively
will not come until after May 31, 2007, and we intend to carry out the
analysis in question at that time. Thus, as further elucidated below,
we strongly disagree with the conclusion on page 6 that CMS' monitoring
of retroactive payments and reimbursements has been "lacking."
[End of section]
Appendix III: GAO Contacts And Staff Acknowledgments:
GAO Contacts:
Kathleen King, (202) 512-7119 or kingk@gao.gov David A. Powner, (202)
512-9286 or pownerd@gao.gov:
Acknowledgments:
In addition to the contacts named above, Rosamond Katz, Assistant
Director; Lori Achman; Diana Blumenfeld; Marisol Cruz; Hannah Fein;
Samantha Poppe; Karl Seifert; Jessica Smith; Hemi Tewarson; and Marcia
Washington made major contributions to this report.
FOOTNOTES
[1] MMA, Pub. L. No. 108-173, tit. I, §101, et seq., 117 stat. 2066,
2071-2152 (2003) (adding new sections 1860D-1, et seq. and 1935 to the
Social Security Act, to be codified at 42 U.S.C. §1395w-101, et seq.
and 42 U.S.C. §1396u-5). For the remainder of the report, we will refer
only to provisions of the Social Security Act when referencing MMA
requirements.
[2] Drug coverage may also be provided through Medicare Advantage (MA)
prescription drug plans. MA plans are Medicare's private health plan
option, providing coverage of benefits beyond prescription drugs.
[3] While drug coverage is an optional Medicaid benefit, all state
Medicaid programs cover prescription drugs as part of their benefit
package. In 2004, 40 state Medicaid programs and the District of
Columbia had copayments for prescription drugs and 17 states had limits
on the number of prescriptions that could be filled by the beneficiary.
[4] In this report, the term dual-eligible beneficiaries refers to full-
benefit dual-eligible beneficiaries unless otherwise noted.
[5] Social Security Act §§ 1860D-1(a)(2), 1935(d).
[6] Social Security Act § 1860D-14.
[7] SPAPs are state-funded programs that provide financial assistance
for prescription drugs to low-income elderly and disabled individuals.
[8] See Mike Leavitt, Secretary's One Month Progress Report on the
Medicare Prescription Drug Benefit (Washington, D.C.: Department of
Health and Human Services, Feb. 1, 2006).
[9] See Vernon Smith, Kathleen Gifford, Sandy Kramer, and Linda Elam,
The Transition of Dual Eligibles to Medicare Part D Prescription Drug
Coverage: State Actions During Implementation (Washington, D.C.: The
Henry J. Kaiser Family Foundation, Feb. 2006).
[10] In addition to assigning and enrolling new dual-eligible
beneficiaries on a monthly basis, CMS assigns and enrolls existing dual-
eligible beneficiaries who have disenrolled from a Part D plan without
re-enrolling in another one.
[11] The 633,614 excludes those Medicare beneficiaries who were
previously enrolled by CMS prior to becoming full-benefit dual-eligible
beneficiaries. In 2006, CMS chose to enroll about 1.5 million of these
Medicare beneficiaries in PDPs under CMS's facilitated enrollment
process, which is outside the scope of this report.
[12] See also GAO, Medicare: Contingency Plans to Address Potential
Problems with the Transition of Dual-Eligible Beneficiaries from
Medicaid to Medicare Drug Coverage, GAO-06-278R (Washington, D.C.: Dec.
16, 2005).
[13] The SSA pays retirement, disability, and survivors' benefits to
workers and their families.
[14] For purposes of this report, we use the term pharmacy associations
to include both associations that represent pharmacies and those that
represent pharmacists.
[15] Although dual-eligible beneficiaries may obtain drug coverage
through either PDPs or MA plans, we focused on stand-alone PDPs. More
than 90 percent of dual-eligible beneficiaries are enrolled in PDPs,
rather than MA plans. In addition, CMS only enrolls dual-eligible
beneficiaries into stand-alone PDPs, unless the individual was
previously enrolled in a MA plan.
[16] We also considered the degree of difficulty with the January 2006
transition as reported in a survey of state Medicaid agencies conducted
for The Henry J. Kaiser Family Foundation. See Vernon Smith, Kathleen
Gifford, Sandy Kramer, and Linda Elam, The Transition of Dual Eligibles
to Medicare Part D Prescription Drug Coverage: State Actions During
Implementation (Washington, D.C.: The Henry J. Kaiser Family
Foundation, Feb. 2006).
[17] The number of health care organizations sponsoring private plans
was 79 in 2006 and more than 90 for 2007.
[18] Under the MMA, PDPs must cover drugs within each therapeutic
category and class of Part D drugs. PDPs may not cover the following
nine categories of drugs as the MMA excluded these categories from
Medicare Part D coverage: (1) agents used for anorexia, weight loss, or
weight gain; (2) agents used to promote fertility; (3) agents used for
cosmetic purposes or hair growth; (4) agents used for the symptomatic
relief of coughs or colds; (5) prescription vitamins and minerals,
except prenatal vitamins and fluoride preparations; (6) nonprescription
drugs; (7) outpatient drugs for which the manufacturer seeks to require
associated tests or monitoring be purchased from the manufacturer or
their designee as a condition of sale; (8) barbiturates; and (9)
benzodiazepines. State Medicaid agencies may provide coverage of drugs
in these excluded drug categories to their dual-eligible beneficiaries
under the Medicaid program. Social Security Act §§1860D-2(e), 1860D-
4(b)(3)(C), 1935(d)(2).
[19] All PDPs must have a contracted pharmacy in their network that is
within 2 miles of 90 percent of urban beneficiaries, 5 miles of 90
percent of suburban beneficiaries, and 15 miles of 70 percent of rural
beneficiaries. Social Security Act §1860D-4(b)(1)(C); 42 C.F.R.
§423.120.
[20] The Part D standard benefit for 2007 includes a $265 annual
deductible, 25 percent coinsurance for total covered drug costs between
$265 and $2,400, and 100 percent coinsurance for drug spending between
$2,401 and $5,451.25. After a beneficiary incurs $3,850 in covered out-
of-pocket costs, catastrophic coverage begins and the beneficiary is
responsible for modest cost-sharing. Each year the standard benefit is
adjusted to account for the increase in average total drug expenses of
Medicare beneficiaries. Actuarially equivalent coverage is coverage
that is at least the same in value as the standard benefit, but may be
structured differently, as approved by CMS.
[21] Social Security Act §1860D-1(a)(2).
[22] Social Security Act §1860D-1(b)(1)(C). The formal name for this
process is automatic enrollment.
[23] Social Security Act §1860D-1(b)(1)(C); see also 42 C.F.R. §
423.34. The low-income benchmark is the average monthly beneficiary
premium for all PDPs in a region, weighted by each plan's enrollment.
[24] PDP formularies generally must cover at least two Part D drugs in
each therapeutic category and class, except when there is only one drug
in the category and class or when CMS has allowed the plan to cover
only one drug in that category or class. 42 C.F.R. §423.120(b)(2). CMS
may require coverage of more than two drugs in each category or class
when the drugs provide therapeutic advantages or absence from a
formulary may discourage enrollment in a plan. For example, CMS has
designated six categories of drugs (antidepressant, antipsychotic,
anticonvulsant, anticancer, immunosuppressant, and HIV/AIDS drugs) for
which PDPs must cover "all or substantially all" of the drugs. See
Centers for Medicare & Medicaid Services, Medicare Modernization Act
2007 Final Guidelines - Formularies, posted at Hyperlink,
http://www.cms.hhs.gov/PrescriptionDrugCovContra/03_RxContracting_Formul
aryGuidance.asp#TopOfPage, accessed January 19, 2007.
[25] In its comments on the OIG report, CMS stated that the methodology
OIG used was flawed because it was based on a list of 178 drugs
commonly used by dual-eligible beneficiaries rather than an examination
of actual use of drugs at the individual beneficiary level. CMS also
stated that because all formularies cover multiple drugs in each
therapeutic class, all beneficiaries have access to drugs that are very
similar to their current medications. See Department of Health and
Human Services, Office of Inspector General, Dual Eligibles'
Transition: Part D Formularies' Inclusion of Commonly Used Drugs, OEI-
05-06-00090 (Washington, D.C.: Jan. 2006).
[26] 42 C.F.R. § 423.120(b)(3).
[27] See Social Security Act §1860D-14.
[28] This refers to the fact that the standard Part D benefit provided
no coverage for total covered drug expenditures between $2,251 and
$5,100 for 2006, shifting to between $2,401 and $5,451.25 in 2007.
[29] In most states, beneficiaries who qualify for cash assistance from
SSI--a cash assistance program for aged, blind, and disabled
individuals with limited income and resources--automatically qualify
for full Medicaid benefits. In 39 states and the District of Columbia,
SSI eligibility assures an individual's eligibility for Medicaid
benefits. Eleven state Medicaid agencies either (1) use more
restrictive income or asset requirements than SSI for Medicaid
eligibility or (2) require a separate Medicaid application/
determination than the SSI application/determination.
[30] Beneficiaries already enrolled in a PDP are allowed to stay in the
same PDP after they become dually eligible. They are not included in
the two-thirds number because CMS did not enroll them when they became
dually eligible for Medicare and Medicaid.
[31] Under Social Security Disability Insurance (DI), which assists
people who worked but became disabled before their retirement age,
individuals are eligible for Medicare coverage after they have received
DI cash benefits for 24 months.
[32] This system's official name is the Medicare Beneficiary Database.
[33] This system's official name is the Medicare Advantage Prescription
Drug system.
[34] This tool's official name is the E-1 query.
[35] Dual-eligible files contain both newly identified dual-eligible
beneficiaries and those who were previously identified.
[36] According to CMS, an effort to design, test, and implement a
system specifically designed to support a program of the magnitude of
Part D would take years.
[37] End-to-end testing is performed to verify that a defined set of
interrelated systems that collectively support an organizational core
business function interoperate as intended in an operational
environment. The interrelated systems include not only those owned and
managed by the organization, but also the external systems with which
they interface.
[38] See Claude H. Snow, Jr., Opportunities for Improving Enrollment
and Eligibility Processes and Systems in the Medicare Part D
Prescription Drug Program: An Assessment (prepared by EDS for the
Centers for Medicare & Medicaid Services, Mar. 2006).
[39] The pharmacy would be able to fill Mr. Smith's prescription and
bill a PDP serving as a contingency option if Mr. Smith produced
evidence of entitlement to both Medicare and Medicaid at the pharmacy.
[40] In commenting on a draft of this report, CMS officials noted that
they updated this guidance to PDPs in December 2006.
[41] In commenting on a draft of this report, CMS indicated that once
it implemented plan-to-plan reconciliation in early 2006, WellPoint
reconciled claims for beneficiaries already enrolled in another PDP
with the appropriate PDP.
[42] Social Security Act § 1860D-1(b)(1)(C).
[43] Federal regulations also do not clearly define the effective date
of coverage for dual-eligible beneficiaries and instead only require
individuals who are Part D eligible and subsequently become eligible
for Medicaid to be enrolled in a PDP by CMS as soon as practicable in a
process to be determined by CMS. See 42 C.F.R. § 423.34(f)(3).
[44] However, in response to a draft of this report, CMS officials
notified us that, beginning with those dual-eligible beneficiaries
identified by states in February 2006, coverage for dual-eligible
beneficiaries was effective January 1, 2006, or the effective date of
Medicaid coverage, whichever was later.
[45] Social Security Act §1902(a)(34) (codified, as amended, at 42
U.S.C. §1396a(a)(34)). Under section 1115 of the Social Security Act,
the Secretary of Health and Human Services may waive this requirement
for demonstration projects that are likely to assist in promoting the
objectives of the Medicaid program. Social Security Act §1115
(codified, as amended, at 42 U.S.C. §1315). If a state receives
approval of such a waiver, the state only needs to extend Medicaid
eligibility back to the date of application for the population covered
under the demonstration.
[46] For the 2006 benefit year, CMS is requiring PDP sponsors to submit
all utilization information by the end of May 2007 and will begin the
reconciliation process in August 2007.
[47] In 2006, the direct subsidy payment was $60.10 (subject to
adjustment based on the beneficiary's health) and $53.08 for 2007. The
low-income benchmark is a regional amount that ranged from $23.25 to
$36.39 in 2006 and ranges from $20.56 to $33.56 in 2007.
[48] This total represents only Medicare payments to PDPs associated
with the retroactive coverage policy for beneficiaries enrolled by CMS
after becoming dually eligible. Based on data provided by CMS, we
estimated that roughly 256,000 dual-eligible beneficiaries enrolled by
CMS from April through December 2006 were provided retroactive
coverage. We assumed that most of these beneficiaries were provided up
to 5 months of retroactive coverage from the date they were notified of
their PDP enrollment--a period that includes both their retroactive
Medicaid coverage and PDP enrollment processing time. We estimated
that, for each month, PDP sponsors received approximately $90 per
beneficiary in direct subsidy and low-income premium payments.
[49] CMS conducts a separate reconciliation for all payments made to
PDPs, termed risk sharing, in which CMS may recoup a share of Medicare
payments made to a Part D sponsor that exceed the sponsor's actual
costs. Recoupment may occur if actual costs are less than the sponsor's
estimates of revenue necessary to provide Part D benefits to all its
enrollees. CMS performs risk sharing with Part D sponsors at the end of
each coverage year.
[50] As consistent with federal requirements, Medicare pays PDPs the
same monthly premium amounts for periods of retrospective coverage as
for prospective coverage, although evidence suggests that
beneficiaries' drug purchases are likely to be significantly lower
during the retrospective periods. On average, beneficiaries without
drug insurance use 25 percent fewer prescriptions and spend 40 percent
less on drugs than do insured beneficiaries. See John Poisal and George
Chulis, "Medicare Beneficiaries and Drug Coverage," Health Affairs,
vol. 19, no. 2, March/April 2000, pp. 248-256.
[51] In commenting on a draft of this report, CMS noted that it had
educated its partners--organizations that assist Medicare beneficiaries
with enrollment--about this policy, so that they could help dual-
eligible beneficiaries understand their right to reimbursement for
retroactive drug costs. The agency pointed to an April 2006 fact sheet
for partners on how Medicare beneficiaries, in general, should seek
repayment of out-of-pocket costs incurred while their plan enrollment
was being processed. However, the guidance did not make specific
reference to the rights of dual-eligible beneficiaries who are provided
several additional months of retroactive coverage nor did it define
which drug costs are covered.
[52] PDPs must also reimburse beneficiaries in cases such as Mrs.
Jones--a Medicare beneficiary previously enrolled in a PDP who
subsequently became eligible for Medicaid, and thus the low-income
subsidy (see fig. 3). CMS would make the payments for the low-income
benchmark premium to the PDP retroactive to the date Mrs. Jones had a
change in subsidy status and the PDP would reimburse Mrs. Jones for
that period up to the same premium amount. For the cost-sharing
payment, the PDP has the prescription drug claims for the retroactive
period, which include the amount Mrs. Jones paid at the pharmacy. The
PDP would resolve differences between the amount she actually paid and
the amount she would have paid given the low-income subsidy. If the PDP
has automated systems to amend claims and pay accordingly, Mrs. Jones
would not have to contact the PDP to be refunded for her costs.
[53] Under CMS's 2006 policy, PDP sponsors were responsible for
compensating dual-eligible beneficiaries, or those that paid on their
behalf, for out-of-pocket costs incurred during the retroactive period
for drugs covered by the PDP. Similarly, if a pharmacy provided
medications to Mr. Smith without charge during this time period, the
PDP sponsor would also be required to reimburse the pharmacy for
covered drug costs if the pharmacy was in the PDP's network. Under
CMS's 2007 policy, the agency requires that PDP sponsors reimburse
third-party payers for allowable drug charges during a retroactive
eligibility period of up to 7 months, including charges for
nonformulary drugs or formulary drugs with prior authorization
requirements.
[54] In unit testing, each module is tested alone in an attempt to
discover any errors in its code. System testing is performed to
discover defects that are properties of the entire system rather than
of its individual components. Integration testing is performed to
verify that multiple applications that work together to accomplish a
system function, when combined, work correctly. Because the separate
applications being integrated have already been tested successfully,
integration testing focuses on ensuring that the interfaces work
correctly and that the integrated software meets specified
requirements.
[55] Social Security Act § 1860D-1(b)(1)(C).
[56] Social Security Act §1860D-1(b)(3)(D); see also 42 C.F.R. §
423.38.
[57] CMS only receives one address per beneficiary, which may be that
of a representative payee. A representative payee is an individual or
organization that receives Social Security or SSI payments for someone
who cannot manage or direct the management of his or her money. The
file CMS receives from SSA contains information indicating that an
individual has a representative payee.
[58] PDPs are required to cover the cost of prescriptions filled at
pharmacies that are outside of the PDP's pharmacy network; however, the
beneficiary may have to pay more of the cost.
[59] Qualified SPAPs must attest to CMS that they meet five criteria
established by CMS, including a prohibition on discriminating against
any PDP when enrolling beneficiaries. SPAPs must also qualify as
authorized representatives of beneficiaries under state law in order to
enroll beneficiaries in PDPs. See Social Security Act §1860D-23(b); 42
C.F.R. §423.464(e)(1). As of May 17, 2006, SPAPs in 25 states had
attested to their qualified status.
[60] Social Security Act §1860D-23(b)(2); 42 C.F.R. §
423.464(e)(1)(ii). CMS informed us that it has coordinated enrollment
processes with SPAPs, in which SPAPs have assigned dual-eligible
beneficiaries to a PDP, eliminating the need for CMS to assign these
individuals to a PDP.
[61] Me. Rev. Stat. Ann. tit. 22, § 254-D (2006).
[62] Prior authorization is the requirement to obtain authorization
from the PDP sponsor before the PDP will cover a drug.
[63] CMS currently receives drug claims data from PDPs for the purpose
of adjusting payments made to PDP sponsors. The MMA provides that these
data may only be used by CMS for purposes of determining subsidies to
PDPs. Social Security Act §1860D-15(d). In October 2006, CMS issued a
proposed rule that would permit the agency to share claims data with
other governmental and outside entities for purposes of research and
evaluation of the Medicare Part D program. See Medicare Program;
Medicare Part D Data, 71 Fed. Reg. 61445 (Oct. 18, 2006).
[64] PAAD did not include any dual-eligible beneficiaries in its
assignment process.
[65] This program has counselors in every state and several territories
who offer free individualized help with a beneficiary's Medicare
questions or problems.
[66] CMS developed a Web-based "Formulary Finder" that allows a user to
enter the drugs they are using to find out which PDPs in an area match
their drug list. This tool is available online at: Hyperlink,
http://formularyfinder.medicare.gov/formularyfinder/selectstate.asp
[67] Maintenance drugs are used to treat medical conditions that are
considered chronic, long term, and stable.
[68] The 210,000 includes about 20,000 members of another SPAP in the
state that PAAD included in the process.
[69] NASMD is a professional, nonprofit organization of representatives
of all state Medicaid agencies (including the District of Columbia and
territories).
[70] 42 C.F.R. § 423.120(b)(3). New enrollees include beneficiaries who
(1) transitioned to Medicare Part D on January 1, 2006, (2)
transitioned to Medicare Part D after the initial implementation, and
(3) switched from one plan to another after implementation of the Part
D program.
[71] Under step therapy restrictions, the PDP requires that the
beneficiary first try a less expensive drug for their condition before
it will cover the beneficiary's prescribed drug. Under quantity limit
restrictions, the PDP limits the amount of the drug it covers over a
certain period of time.
[72] The extension of the transition period to March 31st was limited
to those beneficiaries who were enrolled in the first few months of the
program. For those who enrolled on March 1, 2006, or after, the 30-day
transition period remained in effect.
[73] In referring to 2007 contracts with PDP sponsors, we are reporting
on the attestations PDPs must provide to CMS on transition processes
for contract year 2007.
[74] For long-term care residents that are beyond the 90-day transition
period afforded to these individuals, the plans must still provide a 31-
day emergency supply of nonformulary Part D drugs, including Part D
drugs that are on a plan's formulary but require prior authorization or
step therapy, while approval is being sought to remain on the drug.
[75] CMS uses the beneficiary's official address as contained in SSA
data. This address represents the beneficiary's residence or where the
beneficiary's representative payee is located.
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