Medicare Part D
Plan Sponsors' Processing and CMS Monitoring of Drug Coverage Requests Could Be Improved Gao ID: GAO-08-47 January 22, 2008Under the Medicare Part D program, prescription drug coverage is provided through plans sponsored by private companies. Beneficiaries, their appointed representatives, or physicians can ask sponsors to cover prescriptions restricted under their plan--a process known as a coverage determination--and can appeal denials to the sponsor and the independent review entity (IRE). GAO was asked to review (1) the processes for sponsors' coverage determination decisions and the approval rates, (2) the processes for appealing coverage denials and the approval rates at the sponsor and IRE levels, and (3) the Centers for Medicare & Medicaid Services' (CMS) efforts to inform the public about sponsors' performance and oversee sponsors' processes. GAO visited seven sponsors that account for over half of Part D enrollment. GAO also interviewed and obtained data from CMS and IRE officials.
Sponsors in our study address coverage requests for drugs with restrictions using processes that allow for prompt decisions, apply a range of criteria, and have resulted in approvals of most cases. To minimize the amount of time needed to make a determination, study sponsors use automated systems to compare the patient information they receive from prescribing physicians against preset coverage criteria. The coverage criteria for specific drugs incorporate Medicare requirements--such as whether the drug use is excluded from coverage under Medicare Part D--and discretionary components--such as whether a less expensive alternative drug has been tried and failed. Some study sponsors indicated they feel pressure to make decisions within the CMS-required time frames even when all pertinent patient information from physicians is not at hand. In reviewing a sample of 421 case files, GAO found that overall, study sponsors approved about 67 percent of the coverage determination requests, ranging from 57 percent to 76 percent. The process for conducting appeals allows staff not involved in the previous case review to make better-informed decisions by considering additional supporting evidence. At the first level of appeal, sponsor staff evaluate any corrected or augmented evidence to see if coverage criteria have been met. At the second level of appeal, IRE staff consider the information the sponsor reviewed, along with any additional support that may be available. In many cases, appeals result in new interpretations of whether the requested drug should be covered. CMS appeals data show that, from July 2006 through December 2006, the median approval rate across all Part D sponsors was 40 percent; from July 2006 through June 2007, appeals to the IRE received full or partial approval in 28 percent of cases. For some standard appeals, missing appointment of representative (AOR) documentation contributed to delays in sponsor-level appeals decisions and dismissals of IRE appeals cases. Some study sponsors have developed "workarounds" to eliminate the need for the completed AOR form. CMS has improved its efforts to inform beneficiaries about sponsors' performance, but its oversight of sponsors is hindered by poorly defined reporting requirements. CMS developed two performance metrics on sponsors' timeliness and the outcomes of their coverage decisions. The agency improved the way it displays this information on the Medicare Web site in late 2007. In addition, CMS requires that sponsors report data on various measures of coverage requests and approvals. However, the agency has provided minimal guidance on the types of cases to be included in each coverage determination measure. As a result, our study sponsors reported data differently to CMS, hindering the agency's ability to adequately monitor sponsors' activities. Finally, CMS has conducted several audits and found that sponsors were noncompliant with a number of specific requirements. Areas of sponsor noncompliance ranged from incomplete written policies and procedures to delays in authorizing drug coverage after the IRE approved an urgent request.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-08-47, Medicare Part D: Plan Sponsors' Processing and CMS Monitoring of Drug Coverage Requests Could Be Improved
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
January 2008:
Medicare Part D:
Plan Sponsors' Processing and CMS Monitoring of Drug Coverage Requests
Could Be Improved:
GAO-08-47:
GAO Highlights:
Highlights of GAO-08-47, a report to congressional requesters.
Why GAO Did This Study:
Under the Medicare Part D program, prescription drug coverage is
provided through plans sponsored by private companies. Beneficiaries,
their appointed representatives, or physicians can ask sponsors to
cover prescriptions restricted under their plan”a process known as a
coverage determination”and can appeal denials to the sponsor and the
independent review entity (IRE). GAO was asked to review (1) the
processes for sponsors‘ coverage determination decisions and the
approval rates, (2) the processes for appealing coverage denials and
the approval rates at the sponsor and IRE levels, and (3) the Centers
for Medicare & Medicaid Services‘ (CMS) efforts to inform the public
about sponsors‘ performance and oversee sponsors‘ processes. GAO
visited seven sponsors that account for over half of Part D enrollment.
GAO also interviewed and obtained data from CMS and IRE officials.
What GAO Found:
Sponsors in our study address coverage requests for drugs with
restrictions using processes that allow for prompt decisions, apply a
range of criteria, and have resulted in approvals of most cases. To
minimize the amount of time needed to make a determination, study
sponsors use automated systems to compare the patient information they
receive from prescribing physicians against preset coverage criteria.
The coverage criteria for specific drugs incorporate Medicare
requirements”such as whether the drug use is excluded from coverage
under Medicare Part D”and discretionary components”such as whether a
less expensive alternative drug has been tried and failed. Some study
sponsors indicated they feel pressure to make decisions within the CMS-
required time frames even when all pertinent patient information from
physicians is not at hand. In reviewing a sample of 421 case files, GAO
found that overall, study sponsors approved about 67 percent of the
coverage determination requests, ranging from 57 percent to 76 percent.
The process for conducting appeals allows staff not involved in the
previous case review to make better-informed decisions by considering
additional supporting evidence. At the first level of appeal, sponsor
staff evaluate any corrected or augmented evidence to see if coverage
criteria have been met. At the second level of appeal, IRE staff
consider the information the sponsor reviewed, along with any
additional support that may be available. In many cases, appeals result
in new interpretations of whether the requested drug should be covered.
CMS appeals data show that, from July 2006 through December 2006, the
median approval rate across all Part D sponsors was 40 percent; from
July 2006 through June 2007, appeals to the IRE received full or
partial approval in 28 percent of cases. For some standard appeals,
missing appointment of representative (AOR) documentation contributed
to delays in sponsor-level appeals decisions and dismissals of IRE
appeals cases. Some study sponsors have developed ’workarounds“ to
eliminate the need for the completed AOR form.
CMS has improved its efforts to inform beneficiaries about sponsors‘
performance, but its oversight of sponsors is hindered by poorly
defined reporting requirements. CMS developed two performance metrics
on sponsors‘ timeliness and the outcomes of their coverage decisions.
The agency improved the way it displays this information on the
Medicare Web site in late 2007. In addition, CMS requires that sponsors
report data on various measures of coverage requests and approvals.
However, the agency has provided minimal guidance on the types of cases
to be included in each coverage determination measure. As a result, our
study sponsors reported data differently to CMS, hindering the agency‘s
ability to adequately monitor sponsors‘ activities. Finally, CMS has
conducted several audits and found that sponsors were noncompliant with
a number of specific requirements. Areas of sponsor noncompliance
ranged from incomplete written policies and procedures to delays in
authorizing drug coverage after the IRE approved an urgent request.
What GAO Recommends:
GAO recommends that CMS (1) reduce the need for an AOR form by
requiring that sponsors and the IRE, upon receipt of standard appeal
requests submitted by prescribing physicians without AOR forms,
telephone beneficiaries to see if they wish to initiate the appeal, and
(2) provide specific definitions for data that sponsors must report to
CMS. The agency supports the intent of our first recommendation and is
considering it in light of current legal requirements. CMS has taken
steps to implement the second recommendation.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-47]. For more information, contact
Kathleen M. King at (202) 512-7114 or kingk@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Coverage Determination Processes Allow for Prompt Decisions, Apply a
Range of Criteria, and Have Resulted in Approvals for the Majority of
Requests:
Appeals Processes Allow for Better Informed Decisions, Have Often
Resulted in Coverage Approvals, and Are Impeded by AOR Requirement:
CMS Efforts to Inform Beneficiaries about Sponsors' Performance Have
Improved; Oversight Hindered by Poorly Defined Reporting Requirements:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Steps and Time Frames for Part D Coverage Determination and
Appeals:
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Requests Addressed in Coverage Determinations and Appeals:
Table 2: CMS's Revised Metric on IRE Appeals Decisions, as of November
2007:
Table 3: Audit Elements Found Deficient at Four or More Sponsors in
CMS's Audits of Five PDP Sponsors, as Reported in October 2007:
Figures:
Figure 1: IRE Disposition of Part D Appeals, July 2006 through June
2007:
Figure 2: IRE Decisions by Issue Addressed in the Request, July 2006
through June 2007:
Abbreviations:
AOR: appointment of representative:
CMS: Centers for Medicare & Medicaid Services:
FDA: Food and Drug Administration:
IRE: independent review entity:
MA-PD: Medicare Advantage prescription drug:
MMA: Medicare Prescription Drug, Improvement, and Modernization Act of
2003:
PDP: prescription drug plan:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
January 22, 2008:
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 drug benefit, known as
Medicare Part D, that provides prescription drug coverage for nearly 25
million beneficiaries--seniors and individuals with disabilities--
enrolled in the program.[Footnote 1] Beneficiaries may obtain the drug
benefit, which began on January 1, 2006, by enrolling in plans offered
by Part D sponsors--private companies, such as health insurance
companies and pharmacy benefit managers.[Footnote 2] The Centers for
Medicare & Medicaid Services (CMS)--the agency that administers the
Medicare program--is responsible for contracting with and overseeing
the sponsors that provide the drug benefit. Among its many functions,
the agency is responsible for monitoring sponsor compliance with
program rules and publicly reporting information on certain aspects of
sponsor performance.
The MMA and CMS's implementing regulations established specific
requirements for Part D sponsors. Sponsors' formularies--lists of plan-
covered drugs--must include "all or substantially all" drugs within six
designated drug categories: antidepressants, antipsychotics,
anticonvulsants, anticancer drugs, immunosuppressants, and HIV/AIDS
drugs. For each of the other therapeutic drug categories and classes,
sponsors' formularies generally must include at least two Part D
drugs.[Footnote 3] However, formularies generally cannot include drugs
or their uses that the MMA excluded from Medicare Part D
coverage.[Footnote 4] In addition, MMA promotes the use of generic
drugs, which are generally cheaper than most brand-name drugs. The MMA
states that a Part D sponsor must require a pharmacy to inform a
beneficiary of any differential between the price of a drug and the
price of its lowest-priced generic version.[Footnote 5]
Beyond the minimum formulary requirements, the MMA gives sponsors
discretion in designing their formularies to keep costs low. Because
Part D plan sponsors share financial risk with the Medicare program,
they have an incentive to control beneficiaries' drug
spending.[Footnote 6] To do so, sponsors negotiate discounted prices
with drug manufacturers and design their formularies to encourage the
use of cost-saving prescription drugs. As long as they meet the minimum
formulary requirements, sponsors may exclude particular drugs from
their formularies. For drugs included on the formulary, sponsors may
assign drugs to tiers that correspond to different levels of cost
sharing. In general, they encourage the use of generic medications by
putting them on a cost-sharing tier that requires the lowest out-of-
pocket costs for beneficiaries and discourage the use of expensive
drugs by putting them on tiers that require higher out-of-pocket
spending by beneficiaries. A national survey of noninstitutionalized
seniors conducted in the fall of 2006 found that 25.7 percent of
beneficiaries reported switching to a cheaper medication after they
enrolled in a Part D plan.[Footnote 7]
Sponsors can also lower drug spending by applying various utilization
management restrictions to drugs on their formularies.[Footnote 8]
Utilization management restrictions typically include (a) prior
authorization, which requires the beneficiary to obtain the sponsor's
approval before a drug is covered for that individual; (b) quantity
limits, which restrict the dosage or number of units of a drug provided
within a certain period of time; and (c) step therapy, which requires
that a beneficiary try lower-cost drugs before a sponsor will cover a
more costly drug.
Beneficiaries who attempt to fill a prescription for a nonformulary
drug or a restricted formulary drug will have coverage withheld unless
the beneficiary receives special permission from the plan sponsor. In a
2006 national survey of seniors, 11.3 percent of respondents reported
needing special permission to get a prescription filled.[Footnote 9]
When coverage is withheld, CMS regulations require that pharmacies
inform beneficiaries of their right to make a formal request to their
plan for coverage--a process known as a coverage determination.
Beneficiaries, their appointed representatives,[Footnote 10] or
prescribing physicians can use the coverage determination process to
demonstrate that the sponsor's coverage criteria have been met or that
an exception to the formulary,[Footnote 11] cost-sharing requirements,
or utilization restrictions should be granted based on the medical
needs of the beneficiary. Beneficiaries who receive an unfavorable
coverage determination may appeal the decision, first to the sponsor--
a process known as a redetermination--and then to an independent review
entity (IRE)[Footnote 12]--a process known as a reconsideration.
[Footnote 13]
As a beneficiary protection, MMA and CMS regulations require that
sponsors have procedures in place to make coverage determination and
appeal decisions in a timely manner. CMS established priority levels
for coverage determinations and appeal requests as either standard or
expedited (for requests thought to be urgent, based on the
beneficiary's or physician's judgment).[Footnote 14] Prescribing
physicians may initiate coverage determinations and expedited
redeterminations on behalf of a beneficiary without permission from the
beneficiary, but to initiate a standard appeal on a beneficiary's
behalf, they must have a completed appointment of representative (AOR)
form.[Footnote 15] Sponsors must make standard coverage determination
decisions within 72 hours and expedited coverage determination
decisions within 24 hours. Decisions at the redetermination level must
be made within 7 days for a standard request and within 72 hours for an
expedited request. If the sponsor fails to notify the beneficiary of
its decision within the established time frames, the decision is deemed
an automatic denial, at which point the sponsor must forward the case
to the IRE. At the reconsideration level--the second level of appeal--
the IRE has 7 days to decide a standard request and 72 hours for an
expedited request. (See app. I for an illustration of the coverage
determination and appeals levels and time frames.)
Questions have been raised about how coverage determination and appeals
processes work to safeguard beneficiaries' access to the Part D-covered
drugs they need. Little is known about how decisions are made, the
outcomes of coverage requests, and how CMS oversees sponsors' coverage
determination and appeals processes. You asked us to review Part D
coverage determination and appeals processes at the sponsor and IRE
levels. This report provides information on (1) the processes for
sponsors' coverage determination decisions and the approval rates, (2)
the processes for appealing coverage denials and the coverage approval
rates at the sponsor and IRE levels, and (3) CMS's efforts to inform
beneficiaries about sponsors' performance and to oversee sponsors'
coverage determination and appeals processes.
To review the processes for sponsors' coverage determination decisions
and approval rates, we conducted site visits to seven sponsors offering
Part D plans in 2006, and interviewed officials about how coverage
determinations are made. The seven sponsors were chosen because they
varied on a number of measures, including size of enrollment and their
market presence across the country. As of September 1, 2006, the seven
sponsors we interviewed enrolled about 13 million beneficiaries, about
54 percent of all Part D enrollees. In addition, at each sponsor we
reviewed a randomly selected sample of coverage determination case
files from October 2006 to verify the information sponsor officials
told us.[Footnote 16] In total, we reviewed 421 coverage determination
case files--at least 34 from each sponsor. Information from these
sponsors is illustrative and cannot be generalized to the entire
sponsor community. We also reviewed relevant documents, including the
MMA and Part D implementing regulations, to understand sponsor
requirements. Also, we obtained the views of beneficiary advocates and
physician association representatives about the Part D coverage
determination process. Physician association representatives included
both general and specialty practitioners.
To examine appeals processes, we interviewed management staff from the
seven selected sponsors and the IRE about their policies and
procedures. We reviewed randomly selected samples of October 2006
appeals case files at each sponsor and the IRE to verify information
obtained from our interviews. In total, we reviewed 458 redetermination
case files--at least 43 from each sponsor--and 100 reconsideration case
files. To learn about coverage approval decisions at the
redetermination level, we analyzed data reported by sponsors to CMS on
the number of redeterminations made from July 2006 through December
2006. To assess the reliability of these sponsor-reported data, we
interviewed CMS officials responsible for the collection and analysis
of the data, and we reviewed the CMS data reporting requirements for
redeterminations. We determined that the data were sufficiently
reliable for purposes of this report. To learn about coverage approval
decisions at the reconsideration level, we analyzed IRE workload data
reported to CMS, including data on the results of IRE decision making.
To assess the reliability of the IRE data, we conducted interviews with
IRE staff to learn about how the data are compiled. We determined the
data were sufficiently reliable for the purposes of this report.
To determine how CMS informs beneficiaries about sponsors' performance,
we examined information posted on the Medicare Prescription Drug Plan
Finder tool and discussed planned changes to the Web site with CMS
officials. To determine how CMS oversees the coverage determination and
appeals processes, we interviewed agency officials responsible for
policy development and oversight of the Part D program. We also
examined data CMS collected to monitor sponsors' activities and
compared the reporting practices of our study sponsors. Finally, we
reviewed CMS's compliance audit reports.
In conducting our work, we did not examine how beneficiaries are
informed about their rights to request a coverage determination, or the
appropriateness of sponsors' coverage criteria or coverage decisions.
In addition, we did not examine the extent to which beneficiaries use
the coverage determination process because the CMS data needed to do so
were inadequate. Although beneficiaries may pursue appeals beyond the
reconsideration level, reviewing these additional levels is beyond the
scope of this report. We performed our work from July 2006 through
January 2008 in accordance with generally accepted government auditing
standards.
Results in Brief:
The sponsors we studied address coverage requests for drugs with
restrictions using processes that allow for prompt decisions, apply a
range of criteria, and have resulted in approvals of most cases. To
minimize the amount of time needed to make a determination, sponsors we
visited obtain patient information needed to make their decisions using
drug-specific coverage determination request forms. Information on the
forms is entered into a computer for analysis of whether coverage
criteria--the conditions that need to be met for the requested drug to
be covered--have been met. These drug-specific coverage criteria
incorporate Medicare requirements--such as whether the drug use is
excluded from coverage under Medicare Part D--and sponsor-developed
components--such as whether a less expensive alternative drug has been
tried and failed. When a request cannot be approved by technical staff,
sponsors' clinical staffs make the final determination. However, the
pressure to make a coverage determination within the CMS-mandated time
frames increases the likelihood that sponsors may deny requests when
complete information is not at hand or cannot be obtained quickly. In
reviewing a sample of 421 case files, we found that study sponsors
approved about 67 percent of the coverage determination requests.
Overall, the approval rate for standard requests in our sample was 67
percent, compared to 53 percent for expedited requests.
Appeals decisions at the study sponsors and the IRE typically involve
the review of more information than was available at the previous level
and different decision makers. For redeterminations--the first level of
appeal--we found that, generally, sponsor staff often consider
additional supporting patient information provided by prescribing
physicians that was not available for the coverage determination. The
redetermination staff evaluate the corrected or augmented evidence to
see whether coverage criteria have been met. In conducting
reconsiderations--the second level of appeal--IRE officials review the
information the sponsor reviewed, along with any additional support
that may be available or that they solicit from the prescribing
physician. In many cases, new interpretations of the evidence resulted
in approval for coverage of the requested drug. CMS appeals data show
that, from July 2006 through December 2006, the median approval rate
for all Part D sponsors was 40 percent. For the period from July 2006
through June 2007, the IRE either fully or partially approved coverage
of the drug in 28 percent of reconsideration cases. We found that, for
some standard appeals, missing AOR documentation contributed to delays
in study sponsor redeterminations and dismissals of IRE
reconsiderations. Most sponsors in our study, as well as IRE officials,
reported that the AOR requirement--that prescribing physicians be
appointed beneficiary representatives with a signed AOR form in order
to initiate standard appeals--impedes the process. Some study sponsors
have developed "workarounds" to eliminate the need for the completed
AOR form.
CMS has improved its efforts to inform beneficiaries about sponsors'
performance, but its oversight of sponsors is hindered by poorly
defined reporting requirements. CMS has developed two sponsor
performance metrics in the area of coverage determinations and appeals:
the rate at which sponsors met required time frames for decision making
and the rate at which the IRE concurs with sponsors' redetermination
decisions. As of November 2007, the agency changed the manner in which
it calculates and displays these performance metrics on its Medicare
Web site to improve the information available to beneficiaries. In its
efforts to monitor sponsors' coverage determinations and appeals
activities, we found that CMS is hindered by inconsistent data. The
agency requires that sponsors report data quarterly on various measures
of coverage requests and approvals. However, CMS has provided minimal
guidance on the types of cases to be included in each coverage
determination measure. As a result, for 2006, our study sponsors
reported measures differently--for instance, some sponsors double
counted cases in separate measures while other sponsors omitted certain
types of cases from any of the measures. In addition, CMS audited
several prescription drug plan (PDP) sponsors for their adherence to
coverage determination and appeals requirements and found that each
audited sponsor was noncompliant for a number of specific requirements.
Areas of sponsor noncompliance ranged from incomplete written policies
and procedures to delays in authorizing drug coverage after the IRE
approved an expedited request. CMS required these sponsors to submit
corrective action plans to address the identified deficiencies.
To improve the Medicare Part D coverage determination and appeals
processes, we are making two recommendations. First, we recommend that
CMS require sponsors and the IRE, upon receipt of standard appeal
requests submitted by prescribing physicians without completed AOR
forms, to telephone beneficiaries to determine whether they wish to
initiate the appeal. Second, we recommend that CMS provide specific
definitions for data sponsors report to CMS that the agency uses for
monitoring coverage determination and appeals activities. In commenting
on a draft of this report, the agency wrote that it is considering the
first recommendation in light of current legal requirements. CMS also
stated that it is in the process of implementing the report's second
recommendation and has already modified its Part D reporting
requirements guidance.
Background:
The Medicare Part D Program:
The Medicare Part D benefit is provided through private organizations
that offer one or more drug plans with different levels of premiums,
deductibles, and cost sharing. Plan sponsors must offer the standard
Part D benefit established under MMA or an actuarially equivalent
benefit. The standard benefit includes an annual deductible, coverage
up to a level of spending, a coverage gap--the period when
beneficiaries pay all of the costs of their drugs--and catastrophic
coverage above a specified out-of-pocket limit. Sponsors may also offer
enhanced benefit plans that provide a lower deductible and coverage in
the coverage gap in exchange for higher premiums. Certain low-income
beneficiaries are eligible for subsidies to defray most of their out-
of-pocket costs.
Part D sponsors offer drug coverage either through stand-alone PDPs for
those in traditional fee-for-service Medicare, or through Medicare
Advantage prescription drug (MA-PD) plans for beneficiaries enrolled in
Medicare's managed care program. As of September 2007, CMS had
contracts with 101 PDPs and 461 MA-PDs.[Footnote 17] The majority of
Part D enrollees, about 71 percent, are in PDPs. PDP enrollment across
contracts varies widely, ranging from fewer than 20 enrollees to more
than 3.3 million enrollees, and is highly concentrated--the four
largest contracts account for about 53 percent of total PDP enrollment
in September 2007.
Sponsors' Use of Formularies and Utilization Management Restrictions:
For the drugs included on their formularies, Part D sponsors decide
which drugs will have utilization management restrictions and which
type of restriction they will apply.[Footnote 18] Utilization
management restrictions may include prior authorization, quantity
limits, and step therapy requirements. Sponsors may apply utilization
management restrictions to prevent the overuse of expensive medications
by requiring lower-tier drugs be tried first.[Footnote 19] The
restrictions may also serve to ensure that proper dosages are
dispensed, to protect against adverse drug interactions, and to control
the use of medications with potential for abuse. Each sponsor has
discretion to decide under which circumstances it will apply
utilization restrictions.
Research conducted for The Kaiser Family Foundation has shown that
sponsors' use of formularies and utilization management restrictions
varies significantly.[Footnote 20] The study reported that the 2007
formularies of the 10 largest PDPs differed in their coverage of a
sample of commonly used drugs and their use of utilization management
restrictions on those drugs.[Footnote 21] Four PDPs included on their
formulary all of the 152 sampled drugs commonly used by Medicare
beneficiaries. Among the remaining 6 PDPs, 1 covered between 90 and 100
percent, and 5 covered between 70 and 80 percent of the sampled drugs.
The authors also found that the 10 PDPs placed prior authorization
requirements on between 3 and 14 of the 152 sampled drugs. While 3 of
the 10 PDPs did not have a step therapy requirement on any of the 152
drugs, 2 PDPs had the requirement on 8 of the drugs. The number of the
152 sampled drugs with quantity limits ranged from 3 to 62.
Types of Coverage Determinations and Appeals:
Beneficiaries can use the coverage determination and appeals processes
to challenge a utilization management restriction on a drug on the
sponsor's formulary or to request coverage for a Part D drug that is
not on the sponsor's formulary. Table 1 describes types of requests.
Table 1: Requests Addressed in Coverage Determinations and Appeals:
If the drug is on the plan formulary:
Prior authorization request: The beneficiary attempts to gain the
sponsor's approval of coverage for a drug with a prior authorization
requirement by either meeting the sponsor's coverage criteria or
showing that the drug is medically necessary.
If the drug is on the plan formulary:
Step therapy request: The beneficiary attempts to prove to the sponsor
either that they have taken the lower-cost drugs required before a
higher-cost drug or taking the higher-cost drug without first trying
the lower-cost drugs is medically necessary.
If the drug is on the plan formulary:
Quantity or dosage limit exception request: The beneficiary attempts to
obtain approval from the sponsor to take a drug at higher strength than
approved by the sponsor or take more units of a drug than the sponsor
will approve per month.[A]
If the drug is on the plan formulary:
Tiering exception request: The beneficiary attempts to obtain approval
to pay the cost-sharing associated with a lower cost-sharing tier than
the tier to which the drug is assigned.
If the drug is not on the plan formulary:
Formulary exception request: The beneficiary attempts to obtain
coverage of Part D drugs that are not included on a sponsor's formulary
for reasons of medically necessity.
Source: GAO analysis of CMS information.
[A] Quantity or dosage limits may be based on FDA labeling.
[End of table]
Coverage Determination Processes Allow for Prompt Decisions, Apply a
Range of Criteria, and Have Resulted in Approvals for the Majority of
Requests:
Study sponsors have designed their coverage determination processes to
allow for prompt decision making within CMS-required time frames. They
obtain patient information needed to make their decisions using drug-
specific coverage determination request forms and enter this
information into a computer for analysis of whether coverage criteria
have been met. When coverage requests cannot be approved by technical
staff, they are decided by clinical staff. Sponsors apply drug-specific
coverage criteria that incorporate the requirements established by MMA
and CMS as well as factors that they have discretion to apply, such as
evidence of trial and failure of lower-cost drugs. In the sample of
coverage determination case files we reviewed at the seven study
sponsors, coverage of the requested drug was approved in approximately
two-thirds of the cases.
Streamlined Processes Make Expeditious Coverage Determination Decisions
Possible:
The sponsors we studied developed coverage determination processes
designed to produce decisions within the CMS-required time frames--72
hours for standard requests and 24 hours for expedited requests. To
collect the patient information needed to make coverage determination
decisions, study sponsors generally rely on drug-specific request
forms. These forms typically ask a series of questions based on the
sponsor's established coverage criteria for a given drug. Prescribing
physicians are asked to use these forms to submit clinical information
about a beneficiary that generally includes the diagnosis associated
with the requested drug, and may include the beneficiary's other
medical conditions and drug history. For instance, to process a
coverage determination request for the osteoporosis drug Forteo, a
sponsor may ask whether the beneficiary has a diagnosis of
osteoporosis, has multiple risk factors for fractures, and has tried
and failed other specific osteoporosis therapies. Some study sponsors
had dozens of different forms for drugs in different classes, with a
varying number of questions. For example, one sponsor asked 5 questions
for the sleep medications Ambien and Lunesta and 23 questions for the
injectible drug Pegasys, used to treat hepatitis. If a physician makes
a coverage determination request over the phone, sponsor staff have on-
line access to the drug-specific questions they need to ask.
With the information submitted by the prescribing physician, study
sponsors used computer algorithms--a series of questions with yes/no
answers--in order to make expeditious, consistent decisions. Technical
staff, such as pharmacy technicians or call center representatives,
enter the patient information into the computer system. The algorithms
are used to assess the information to determine whether the beneficiary
meets the sponsor's coverage criteria for the specific drug in
question. This process generates rapid, consistent decisions if
sponsors receive sufficient information from prescribing physicians.
When the technical staff cannot approve the drug, coverage
determination requests are forwarded for a decision by clinical staff
with more expertise, such as staff pharmacists. One sponsor reported
that, on average, a standard coverage determination involving prior
authorization takes about 40 minutes after the prescribing physician
provides the needed information.
However, the pressure to make a coverage determination within the CMS-
mandated time frames increased the likelihood that sponsors may deny
requests when complete information is not at hand or can not be
obtained quickly.[Footnote 22] Two study sponsors told us that if they
were not successful in getting information they requested, they made
decisions based on the information they had at the time. For example,
if physicians are asked to provide a patient's medical records as part
of their request but do not provide that information quickly, the
sponsor may deny the request in order to meet the required time frame.
Among the coverage determination case files we reviewed at the study
sponsors, the sponsor requested additional information from the
physician in about 13 percent of the cases and about 30 percent of the
denials were for lack of requested medical information. One sponsor
noted that there would probably be fewer denials at the coverage
determination stage if sponsors had more time to acquire needed
information.
Sponsors Apply a Range of Coverage Criteria in Making Coverage
Decisions:
Sponsors apply a range of coverage criteria to evaluate requests for
drugs with restrictions. Their criteria are used, in part, to determine
whether a requested drug can be covered under Part D program rules set
by MMA or CMS. Sponsors consider a number of factors in reviewing a
request, including the following:
* Should the drug be covered under another part of the Medicare
program? There are an estimated 6,000 unique drug products[Footnote 23]
that potentially could be covered under either Part B or Part D of the
Medicare program.[Footnote 24] Which part of the Medicare program is
the appropriate payer depends on factors such as the patient's
diagnosis, when the beneficiary is taking the drug, or the setting in
which the drug is being administered. For instance, immunosuppressive
drugs suppress the body's immune response and are used to treat
autoimmune diseases--diseases in which the body attacks its own
tissues--and to prevent rejection of a transplanted organ.
Immunosuppressives are covered by Part B when the physician prescribes
them after a Medicare-covered organ transplant and by Part D for all
other outpatient uses.
* Is the requested drug in a Part D-excluded drug class? Although
sponsors generally can not cover drugs in 1 of 10 statutorily excluded
drug categories, beneficiaries or prescribing physicians may request a
coverage determination for a drug that is in an excluded drug category.
For such coverage determinations, the physician must show that the drug
is prescribed for a purpose that is not excluded under the law or that
it has been mistakenly classified by the sponsor as excluded. For
instance, medications for coughs and colds are generally excluded from
Part D. However, CMS has issued guidance to plan sponsors that cough
and cold medications are eligible to meet the definition of a Part D
drug in clinically relevant situations. For example, if a physician
prescribes a cough suppressant to a beneficiary because the beneficiary
has osteoporosis and may break a bone if the cough is not controlled,
then the cough suppressant would be considered a Part D-covered drug.
* Is the requested drug medically necessary? Part D sponsors must
approve coverage when the requested drug at the requested dosage is
medically necessary.[Footnote 25] In order to show medical necessity,
the prescribing physician must provide a statement that the requested
drug is medically necessary because (1) all of the covered Part D drugs
on the sponsor's formulary for treatment of the same condition would
not be as effective for the beneficiary, would have adverse effects for
the beneficiary, or both; (2) the prescription drug alternatives on the
formulary have been ineffective in the past, are likely to be
ineffective, or are likely to cause an adverse reaction for the
beneficiary; or (3) the number of doses available under a quantity
limit for a requested drug has been ineffective or is likely to be
ineffective. In addition, sponsors are required to approve a tiering
exception if they agree with the prescribing physician's statement that
treatment of the beneficiary's condition using the preferred
alternative drug would not be as effective for the beneficiary as the
requested drug, would have adverse effects for the beneficiary, or
both.
* Is the requested drug being prescribed for a medically accepted
indication? Under Medicare Part D, a drug is considered to be
prescribed for a medically accepted indication if the drug is FDA-
approved for that use. Any off-label use[Footnote 26]--one not approved
by FDA--is considered medically accepted only if it is supported by a
citation in one of the three designated drug reference guides.[Footnote
27] Beneficiary advocates have argued that the coverage restrictions on
those off-label drug uses not listed in the designated drug reference
guides cause beneficiaries to be denied coverage for needed drugs, some
of which beneficiaries had been previously taking successfully. For
instance, a beneficiary without cancer may have a condition which
causes severe pain. After trying several medications, the beneficiary
may have less pain with the use of Actiq, a medication approved only
for breakthrough pain in cancer patients. Under Part D, the beneficiary
would be denied coverage for the drug, even if the beneficiary's
physician stated that the medication was medically necessary, because
the drug was not prescribed for a medically accepted indication, and
this use is not listed in one of the three drug reference guides.
Beyond ensuring compliance with MMA and CMS coverage rules, sponsors
have discretion to develop their own drug-specific coverage criteria.
Sponsors in our study also considered the following factors.
* Has the beneficiary tried and failed on a generic or preferred
alternative drug? To reduce costs, sponsors may require beneficiaries
to try and fail on generic or preferred alternative drugs before
approving coverage for higher-cost drugs. Sponsors told us, and CMS has
affirmed, that beneficiaries generally can switch to a therapeutically
equivalent drug without disruption to their care.[Footnote 28]
Therefore, although a beneficiary has been stable on a particular drug
for a period of time, sponsors may require the beneficiary to switch to
a generic or preferred alternative drug.
* Has the physician conducted specific tests to confirm the
beneficiary's diagnosis or condition? Study sponsors sometimes also ask
for information from specified tests or studies that document a
patient's diagnosis or condition. For instance, one sponsor told us
that it requires genotype tests for hepatitis drugs because the length
of time a patient should be on the drug is determined by the
genotype.[Footnote 29]
* Is the beneficiary already stable on the requested drug? Sponsors may
consider whether the beneficiary is stable on the requested drug when
deciding whether to approve or reapprove coverage.
* Does the beneficiary have other medical conditions or take other
medications that may contraindicate the use of the requested drug? For
instance, one sponsor's criteria for the drug Actiq--used to treat
breakthrough cancer pain--stipulated that the enrollee must not have
severe asthma or chronic obstructive pulmonary disease, which are
contraindications to Actiq. This same sponsor's criteria for the
antidepressant Ensam noted that the medication should not be approved
if the enrollee is taking other types of antidepressants, such as
monoamine oxidose inhibitors or tricyclic antidepressants.
Duration of the approval period depends upon the drug requested and on
plan policies. In general, sponsors told us they approve coverage of a
requested drug for either the duration of the year or a 12-month
period. Some sponsors also approve requests for as long as the
beneficiary remains enrolled in the plan in cases where the drug treats
an illness that can last for the duration of a person's life (such as
multiple sclerosis). All sponsors said that certain drugs, such as
those with a specified length of treatment for safety reasons, may be
approved for shorter time periods. For example, some injectible drugs
are approved for 24 weeks. If coverage criteria are not met, study
sponsors' denial letters generally included the reason for the
decision. For instance, denial notices may state that the requested
drug was not covered because the preferred alternative drug must be
tried first. Some, but not all, sponsors that we visited sent
notification letters to prescribing physicians that identified which
preferred drug should be tried. The IRE told us that some sponsor
denials are vague. For instance, sponsors may not do a good job of
explaining which specific requirements have not been met.
Study Sponsors Approved Two-Thirds of Coverage Determination Requests
in Sample Month:
Study sponsors approved about 67 percent of the coverage determination
requests among the October 2006 requests that we reviewed. Approval
rates varied among sponsors, ranging from 57 percent to 76 percent. We
also found that coverage determinations in MA-PD plans were more likely
to be approved than coverage determinations in PDPs; the approval rate
for MA-PD plans was 72 percent, compared to 63 percent for PDPs.
Sponsors in our study approved standard requests more often than
expedited requests. The approval rates for standard and expedited
requests were 67 percent and 53 percent, respectively.
We found that nearly all requests for coverage determinations were made
by physicians on behalf of their patients. Approximately 94 percent of
the coverage determinations in our case file review were requested by a
physician or a physician's office staff. At the coverage determination
stage, we also found that only a small proportion of requests were
expedited. Of the coverage determination case files we reviewed, just 4
percent of the requests were expedited.
We found that the most commonly requested drug class and category
combinations were, in order of decreasing frequency, (1) blood modifier
agent/hematopoietic, (2) endocrine-metabolic agent/antidiabetic, (3)
central nervous system agent/analgesic, (4) dermatological agent/
antifungal, (5) gastrointestinal agent/antiulcer, (6) anti-infective
agent/antifungal, and (7) musculoskeletal agent/antirheumatic. These
seven drug class and category combinations accounted for about half of
the requested drugs in the 421 cases we reviewed. At the individual
drug level, the five most requested drugs--collectively accounting for
about one-quarter of our sampled coverage determination requests--were
Procrit, Lamisil, Byetta, Celebrex, and Omeprazole.
Appeals Processes Allow for Better Informed Decisions, Have Often
Resulted in Coverage Approvals, and Are Impeded by AOR Requirement:
The appeals process allows for individuals not involved in the previous
case review to make better-informed decisions by considering additional
supporting evidence. In making redeterminations--the first level of
appeal--sponsor staff evaluate any corrected or augmented evidence to
see if coverage criteria have been met. In conducting reconsiderations-
-the second level of appeal--IRE officials consider the information the
sponsor reviewed, along with any additional support that may be
available. In many cases, appeals result in new interpretations of
whether the requested drug should be covered. CMS appeals data show
that, from July 2006 through December 2006, the median approval rate
across all Part D sponsors was 40 percent; from July 2006 through June
2007, appeals to the IRE received full or partial approval in 28
percent of cases. We found that, for some standard appeals, missing AOR
documentation contributed to delays in study sponsor redetermination
decisions and dismissals of IRE reconsideration cases. Some study
sponsors have developed "workarounds" to eliminate the need for a
completed AOR form.
Appeals Processes Involve Clinical Evidence and Patient Information Not
Previously Available:
Appeals processes at both the study sponsors' level and the IRE
typically involve (1) reviewing more information than was available for
the previous decision level and (2) different decision makers.
First-Level Appeals to Sponsors:
In conducting redeterminations--the first level of appeal--sponsors
typically receive corrected or augmented patient information that was
not submitted within the allotted time frame for the coverage
determination. For example, prescribing physicians may not have
identified the beneficiary's conditions with sufficient specificity or
included a complete drug use history when making the coverage
determination request; for redeterminations, physicians often provide
new information on the reason for the requested drug and a list of
drugs the beneficiary had previously tried but were found to be
ineffective or not well tolerated. Physicians may forward laboratory
test results or chart notes that sponsors had requested previously. In
addition, our reviews of sponsors' redetermination case files showed
that physicians revise the statements they had provided originally to
address issues raised in the sponsors' coverage denial letters.
To determine whether the sponsor's drug-specific coverage criteria have
been met, study sponsor staff reassess the submitted information, along
with any additional support not previously considered. For
redeterminations that involve requests for off-label uses of drugs,
study sponsors said they make an effort to look for citations in one of
the three Part D-designated drug reference guides to see if one of them
supports use of the drug for the indication for which it was
prescribed.[Footnote 30] In reviewing requests for dosage limit
exceptions, in addition to considering a beneficiary's medical record,
study sponsors may also examine medical research literature for
evidence not included in the reference guides. In addition, sponsors
may discuss a case directly with the prescribing physician. We found
that study sponsors contacted prescribing physicians to obtain
additional information in 31 percent of the redetermination case files
we reviewed.
CMS requires that redetermination decisions be made by individuals not
previously involved in reviewing the drug request. Study sponsors'
redetermination decision staff making clinical decisions consist
largely of pharmacists or staff medical directors. If the staff
pharmacist does not approve a decision, a medical director makes the
final decision. CMS additionally requires that decisions concerning the
medical necessity of the requested drug be made by a physician with
expertise in the field of medicine appropriate to the condition being
treated. Some of the study sponsors contract with external physicians
or utilization review companies for this function.[Footnote 31]
Second-Level Appeals to the IRE:
Along with the information in the sponsor case file, IRE staff review
any new supporting information they receive or solicit from the
prescribing physician as well as relevant medical literature.[Footnote
32] In making a reconsideration decision--the second level of appeal--
the IRE is likely to have more information than did the sponsor at the
first level of appeal. It not only has information from the sponsor's
case file, but also information in the physician's letter or
beneficiary correspondence that may be submitted with the
reconsideration request. In addition, IRE staff told us that they
contact the physician or beneficiary to obtain specific details about
the beneficiary's health or to clarify the information submitted, such
as adverse effects the beneficiary has experienced or contraindications
to the preferred formulary drugs. During its review, the IRE may also
perform additional research in the drug reference guides on the reason
the physician is prescribing a particular drug or dosage. For instance,
IRE staff may be successful in researching the Part D-designated drug
reference guides for a specific off-label drug use that a sponsor had
not identified.
As Medicare's independent external appeals contractor, the IRE employs
medical professionals subject to conflict-of-interest prohibitions,
which bar them from having certain relationships with any health
insurance utilization review company, provider network, or drug supply
company. The IRE staff conducting most reconsiderations are
predominantly physicians credentialed in various medical specialties.
For example, according to IRE officials, appeals cases involving
opioids are handled by pain management specialists because these cases
need a specialty review. IRE officials also said that, when necessary,
the IRE contracts with external specialists to review cases.
First-Level and Second-Level Appeals Approved Drug Coverage in 40
Percent and 28 Percent of Cases, Respectively:
Consideration of new evidence during the appeals process often leads to
decisions that reverse the sponsors' decisions. At the first level of
appeal, CMS appeals data show that, from July 2006 through December
2006, the median approval rate across all Part D sponsors was 40
percent. Across Part D sponsors, approval rates ranged from 0 percent
to 100 percent for all appeals during that period. PDP sponsors were
somewhat more likely to approve coverage; the median rate of approvals
for PDPs was about 45 percent, compared to about 38 percent for MA-PDs.
At the second level of appeal, IRE appeals data show full or partial
coverage approvals of the requested drug in about a quarter of the
11,679 reconsideration cases decided from July 2006 through June 2007.
IRE data for this period show that the IRE either fully or partially
approved[Footnote 33] coverage in 28 percent of appeals and denied
coverage in 36 percent of appeals. A significant proportion of IRE
cases, 34 percent, were dismissed for various reasons, such as the lack
of AOR documentation. (See fig. 1.)
Figure 1: IRE Disposition of Part D Appeals, July 2006 through June
2007:
[See PDF for image]
This figure is a pie-chart, depicting the following data:
Disposition of Part D Appeals, July 2006 through June 2007:
Denied coverage: 36%;
Dismissed: 34%;
Fully or partially approved coverage: 28%;
Other: 2%.
Source: GAO analysis of IRE data.
Note: Fully approved cases: the IRE totally disagrees with the
sponsor's redetermination and decides in favor of the appealing party.
Partially approved cases: the IRE disagrees with one part of the
sponsor's decision but agrees with another part. Denied cases: the IRE
agrees with the sponsor's decision against the appealing party.
Dismissed cases: those with missing AOR documentation or other
deficiencies. "Other" refers to the remaining cases, such as those that
were withdrawn.
[End of figure]
The 11,679 cases reviewed by the IRE addressed a variety of issues.
From July 2006 through June 2007, about one-third of IRE cases
concerned a drug utilization restriction, such as a prior authorization
requirement or quantity limit. Another 33 percent of IRE cases were
requests for a drug not covered under Part D, such as a drug in one of
the 10 Part D-excluded categories. Twenty-eight percent of cases were
requests for Part D drugs not on the sponsor's formulary. The remaining
5 percent of IRE cases involved issues such as requests to pay a lower
cost-sharing level and reimbursement for drugs provided outside of the
sponsor's pharmacy network.
IRE approval rates for Part D appeals were highest for disputes
involving drug utilization restrictions and lowest for cases involving
Part D-excluded drugs. The IRE fully or partially approved coverage in
39 percent of the appeals concerning a drug utilization restriction, 30
percent of appeals involving nonformulary drugs, and 18 percent of
appeals for coverage of a drug that sponsors denied as an excluded drug
under Part D. (See fig. 2.)
Figure 2: IRE Decisions by Issue Addressed in the Request, July 2006
through June 2007:
[See PDF for image]
This figure is a series of pie-charts. The main chart is depicted, as
well as smaller charts that further explain each portion of the main
chart. The following data is depicted:
IRE Decisions by Issue Addressed in the Request, July 2006 through June
2007:
* Disposition of drug utilization restriction appeals: 34%;
Of that 34%:
- Fully or partially approved: 39%;
- Denied coverage: 26%;
- Dismissed: 33%;
- Other: 2%.
* Disposition of nonformulary drug appeals: 28%;
Of that 28%:
- Fully or partially approved: 30%;
- Denied coverage: 33%;
- Dismissed: 35%;
- Other: 2%.
* Disposition of Part D-excluded drug appeals: 33%;
Of that 33%:
- Fully or partially approved: 18%;
- Denied coverage: 48%;
- Dismissed: 33%;
- Other: 1%.
* Other: 5%.
Source: GAO analysis of IRE data.
Note: Fully approved cases: the IRE totally disagrees with the
sponsor's redetermination and decides in favor of the appealing party.
Partially approved cases: the IRE disagrees with one part of the
sponsor's decision but agrees with another part. Denied cases: the IRE
agrees with the sponsor's decision against the appealing party.
Dismissed cases: those with missing AOR documentation or other
deficiencies. "Other" refers to the remaining cases, such as those that
were withdrawn.
[End of figure]
As part of the decision process, the IRE determines whether the sponsor
has met its obligation for coverage under the Part D rules.[Footnote
34] IRE staff told us that during the first year of the program, some
sponsors denied requests because they did not fully consider the
beneficiary's overriding medical need for the requested drug, as CMS
requires. In contrast, at the IRE, the beneficiary's medical condition
is the determining factor when the sponsor's coverage criteria cannot
be met. For example, in one case, a sponsor denied a physician's
request for the drug Celebrex--a drug used to treat arthritis and other
conditions--because the physician did not provide documentation of the
beneficiary's trial and failure of the sponsor's formulary medications-
-Naproxen, Ibuprofen, or Ketoprofen. In this case, the sponsor did not
cover the requested drug because its step therapy requirement had not
been met. However, in reviewing the case, the IRE applied medical
necessity criteria because the prescribing physician stated that use of
the sponsor's preferred formulary alternatives were contraindicated for
treatment of his patient's condition. As a result, the IRE overturned
the sponsor's decision, stating that an exception to the sponsor's step
therapy requirement was warranted and that the sponsor should provide
coverage of the drug until the end of the plan year.
Missing AOR Forms at Study Sponsors and the IRE Cause Appeals to Be
Delayed or Dismissed:
At our study sponsors and at the IRE, we found evidence that decisions
on standard appeals submitted by prescribing physicians--
redeterminations and reconsiderations--had been delayed and sometimes
dismissed due to missing AOR forms. Without written authorization from
the beneficiary, sponsors and the IRE may begin collecting relevant
documentation to support a physician-submitted standard request, but
they cannot complete their review. Also, the time frame for making the
decision does not begin until the completed AOR form is received.
According to most study sponsors and the IRE, if they do not receive
the signed AOR form within a reasonable amount of time--which ranges
from about a week to about a month after receiving the request--they
deny or dismiss the request. Of the cases we reviewed at the study
sponsors, missing AOR forms generated processing delays in 7 percent of
cases. These delays were typically about 14 days, but could stretch to
67 days. At the IRE, missing AOR forms caused dismissals of about 9
percent of appeals, which is about one in every five reconsideration
cases that were dismissed.[Footnote 35]
Data on the prevalence of delays in processing redetermination requests
attributable to missing AOR forms mask the fact that some sponsors in
our study have developed "workarounds" to eliminate the need for a
completed AOR form. For example, one sponsor told us it treats all
physician appeals as expedited, regardless of the priority level
indicated by the physician. Our review of a sample of sponsors' case
files showed that 26 percent of redetermination requests were
classified as expedited compared to 4 percent of the coverage
determination case files we reviewed. Although expediting requests
precludes the need for an AOR form, one sponsor stated that because
these requests may not be truly urgent, it may not be in the
beneficiary's best interest for the appeal to be rushed. Expedited
appeals allow less time--72 hours versus 7 days--for reviewers to
consider the evidence at hand or to request additional information,
which might affect the outcome of the appeal. For the case files we
reviewed, the denial rate for expedited redeterminations was 73 percent
compared with a denial rate of 67 percent for standard
redeterminations.
In another workaround, sponsors obviate the need to obtain two
signatures--the beneficiary's to appoint the physician to act as a
representative and the physician's to accept the appointment--by
arranging for the redetermination request to be made by the
beneficiary. For example, one sponsor reported contacting beneficiaries
to ask whether they want to initiate the redetermination instead of
their physicians, who had contacted the sponsor first. Our case file
reviews showed that beneficiaries made requests in about 36 percent of
redetermination cases compared to 2 percent of coverage determination
cases. This approach was designed to identify those beneficiaries who
wish to initiate an appeal rather than having their physician appeal on
their behalf, thus reducing the need for the AOR paperwork.
Most sponsors in our study and IRE officials reported that the
requirement that prescribing physicians be formally appointed
beneficiary representatives with a signed AOR form in order to initiate
standard appeals is an administrative impediment. The only actions
prescribing physicians without explicit authorization cannot take are
initiating the appeal, opening discussions with a sponsor or the IRE
about an ongoing appeal requested by the beneficiary, or receiving
notices of adverse standard redeterminations or reconsiderations. In
practical terms, prescribing physicians' involvement in a standard
appeal does not differ significantly whether they are appointed
representatives or not.
CMS Efforts to Inform Beneficiaries about Sponsors' Performance Have
Improved; Oversight Hindered by Poorly Defined Reporting Requirements:
CMS has improved its efforts to inform beneficiaries about sponsors'
performance, but its oversight of sponsors is hindered by poorly
defined reporting requirements. CMS publicly reports information on two
performance metrics: the rate at which sponsors met required time
frames for decision making and the rate at which the IRE concurs with
sponsors' redetermination decisions. In November 2007, for one of these
metrics, CMS modified the way it informs beneficiaries by grading
sponsors' performance against absolute benchmarks, rather than relative
rankings as it had done previously. To oversee sponsors' processes, CMS
requires that sponsors report data on several coverage determinations
and appeals measures; however, the agency provided minimal guidance on
the information to be included in each coverage determination measure.
As a result, our study sponsors have reported data differently to CMS,
hindering the agency's ability to monitor sponsors' activities
adequately. In its audits of PDP sponsors, CMS found that most of the
sponsors it audited were noncompliant with many of the coverage
determination and appeals requirements.
CMS Improved Its Use of Performance Metrics to Inform Beneficiaries:
Using quarterly IRE data, CMS has developed two performance metrics to
gauge how well sponsors' coverage determination and appeals processes
are operating. CMS calculates metrics on (1) the rate at which sponsors
met required time frames for coverage determinations and
redeterminations, as measured by the number of cases, per 10,000
beneficiaries, automatically forwarded to the IRE because of delays in
sponsors' decision making; and (2) the rate at which the IRE concurs
with sponsors' redetermination decisions, as measured by the percentage
of cases in which the IRE upheld, or agreed with, sponsors' coverage
denials.[Footnote 36] CMS officials told us that the agency selected
these two performance metrics, in part, because beneficiaries could
interpret their meaning easily. CMS includes the two metrics in
information made available to the public on the Medicare Prescription
Drug Plan Finder--a Web site designed to help beneficiaries compare
drug plans.[Footnote 37]
CMS account managers--staff responsible for overseeing sponsors'
performance--review sponsors' scores on these performance metrics to
monitor how well their coverage determination and appeals processes are
operating.[Footnote 38] Sponsors with the highest rates of cases
forwarded automatically to the IRE and the lowest percentages of cases
in which the IRE agreed with their decisions are viewed as problematic.
When a sponsor is identified as an outlier, the assigned account
manager contacts the sponsor to discuss its coverage determination and
appeal procedures and works with the sponsor to identify ways to
improve its performance, such as conducting additional training
sessions.
Both the IRE and the sponsors in our study noted certain limitations in
the data underlying each of these metrics. The number of automatically
forwarded cases used for the timeliness metric may understate sponsors'
timeliness.[Footnote 39] According to IRE officials, some sponsors have
forwarded cases to the IRE believing they had exceeded the required
decision time frames when they had not. According to the officials,
these sponsors automatically forwarded cases when they had not yet
received a signed AOR form or a physician statement to support a
coverage request. In such cases, the required time frames have not yet
expired and the IRE returns the case to the sponsor for processing.
Because these sponsors automatically forwarded cases to the IRE
inappropriately, their rates of missed time frames are higher than they
should be.
Another limitation is that the performance metric on the IRE's
concurrence with sponsors' decisions can be misleading. In discussing
this measure with the sponsors in our study, one sponsor commented that
a low rate of IRE agreement with their decisions implies, unfairly,
that the sponsor's decisions were flawed. They contend that the IRE
often receives additional supporting evidence that results in an
overturn, as we found by interviewing IRE officials. They state that
had they received the same information within their time frame for
processing the case, they may have approved the request. In their view,
a low percentage of cases in which the IRE agrees with the sponsor's
decisions does not necessarily mean that the sponsor was not performing
well. However, a CMS official asserted that sponsors are responsible
for collecting all the information needed to adjudicate a request in
the time allotted and are accountable if they do not obtain the same
information available to the IRE.
CMS uses these performance metrics to inform beneficiaries of sponsors'
performance and to encourage poor performing sponsors to do better. In
an effort to improve the information shared with beneficiaries for the
2008 open enrollment period, the agency changed the manner in which it
calculates and displays these metrics--using a star designation system.
[Footnote 40] For the 2007 open enrollment period, CMS used 2006 data
from the IRE to rank order sponsors' rates, classify sponsors into
groups based on sponsors' relative performance, and assign a star
designation to each group.[Footnote 41] For example, CMS chose to
assign three stars, indicating very good performance, to 90 percent of
sponsors for each metric. The next 5 percent of sponsors were assigned
two stars, indicating acceptable performance, while the remaining
sponsors were given one star, indicating poor performance.
By setting the star designations using relative comparisons rather than
defined benchmarks for different levels of performance, CMS implied
that those sponsors receiving the most stars had superior performance
while those with fewer stars were not meeting a CMS-set standard. The
clustering of 90 percent of sponsors in the three-star designation
could have been misinterpreted by beneficiaries as identifying those
sponsors with superior performance when, in fact, by definition, 90
percent of sponsors received three stars. Moreover, the performance of
sponsors in the top category varied significantly. For example, among
the 26 PDP sponsors receiving three stars, the percentage of cases
where the IRE concurred with sponsors' redetermination decisions ranged
from 39 to 75 percent. At the same time, the remaining categories were
quite compressed. A relatively small difference in rates could have
placed a sponsor in the lowest category rather than the highest
category. CMS designated an IRE concurrence rate of 39 percent to be
very good performance, but a 36 percent rate as acceptable performance,
and 34 percent as poor performance.
Recognizing the value of comparing sponsor performance against absolute
standards (benchmarks), CMS changed its star designation system in time
for the 2008 open enrollment period. For the performance metric on IRE
concurrence, the agency now assigns sponsors to one of five star
categories using fixed benchmarks rather than a percentile ranking.
Table 2 shows how sponsors are assigned to different performance
categories for the metric on IRE concurrence. For example, under the
new designation system, only those sponsors with IRE concurrence rates
better than 95 percent receive five stars, indicating excellent
performance. Also, stars are only displayed for sponsors that have at
least five appeals cases reviewed by the IRE.
Table 2: CMS's Revised Metric on IRE Appeals Decisions, as of November
2007:
CMS star designation: 5 stars (Excellent);
IRE appeals uphold rate: greater than 95 percent.
CMS star designation: 4 stars (Very good);
IRE appeals uphold rate: greater than 90 percent and less than or equal
to 95 percent.
CMS star designation: 3 stars (Good);
IRE appeals uphold rate: greater than 75 percent and less than or equal
to 90 percent.
CMS star designation: 2 stars (Fair);
IRE appeals uphold rate: greater than 50 percent and less than or equal
to 75 percent.
CMS star designation: 1 star (Poor);
IRE appeals uphold rate: less than or equal to50 percent.
CMS star designation: Insufficient data;
IRE appeals uphold rate: 1 to 4 cases reviewed by the IRE.
CMS star designation: No appeals required review;
IRE appeals uphold rate: 0 cases reviewed by the IRE.
Source: CMS.
[End of table]
For the 2008 open enrollment period, CMS expanded its star designation
system for the timeliness metric from three stars to five stars.
Although it retained the relative ranking approach, CMS more evenly
distributed the sponsors across the star categories. For example,
whereas previously CMS assigned the top 90 percent of sponsors--those
with the lowest rates of cases forwarded to the IRE because of missed
time frames--the highest rating, the agency now assigns the highest
rating to the top 15 percent of sponsors. Previously, CMS assigned 5
percent of sponsors the lowest rating, but now it assigns the lowest
rating to 15 percent of the sponsors. The remaining sponsors are
distributed more evenly across the two-, three-, and four-star
designations. CMS continues to include among the top performing
sponsors those with no cases forwarded to the IRE due to missed time
frames. In our examination of 2006 publicly reported performance data,
we found that, among the 60 PDP sponsors receiving three stars for
making timely decisions, 21 did not forward any cases to the IRE
because of missed time frames.
CMS Monitoring Hampered by Lack of Specificity in Reporting
Requirements; Audits Identified Sponsors Needing Improvement:
CMS's oversight of sponsors' coverage determination and appeals
processes include both monitoring and auditing.
CMS's Monitoring Efforts:
In monitoring the coverage determination processes, CMS reviews
quarterly data reported by sponsors. The coverage determination
measures selected for reporting capture information about the extent to
which beneficiaries use the coverage determination process and the
outcomes of that process. An agency official involved in selecting the
measures to be reported noted that CMS sought to minimize the
administrative burden on sponsors by selecting measures for which data
were likely to be readily available. For 2006, the first year of the
Part D program, CMS required sponsors to submit data on the following
types of coverage determination cases:
* the number of requests and the number of approvals for formulary
drugs requiring prior authorizations;
* the number of requests and the number of approvals for formulary
exceptions, such as for nonformulary drugs; and:
* the number of requests and the number of approvals for tiering
exceptions.[Footnote 42]
CMS used the submitted coverage determination data to calculate an
overall request rate and an overall approval rate. In its analysis of
the 2006 sponsor-reported data, CMS identified sponsors with relatively
high overall rates of coverage requests and low overall rates of
approvals. The agency wrote to these sponsors requesting that they
confirm whether their submitted data were accurate and not the result
of clerical errors.
We found that our study sponsors submitted information differently to
CMS because the agency provided limited guidance on the information to
be included in each coverage determination measure.[Footnote 43] CMS
defined the coverage determination measures sponsors are required to
report too broadly, thus allowing each sponsor to use its existing data
categorizations for each of the measures. After examining data reported
for the third and fourth quarters of 2006, and following up with our
study sponsors, we found substantial discrepancies in how sponsors
reported these overall data for requests and approvals, as the
following illustrate.
* While four of our seven sponsors said their measure of formulary drug
requests requiring prior authorizations included requests for quantity
limit exceptions, three sponsors included only a portion or none of
these types of cases. For example, one sponsor told us that it omitted
6,032 requests for quantity limit exceptions in reporting the formulary
drug request measure in the fourth quarter of 2006. These cases
accounted for about 22 percent of the sponsor's total coverage
determination requests during that period. Another sponsor did not
include 4,608 requests involving quantity limit exceptions in reporting
the formulary drug request measure. These cases accounted for about 25
percent of all its coverage determination requests in the fourth
quarter of 2006.
* Some, but not all, study sponsors included other types of cases in
the requests and approvals for formulary drug measures. For example,
three of our seven study sponsors included cases disputing coverage
under Part B or Part D in their formulary drug measures, and four study
sponsors included requests for drugs excluded from coverage under Part
D.
* One of our seven study sponsors stated that, while it included all
prior authorization requests in the formulary drug request measure, it
included all requests for step therapy and quantity limits in the
nonformulary drug request measure, based on a definition for
nonformulary drugs in the Medicare Part D manual.[Footnote 44] In
contrast, another sponsor in our study reported in the nonformulary
drug category requests for drugs that it inadvertently did not include
when designing its open formulary.
* We identified two sponsors that double counted the number of
requested and approved tiering exceptions by reporting them in two
different measures. For example, one of our study sponsors included
13,986 requests for tiering exceptions in its count of prior
authorization requests for formulary drugs reported to CMS. The
inclusion of these tiering exceptions in the number of requests for
formulary drugs increased the requests for formulary drugs reported by
about 43 percent.
For the 2007 contract year, CMS made a number of modifications to its
reporting requirements. CMS instructed sponsors to begin reporting data
on the number of requests and approvals for quantity limit exceptions
measures and renamed the other measures to better convey the types of
coverage determinations to include in their reporting.[Footnote 45] CMS
also instructed sponsors to exclude cases related to Part B versus Part
D coverage from their data submissions.[Footnote 46] However, because
CMS has yet to address categorization issues, such as whether the
measures should be mutually exclusive, sponsors' data reporting may
remain inconsistent. Until data reliability issues are addressed, CMS
may not be in a position to use these measures to oversee sponsors'
coverage determination process effectively.
CMS's Auditing Efforts:
In it 2007 compliance audits of five PDP sponsors, CMS found numerous
violations of Part D standards.[Footnote 47] The agency used an audit
protocol that examined 13 elements related to the coverage
determination process and 13 elements of the appeals processes. CMS
auditors reported that the number of violations across sponsors ranged
from 15 to 26 specific coverage determination and appeals process
requirements. CMS has required sponsors to fix the violations by
adopting corrective action plans.
Areas of sponsor noncompliance ranged from incomplete written policies
and procedures to delays in authorizing drug coverage after the IRE
approved an expedited request. Auditors found that some sponsors did
not notify beneficiaries of coverage decisions within the required time
frames. Several sponsors were cited for not using CMS-approved decision
notices; such notices must explain the reasons for denying requests or
inform beneficiaries of their appeal rights. Other sponsors did not
have policies to use physicians to review appeals of coverage requests
denied for a lack of medical necessity. Table 3 shows those audit
elements for which CMS found at least four of the five sponsors
noncompliant. As of October 2, 2007, each of the five sponsors had
submitted to CMS corrective action plans to remediate the identified
deficiencies, which CMS was in the process of reviewing.
Table 3: Audit Elements Found Deficient at Four or More Sponsors in
CMS's Audits of Five PDP Sponsors, as Reported in October 2007:
Audit elements found deficient: coverage determinations[A]: Notices
instructing enrollees to contact their plan to obtain a coverage
determination must be posted or arranged with network pharmacies;
Audit elements found deficient: appeals[A]: Use of a reviewer not
involved in the initial coverage decision, or use of physicians to
review denials based on lack of medical necessity.
Audit elements found deficient: coverage determinations[A]: Maintain
policies and procedures for tracking and addressing the timely
resolution of requests, as well as for accepting or denying requests
for expedited decisions;
Audit elements found deficient: appeals[A]: Maintain policies and
procedures for addressing requests for standard and expedited
redeterminations.
Audit elements found deficient: coverage determinations[A]: Timely
notification of decisions for requests for drug coverage or
reimbursement;
Audit elements found deficient: appeals[A]: Timely notification of
decisions, and, if applicable, authorization for:
* standard redeterminations involving drugs;
* redeterminations involving reimbursement, and;
* expedited redeterminations involving drugs.
Audit elements found deficient: coverage determinations[A]: Use of CMS-
approved decision notices;
Audit elements found deficient: appeals[A]: Provide for the timely
transfer of cases to IRE.
Audit elements found deficient: coverage determinations[A]: Establish
and maintain procedures for processing and approving requests for
tiering and nonformulary exceptions;
Audit elements found deficient: appeals[A]: Provide for the timely
authorization of drug coverage (for standard and expedited requests),
or timely reimbursements, when coverage was approved by the IRE.
Source: GAO analysis of CMS data.
Note: CMS produced seven audit reports for the five audited PDP
sponsors. For this analysis, we analyzed combined audit findings for
the two sponsors with multiple contracts.
[A] A deficiency on an audit element could mean the following: (1)
actual failure of the sponsor to take the desired action, such as
transferring cases to the IRE within required time frames; (2) failure
to address the audit element sufficiently in policies and procedures;
or (3) failure to provide sufficient information or data to enable CMS
auditors to make an assessment of compliance.
[End of table]
A number of the audit findings indicate that the publicly reported
performance metric on sponsor timeliness may not accurately reflect
sponsors' adherence to the requirement to automatically forward cases
to the IRE. In reviewing case files, for example, CMS found that
sponsors inconsistently forwarded standard coverage determination cases
to the IRE when they did not meet the required CMS time frame, with one
of the sponsors providing CMS with a written statement acknowledging
that it had not forwarded any cases to the IRE for review during the
audit period. Another two sponsors inappropriately allowed themselves
more time to process certain coverage determination requests by
starting their coverage determination review only after they received a
supporting statement from the physician.
In a separate initiative, CMS has worked with a selected group of
sponsors to improve their performance on coverage determinations and
appeals. Using a collaborative approach to performance improvement, CMS
has conducted evaluations of two sponsors with comparatively high
reversal rates at the IRE level of appeal to identify reasons why the
IRE often did not agree with these sponsors' prior coverage decisions.
[Footnote 48] After examining a random sample of IRE case files for
each sponsor in 2006, CMS identified several process-related issues
that each sponsor could improve and provided feedback in the form of
recommendations to each sponsor. For example, at one sponsor, CMS found
that in about two-thirds of the reviewed cases, the sponsor should have
done a better job of obtaining and assessing documentation of the
evidence to support the request. The agency recommended that the
sponsor revise certain forms in order to obtain all the information
needed to make appropriate coverage determination decisions. CMS
officials told us that both sponsors improved their performance by
increasing the number of cases in which the IRE agreed with their
decisions. As of September 2007, CMS was completing its evaluation of a
third sponsor that did not receive a three-star designation for the
performance metric based on the 2006 data.
Conclusions:
In the Part D program, beneficiaries' access to prescription drugs is a
function not only of whether a particular drug is on a plan's formulary
and whether it is subject to utilization management tools, but also how
plan sponsors make individualized coverage decisions when requested.
The Medicare drug benefit allows sponsors to operate in a regulated but
flexible environment. Thus, sponsors in our study follow similar
procedural steps but apply discretion in making coverage determinations
and appeal decisions.
Administrative barriers in the appeals process can have implications
for beneficiaries' drug coverage. Efforts to implement the requirement
that prescribing physicians be formally appointed beneficiary
representatives with a signed AOR form in order to initiate standard
appeals have been cited as an impediment to the appeals process. We
found evidence that missing AOR forms have caused delays and some
dismissals in cases being considered. A more streamlined approach that
reduces AOR paperwork by quickly identifying those beneficiaries who
wish to initiate an appeal could improve the process while maintaining
physician involvement.
While CMS has improved its efforts to inform beneficiaries about
sponsors' performance, its oversight efforts remain mixed. The agency
has begun to hold sponsors accountable for maintaining compliance with
coverage determination and appeals requirements. Agency auditors cited
sponsors for widespread deficiencies and have required them to revise
procedures to better serve beneficiaries. However, CMS lacks the data
it needs to routinely monitor coverage determination and appeals
requests and approvals across all sponsors. The agency has not taken
steps necessary to ensure that sponsors report data consistently.
Recommendations for Executive Action:
To improve the Medicare Part D coverage determination and appeals
processes, we recommend that the Administrator of CMS:
* reduce the need for completed AOR forms by requiring sponsors and the
IRE, upon receipt of standard appeal requests submitted by prescribing
physicians without completed AOR forms, to telephone beneficiaries to
determine whether they wish to initiate the appeal, and:
* ensure that sponsor-reported data used for monitoring coverage
determination and appeals activities are accurate and consistent by
providing specific data definitions for each measure.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, CMS remarked that our
review presents a balanced evaluation of Part D coverage determination
and appeals procedures and the associated data reporting procedures,
and does an excellent job of highlighting various challenges in the
Part D appeals process. (See app. II.) The agency reported that it is
exploring the adoption of one of the report's recommendations and is in
the process of implementing the other. In addition to comments on each
of our recommendations, CMS provided detailed, technical comments that
we incorporated where appropriate.
CMS stated that it intends to consider our recommendation that the need
for a signed AOR form be reduced through a process where sponsors call
beneficiaries when physicians request appeals on their patients'
behalf. However, it noted that it was not certain whether any change to
the current policy could be implemented without modifying the statutory
and regulatory provisions associated with the AOR requirement. The
agency pointed out that physician representation of beneficiaries is
limited by law because only a Medicare Part D eligible individual can
bring an appeal at the IRE level. Therefore, CMS said that it is
reviewing the current legal requirements about making appeal requests
to determine whether changes are appropriate and necessary. CMS added
that it intends to work with physician groups to ensure that physicians
promptly submit any needed AOR forms.
We are pleased that CMS is considering how it can implement our
recommendation to address the difficulties regarding the AOR
requirement. In making this recommendation, we considered relevant
statutory and regulatory provisions and found no limitations that would
preclude its adoption by CMS. Our recommendation would reduce the need
for AOR forms by requiring that sponsors and the IRE determine at the
outset whether beneficiaries want to initiate their appeals or have
physicians do so on their behalf. If it is determined that the
beneficiary is requesting the appeal, an AOR form would not be needed
and the sponsor or IRE could immediately process the request. However,
if sponsors or IRE find that beneficiaries want their physicians to
initiate the appeal for them, then completed AOR forms would still be
required. We have slightly reworded our recommendation, to clarify our
intent and eliminate any ambiguity, and included the revised language
in the final report.
CMS agreed with our recommendation to ensure that sponsor-reported data
are accurate and consistent by providing specific data definitions for
the coverage determination and appeals measures. The agency noted that
it has taken steps to modify the Part D Plan Reporting Requirements
guidance on data element definitions. It plans to reinforce this
guidance during upcoming calls with Part D sponsors, as well as in
memoranda to sponsors, Frequently Asked Questions documents, and
conference presentations. In addition, to minimize data entry errors,
CMS has implemented data edit rules that will, among other things,
reject a value that exceeds an expected range. It also developed
procedures for sponsors to correct previously submitted information.
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 [hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact Kathleen King at (202) 512-7114 or kingk@gao.gov. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. GAO staff who made
contributions to this report are listed in appendix III.
Signed by:
Kathleen M. King:
Director, Health Care:
[End of section]
Appendix I: Steps and Time Frames for Part D Coverage Determination and
Appeals:
[See PDF for image]
This figure is a flowchart illustration of the Steps and Time Frames
for Part D Coverage Determination and Appeals. The following data is
depicted:
Beneficiary, representative,or prescribing physician requests coverage
determination from sponsor:
Standard Request:
Sponsor-level decision:
Coverage determination decision within 72 hours:
Approve, or;
Deny, or;
Sponsor misses deadline (skip ahead to independent appeal).
Request redetermination within 60 days:
Sponsor-level appeal:
Redetermination within 7 days:
Approve, or;
Deny, or;
Sponsor misses deadline (skip ahead to independent appeal).
Request reconsideration within 60 days:
Independent appeal:
IRE reconsideration decision within 7 days.
Expedited Request:
Sponsor-level decision:
Coverage determination within 24 hours:
Approve, or;
Deny, or;
Sponsor misses deadline (skip ahead to independent appeal).
Request redetermination within 60 days:
Sponsor-level appeal:
Redetermination within 72 hours:
Approve, or;
Deny, or;
Sponsor misses deadline (skip ahead to independent appeal).
Request reconsideration within 60 days:
Independent appeal:
IRE reconsideration decision within 72 hours.
Source: GAO analysis based on CMS information.
Notes: For coverage determinations, time frames generally begin when
the sponsor receives a request; in some cases it begins when the
sponsor receives the physician's supporting statement. In addition to
the appeals levels shown, there are three other levels of appeal:
administrative law judge hearing, a Medicare Appeals Council review,
and federal district court review. This chart reflects situations in
which expedited reviews have been granted.
[End of figure]
[End of section]
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Department Of Health & Human Services:
Centers for Medicare & Medicaid Services:
Office of the Administrator:
Washington, DC 20201:
Date: December 20, 2007:
To: Kathleen M. King:
Director, Health Care:
Government Accountability Office:
From: [Signed by] Kerry Weems:
Acting Administrator:
Subject: Government Accountability Office (GAO) Draft Report: "Medicare
Part D: Plan Sponsors' Processing and CMS Monitoring of Drug Coverage
Requests Could Be Improved" (GAO-08-47):
Thank you for the opportunity to review and comment on the above GAO
Draft Report. This study focused on the Part D Sponsors' process for
drug coverage appeal determinations and CMS monitoring of such
information via plan reported data.
We appreciate the GAO's thorough review of the issues involved. as well
as the recommendations for enhancing CMS' current procedures. Overall.
the report presents a balanced evaluation of the Medicare Part D
coverage determination and appeals procedures and the associated data
reporting procedures, and does an excellent job of highlighting various
challenges of the Part D appeals process. As the GAO report cites, CMS
developed two new measures related to the sponsors' timeliness and
determination outcome of coverage decisions in the Medicare Plan
Ratings available on [hyperlink, http://www.Medicare.gov]. These two
measures. in combination with the other Medicare plan ratings, provide
beneficiaries with valuable information to make informed decisions
regarding plan selection. CMS is committed to providing clear
differentiation of the various plans to beneficiaries. as well as
utilizing effective data for operations and plan evaluation purposes.
CMS welcomes constructive suggestions on improving both the sponsors'
adherence to Part D drug coverage processes. and CMS' oversight, and we
are in the process of implementing some of the report's
recommendations. For example. we have taken immediate steps to modify
our Part D Plan Reporting Requirements guidance around data element
definitions and plan to review this information during upcoming user
calls.
We address each of the report's recommendations below, followed by
detailed additional comments.
GAO Recommendation:
Reduce the need for completed appointment of representative (AOR) forms
by requiring sponsors and the independent review entity (IRE), upon
receipt of standard appeal requests by prescribing physicians, to
telephone beneficiaries to determine their intention to initiate the
appeal.
CMS Response:
We support steps aimed at decreasing barriers to appeals and intend to
consider carefully GAO's recommendation that the need for a signed AOR
form can be reduced through a process where plans call beneficiaries
when their physicians requests appeals on the members' behalf. However,
we are concerned that GAO's recommendation does not fully consider the
statutory and regulatory provisions associated with this requirement.
The current Medicare Part D regulations place a limitation on physician
representation of enrollees because section 1860D-4 of the Social
Security Act provides that with respect to appeals at the IRE level and
above, " ...only a Medicare Part D eligible individual shall be
entitled to bring such an appeal". We are not certain that any change
to the current policy could be implemented without either a statutory
change or, at a minimum, changes to the Medicare Advantage and Part D
regulations.
Thus, we are carefully reviewing the current regulatory requirements
about making appeal requests in light of the GAO recommendation. Based
on this review, we intend to determine whether associated regulatory
changes are appropriate and necessary. As CMS conducts this review and
decides how best to proceed, CMS intends to continue working with
physicians, through groups such as the American Medical Association and
the American College of Physicians, to ensure that physicians promptly
submit any needed AOR forms and medical documentation.
GAO Recommendation:
Ensure that sponsor reported data used for monitoring coverage
determination and appeals activities is accurate and consistent by
providing specific data definitions for each measure.
CMS Response:
CMS has extended many educational opportunities to sponsors and other
stakeholders to reinforce the importance of providing accurate and
consistent reporting requirements data. CMS has offered guidance via
Medicare Part C and D User Calls, Health Plan Management System (HPMS)
memos, Part D Plan Reporting Requirements Frequently Asked Questions
documents, and presentations at numerous industry conferences. In
addition, both the Part D Reporting Requirements email mailbox and the
HPMS Help Desk provide sponsors with the opportunity to obtain
assistance regarding technical and other policy related questions.
The draft report lists several examples of sponsors' inconsistencies in
reporting. CMS expects to continue providing clarification in the Part
D Plan Reporting Requirements data elements and the Part D Plan
Reporting Requirements Frequently Asked Questions documents to help
increase consistency in reporting. Specific enhancements to the
existing data descriptions are under discussion and review, and will be
released once finalized.
Accuracy in plan-reported data is a priority for CMS. In an effort to
minimize data entry errors, HPMS data edit rules have been implemented.
An example of these data edit rules include HPMS rejection of a value
that exceeds an expected range. CMS has also developed procedures for
plans to correct previously submitted data.
[End of section]
Appendix III GAO Contact and Staff Acknowledgments:
GAO Contact:
Kathleen King, (202) 512-7114 or kingk@gao.gov:
Acknowledgments:
In addition to the contact named above, Rosamond Katz, Assistant
Director; Lori Achman; Todd Anderson; Hazel Bailey; Krister Friday;
Lisa Rogers; and Jennifer Whitworth made major contributions to this
report.
[End of section]
Footnotes:
[1] Pub. L. No. 108-173, § 101, 117 Stat. 2066, 2071-2152 (codified at
42 U.S.C. §§ 1395w-101--1395w-152). Part D enrollment is as of
September 2007.
[2] Typically, pharmacy benefit managers manage prescription drug
benefits for third-party payers. In Medicare, some pharmacy benefit
managers have contracted directly with Medicare to offer the Part D
benefit.
[3] This requirement does not apply when there is only one drug in the
category and class or when CMS has given the sponsor approval to have
fewer than two. In general, a drug category includes drugs of different
types used to treat similar conditions. A drug class is a subset of
drugs within a drug category that has similar properties or mechanisms
of action. In some instances, there are no drug classes within a drug
category.
[4] The 10 excluded categories of drugs are (1) agents when used for
anorexia, weight loss, or weight gain; (2) agents when used to promote
fertility; (3) agents when used for cosmetic purposes or hair growth;
(4) agents when used for the symptomatic relief of coughs or colds; (5)
prescription vitamins and minerals, except prenatal vitamins and
fluoride preparations; (6) nonprescription drugs; (7) covered
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; (9) benzodiazepines;
and (10) agents when used for the treatment of sexual or erectile
dysfunction unless used to treat another condition as approved by the
Food and Drug Administration (FDA)--the agency responsible for
approving drugs for sale in the United States. These are the same drug
categories that state Medicaid programs, which provide health care
coverage to certain low-income individuals, may restrict.
[5] Although some drugs are protected by patents and are manufactured
by only one company, when the patent expires, other manufacturers can
produce its generic version. Currently, about half the drug sales in
the United States are generics.
[6] Medicare pays sponsors a monthly amount per enrollee independent of
each enrollee's drug use, therefore creating an incentive to manage
costs. Payments to prescription drug plan sponsors are adjusted
according to each beneficiary's risk factors, including diagnoses and
demographic factors. However, sponsors still have an incentive to
control costs so that they are less than the adjusted payment received
from CMS and payments received from the beneficiary.
[7] P. Neuman et al., "Medicare Prescription Drug Benefit Progress
Report: Findings from a 2006 National Survey of Seniors," Health
Affairs, vol. 26, no. 5 (2007): w630-w643, [hyperlink,
http://www.healthaffairs.org] (accessed Aug. 21, 2007).
[8] For information on how drug utilization management tools contribute
to cost savings, see GAO, Federal Employees' Health Benefits: Effects
of Using Pharmacy Benefit Managers on Health Plans, Enrollees, and
Pharmacies, GAO-03-196 (Washington, D.C.: Jan. 10, 2003).
[9] See Neuman et al.
[10] Within the scope of this report, we refer to "beneficiaries or
their appointed representatives" as beneficiaries.
[11] A request for a Part D drug that is not on the sponsor's formulary
would be considered a request for an exception to the formulary.
[12] To handle reconsiderations, CMS contracted with MAXIMUS Federal
Services to serve as the IRE. MAXIMUS Federal Services also serves as
the IRE for appeals for medical services in Medicare Advantage,
Medicare's managed care program.
[13] Subsequent levels of appeals are a hearing before an
administrative law judge, a Medicare Appeals Council review, and,
finally, a federal district court review. However, these subsequent
levels are outside the scope of this report.
[14] CMS requires a sponsor to expedite a request if it determines, or
the beneficiary's prescribing physician indicates, that applying the
standard time frame could seriously jeopardize the health of the
beneficiary.
[15] The AOR documentation requirement in Part D was modeled on that
used in traditional Medicare and Medicare Advantage. In applying this
rule to Part D, CMS guidance states that prescribing physicians can
only act on behalf of beneficiaries in requesting standard
redeterminations or any type of reconsiderations if they are appointed
representatives.
[16] Case file documentation typically includes a log indicating when
the request was initiated and when it was completed, the request form
or letter, supporting evidence, and copies of the decision notice.
[17] The count of MA contracts that offered the Part D benefit includes
local health maintenance organizations, local preferred provider
organizations, local provider-sponsored organizations, regional
preferred provider organizations, and private fee-for-service plans.
[18] MMA requires that sponsors establish a drug utilization management
program for covered Part D drugs.
[19] For the period January 1, 2007, through March 31, 2007 (the most
recent data available), generics accounted for nearly 62 percent of all
drugs dispensed to beneficiaries enrolled in Part D.
[20] J. Hoadley, E. Hargrave, K. Merrell, J. Cubanski, and T. Neuman,
Benefit Design and Formularies of Medicare Drug Plans: A Comparison of
2006 and 2007 Offerings, (Menlo Park, Calif.: The Henry J. Kaiser
Family Foundation, November 2006).
[21] These 10 PDPs had the highest enrollment in 2006.
[22] Sponsors must start the clock on the mandated processing times
upon receipt of the coverage request, except for requests requiring a
physician's supporting statement. In a 2007 CMS review of PDP sponsors,
auditors found that one sponsor allowed itself additional time for
coverage determinations. It categorized all requests so that the
processing time began only after receiving a completed physician's
supporting statement. As part of a corrective action plan, CMS required
this sponsor to submit a monthly summary report of the volume and
outcome of its coverage determination decisions.
[23] Unique drug products include the multiple strengths and packages
of a particular drug in which a product could be available.
[24] In general, Medicare Part B covers a range of medical services,
including physician, laboratory, hospital outpatient services, and
durable medical equipment. Medicare Part B covers selected outpatient
drugs, typically those administered by physicians, drugs used with
durable medical equipment, and other drugs specifically named in
statute.
[25] The drug must also be a Part D-covered drug.
[26] Evidence suggests that off-label drug use is frequent. One study
estimated that 21 percent of drugs prescribed by office-based
physicians were for off-label uses. See D. Radley, S. Finkelstein, and
R. Stafford, "Off-Label Prescribing Among Office-Based Physicians,"
Archives of Internal Medicine, vol. 166 (May 8, 2006).
[27] Drug reference guides include information on drugs, such as
dosage, safety, and FDA-approved and investigational uses. The three
MMA-approved reference guides, or drug compendia, are the American
Hospital Formulary Service Drug Information, US Pharmacopeia-Drug
Information, and DRUGDEX Information System.
[28] Therapeutically equivalent drug products can be substituted with
the full expectation that they will produce the same clinical effect as
the prescribed drugs.
[29] A genotype test shows the genetic makeup of the hepatitis virus.
[30] One sponsor told us that about 75 to 80 percent of clinical
redetermination requests reviewed by medical staff involved off-label
uses of drugs. Some study sponsors noted that, in determining whether a
particular drug use is medically indicated, they have less flexibility
in accepting evidence from peer-reviewed literature for drug coverage
decisions under Part D than under commercial plans.
[31] All but one of our study sponsors used clinical staff not involved
in the decisions at the previous level to make redeterminations, as
required. One sponsor told us that it used the same staff for both
decision levels in 2006 and had now corrected its procedures.
[32] Under Part D, cases reach the IRE because they are either
requested by the beneficiary (or on behalf of the beneficiary) or
forwarded by sponsors because required time frames were not met. This
differs from appeals procedures under Medicare Advantage, where all
adverse appeals decisions by health plans are automatically forwarded
to the IRE, regardless of whether the time frame was met.
[33] In a partial approval, the IRE may, for example, approve coverage
of the requested drug for the appealing party but not in the quantity
prescribed.
[34] The IRE compares all of the beneficiary information against the
sponsor's coverage criteria to see whether the sponsor properly applied
the appropriate coverage criteria when making its denial. The IRE lacks
authority to change a sponsor's coverage criteria because these have
already been approved by CMS.
[35] In one of the cases we reviewed, the IRE returned the case to the
sponsor for proper processing.
[36] This metric, measured by the percentage of cases where the IRE
agrees with sponsors' coverage denials, excludes cases that are
dismissed, remanded, or withdrawn. In addition, the metric excludes any
cases that are not related to Part D.
[37] CMS uses its Web site to publicly report sponsor performance
information in key domains. For beneficiaries enrolling in Part D plans
effective January 1, 2007, CMS used five key domains--customer service,
complaints, appeals, data systems, and drug pricing. For beneficiaries
enrolling in Part D plans effective January 1, 2008, CMS is combining
the five key domains into three--customer service, access to
prescription drugs, and drug pricing and utilization. The appeals
performance metrics are two of seven metrics in the access to
prescription drugs domain.
[38] The account managers also act as liaisons between sponsors and CMS
to help ensure that sponsors understand CMS regulations and guidance
regarding Part D.
[39] According to CMS, sponsors may not always automatically forward
late cases to the IRE. The agency has instructed sponsors not to
automatically forward cases where sponsors are a few hours late and are
issuing fully favorable decisions for beneficiaries.
[40] Each year, beneficiaries have an opportunity to change
prescription drug plans during the annual coordinated election period
(open enrollment). The 2008 annual coordinated election period runs
from November 15 through December 31, 2007, with enrollment changes
effective as of January 1, 2008.
[41] CMS updated its Medicare Prescription Drug Plan Finder in April
2007 using data for all of 2006. For the 2008 annual coordinated
election period, CMS used data from January 1 through June 30, 2007.
[42] In addition, sponsors submit data for several appeals-related
measures, including the number of standard and expedited
redeterminations requested, the number of redeterminations resulting in
a reversal of the original decision, the number of coverage
determinations and redeterminations submitted to the IRE due to
inability to meet time frames, the number of standard and expedited
reconsiderations resulting in a reversal of sponsors' decisions, and
the number of standard and expedited reconsiderations resulting in an
approval of sponsors' decisions. See CMS, Medicare Part D Reporting
Requirements, (Baltimore, Md.: updated Jan. 25, 2006).
[43] In 2006, CMS provided limited guidance in reporting instructions.
It required that sponsors exclude from the formulary drugs with prior
authorization and tiering exception measures "first pass step therapy
edits"--referring to requests to approve higher cost drugs when there
are previous claims in their systems showing that the available lower
cost alternatives have been tried. CMS also instructed sponsors to
exclude "early refills"--that is, requests for a refill of a drug
before the minimum time allowed, given the quantity dispensed--from the
count of formulary drugs with prior authorization, formulary exception,
and tiering exception measures.
[44] CMS, Medicare Part D Manual "Chapter 6--Part D Drugs and Formulary
Requirements," Section 30.40.1, (Baltimore, Md.: Mar. 9, 2007), 24.
[45] CMS, Medicare Part D Reporting Requirements: Contract Year 2007,
(Baltimore, Md.: updated Mar. 21, 2007).
[46] CMS, CY2007 Part D Reporting Requirements: Frequently Asked
Questions, (Baltimore, Md.: revised Apr. 26, 2007).
[47] CMS selected sponsors for audit based on enrollment and issues
identified through monitoring. As of September 24, 2007, CMS had
completed five PDP sponsor audits, representing seven contracts.
[48] A collaborative partnership with sponsors is one of five
objectives CMS established in its 2006-2009 Strategic Action Plan. See
CMS, Achieving a Transformed and Modernized Health Care System for the
21st Century, CMS Strategic Action Plan 2006-2009, (Baltimore, Md.:
Oct. 16, 2006) [hyperlink, http://www.cms.hhs.gov/MissionVisionGoals]
(accessed July 12, 2007).
[End of section]
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